PTD 2003 Judgments

2003 P T D (Trib.) 29

[Customs, Excises and Sales Tax Appellate Tribunal]

Before Justice (Retd.) Abdul Majeed Tiwana, Chairman, Safdar Ali and Zafar

Iqbal Members (Technical)

Appeal No. 14/LB of 2001, decided on 24th June, 2002.

(a) Sales Tax Act (VII of 1990)‑‑‑

‑‑‑‑S.23‑‑‑Tax invoices‑‑‑Phrase "Flying invoices" as in vogue and use in business and trade circles‑‑‑Connotation‑‑‑Flying invoices are paper transactions having no link with actual transactions they refer to‑‑‑Mode of coming into existence of "flying invoices", their dishonest use by business community and injurious effects on Government Revenue‑‑­Exhaustively stated.

Exporters and manufacturers of textile, unfortunately continued to massively indulge in unlawful trade of fake and fictitious invoices, which had, on account of their dubious character and absence of any actual connection with sale and purchase of any goods, acquired the nickname of "flying invoices". These invoices continued to be sold and. purchased in textile market not only by petty businessman, but also big business magnets and as a necessary consequence of this malpractice on such a large scale, the whole textile market stood plagued with flying invoices. These forged and fake documents have wrecked the entire new scheme of sales tax and has virtually deprived Government of its main source of Revenue from textile sector engaged in voluminous export trade.

Manufacturers in textile sector generally purchase yarn at lower rates from unregistered persons flooding the textile market, who in order to cover these transactions for enabling their customers to claim input tax also manage to provide them with invoices issued in their names after purchasing same from spinning units and other registered suppliers on cheaper rates being their regular unregistered customers of yarn. Purchaser of those documents later use them for claiming input tax at full rates, thus earning substantial profits by cheating Government through Sales Tax Authorities, who have no effective means to ascertain the authenticity of those invoices. If the spinners and other registered yarn suppliers have supplied yarn to unregistered purchasers, who are many in textile market, they have also to pay to the department further tax at prevalent rate, but in order to avoid payment of further tax, they will sell the yarn to unregistered persons and will issue invoices to registered persons, who will purchase yarn from unregistered person, but will obtain invoices from registered persons. By this device, registered suppliers, who will issue invoices to registered purchasers will share profits with them, because the purchasers will get the input tax without spending a penny. In this way, the department is losing further tax and unregistered suppliers of yarn flourished without coming into the tax net and registered spinners or suppliers earn more profits than they actually pay by way of sales tax, but if they issue fake or bogus invoices, then they earn much more profits.

Phrase "flying invoices" is in vogue and use in business and trade circle since long and by this time, it has gained sufficient notoriety. Flying invoices are obviously paper transactions having no link with the actual transactions they refer to and the nomenclature assigned to them seems to be correctly reflective of what they actually are.

(b) Sales Tax Act (VII of 1990)‑‑‑

‑‑‑‑Ss.2(37), 23, 32‑A, 33(4), 34 & 46‑‑‑Tax fraud‑‑‑Charge of un­deserved refund or adjustment of input tax framed on the basis of report prepared by Chartered Accountants after special audit‑‑‑Adjudicating Officer found appellants guilty of tax fraud, and directed them to pay evaded sales tax alongwith additional tax and penalty equivalent to 30% of sales tax involved‑‑‑Validity‑‑‑Appellants during relevant period had been purchasing yarn from different sellers/suppliers for getting same converted into cloth meant for export and home consumption, but as per audited report, they had never brought even an ounce of yarn in their manufacturing unit and elsewhere to supplement at their own yarn production for manufacturing cloth nor they could prove actual payment of its price to sellers by any reliable mode of payment through Banks and other financial institutions‑‑‑Such fact alone was sufficient to conclude that no actual transactions of sale and purchase of' yarn had ever taken place between appellants and suppliers, and the latter had issued talc invoices to the former generally nicknamed as "flying invoices" at lesser price than their face value, which appellants had later utilized for receipt of full amount of input tax from Department and in this way, they had fraudulently used them as a huge profit earning device‑‑‑Invoices in question verified and cleared by concerned staff/officers for payment of input tax claim embodied in them would .not confer any validity or authenticity on them, because either they had considered same a routine matter or they had been in league with appellants in playing the foul game of committing tax fraud by cheating public exchequer to the tune of billions of rupees‑‑‑Such charge stood amply proved‑‑‑Tribunal partly accepted appeal affirming findings of trial forum to the extent of principal amount of sales tax and additional tax, but reduced the percentage of penalty from 30% to 10% which would also include penalty worked out by second Auditor‑‑‑Tribunal recommended that if appellants were to be prosecuted for tax fraud, their collaborators and abettors in the crime including officials/officers of concerned Sale Tax Collectorate, who had been thoughtlessly sanctioning appellants' claim of input tax based on "flying invoices" were also to be prosecuted as co-­accused, but subject to compliance of all requirements of natural justice.

(c) Sales Tax Act (VII of 1990)‑‑‑

‑‑‑‑Ss.8(1), 33, 34 & 46‑‑‑S.R.O. 1307(I)/97‑‑‑S.R.O. 578(I)/98‑‑­Charge against appellants was of having received inadmissible input tax refund on building material, G.I. pipes fittings, machinery, stores parts and chemicals‑‑‑Adjudicating Officer directed appellants to pay back amount illegally ‑‑received alongwith additional tax and penalty‑‑‑Validity‑‑‑Out of various such listed items, no one had been dealt with in impugned order separately and independently to determine the admissibility or otherwise of its refund claim in the light of law on the subject and with reference to alleged violation of S.8(1) of the Act read with S.R.O. 1307(I)/98 and S.R.O. 578(I)/98‑‑‑Not explained in impugned order as how and in what respect, appellants had claimed inadmissible input tax as a result of Department's reconciliation and verification‑‑‑Tribunal accepted appeal and set aside findings of Adjudicating Officer with observations that no liability was outstanding against appellants.

1999 SCMR 1442 ref.

Raja Muhammad Akram, Maqsood Ahmad Butt and Imtiaz Rashid Siddiqui for Appellant.

Amen Ahmed, D.R. assisted by Saleem Akhtar, Superintendent for Respondent.

Date of hearing: 4th June, 2002.

2003 P T D (Trib.) 57

[Customs, Excise and Sales Tax Appellate Tribunal]

Before Sajid Husain Member (Judicial) and Zafar Iqbal, Member (Technical)

Appeal No.K‑103 of 2000, decided on 15th May, 2001.

Customs Act (IV of 1969)‑‑‑

‑‑Ss.18 & 20‑‑‑Non‑payment of regulatory duty in view of Special exemption Order No.63/97, dated 12‑8‑1997 granting exemption to all machinery and equipment imported for use in PTA plant during specified period‑‑‑Contention of Department was that Special Exemption Order in view of C.G.O. 12/81, dated 14‑9‑1981 would have restricted application and that too to the extent of spare parts as mentioned in original order‑‑‑Validity‑‑‑Special Exemption Order in unambiguous language allowed exemption from whole of regulatory duty on goods imported by appellant for their PTA plant during specified period‑‑­Department was bound by the contents of Special Exemption Order and could not read therein other extraneous conditions‑‑‑Installation of imported machinery was a pre‑requisite for an exemption under S.R.O. 506(I)/94, which was not, the case in Special Exemption Order‑‑‑C. G. O. No. 12/81 ruled that benefit of same concession as admissible on plant and machinery should be given to so much of spares as were provided for in original sanction‑‑‑Spares under reference had been imported by appellant as a part of original sanction‑‑‑Exemption from whole of regulatory duty in view of C.G.O. No.12/81 was available to spares of machinery imported under original sanction‑‑‑Tribunal set aside order passed by Authority as being not based on sound legal reasoning.

Makhdoom Ali Khan for Appellant.

Qamaruddin Sameejo, Appraising Officer for Respondent.

2003 P T D (Trib.) 81

[Customs, Excise and Sales Tax Appellate Tribunal]

Before Mian Abdul Qayyum, Member (Judicial) and Zafarul Majeed, Member

(Technical)

S. T. A. No. 177/LB of 2002, decided on 2nd May, 2002.

(a) Sales Tax Act (VII of 1990)‑‑‑

‑‑‑‑Ss. 34 (as amended by Finance Act (IX of 1996) & 46‑‑‑Substitution of words "shall pay" for words "shall be liable to pay" as used in S.34 of Sales Tax Act, 1990‑‑‑Effect‑‑‑Prior to such substitution imposition of additional tax was not a necessary consequence or corollary to non­payment of sales tax within time, but was subject to determination of liability to pay additional tax on the basis of discretion vested in appropriate officer, who was to adjudge the same keeping in view facts and circumstances of each case explaining the causes of delayed payment of sales tax‑‑‑Legislature in its wisdom had changed the law‑‑‑Position had undergone a material change after substitution of words "shall pay" for words "shall be liable to pay", whereby element of discretion of appropriate officers had been taken away and imposition of additional tax had become a necessary and automatic legal consequence of belated payment of sales tax‑‑‑Wisdom of Legislature could not be questioned before Tribunal, which did not have any jurisdiction to strike down such amendment for not having inherent supervisory, suo motu or constitutional jurisdiction.

1995 PTD 91; 1999 PTD 1308 and Custom Appeal No.4 of 1998 ref.

(b) Sales Tax Act (VII of 1990)‑‑‑

‑‑Ss. 34 [as amended by Finance Act (IX of 1996)], 34‑A [as inserted v Finance Act (I of 1999)] and substituted by Finance Act (XXV of 2001)) & 46‑‑‑Exemption from penalty and additional tax‑‑‑Jurisdiction of Authority and Tribunal‑‑‑Scope‑‑‑Appropriate Officer after amendment of S.34 of Sales Tax Act, 1990, did not have any discretion to waive additional tax‑‑‑Authority once coming to the conclusion that sales tax due had not been paid or had been paid late, then imposition of additional tax was automatic‑‑Tribunal being a creature of statute had no jurisdiction to allow relief to an assessee, which appropriate officer could not grant in view of express provisions of S.34 of Sales Tax Act, 1990‑‑‑Tribunal could examine question of levy of sales tax, if it came to conclusion that sales tax was not leviable at all, then it could examine question of imposition of additional tax' and penalty and allow appropriate relief‑‑‑If power conferred upon Federal Government and Central Board of Revenue by virtue of S.34‑A of Sales Tax Act, 1990, was exercised by Tribunal except in case where the very levy of sales tax was illegal, then same would amount to usurpation of power, which was unwarranted by law.

(c) Jurisdiction‑‑‑

‑‑‑‑ Power vested in an authority could only be exercised by that authority and by none‑else‑‑‑Exercise of that authority by any other authority would be without jurisdiction.

(d) Sales Tax Act (VII of 1990)‑‑‑

‑‑‑‑S. 33‑‑‑"Penalty"‑‑‑Meaning‑‑‑Such expression in ordinary parlance means punishment, such as imprisonment, a fine etc. imposed for wrong doing, breaking a contract or rule etc., and a punishment that one brings on oneself through ill‑advised action.

(e) Sales Tax Act (VII of 1990)‑‑‑

‑‑‑‑Ss. 26, 26‑A, 26‑AA, 2(9), 33, 34 [as amended by Finance Act (IX of 1996)], 34‑A [as inserted by Finance Act (I of 1999)] and substituted by Finance Act (XXV of 2001) & 46‑‑‑Filing of Monthly Return Rules, 1996, R.2(iv)‑‑‑Non‑payment of sales tax within due date‑‑‑Liability of assessee to pay principal amount with additional tax and penalty‑‑­Validity ‑‑‑Assessee had collected sales tax on behalf of Government at time of supply to unregistered persons, issued invoices incorporating amount of sales tax and held same as trust on behalf of Government, but instead of discharging its liability by depositing same in Government Treasury at time of filing of return by 15th of next month, had utilized same‑‑‑No one else was to be blamed except assessee, who could not seek any indulgence for its lapse and default‑‑‑No moral, ethical or legal justification existed for waiving off additional tax or penalty‑‑‑Contention of assessee that Member, Sales Tax had allowed it to clear past liability in instalments did not in itself amount to a special order, which was required to be issued in case Central Board of Revenue decided to waive off additional tax and penalty imposed against assessee‑‑‑Tribunal dismissed appeal in circumstances.

Ijaz Ahmad Awan for Appellant.

Imran Tariq, D. R. with Khurrum Bashir, Auditor for Respondent.

Date of hearing: 26th March, 2002.

2003 P T D (Trib.) 149

[Customs, Excises and Sales Tax Appellate Tribunal]

Before Sajid Hussain, Member (Judicial) and Zafar Iqbal, Member. (Technical)

Appeals Nos. K‑492, K‑493 and K‑494 of 2001, decided on 22nd May, 2001.

(a) Notification‑‑‑

‑‑‑Notification cannot have retrospective effect and operates prospectively, unless there is a clear provision to that effect in the legislation itself.

Federation of Pakistan v. Chaudhry Muhammad Aslam 1986 SCMR 916; Al‑Samrez Enterprises v. The Federation of Pakistan 1986 SCMR 1917 and Taj Mahal Hotel Limited and others v. Karachi Water and Sewerage Board and others 1997 SCMR 503 ref.

(b) Notification‑‑‑

‑‑‑‑Scope‑‑‑Effect on certain rights‑‑‑Rights which accrue to or vested in a person on account of his having taken some action on the basis of a contract or a policy cannot be taken away by issuing a notification.

(c) Imports and Exports (Control) Act (XXXIX of 1950)‑‑‑

‑‑‑‑S.3‑‑‑Powers of Government to allow or prohibit import or export of any goods‑‑‑Scope‑‑‑Government could do so subject to rider that notification issued in this behalf would operate prospectively and could not affect rights already vesting in a person on the basis of contracts entered into or other steps taken for export and import, both on principle of promissory estopple and theory of vested rights.

Federation of Pakistan v. Chaudhry Muhammad Aslam 1986 SCMR 916; Al‑Samrez Enterprises v. The Federation of Pakistan 1986 SCMR 1917; Taj Mahal Hotel Limited and others Karachi Water and Sewerage Board and others 1997 SCMR 503; Hashwani Hotels Limited v. Federation of Pakistan and others PLD 1997 SC 315 and Messrs Army Welfare Sugar Mills Limited and others v. Federation of Pakistan and others 1992 SCMR 1652 ref.

(d) Customs Act (IV of 1969)‑‑‑

‑‑‑‑Ss.16 & 194‑A‑‑‑Imports and Exports (Control) Act (XXXIX of 1950), S.3‑‑‑Export Policy Order, 1998, Sched. I‑‑‑Export of poppy seeds‑‑‑Contract of export was entered into before 14‑1‑1999‑‑‑Ban on such export was imposed w.e.f. 14‑1‑1999 through S.R.O. 28(I)/99‑‑­Authority found appellant guilty for having exported banned goods and imposed on him penalty under S.16 of Customs Act, 1969‑‑‑Validity‑‑­S.R.O. 28(I)/99 was only of prospective operation, which would be ineffective against rights of appellant‑‑‑Tribunal allowed appeal and set aside impugned order.

A. Razzaq & Co. v. Government of Pakistan PLJ 2000 Lah. 53 fol.

Muhammad Aleem Khan for Appellant.

Z.A.K. Ghori, Departmental Representative.

2003 P T D (Trib.) 173

[Customs, Central Excise and Sales Tax Appellate Tribunal]

Before Zafar Iqbal, Member (Technical) and Mrs. Yasmeen Abbasey, Member

(Judicial)

Central Excise Appeals Nos. H‑168 and H‑8 of 2000, decided on 20th March, 2002.

(a) Central Excises Act (I of 1944)‑‑‑

‑‑‑S.3 & First Sched., Hdg. 9817.0000‑‑‑Central Excise Rules, 1944, R‑96ZZO ‑‑‑Excise duty on Services, levy of‑‑‑Legality‑‑‑Supply of national gas to consumers by a person, firm or company engaged in supply or distribution thereof‑‑‑Such Service is an "excisable service" chargeable to Central Excise duty.

(b) Central Excises Act (I of 1944)‑‑‑

‑‑‑S.3 & First Sched., Hdg. 9817.0000‑‑‑Central Excise Rules, 1944, R.96ZZO‑‑‑S.R.O. 455(I)/96, dated 13‑6‑1996‑‑‑Natural Gas Rules, 1960, Rr. 2(c) & 3‑‑‑Excise duty on Services, levy of‑‑‑Supply of natural gas to Staff Canteen located at production .fields by appellant‑‑­Company engaged in exploration and production of gas‑‑‑Adjudicating Officer adjudged such supply to be excisable services, thus, raised demand of duty‑‑‑Validity‑‑‑Not sufficient merely that a person engaged in use of gas became a person liable to duty only a person, firm or company engaged in supply or distribution of natural gas could be made liable to duty under S.3 of the Act read with R.96ZZO of Central Excise Rules, 1944‑‑‑Appellant had never engaged itself in distribution or supply of natural gas to consumers, rather same was engaged in drilling out gas from gas‑fields and for carrying on operations of gas drilling, field staff used gas for preparation of foods etc.‑‑‑Such act of appellant did not fell within framework of excise law‑‑‑Gas supplied from gas field to on site workers did not fell within definition of "excisable services" as given in S.2(2) of the Act‑‑‑Duty was chargeable on service charges at the gate of 10% whereas appellant had neither charged its staff nor received any charges‑‑‑Appellant did not fall within any definitions given in Natural Gas Rules,. 1960‑‑‑Natural Gas Rules, 1960 provided an exception to a flow line used for transportation or conduct of gas within leased area or from well-head to purification plant or connection with main 'transmission line within such area‑‑‑Field camps and masses of appellant fell within such exception‑‑‑Contract with appellant also provided that gas' used at the site and in gas fields would be exempt from domestic taxation, which contractual provisions were given effect to through S.R.O. 455(I)/96, dated 13‑6‑1996‑‑‑Show‑cause notice had not been issued by an Officer competent to re‑open past and closed transactions‑‑‑Demand raised by appellant was not only illegal, but was also time‑barred‑‑‑Tribunal accepted appeal and set aside impugned order in circumstances.

(c) Words and phrases‑‑‑

... "Consumer"‑‑‑Meaning of.

Black's Law Dictionary, 5th Edition ref.

Muhammad Naeem for Appellant.

Abdul Saeed Khan, Superintendent for Respondent.

Date of hearing: 20th March, 2002.

2003 P T D (Trib.) 181

[Customs, Central Excises and Sales Tax Appellate Tribunal]

Present: Zafar Iqbal, Member (Technical) and Yasmeen Abbasey, Member

(Judicial)

Sales Tax Appeal No. K‑55 of 2002, decided on 19th March, 2002.

(a) Sales Tax Act (VII of 1990)‑‑‑

‑‑‑Ss. 3(3), 7, 8(1)(a), 10, 11 & 36‑‑‑Input tax, adjustment of‑‑‑Goods manufactured were liable to levy of sales tax from 1‑7‑1996 to 21‑10‑1996‑‑‑Appellant adjusted tax paid on raw materials purchased/imported during such tax period‑‑‑Department later on termed such adjustment to be wrong and raised demand on the plea that on 21‑10‑1996, still a portion of raw material was in stock and was not used in production of taxable goods‑‑‑Validity‑‑‑Perusal of S.7 of the Act would show that a registered person was entitled to deduct input tax during a tax period in respect of taxable supplies made or to be made during that period‑‑‑Use of word "purpose" and "supplies made or to be made" in S.7(I) were indicative of fact that payment of input tax was available for adjustment as well as for refund with regard to input tax paid during a particular tax period‑‑‑Goods on which input tax had been paid by appellant were intended to be used for taxable supplies‑‑Intention of appellant at time of receiving supplies and paying input tax was apparently to make taxable supply of them‑‑‑Case of department was not that either such supplies had not been received or such supplies had not been covered by negative list as given in S.8 of the Act ‑‑‑Co‑relating payment of input tax to goods in question would not be in accordance with provisions of the Act‑‑‑Claim of input tax for adjustment as well as for refund according to S.7 of the Act, was co‑related only to payment of input tax "paid during the tax period" and for the purpose of "supplies made or to be made"‑‑‑Purpose for which supplies had been received and amount of input tax paid by appellant having never been doubted by department, its refusal to allow either refund or adjustment, could not be supported on any premises‑‑‑Claim that input tax was related more to a tax period rather than goods in relation to which same had been paid, was also supported by provisions of Ss. 10 & 11 of the Act‑‑­Appellant's act of input tax adjustment at relevant tax period was perfectly in order‑‑‑Demand raised by department was not legally sound‑‑‑Tribunal accepted appeal and set aside impugned order.

Mayfair Spinning Mills Ltd. v. Customs Excise and Sales Tax Tribunal C.A. No. 666 of 1999 fol.

(b) Sales Tax Act (VII of 1990)‑‑‑

‑‑‑‑Ss.3(3), 7 & 8‑‑‑Provisions of Ss. 7 & 8 of Sales Tax Act, 1990‑‑­Scope‑‑‑Such provisions are not charging provisions, but are machinery provisions to crystallize liability to pay tax as contemplated in S.3(3) of the Act.

(c) Vested right‑‑‑

‑‑‑‑ Any change in law would not affect accrued rights, and past and closed transactions.

(d) Sales Tax Act (VII of 1990)‑‑‑

‑‑‑‑Ss.7 & 36‑‑‑Demand of tax adjusted wrongly ‑‑‑Limitation‑‑­Adjustment was made in 1996, whereas demand was raised in August, 2001‑‑‑Validity‑‑‑Such demand raised by department was miserably time barred as per provisions of S.36 of the Act.

Sattar Silat for Appellant.

Iftikhar M. Ansari, Senior Auditor for Respondent.

Date of hearing: 19th March, 2002.

2003 P T D (Trib.) 293

[Customs, Excises and Sales Tax Appellate Tribunal]

Before Zafar Iqbal, Member (Technical) and Rashid A. Shaikh, Member (Judicial)

Customs Appeals Nos.K‑1489 and K‑743 of 2001, decided on 8th April, 2002.

(a) Customs Act (IV of 1969)‑‑‑

‑‑‑‑S.32‑‑‑Misdeclaration of goods‑‑‑Scope‑Emphasis in S.32 of the Customs Act is made on words "material particulars' which means something going to root‑cause of basic declaration‑‑‑Simply transcribing wrong PCT Heading on Bill of Entry would not amount to a mis-declaration‑‑‑While filing Bill of Entry, Clearing Agent is required to fill PCT column for assistance of Assessing Officer.

(b) Customs Act (IV of 1969)‑‑‑

‑‑‑‑S.80‑‑Assessment of duty‑‑‑Duty of Assessing Officer during process of assessment‑‑‑Not only to examine goods, but also to tally its description, weight, value and to consider extra information available on Bill of Entry in order to arrive at correct assessment of duty and taxes.

(c) Customs Act (IV of 1969)‑‑‑

‑‑‑‑Ss.32, 80 & 194‑A‑‑‑Charge of mis-declaration of goods—Charge found incorrect‑‑‑Attitude of departmental. functionaries deprecated‑‑­Importer had made a correct declaration in respect of description, weight and value of goods; and same did correspond to import documents submitted in support thereof‑‑‑Assuming :n such circumstances that there was an intention of importer to misguide authority would amount to stretching law to bring a normal act of an importer in the fold of violations‑‑‑Such attitude on the part of functionaries was not desirable, as functionary was to carry out its duties within framework of law‑‑­Assessing Authority could send goods for testing to proper professional authorities and could assess goods on the basis of their advice‑‑‑No mis-declaration had been made by importer in circumstances‑‑‑Tribunal set aside impugned order and remanded case to Adjudicating Officer for its decision afresh on merits.

Muhammad Afzal Awan for Appellant.

Muhammad Farooq, Law Officer for Respondent.

Date of hearing: 8th April, 2002.

2003 P T D (Trib.) 583

[Customs, Central Excises and Sales Tax Appellate Tribunal]

Before S. M. Kazimi, Member (Technical) and Raj Muhammad Khan, Member (Judicial)

Appeal No. 7(480) ST/IB of 2001(PB), decided on 8th November, 2002.

(a) Sales tax ‑‑­

‑‑‑‑Limitation‑‑‑Condonation of delay‑‑‑Appeal‑‑‑Filing of appeal registered post‑‑ Refusal to accept‑‑‑Appeal was sent under postal registration which was received back undelivered with the postal remarks "refused to accept" and was submitted in person with delay of 8 days with the request for condonation of delay‑‑‑Validity‑‑‑Circumstances were explained and postal envelope was produced before the Appellate Tribunal—Appeal was admitted in relaxation of the time limitation by the Appellate Tribunal.

(b) Sales Tax Act (VII of 1990)‑‑‑

‑‑‑Ss.13, 2(25)(39(48), 4 & 8(2)‑‑‑Input Rules, 1996‑‑‑S.R.O. No.698(I)/96, dated 22‑8‑1996‑‑‑Exemption‑‑‑Gypsum, clay and limestone‑‑Taxation‑‑‑Department found that gypsum, clay and limestone were not exempt from sales tax and its excavation and supply for self ­consumption was also not exempt and directed for audit of record for determination of the sales, tax due and not paid on such Gypsum, clay and limestone excavated and consumed in‑house for the production of non‑taxable cement ‑‑‑Assessee contended that excavation of Gypsum, clay and limestone was not covered by the terms/words "imported", "manufactured", "produced", "retailed", "wholesale", etc. and its in house consumption in the manufacture of cement could not be termed as "supply" or "taxable supply"‑‑‑Validity‑‑‑Excavation of Gypsum, clay and limestone by the cement factories was done essentially for the disposition (self‑consumption) thereof in furtherance of the business (manufacture of cement) carried out by the manufacturer‑‑‑Cement factories or the excavating units engaged in such excavation and production of the movable property (Gypsum, clay and limestone) were liable to be registered under S.2(25) of the Sales Tax Act, 1990 read with Chap. III thereof since Gypsum, clay and limestone were not exempt from sales tax under S.13 of the Sales Tax Act, 1990 ‑‑‑Like the sales tax paid by the assessee on the bags/sacks (whether manufactured by the assessee or procured from outside) for packing of exempt cement produced, assessee also had to pay sales tax on the Gypsum, clay and limestone excavated by the assessee and consumed in the factory for the manufacture of exempt cement and/or supplied by the assessee for consumption by persons other than the assessee‑‑‑Cement, during the relevant period, was not taxable item within the meaning of S.2(39) of the Sales Tax Act, 1990, being exempt under S.13 of the Sales Tax Act, 1990 and its supply was not zero‑rated under S.2(48) read with Fifth Sched. of the Sales Tax Act, 1990‑‑‑Tax on taxable inputs of exempt goods (or supplies) were not automatically exempt (or refundable) unless such inputs were specifically exempted under S.13 of the Sales Tax Act, 1990‑‑‑Tax payable on taxable inputs of exempt cement had to be paid as the cement was not a zero‑rated item under the Sales Tax Act, 1990‑‑­Assessee used such sales taxable inputs (Gypsum, clay and limestone) in the manufacture of some taxable goods (if any) and also in the manufacture of non‑taxable cement as well, the appellant shall be entitled to the benefits of S.8(2) of the Sales Tax Act, 1990 read with the Apportionment of Input Tax Rules, 1996‑‑‑Order of the Department was confirmed and appeal of the assessee was dismissed by the Appellate Tribunal.

2001 PTD 2097 = 2001 SCMR 1376; Civil Appeal No.11‑S of 2001 and PTCL 2001 CL 333 rel.

C.A. No. 289‑311 of 1965, 999‑101 of 1967, W. P. No. 212 of 1966, (South Bihar Sugar Mills Ltd. etc. v. R.M. Desai, Inspector of Central Excise and others) PTCL 1996 CL 227, Govind Saran v. CST ((1985) 155 ITR 144), Collector, Customs, Central Excise and Sales Tax (West), Karachi v. Novartis Pakistan Ltd. 2002 PTD 976 and WAPDA v. Collector of Central Excise & Sales Tax and others W.P. No. 6147 irrelevant.

Abdul Latif Yousafzai and Mian Faiz Muhammad, Senior Manager (Accounts) for Appellant.

Ishtiaq Ahmad, Law Officer of the Collectorate for Respondents.

Dates of hearing: 14th, 24th January: 20th February, 22nd May and 1st July, 2002.

2003 P T D (Trib.) 682

[Customs, Central Excises and Sales Tax Appellate Tribunal]

Before S.M. Kazimi, Member (Technical) and Raja Muhammad Khan, Member

(Judicial)

Appeal No.7(316) CU/IB of 2000(PB), decided on 28th September 2002.

Sales Tax Act (VII of 1990)‑‑‑

‑‑‑‑Ss. 13, 2(33)(39)(41), 6 & 31‑‑‑Customs Act (IV of 1969), S.32‑‑­S.R.O. 582(I)/98, dated 12‑6‑1998‑‑‑S.R.O. 561(I)/94, dated 9‑6‑1994‑‑‑Exemption on local supplies‑‑ Import of machinery as on 4‑3‑1999‑‑‑Appellant claimed exemption on the ground that the machinery imported was exempt under S.R.O. 582(I)/98 dated 12‑6‑1998‑‑‑Recovery of such short paid sales tax on the ground that benefit of exemption was not available because the appellant commenced trial production on 15‑5‑1994 and its production was exempt until 14‑5‑1999 in terms of S.R.O. 561(I)/94, dated 9‑6‑1994‑‑‑Since S.R.O. 582(I)/98, dated 12‑6‑1998 did not provide benefit of exemption of machinery, producing exempt goods, the non­-levy of sales tax on machinery imported was not proper‑‑‑Appellant argued that the S.R.O. 582(I)/98 dated 12‑6‑1998 allowed exemption of sales tax on plant and machinery, operated by power of any description, to be used for the manufacture of taxable goods by registered persons and machines were not installed instantly at the time of filing of bill of entry and, therefore, the exemption notification used the word "to be used" which included the use on and after 15‑5‑1999 when the appellants were to produce taxable goods‑‑­Department pleaded that since the goods produced by the appellants were exempt up to 14‑5‑1999, the machinery imported provisions to that date were not entitled to the benefits of exemption under S.R.O. 582(I)/98 dated 12‑6‑1998 in terms of the provisions of S.30(1) of the Customs Act, 1969 read with S.31‑A(1) thereof and S.6 of the Sales Tax Act, 1990‑‑‑Validity‑‑‑Appellant claimed exemption on local supplies up to 14‑5‑1999 under S.R.O. 561(I)/94 dated 9‑4‑1994 which exempts all supplies made by manufacturers or producers of industrial units‑‑‑Obviously it refers to supply or taxable supply as defined in subsections (33) & (41), respectively of S.2 of the Sales Tax Act, 1990‑‑‑However, S.R.O. 582(I)/98 dated 12‑6‑1998 allowed exemption on plants and machinery for manufacture of taxable goods by registered person‑‑‑Bill of entry showed that the appellants had sales tax registration on the date they claimed benefit of S.R.O. 582(I)/98, dated 12‑6-1998 and even otherwise, the prosecution did not have a case to the contrary on such issue of being registered person ‑‑‑S.R.O. 582(I)/98 dated 12‑6‑1998 used the word taxable goods' which was defined under Cl. (39) of S.2 of the Sales Tax Act, 1990, which was distinct from the termssupplies' and taxable supplies' used for the purposes of S.R.O. 561(I)/94 dated 9‑6‑1994‑‑­Wordtaxable goods' as defined under S.2(39) of the Sales Tax Act, 1990 means all goods other than those which had been exempted under S.13 of the Sales Tax Act, 1990‑‑‑Appellant produced plastic mats which in itself were not exempt as goods under the Sixth Sched. to the Sales Tax Act, 1990 or under any other notification issued under S.13 of the Sales Tax Act, 1990‑‑‑Undoubtedly S.R.O. 561(I)/94 dated 9‑6‑1994 had been issued under S.13 of the Sales Tax Act, 1990 but this exempted the taxable supplies and not the taxable goods‑‑‑Plastic mats manufactured by the appellant shall still be treated as taxable goods under S.2(39) of the Sales Tax Act, 1990 but supplies under Ss.2(33) & 2(41) of the Sales Tax Act, 1990, by the appellants shall be exempted under S.R.O. 561(I)/94 dated 9‑6‑1994‑­Plastic mats manufactured by the appellant being registered person, were entitled to the relief/concession under S.R.O. 582/(I)/138 dated 12‑6‑1998‑‑‑Accepting the appeal Appellate Tribunal set aside the recovery order.

Qazi Waheeduddin for Appellants.

Al‑Haj Gul, D.R. for Respondent No. 1.

Ishtiaq Ahmad, Law Officer for Respondent No.3.

Shamsur Rehman, Inspector for Respondent No.1.

Dates of hearing: 5th, 14th, March; 16th April and 26th September, 2002.

2003 P T D (Trib.) 707

[Customs, Central Excises and Sales Tax Appellate Tribunal]

Before S. M. Kazimi, Member (Technical) and Raj Muhammad Khan, Member

(Judicial)

Appeal Case No.7(895)CU/IB of 2000(PB), decided on 19th October, 2002.

Customs Act (IV of 1969)‑‑‑

‑‑‑‑Ss.33 & 156(1)‑‑‑Sea Customs Act (VIII of 1878), S.40 ‑‑‑ S. R. O. 1108(I)/94, dated 14‑11‑1994‑‑‑C.B.R. Letter C. No.10(122) CUS. Ref/96, dated 28‑2‑1996‑‑‑General Manual of Orders Relating to Customs and Tariff Laws, Ruling No. 1229‑Cus,I/37, dated 18‑12‑1937‑­Refund to be claimed within six months‑‑‑Redemption fine was paid‑‑­Appellate Tribunal declared the same as illegal‑‑‑Claim of refund for the same‑‑‑Department refused to pay the same being time‑barred on the ground that the claimant was required to file the application for refund of such amount within 6 months of the date of the decision/order so passed in his favour‑‑‑Validity‑‑‑Imposition of the said redemption fine being unlawful and arbitrary, the recovery of the amount was also unlawful and ought to be refunded to the appellant‑cum‑claimant without awaiting any formal refund claim under S.33 of the Customs Act, 1969‑‑­Appellate Tribunal observed the Central Board of Revenue's Letter C.No.10(122)CUS. Ref/96, dated 28‑2‑1996 was not a correct interpretation of the provisions of S.33(1) of the Customs Act, 1969 since the appellant did not pay the amount through any error, inadvertence or misconstruction on his part, the refund of said amount was allowed by the Appellate Tribunal, if otherwise due and admissible, without applying the time limitation prescribed under S.33(1) of the Customs Act, 1969‑‑‑Order was set aside and remanded for de novo decision to allow the refund, if otherwise due and admissible, without reference to the time limitation of S.33(1) of the Customs Act, 1969.

PLD 1998 SC 64 ref.

Mian Noorul Ghani for Appellant.

Al‑Haj Gul, D.R. and Javed Iqbal, Appraiser for Respondent.

Date of hearing: 2nd July, 2002.

2003 P T D (Trib.) 757

[Customs, Central Excises and Sales Tax Appellate Tribunal]

Before Raj Muhammad Khan, Member (Judicial) and S.M. Kazimi, Member

(Technical)

Appeal Case No.STA‑711‑A/PB of 2002, decided on 5th October, 2002.

Sales Tax Act (VII of 1990)‑‑‑

‑‑‑‑Ss. 13, 36 & 33‑‑‑General Clauses Act (X of 1897), S.21‑‑S.R.O. 826(I)/98, dated 21‑7‑1998‑‑‑S.R.O. 543(I)/99, dated 7‑5‑1999‑‑‑C.B.R. Letter OM C. No.2 (19)/STM/98, dated 7‑12‑1998‑‑‑C.B.R. Letter C. No.3 (28) STP/98, dated 2‑4‑1998‑‑ Exemption‑‑‑Recovery of tax not levied or short‑levied or erroneously refunded‑‑‑Special Registration Certificate‑‑‑Directorate General, of Audit Revenue Receipt observed that during the period from 11/98 to 4/99 taxable supplies had been made free of sales tax under S.R.O. 826(I)/98, dated 21-7‑1998 despite the fact that the operation of the said notification had been suspended by the Central Board of Revenue vide its Letter OM C. No.2(19)/STM/98, dated 7‑12‑1998, resulting in short‑realization of sales tax‑‑‑Additional Collector (Adjudication) passed order for recovery of such amount of tax alongwith additional tax and penalty by holding the Special Exemption Certificate as not re‑verified and doubtful‑‑‑Validity‑‑Central Board of Revenue's Letter C. No.3(28) STP/98, dated 2‑4‑1998 did not deny the benefit of S.R.O. 826(I)/98, dated 21‑7‑1998 to the Special Registration Certificate holders if they acquired such certificate under the S.R.O. 826(I)/98, dated 21‑7‑1998 on any date prior to 7‑12‑1998 and did not surrender it prior to 1‑7‑1999 when the said S.R.O. 826(I)/98, dated 21‑7‑1998 should have been rescinded in terms of S.R.O. 543(I)/99, dated 7‑5‑1999 in accordance with S.21 of the. General Clauses Act, 1897‑‑‑Department having not shown any material the Special Registration Certificate issued by the Collector of Sales Tax under S.R.O. 826(I)/98, dated 21‑7‑1998 was cancelled by the Collector of Sales Tax on any date before 1‑7‑1999, the order had no force of law and was set aside by the Appellate Tribunal and appeal was disposed of as accepted.

Tariq Javed for Appellant.

Ishtiaq Ahmad, Law Officer for Respondents.

Dates of hearing: 22nd May; 18th June and 2nd July, 2002.

2003 P T D (Trib.) 764

[Customs, Central Excises and Sales Tax Appellate Tribunal]

Before Raj Muhammad Khan, Member (Judicial) and S.M. Kazimi, Member

(Technical)

Appeal Case No.STA‑344/PB of 2001, decided on 29th October, 2002.

Sales Tax Act (VII of 1990)‑‑‑

‑‑‑‑S. 36‑‑‑Collection and Payment of Sales Tax on Natural Gas Rules, 1999‑‑‑S.R.O. 1014(I)/99, dated 14‑9‑1999‑‑‑C.B.R. Letter C.No.2(1)­M(Audit)/2002, dated 8‑7‑2002‑‑‑Recovery of tax not levied or short-­levied or erroneously refunded‑‑‑Wastage of gas‑‑‑Short payment of tax, recovery of‑‑‑Tax not paid on claimed 15% wastage of gas was demanded by the Department‑‑‑Subsequently, Central Board of Revenue communicated that wastage factor for C.N.G. stations be allowed at a maximum of 13% for sales tax purpose ‑‑‑Assessee/appellant agreed to pay the sales tax short‑paid on the 2% (15% minus 13%) wastage‑‑‑Department contended that C.R.R.'s Letter C. No.2(1)‑M (Audit)/2002, dated 8‑7‑2002 was prospective in nature and was applicable for sales tax audits in future and also in sales tax audits where reports had not been finalized‑‑‑Validity‑‑‑Appellate Tribunal directed the appellant to immediately pay the sales tax involved on the 2% wastage not contested by him‑‑‑If paid by the given date, the levy of additional tax shall stand remitted and if failed to do so, the amount of sales tax agreed and undisputed short‑payment on account 2% wastage shall be recovered alongwith additional tax‑‑‑As regards remaining 13% wastage, Appellate 'Tribunal observed that Central Board of Revenue's guidelines describe it as a maximum permissible wastage and said 13% wastage was neither compulsory nor automatic‑‑‑Actual wastage (subject of the maximum of 13% wastage) had to be calculated and determined on the basis of actual receipts and actual supply during the tax period‑‑‑Said wastages/losses varied from station to station and from equipment to equipment and on grounds of temperature and pressure and various other actual factors‑‑­Audit should first determine the actual wastages/losses and then investigate the factors, reasons and causes of these wastages/losses and permit the same subject to a maximum of 13% in terms of C.B.R.'s guidelines ‑‑‑Wastages/losses claimed in excess of actual and those claimed in excess of 13% should be reported by Audit (alongwith the reasons as advanced by the registered person) in their report for recovery/adjudication action‑‑‑Case was remanded for determination and recovery of short‑paid, if any amount of sales tax on the balance 13 wastages/losses involved with the directions that Auditors should do the audit afresh and submit their report‑‑‑On receipt of such a report, the Deputy Collector (Adjudication) shall decide this case of wastage of up to 13% (15% as short‑paid minus 2% agreed to have short‑paid and also agreed to pay immediately and by 25‑11‑2002) afresh on merits after affording an opportunity of being heard to explain their case and view‑point‑‑‑Order was modified accordingly by the Appellate Tribunal.

Zahid Idrees Mufti for Appellant.

Al‑Haj Gul, D.R., Mr. Zaman, D.S., Hussain Muhammad. Senior Auditor and Ehsanullah, Senior Auditor for Respondents.

Dates of hearing: 26th September; 17th and 22nd October, 2002.

2003 P T D (Trib.) 873

[Customs, Excises and Sales Tax Appellate Tribunal]

Before Sajid Hussain, Member (Judicial) and Zafar Iqbal, Member (Technical)

Appeal No.K‑288 of 2000; decided on 10th May, 2001.

Customs Act (IV of 1969)‑‑‑

‑‑‑‑Ss.9 & 196‑‑‑Baggage of passenger arriving from abroad‑‑­Confiscation‑‑ Appeal‑‑‑Appeal against confiscation and detention of Shawls, Saudi Riyals and UAE Dirhams carried by a passenger at the airport was rejected by the Appellate Tribunal.

Collector of Customs v. Abdul Majeed C.A. No.47 of 2000 ref.

Muhammad Afzal Awan for Appellant.

Departmental Representative for Respondent.

Date of hearing: 10th May, 2001.

2003 P T D (Trib.) 902

[Customs, Excises and Sales Tax Appellate Tribunal]

Before Ms. Yasmin Abbassey, Member (Judicial‑III) and Safdar Ali, Member

(Technical‑III)

Custom Appeal No. K‑426 of 2000, decided on 19th August, 2002.

Customs Act (IV of 1969)‑‑‑

‑‑‑‑S. 32(1) & (2)‑‑‑Untrue statement, error, etc.‑‑‑Clearing agent‑‑­Charge for fraudulent clearance and unauthorized sale of plastic moulding compound and other imported items with the active connivance of clearing agent‑‑‑Imposition of personal penalty on clearing agent‑‑­Validity‑‑‑Since clearing agent, had no control on the goods when these were out of charge from the port area neither he was required to ensure its safe transportation nor he was required to monitor its arrival at the point of destination‑‑‑Charges framed against the clearing agent were not maintainable in the eyes of law as there was no proof regarding involvement of the clearing agent in the whole affair.

M. Afzal Awan for Appellant.

Sanaullah Abbasi, D.S. for Respondent.

Date of hearing: 19th August, 2002.

2003 P T D (Trib.) 928

[Customs, Excises and Sales Tax Appellate Tribunal]

Before Abdul Majeed Tiwana, Chairman/Member (Judicial), Sarfraz Ahmad Khan, Zafar Iqbal, Safdar Ali, Members (Technical) and Raj M. Khan, Member (Judicial)

Appeal No. 157/LB of 2002, decided on 10th July, 2002.

Per Abdul Majeed Tiwana, Chairman/Member (Judicial), Zafar Iqbal, Member (Technical), Raj M. Khan, Member (Judicial) and Safdar Ali, Member (Technical)‑‑‑

(a) Sales Tax Act (VII of 1990)‑‑‑

‑‑‑‑S. 2(46)(d)‑‑‑Customs Act (IV of 1969), Ss.25 & 25B‑‑‑"Value of supply" of goods‑‑‑Determination of ‑‑‑Imported goods‑‑‑Value addition @ 10% by the Adjudicating Officer for purpose of sales tax in the declared value of supply on the ground that value of supply was suppressed as the value addition to the goods, after payment of customs duty and sales tax at the import stage included charges incurred like advance income‑tax, clearing charges, financial charges and profit etc:‑‑­Validity‑‑‑"Value of supply" of imported goods would be the value as defined in S.2(46)(d) of the Sales Tax Act, 1990 and that will be the value determined under S.25 or 25B of the Customs Act, 1969 plus the customs duty and central excise duty levied thereon‑‑‑No other provision existed in the Sales Tax Act, 1990, whereby a value could be determined by any process other than an objective method‑‑‑For purpose of determining the value of supply, the governing conditions were given in Cl. (d) of subsection (46) of S.2 of the Sales Tax Act, 1990‑‑‑No provision existed in the law whereby the Revenue Authorities were legally competent to fix percentage of value addition and compel the registered person to calculate and pay sales tax accordingly.

(b) Sales Tax Act (VII of 1990)‑‑‑

‑‑‑‑Ss. 7(1), 3, 6, 8, 10, 34 & 66‑‑‑Finance Act (III of 1998)‑‑­Determination of tax liability‑‑‑Adjustment of input tax after prescribed period‑‑‑Tax period July, 1998 to November, 1998‑‑‑Inadmissibility of adjustment of input tax against output tax on the ground that the adjustment had been made after the prescribed period of one month‑‑­Validity‑‑‑Tax was paid at import stage‑‑‑Tax earlier paid termed as "input tax" was adjustable against the output tax payable for which various procedures remained in operation from time to time but the statutory provision of law conferring the right remained intact‑‑­Divergence may occur in procedure adopted but there was no evasion of Government Revenue and claim backed by statutory right could not be defeated‑‑‑Statutory right of a party to claim input tax or adjustment against the output tax was further supported by the provision of S.10 of the Sales Tax Act, 1990 which permits the excess amount of input tax to be carried forward to the next tax period and the excess amount if it was not fully covered by the tax payable during the period of one year, had to be refunded to the registered person under S.66 of the Sales Tax Act, 1990 which, besides prescribing period of limitation, also allowed the refund on account of input adjustment not claimed within the relevant tax period‑‑‑Adjustment of input tax from output tax beyond the tax period was, at the most, .a procedural lapse, which .was condonable to maintain the right and to facilitate its exercise instead of forcing it to avail of cumbersome remedy of resorting to S.66 of the Sales Tax Act, 1990 which involved multi‑staged protracted adjudication, invariably resulting in unnecessary hardship and despondency to the taxpayers for being taxed twice‑‑‑No evasion of tax or loss of revenue having occasioned to Department, imposition of additional tax and penalties on alleged wrong adjustments were set aside by the Tribunal.

Per Sarfraz Ahmad Khan, Member (Technical).‑‑‑[Minority view].‑‑‑

Jowitt's Dictionary of English Law; Messrs Pfizer Laboratories Ltd. v. Federation of Pakistan and others PLD 1998 SC 64; Pakistan Industrial Development Corporation v. The Federation of Pakistan 1992 PTD 593 and Messrs Humayyun Ltd. v. Pakistan and others PLD 1991 SC 963 rel.

Naveed Andrabi for Appellant.

Amer Ahmed, D.R. for Respondent.

2003 P T D (Trib.) 953

[Customs, Excises and Sales Tax Appellate Tribunal]

Before Masud Ahmed Daher, Chairman and Abdul Hameed Khan Khattak. Member (Judicial)

Appeal No. 117 of 2002, decided on 4th October, 2002.

(a) Sales Tax Act (VII of 1990)‑‑‑

‑‑‑‑Ss.2(33), 2(41), 3, 6, 22, 23, 26, 33 & 34‑‑‑Constitution of Pakistan (1973), Federal Legislative List, Entries 49 & 51‑‑‑Evasion of sales tax‑­Imposition of additional tax and penalty ‑‑‑Assessee had claimed that no sales tax had ever been levied by the Legislature on limestone and clay in natural stage as used in the manufacture of cement that simply digging/excavating limestone and clay and then shifting the same in their natural state to the kiln did not fall within definition of the word 'manufacture' as used in S.2(16) of Sales Tax Act, 1990‑‑‑Validity‑‑­Notwithstanding the fact that minerals like limestone, clay and gypsum were self‑supplied/self‑used, they were deemed to be taxable supply' as defined in the Sales Tax Act, 1990 and covered under Entry 49 of the Federal Legislative List, Part I, Fourth Sched. of the Constitution of Pakistan‑‑‑Limestone and clay which was self‑excavated was taxable goods by itself‑‑Limestone and clay was an intermediary produce which was manufactured/produced during the process of excavation for furtherance of taxable activity, therefore, it was liable to sales tax under S.3 of the Act‑‑‑Limestone and clay was an identifiable/marketable goods on which tax could be levied, therefore, once taxable goods had been supplied by a person to itself, same would fall within the definition oftaxable supply' notwithstanding the fact whether the sales had taken place or not between two persons but the fact remained that the excavation and bringing the limestone and clay to the factory constituted a taxable supply during the process of taxable activity‑‑‑Taxable activity covered any forms of those taxable activities which were even carried on by one person for his own business‑‑‑Impugned order‑ was maintained in the circumstances by the Tribunal.

(b) Sales Tax Act (VII of 1990)‑‑‑

‑‑‑‑S.2(41)‑‑‑Taxable supply'‑‑‑Connotation‑‑‑Once a taxable goods has been supplied by a person to itself, same would fall within definition oftaxable supply' notwithstanding the fact whether the sales has taken place or not between two persons.

(c) Sales Tax Act (VII of 1990)‑‑‑

‑‑‑‑S.2(35)‑‑‑"Taxable activity"‑‑‑Connotation‑‑‑Taxable activity covers any form of those taxable activities which are even carried on by one person for his own business.

1979 PTD 484; PLD 1966 SC 559; PLD 1974 Kar. 417; PLD 1964 SC 616; PLD 1965 SC 435 and PLD 1976 Kar. 600 ref.

S.K.M. Kiani for Appellant.

Tariq Ahad Nawaz, D.R. for Respondent.

2003 P T D (Trib.) 1013

[Customs, Excises and Sales Tax Appellate Tribunal]

Before Sajid Hussain, Member (Judicial) and Zafar Iqbal, Member (Technical)

Appeal No.K‑860 of 2001, decided on 4th June, 2001.

(a) Customs Act (IV of 1969)‑‑‑

‑‑‑‑S.165‑‑‑Jurisdiction‑‑‑Monetary limits‑‑‑Monetary limits fixed for various levels of officers were applicable only in those cases where the Adjudicating Officer had to confiscate .the goods or a penalty was to be imposed but where demand for escaped duty had been made the Adjudicating officer was fully competent to decide the case.

(b) Customs Act (IV of 1969)‑‑‑

‑‑‑‑S.19‑‑‑Concessionary customs duty‑‑‑Concessions tied up with conditions were, to be availed in an appropriate manner otherwise the action would become illegal and not warranted by law.

(c) Customs Act (IV of 1969)‑‑‑

‑‑‑‑S. 19 & First Sched.‑‑‑S.R.O. 505(I)/94, dated 9‑6‑1994‑‑‑S. R. O. 505(I)/95 dated 14‑6‑1995‑‑‑S.R.O. 555(I)/98, dated 12‑6‑1998‑‑­S.R.O. 504(I)/94, dated 9‑6‑1994‑‑‑Exemption concessions‑‑­Manufacturing of television sets‑‑‑Import of black and white picture tubes CRT‑‑‑Importer was not entitled to gain the benefit of concessions on imported goods as he had not completed the formalities in respect of disputed goods which came into effect from January, 2001 and all such previous imports made did contravene the conditions laid down in the relevant notifications.

(d) Interpretation of statutes‑‑‑

----Provisions of fiscal statute's are to be construed strictly.

It is a general principle of interpretation of statutes that the provisions of fiscal statutes are to be construed strictly. Where a notification lays down a concession and that too tied up with certain conditions or a specific mode, the intention of Legislature is to follow those conditions or a specific mode because, the conditions or mode prescribe a mechanism to maintain a balance and equity in enforcing the regulations affecting the market economy, otherwise the unintended benefit, if extended, would distort the market economy and may cause a disturbance in the required vertical or horizontal equity thereby defeating the purpose of public interest. Therefore, enforcement of conditions of a particular regulation becomes mandatory for enforcement agencies and as such the claim of the appellant that merely a procedural mode be disregarded for extending benefit of concessionary customs duty to the appellant on disputed goods is not correct.

Mrs. Navin Merchant for Appellant.

S.M. Waseem Kazmi, Appraising Officer for the Department.

Date of hearing: 4th June, 2001.

2003 P T D (Trib.) 1032

[Customs, Excises and Sales Tax Appellate Tribunal]

Before Sajid Hussain, Member (Judicial) and Zafar Iqbal, Member (Technical)

Appeal No.H‑46.of 2001, decided on 31st May, 2001.

Sales tax--

‑‑‑‑Show‑cause notice‑‑‑Natural justice principles of‑‑‑Cause not revealed in the notice‑‑‑Effect‑‑‑Show‑cause notice was issued without providing or revealing the cause of its issuance‑‑‑Order passed on the basis of such show‑‑cause notice suffered from procedural impropriety inasmuch as that the evidence and the basis for the issuance of show-­cause notice were not revealed to the assessee which amounted to denial of a fair opportunity to defend the case‑‑‑Order was declared illegal by the Appellate Tribunal.

Abdul Majeed Akmal, M.D. for Appellant.

M.R.K. Warsi, Superintendent and Ali Gohar, Inspector for the Department.

Date of hearing: 31st May, 2001.

2003 P T D (Trib.) 1109

[Customs, Excise and Sales Tax Appellate Tribunal]

Before Abdul Majeed Tiwana, Chairman/Member (Judicial) and Sarfraz Ahmad Khan, member (Technical)

Appeals Nos.2506, 2505. 2499 2496, 2504, 2554, 2497, 2427, 2426, 2432, 2436, 2463, 2494, 2565, 2500, 2498, 2459, 2551, 2507, 2437, 2433, 2435, 2434, 2305, 2444 2336, 2337, 2314, 2442, 2306, 2307, 2246, 2244, 2279, 2280, 2019 2020, 2574, 2015, 2021, 2658, 2028, 2029, 2027, 2030; 2026, 2031 of 2001, decided on 16th May, 2002.

(a) Customs Act (IV of 1969)‑---

‑‑‑‑Ss. 181 & 194‑‑‑S.R.O. 137 (I)/98, dated 17‑12‑1998‑Option to pay fine in lieu of confiscated goods‑‑‑S.R.O. 1374(I)/9,8, dated 17‑12‑1998 was to be read as part of S.181 of the Act and was binding on Appellate Tribunal.

(b) Customs Act (IV of 1969)‑----

‑‑‑‑S 181‑‑‑S.R.O. 1374(I)/98, dated 17‑12‑1998, Serial No. 4 of Table III [as substituted by S.R.O. 58(I)/2000, dated 15‑2‑2000]‑‑­Option to pay fine in lieu of confiscation of smuggled vehicles‑‑‑Vehicles specified at Serial No.4 of Table III would not suffer any fine in lieu of confiscation, if in respect thereof duty/taxes had been paid by 15‑3‑2000.

(c) Customs Act (IV of 1969)‑----

‑‑‑‑Ss. 15. 16, 17 & 181‑‑‑S.R.O, 1374(I)/98, dated 17‑12‑1998, Cl. (d) [as added by S.R.O. 496(I)/99 dated 22‑4‑1999] read with Serial No.1 of Table I and Serial No. 4 of Table III ‑‑‑S.R.O. 739(I)/99, dated 12‑6‑1999‑‑‑S.R.O. 843(I)/99, dated 13‑7‑1999‑‑‑S.R.O. 1014(I)/99, dated 4‑9‑1999‑‑‑S.R.O. 1355(I)/99, dated 16‑12‑1999‑‑‑S.R.O. 1367(I)/99, dated 22‑12‑1999. S.R.O. 21(I)/2000, dated 24‑1‑2000­S.R.O. 58(I)/2000, dated 15‑2‑2000‑‑‑Option: to pay fine in lieu of confiscation of smuggled vehicles‑‑‑Contention of Department was that S.R.O. 1374(I)/98, dated 17‑12‑1998 allowed release of smuggled vehicles on payment of Nil Fine, if duty/taxes were paid by 15‑3‑2000, which date having passed the main entry at Serial No.4 of Table III of said S.R.O. had become redundant and such vehicles could not be released on payment of fine in lieu of confiscation‑‑‑Validity‑‑‑Only change after 15‑3‑2000 would be that such vehicles could not be released without payment of fine in lieu of confiscation‑‑‑Not correct to contend that thereafter vehicles would revert back to category of smuggled goods at Serial No. 1 of Table I of S.R.O. 1374(I)/98 despite presence of detailed mention of description of goods in Column 2 of Table III at Serial No.4 and Serial No.5‑‑‑Specific mention of vehicles at Serial Nos.4 & 5 of Table III of S.R.O. 1374(I)/98 had proved that vehicles were covered only in Table II and not in Table‑I of S.R.O. ,1374(I)/98 and particularly when C.B.R. through S.R.O. 739(I)/99, dated 12‑6‑1999 had itself excluded goods mentioned in Serial No. 4 of Table‑III from Serial No. 1 of Table I of S.R.O. 1374(I)/98‑‑‑If intention of C.B.R. was same as contended by Department, then only course of action was to cause amendment in Serial of Table I by striking down exclusion of goods mentioned at Serial No.4 of Table III and omission of entry at Serial No.4 of Table III‑‑‑Such course having not been adopted entry "Nil" in Column No.3 of goods mentioned in Column 2 against Serial No.4 of Table III of S.R.O. 1374(I)/98 was with reference to date of. 15‑3‑2000‑‑‑If duty/taxes were paid by 15‑3‑2000, then such vehicles would hot suffer any fine in lieu of confiscation, but after expiry of that, same could be released on payment of fine in lieu of confiscation‑‑­Tribunal partly accepted appeals and ordered release of vehicles on payment of fine equal to 100% of assessed duties/taxes in lieu of confiscation and in addition to payment of assessed duties/taxes under law.

(d) Interpretation of statutes‑‑‑

‑‑‑‑ When two interpretation of legal provisions are possible, the one favouring the subject is to be preferred.

Mian Abdul Ghaffar, Rana Sardar Ali and Muhammad Akram Nizami for Appellants.

Amer Ahmed, D.R., Rahat Pirzada, D.S., Mubarak Ali Sherazi, I.O. and Akhtar Zaidi, Inspector for Respondents.

2003 P T D (Trib.) 1131

[Customs, Central Excise and Sales Tax Appellate Tribunal]

Before S.M. Kazimi, Member (Technical) and Raj Muhammad Khan, Member (Judicial)

Appeal Case No. S.T.A. 992 of 2002/PB, decided on 17th December, 2002.

(a) Sales Tax Act (VII of 1990)‑‑‑

‑‑‑Sixth Sched., Sr. No.43‑‑Exemption‑‑Intention and objects.

(b) Sales Tax Act (VII of 1990)‑‑‑

‑‑‑‑Sixth Sched., Sr. No.43‑‑‑C.B.R. Letter C. No.1/73‑STT/96, dated 15‑10‑1999‑‑‑Exemption‑‑‑Baggase used in‑house as fuel in the manufac­ture of sales taxable sugar‑‑‑Levy and demand of sales tax ‑‑‑Validity‑‑­When sugar became sales taxable in 1998, the in‑house consumption of sales taxable baggase for the manufacture of sales taxable sugar became exempt under the said general exemption clause of Sr. No.43 of the Sixth Sched. of the Sales Tax Act, 1990 and the specific exemption on baggase was not required any further‑‑‑Clarification given in Central Board of Revenue's Letter C. No.1/73‑STT/96, dated 15‑10‑1999 was correct in law and was confirmed by the Appellate Tribunal‑‑‑Order was set aside and appeal was accepted.

S.K. Masud Kiyani for Appellant.

Ishtiaq Ahmad, Law Officer and Phool Badshah, Cost Accountant for Respondents.

Dates of hearing: 24th September and 17th October, 2002.

2003 P T D (Trib.) 1212

[Customs, Central Excise and Sales Tax Appellate Tribunal]

Before Raj Muhammad Khan, Member (Judicial) and S. M. Kazimi, Member (Technical)

Appeal Case No CUS. A‑292/TRF of 2001/(PB), decided on December, 2002.

Sales Tax Act (VII of 1990)‑‑‑

‑‑‑‑S. 3‑B(3)(2), 6(1), 66 & Sixth Sched., Serial No.3(ii)‑‑‑Customs Act (IV of 1969), 33(1)‑‑‑C.B.R. Letter C. No. 3/37‑STB/99, dated 2‑8­-1999‑‑‑Collection of excess tax, etc.‑‑‑Import of fresh fruit ‑‑‑Exemption­‑‑Payment of sales tax under misconception‑‑‑Incidence of such taxes passed on to consumer‑‑‑Non‑payment claimed refund ‑‑‑Validity‑‑­Provision of S.3‑B of the Sales Tax Act, 1990, applied to sales tax paid on imported goods in terms of S.6(1) of the Sales Tax Act, 1990, as there was no provision to the contrary either under the Customs Act, 1969, or under S.6(1) of the Sales Tax Act, 1990‑‑‑Appellant/importer had not yet discharged the burden of proof placed upon them under S.3­B(3) of the Sales Tax Act, 1990‑‑‑No refund claim was admissible under the specific provision of S.3‑B(2) of the Sales Tax Act, 1990‑‑‑Refund provisions of S.66 of the Sales Tax Act, 1990 had not correctly been accorded by the Assistant Collector for non‑compliance of provisions of S.3‑B of the Sales Tax Act, 1990‑‑‑Appeal was dismissed by the Appellate Tribunal.

Zahid Idrees Mufti for Appellants.

Al‑Haj Gul, D.R. for Respondents.

Dates of hearing: 19th June and 23rd July, 2002.

2003 P T D (Trib.) 1215

[Customs, Central Excise and Sales Tax Appellate Tribunal]

Before Raj Muhammad Khan, Member (Judicial) and S. M. Kazimi, Member (Technical)

Appeal Case No. 7(1412)CU/IB of 2001 (PB), decided on 18th January, 2003.

(a) Sales Tax Act (VII of 1990)‑‑‑

‑‑‑‑Ss. 7, 33, 34 & 36‑‑‑Customs Act (IV of 1969), Ss.205, 108 & 27‑‑­Input tax adjustment‑‑‑Goods burnt to a fire incident in Customs bonded warehouse‑‑‑Amount was reimbursed by the Insurance Company to the Collector of Customs which included amount on account of duty and tax inclusive of sales tax‑‑‑Adjustment of such amount of duty and sales tax was allowed against another bill of entry by the Customs Authorities through an amendment under S.205 of the Customs Act, 1969‑‑‑Sales Tax Department disallowed such input tax adjustment on the ground that raw material of said hill of entry was not used for consumption in the manufacturing of taxable goods and also penalized for breach of the provision of S.7 of the Sales Tax Act, 1990‑‑‑Validity‑‑‑Action of availing of input tax credit against ex‑bond bill of entry allowed by the Customs Authorities under S.205 of the Customs Act, 1969, was not improper or unlawful‑‑‑Sales Tax Department should have sorted out the issue with his counterpart with Customs Collectorate instead of punishing the taxpayer who acted bona fide in accordance with the permission given by the said Collectorate of Customs‑‑‑Appellate Tribunal annulled the order of the Collector of Sales Tax and Central Excise in circumstances.

(b) Sales Tax Act (VII of 1990)‑‑‑

‑‑‑‑Ss. 7(1) & 6(1)‑‑‑Words "paid during the period" as used in S.7(1), Sales Tax Act, 1990‑‑‑Interpretation‑‑‑Words "paid during the period" as used in S.7(1) of the Sales Tax Act, 1990, had to be interpreted in the light of S.6(1) of the same Act‑‑‑Since no specific provision existed in y the Sales Tax Act, in terms of S.6(1) of the Sales Tax Act, 1990, the tax paid under the Second Appraisement System shall be deemed to have been paid in the exchequer in the tax period when the goods were made out of customs charge by the appropriate officers of Customs.

(c) Sales Tax Act (VII of 1990)‑‑‑

‑‑‑‑S. 7‑‑‑Determination of tax liability‑‑‑Input tax credit‑‑‑Act of availing of input tax credit, in tax return for 5/99 deposited on 30‑4‑1999 against the ex‑bond bill of entry, dated 30‑4‑1999, was not improper or inconsistent with law because the Customs made the said ex-­bond bill of entry out of customs charge on 17‑5‑1999 i.e. during the tax period of 5/99.

(d) Sales Tax Act (VII of 1990)‑‑‑

‑‑‑‑S. 7‑‑‑Determination of tax liability‑‑‑Input tax credit ‑‑‑Non­-indication of Sales Tax Registration Number on electricity bill‑‑­Disallowance of input tax credit‑‑‑Recovery of, with additional tax­-Validity‑‑‑WAPDA and PESCO took a long time to include the sales tax registration number of the consumers ‑‑‑WAPDA/PESCO's omission did not cause supply of taxable electricity involved in bill to any person registered person‑‑‑Omission on the part of beyond control of the taxpayer for which no mala fides had been attributed to the taxpayer‑‑‑Appellate Tribunal condoned such bona fide omission in the electricity bill.

Muhammad Naeem Qazi, A.K. Masud Kiyani, Qazi Waheeduddin, Syed Nawab and Mr. Altaf for Appellant.

Ishtiaq Ahmad, Law Officer of the Collectorate, Al‑Haj Gul, D.R., Hussain Muhammad, Senior Auditor and Alam Zaib Khan, Senior Auditor for Respondents.

Dates of hearing: 5th March; 2nd, 4th, April; 27th May; 16th 22nd, 31st October and 26th November, 2002:

2003 P T D (Trib.) 1215

[Customs, Central Excise and Sales Tax Appellate Tribunal]

Before Raj Muhammad Khan, Member (Judicial) and S. M. Kazimi, Member (Technical)

Appeal Case No. 7(1412)CU/IB of 2001 (PB), decided on 18th January, 2003.

(a) Sales Tax Act (VII of 1990)---

----Ss. 7, 33, 34 & 36---Customs Act (IV of 1969), Ss.205, 108 & 27--­Input tax adjustment---Goods burnt to a fire incident in Customs bonded warehouse---Amount was reimbursed by the Insurance Company to the Collector of Customs which included amount on account of duty and tax inclusive of sales tax---Adjustment of such amount of duty and sales tax was allowed against another bill of entry by the Customs Authorities through an amendment under S.205 of the Customs Act, 1969---Sales Tax Department disallowed such input tax adjustment on the ground that raw material of said hill of entry was not used for consumption in the manufacturing of taxable goods and also penalized for breach of the provision of S.7 of the Sales Tax Act, 1990---Validity---Action of availing of input tax credit against ex-bond bill of entry allowed by the Customs Authorities under S.205 of the Customs Act, 1969, was not improper or unlawful---Sales Tax Department should have sorted out the issue with his counterpart with Customs Collectorate instead of punishing the taxpayer who acted bona fide in accordance with the permission given by the said Collectorate of Customs---Appellate Tribunal annulled the order of the Collector of Sales Tax and Central Excise in circumstances.

(b) Sales Tax Act (VII of 1990)---

----Ss. 7(1) & 6(1)---Words "paid during the period" as used in S.7(1), Sales Tax Act, 1990---Interpretation---Words "paid during the period" as used in S.7(1) of the Sales Tax Act, 1990, had to be interpreted in the light of S.6(1) of the same Act---Since no specific provision existed in y the Sales Tax Act, in terms of S.6(1) of the Sales Tax Act, 1990, the tax paid under the Second Appraisement System shall be deemed to have been paid in the exchequer in the tax period when the goods were made out of customs charge by the appropriate officers of Customs.

(c) Sales Tax Act (VII of 1990)---

----S. 7---Determination of tax liability---Input tax credit---Act of availing of input tax credit, in tax return for 5/99 deposited on 30-4-1999 against the ex-bond bill of entry, dated 30-4-1999, was not improper or inconsistent with law because the Customs made the said ex-­bond bill of entry out of customs charge on 17-5-1999 i.e. during the tax period of 5/99.

(d) Sales Tax Act (VII of 1990)---

----S. 7---Determination of tax liability---Input tax credit ---Non­-indication of Sales Tax Registration Number on electricity bill--­Disallowance of input tax credit---Recovery of, with additional tax­-Validity---WAPDA and PESCO took a long time to include the sales tax registration number of the consumers ---WAPDA/PESCO's omission did not cause supply of taxable electricity involved in bill to any person registered person---Omission on the part of beyond control of the taxpayer for which no mala fides had been attributed to the taxpayer---Appellate Tribunal condoned such bona fide omission in the electricity bill.

Muhammad Naeem Qazi, A.K. Masud Kiyani, Qazi Waheeduddin, Syed Nawab and Mr. Altaf for Appellant.

Ishtiaq Ahmad, Law Officer of the Collectorate, Al-Haj Gul, D.R., Hussain Muhammad, Senior Auditor and Alam Zaib Khan, Senior Auditor for Respondents.

Dates of hearing: 5th March; 2nd, 4th, April; 27th May; 16th 22nd, 31st October and 26th November, 2002:

2003 P T D (Trib.) 1454

[Customs, Central Excises and Sales Tax Appellate Tribunal]

Before Raj Muhammad Khan, Member (Judicial) and S. M. Kazimi, Member (Technical)

Appeal Case No.7(1240)ST/IB/TRF of 2001(PB), decided on 25th January, 2003.

(a) Central Excise Rules, 1944‑‑‑

‑‑‑‑Rr. 192, 193, 194, 195 & 196‑‑‑Remission of duty on goods used for special industrial purposes‑‑‑Bond Register, maintenance of‑‑­Responsibility‑‑‑Bond Register was to be maintained by the Central Excise Officer incharge of the recipient mill and not by the mill itself‑‑Default of non‑entry in Bond Register could not by termed as breach of Chap. X of the Central Excise Rules, 1944, by the taxpayer or by the recipient mills.

(b) Central Excises Act (I of 1944)‑‑‑

‑‑‑‑S. 3 & 3‑B‑‑‑Central Excise Rules, 1944, Rr.7, 10, 192 & 210‑‑­S.R.O. 455(I)/96, dated 13‑6‑1996‑‑‑PCT Hdg. 73.10‑‑‑Duties specified in the First Schedule to be levied‑‑‑Metal containers‑‑­Concessional rate of duty‑‑‑Payment" of Central Excise Duty @ 5 % ad valorem, instead of 15%‑‑‑Validity‑‑‑Appellant supplied metal containers only and exclusively to a recipient mills who was duly licensed for purposes of R. 192 of the Central Excise Rules, 1944 had a valid B‑4 Bond as required under R. 192; had duly received the metal containers and stored and accounted for the same in the store‑room after entering it in RG‑II Register in terms of R. 194 of the Central Excise Rules, 1944, and there was no report about any shortage or misuse or misappropriation of the conditionally‑exempted (in excess of 5% ad valorem) metal containers in the recipients mills‑‑‑Appellate Tribunal condoned the non‑issuance of AR‑2 applications in view of compliance of all the provisions of Chap. X of the Central Excise Rules, 1944‑‑­Impugued order was set aside and the appeal vas accepted by the Appellate Tribunal.

Issac Ali Qazi and Muhammad Ashraf for Appellant.

Ishtiaq Ahmad, Law Officer, Iftikhar Hussain, Superintendent, Hamidullah, D.S. and Hussain Muhammad, Senior Auditor for Respondents.

Dates of hearing: 17th January; 16th April; 16th September; 3rd, 29th October and 11th November, 2002.

2003 P T D (Trib.) 1473

[Customs, Central Excises and Sales Tax Appellate Tribunal]

Before Raj Muhammad Khan, Member (Judicial) and S. M. Kazimi, Member (Technical)

Appeal Case No.ST.No.799/PB of 2002, decided on 4th January, 2003.

Sales Tax Act (VII of 1990)---

----Ss. 3, 3-AA, 33 & 34---Constitution of Pakistan (1973)---S.R.O. 583(I)/98, dated 12-6-1998---Scope of tax---Retail tax---Supply of alcoholic liquor to permit holders only and not general public ---Non­payment of retail tax---Recovery of same with additional tax and penalty--- Request for adjustment. of such demand against Central Excise Duty---Validity---Request of the appellant was not admissible under the law as Central Excise Duty and Sales Tax were two distinct taxes, levied under Items Nos. 44 & 49 respectively of Fourth Schedule (Legislative List, Par I) of the Constitution of Pakistan (1973)---Such duty and tax neither were substitute of each other or levied in lieu of one another--­Notwithstanding the fact that appellant paid Central Excise Duty on its service of provision of liquors (including alcoholic liquor), he was liable to. pay sales -tax on the taxable supply of alcoholic liquors during the period involved---Demand for payment of sales tax had been made correctly and lawfully and had to be paid as such---Demand was confirmed by the Appellate Tribunal except penalty which was remitted on the ground that the period involved was the initial days of levy of sales tax at retail stage 'and the appellant's delay/default might not have been intentional or deliberate till it was pointed out to him---Order was modified to the extent of remission of penalty only by the Appellate Tribunal. ---[2000 PTD 3765 reversed].

2002 PTD 1912 rel.

2000 PTD 3765 reversed.

Issac Ali Qazi for Appellant.

Ishtiaq Ahmad, Law Officer, Bakht Dauran, Senior Auditor and Al-Haj Gul, D.R. for Respondents.

Dates of hearing: 2nd, 16th September and 2nd October, 2002.

2003 P T D (Trib.) 1489

[Customs, Excises and Sales Tax Appellate Tribunal]

Before Zafar Iqbal, Member (Technical)

Customs Appeal No.K-15 of 2003, decided on 3rd February, 2003.

(a) Words and phrases---

----"Corrigendum"---Means things to be corrected.

(b) Customs Act (IV of 1969)---

----S. 180---Show-cause notice---Corrigendum---Effect---Word "corri­gendum" means things to be corrected---Such phrase refers to original show-cause notice and means that an error or mistake in respect of material particular can be corrected at a later stage---New rights or obligations cannot be created through corrigendum.

(c) Customs Act (IV of 1969)---

----Ss. 180 & 203---Show-cause notice---Correction of errors ---Scope--­Corrigendum creating new liabilities or involving those not party in criminal proceedings, issuing of---Effect---Powers of Customs Officer to correct errors are embodied in S.203 of the Customs Act, 1969---No other provisions in the said Act empower Customs Officer to change character or nature of on-going proceedings---New liabilities cannot he created through a corrigendum---If Adjudicating Officer arrival conclusion that imposition of penalty is required against some persons other than those included in show-cause notice, then an independent show-cause notice is required to be issued---By issuing a corrigendum so as to bring an infringement within ambit of existing proceedings would violate the principles of natural justice.

(d) Taxation---

---- Natural justice„ principles of---Applicability---Reasonable opportunity---Essential requirements---Test of reasonable opportunity--­Principles stated.

Both under Common Law and under the Statute and Constitution, the requirements of a reasonable opportunity are: (i) that the person proceeded against should be clearly and specifically told the charges standing against him; (ii) that he should be given full and adequate opportunity to explain and establish his innocence; (iii) that he should be allowed to show cause against the punishment; (iv) that there must not be any mala fides anywhere; and (v) that whole thing must be honest and fair deal done with a sense of responsibility.

The opportunity in order to be reasonable opportunity must be a real opportunity, which would make it possible for a taxpayer to persuade the competent authority to come to a different conclusion from the one at which he has tentatively arrived, and the Court tests and judges the opportunity from this angle.

Muhammad Aleem Khan for Appellant.

Departmental Representative for Respondent

Date of hearing: 3rd February, 2003.

2003 P T D (Trib.) 1566

[Customs, Excises and Sales Tax Appellate Tribunal]

Before Raj Muhammad Khan, Member (Judicial) and S. M. Kazimi, Member (Technical)

Appeal Case No.7(76)ST/IB of 2000(PB), decided on 4th January, 2003.

(a) Sales Tax Act (VII of 1990)---

----S. 8(1)(b)---S.R.O. 556(1)/96, dated 1-7-1996--Tax credit not allowed---Section 8(1)(b) of the Sales Tax Act, 1990, uses the word "goods" and the Table to S.R.O. 556(1)/96, dated 1-7-1996, specifies "vehicles of respective headings of Chapter 87" of the Pakistan Customs Tariff to be one such "goods" on which the entitlement of a registered person to claim input tax credit shall be disallowed.

(b) Customs Act (IV of 1969)---

----First Sched., Chap. 87---Dumper of Hdg. 87.04 included in terminology "vehicles of respective heading of Chapter 87" and no other interpretation is possible.

(c) Customs Act (IV of 1969)---

----First Sched., Chap. 87---Dumper---Machinery---Dumper not to be treated as a machinery.

(d) Customs Act (IV of 1969)---

--First Sched., Chap. 87---S.R.O. 556(I)/96, dated 1-7-1996---Dumper trucks were vehicles classified under Chap. 87 of the First Schedule to the Customs Act, 1969, and had to be viewed and treated as such for the purposes of Notification No.S.R.O.

(e) Sales tax---

----"Business of a registered person"---Meanings---"Business of a registered person" includes all his activity, whether in the office building or in the mine or, in quarry or in the manufacturing premises or in the storage or marketing premises of that registered person.

(f) Sales Tax Act (VII of 1990)-----

----S. 8(1)(b), 10(1), 2(23), 2(35) & 34---Customs Act (IV of 1969), First Sched., Hdg. 87.04---S:R.O, 556(I)/96, dated 1-7-1996—Tax credit not allowed---Import of dumper trucks---Claim of input tax deduction--Validity---Provisions of S.8(1)(b) of the Sales Tax Act, 1990 read with Sr. No.1 of the Table to S.R.O. 556(1)/96, dated 1-7-1996 were very cleat a°Md the dumper trucks (of Chap. 87) imported by a cement factory were not entitled to input tax credit---Order of the First Appellate Authority was set aside and confirmed/restored that of Additional Collector of Sales Tax by the Appellate Tribunal.

Ishtiaq Ahmad, Law Officer and Syed Ahmad, Senior Auditor for Appellant.

Issac Ali Qazi Muhammad Riaz and Tabrais Baig for Respondents.

Dates of hearing: 11th June; 3rd, 25th July; 5th August and 3rd October, 2002.

2003 P T D (Trib.) 1574

[Customs, Excises and Sales Tax Appellate Tribunal]

Before Mian Abdul Qayyum, Member (Judicial) and Zafar-ul-Majeed, Member (Technical)

Sales Tax Appeal No. 1583/LB of 2001, decided on 13th May, 2002.

Sales Tax Act (VII of 1990)-----

----Ss. 3, 11(2) & 34---Scope of tax---Cotton ginning factory---Recovery ratio of cotton seed from cotton ginned ---Assessee showed production and supply of cotton seed @ 54% of the cotton ginned---Adjudication Officer determined the short paid amount of sales tax on the basis of minimum recovery ratio of cotton seed at 58 % reported by other factories in the area---Validity---Department was competent to assess the correct amount of tax payable by the assessee in exercise of the powers conferred upon it by S.11(2) of the Sales Tax Act, 1990---Recovery ratio, of cotton seed in different areas of Multan Collectorate as accepted by the local Sales Tax Authorities ranged from 55% to 64.92%---Appellate Tribunal allowed the minimum recovery percentage of 55 %--­Department was directed to calculate the short paid amount of sales tax applying recovery ratio of 55% and recovery of the same from the assesses alongwith additional tax in. terms of S.34 of the Sales Tax Act, 1990.

Rana Muhammad Afzal for Appellant.

Imran Tariq, D.R. with Rana Shabbir Ahmed, S.A. for Respondent.

Date of hearing: 17th April, 2002.

2001 P T D (Trib.) 1580

[Customs, Excises and Sales Tax Appellate Tribunal]

Before Mian Abdul Qayvum, Member (Judicial) and Zafar-ul-Majeed, Member (Technical)

Sales Tax Appeal No. 102/LB of 2001, decided on 8th May, 2002.

Sales Tax Act (VII of 1990)---

----Ss. 3 & 34---Scope of tax---Production and supply of cotton lint--­Determination of supply of cotton seed---Supply of cotton seed was determined on the basis of supply of cotton lint---Short paid amount of sales tax was demanded ---Assessee contended that besides cotton lint produced, same was also purchased from the market---Department arbitrarily worked out the quantity of cotton seed produced on the basis of the formula which was not disclosed to them and order was passed ex parte without serving show-cause notice---Validity---Order was passed ex parte without having the assessee's written reply to the show­ cause notice on record or granting personal hearing---Formula of produc­tion of cotton seed had been applied to determine its actual production but neither there were any details about the same. in the order nor Department ,had been able to produce the same---Impugned order lacking necessary details, not being a speaking order, was not sustainable in the eyes of law--Order had been passed ignoring the basic principles of natural justice by condemning the assessee unheard and as such case needed to be heard afresh at original stage of adjudication---Appellate Tribunal set aside the order and 'remanded same for a fresh decision according to law after hearing the parties and receiving the evidence which they may like to produce.

Rana Muhammad Afzal for Appellant.

Imran Tariq, D.R. with Rana Shabbir Ahmad, S.A for Respondent.

Date of hearing: 17th April, 2002.

2003 P T D (Trib.) 1582

[Customs, Excises and Sales Tax Appellate Tribunal]

Before Abdul Majid Tiwana, Chairman and Falak Sher, Member (Technical)

E.A. No. 622/LB of 2000; decided on 11th October, 2000.

Central Excises Act (I of 1944)----

----S. 9---Offences and penalties---Imposition of penalty for failure to remove produced sugar from assessee's own godown a few days after the expiry period specified by the Collector, despite the fact that excise duty had been paid within the specified time ---Validity---Assessee could be penalized only if there had been any wilful evasion of duty on its part but there was no such allegation against it, nor there was anything on record to that effect---Appeal was accepted and order was set aside by the Appellate Tribunal.

PLD 1991 SC 963 rel.

Sajjad Mehmood Sheikh for Appellant.

Ms. Rukhsana Yasmin, Representative for Respondent.

Date of hearing: 11th October, 2000.

2003 P T D (Trib.) 1584

[Customs, Excises and Sales Tax Appellate Tribunal]

Before Zafar-ul-Majeed, Member (Technical) and Mian Abdul Qayyum, Member (Judicial)

Custom Appeal No. 139/LB of 1999, decided on 31st May, 2002.

Customs Act (IV of 1969)---

----Ss. 25, 18, 32, 80 & 83---Imports and Exports (Control) Act (X of 1950), S.3(1)---Value of imported and exported goods---Old and used pipes---Value in. view of physical condition/examination---Appellate Tribunal directed the Customs Authorities to assess a consignment of old and used pipes at value of Rs.10,000 per Metric Ton---Customs Authorities found the valuation of goods at Rs.17,000 per Metric Ton on the basis of evidential bill of entry and maintained the pitch of redemption fine at 10% of the value thereof---Validity---Valuation of old and used serviceable goods lacking standard specifications could not be made without their physical examination---Customs Authorities besides physical condition of the goods, did take into consideration the prevalent value, of identical goods based on the evidential bill of entry---Importer paid customs duty and taxes on the value of Rs.17,000 per Metric Ton which amounted to its implied acceptance---While fixing value of goods at Rs.1,000 per Metric Ton, in the present case, the physical condition of the goods was not discussed which was not possible without their examination, nor evidential bill of entry relied upon by the Customs Authorities was ordered---Appeal of the Department was accepted and order was set aside by the Appellate Tribunal.

Imran Tariq, D.R. for Appellant..

Kh. Ziaullah for Respondents.

Date of hearing: 22nd April, 2002.

2003 P T D (Trib.) 1591

[Customs, Excises and Sales Tax Appellate Tribunal]

Before Mian Abdul Qayyum, Member (Judicial) and Zafar-ul-Majeed, Member (Technical)

Appeal No. S.T.A.-81/LB of 2002, decided on 13th May, 2002.

Sales Tax Act (VII of 1990)---

----Ss. 3, 11(2) & 34---Scope of tax---Cotton ginning factory---Demand of sales tax had been raised on the ground that assessee showed production and supply of cotton seed @ 53.89% of the cotton ginned whereas the normal recovery ratio of other factories of adjoining area was 59%---Assessee contended that 59% recovery ratio of cotton seed applied by the Adjudicating Officer was based on presumption as there was no uniform standard to determine the recovery of cotton seed nor any specific instance was quoted by the Department to prove that the production of cotton seed declared was not correct---Validity---Recovery ratio of cotton seed in different areas of Multan Collectorate which was accepted by the local Sales Tax Authorities ranged from 55 % to 64.92%---In view of this information and in absence of any other evidence with the Department. Appellate Tribunal allowed the minimum recovery percentage of 55 % ---Department was directed to calculate the short paid amount of sales tax by applying recover ratio of 55%- and recover the same from the assessee alongwith additional tax in terms of S.34 of the Sales Tax Act, 1990---Penalty was, however, remitted and order was set aside by the Appellate Tribunal.

Rana Muhammad Afzal for Appellant.

Imran Tariq, D.R. with Rana Shabbir Ahmed, S.A. for Respondent.

Date of hearing: 17th April, 2002.

2003 P T D (Trib.) 1600

[Customs, Excises and Sales Tax Appellate Tribunal]

Before Mian Abdul Qayyum, Member (Judicial) and Zafar-ul-Majeed, Member (Technical)

Sales Tax Appeal No. 100/LB of 2001, decided on 13th May, 2002.

(a) Sales Tax Act (VII of 1990)-----

----S. 2(46)---S.R.O. 1361(I)/98, dated 9-12-1998---Value of supply--­Valuation of cotton seed---Short payment of tax on account of under valuation of cotton seed ---Assessees were required to pay sales tax on supply of cotton seed at its value fixed by the Central Board of Revenue vide S.R.O. 1361(1)/98, dated 9-12-1998 in terms of S.2(46) of the Sales Tax Act, 1990.

(b) Sales Tax Act (VII of 1990)---

----S. 11(2)---Assessment of tax---Suppression of sales---Detection of audit staff---Assessment of tax payable---Validity---Department was competent to assess the correct amount of tax payable by the assessee where audit staff detected suppression of sales by observing that the quantity of cotton seed produced did not-commensurate with the quantity of cotton received---Objection that the Department had gone beyond the record to determine the amount of tax had no force in circumstances.

Appeal No. 1539 of 2001 irrelevant.

(c) Sales tax---

---- Cotton seed---Recovery ratio----Recovery ratio of cotton seed in different areas of Multan Collectorate was accepted by the local Sales Tax Authorities ranged from 55 % to 64.92 %.

(d) Sales Tax Act (VII of 1990)---

----Ss. 3, 11(2) & 34---Scope of tax---Cotton ginning factory--­Determination of correct quantity of cotton seed recovered during the ginning of cotton ---Assessee's recovery ratio of cotton seed during the year 1997-98 was 57 % whereas during the year 1998-99 it reduced to 46.8 %---Department determined sales by ,applying average recovery ratio of 58% prevalent in the industry ---Validity---Assessee had not provided any, convincing reason for fall of recovery ratio from 57 % to 46.8 % in the succeeding year---Appellate Tribunal directed that the same recovery ratio of 57% be applied for the year 1998-99 to determine the amount of tax payable by the assessee---Order was set aside for a fresh decision.

Mian Abdul Ghaffar for Appellant.

Imran Tariq, D.R. with Rana Shabbir Ahmed, S.A, for Respondent.

Date of hearing: 17th April, 2002.

2003 P T D (Trib.) 1751

[Customs, Central Excises and Sales Tax Appellate Tribunal]

Before Raj Muhammad Khan, Member (Judicial) and S. M. Kazimi, Member (Technical)

Appeal No.7(1246)/CE/ST/IB of 2001(PB), decided on 7th August, 2002.

(a) Central Excises Act (I of 1944)---

----S. 4(1)-Determination of value for the purpose of duty---National concept of equalized wholesale cash price elucidated.

(b) Central Excises Act (I of 1944)—

----S. 4(1)---Determination of value for the purpose of duty---Element of incidental charges---Inclusion of---Words "without any abatement or deduction except the amounts of duty and sales tax" clearly mean that the charges (e.g. on account of loading, transportation, octroi, unloading, and duties and taxes other than central excise duty and sales tax) incurred or to be incurred post ex-factory up to the stage of wholesale market (or the consumers stage/market, if there is no wholesale market for such products) shall be included in the assessable value under S.4(1) of the Central Excises Act. 1944 irrespective of the fact as to whether these are borne by the buyers or by the sellers.

(c) Central Excises Act (I of 1944)---

----S. 4(1)---Determination of value for the purpose of duty---Notional concept of assessment value---Notional concept of assessment value under S.4(1) of the Central Excises Act, 1944 implies the general wholesale price. as if it was transacted as on the spot cash, where the seller's price ought to include all costs, duties, taxes and charges up to the wholesale market (or up to die consumers stage if there is no such wholesale cash market) except the amounts of central excise duty and sales tax involved.

(d) Central Excises Act (I of 1944)—--

----Ss. 4(1), 4 & 3---Central Excise Rules, 1944, Rr. 7, 9, 10 & 210---S.R.O. 456(1)/96, dated 13-6-1996---Central Excises General Order No.53/67, paras. 5, 6 & 8---Sales Tax Act (VII of 1990) Ss.2(46), 3, 6, 7, 11, 33, 34 & 36--­Determination of value for the purpose of duty---Element of incidental charges-­Inclusion of value of goods for purposes of excise duty--Incidental charges i.e. loading, unloading, transportation, octroi etc., claimed as paid by die buyer, were included in the value of the goods for paying duty in terms of provision of SA(1) of the Central Excises Act, 1944---Validity--Central Excise Duty was payable on the elements of post-clearance incidental charges (on account of load, transportation, octroi, unloading, etc.) incurred or liable to be incurred ex ­factory and these should be included in the assessable value under S.4(1) of the Central Excises Act, 1944.

Pepsi Cola's case Appeal Case No.52 of 2000; Coca Cola's case Appeal No.651/LB of 1999; Pakistan v. Popular Tobacco Co., Karachi PLD 1961 SC 66 and C.A. No. 1512 of 1999 distinguished.

Pakistan v. Kohat Cement Company and others PLD 1995 SC 659 rel.

(e) Central Excises Act (I of 1944)-----

----S. 4(1)---Sales Tax Act (VII of 1990), S.2(46)---"Determination of value for the purpose of duty" and "determination of value of supply" ---Distinction--­Incidental charges---Demand for sales tax on elements of incidental charges was to be looked into from the angle of the provisions of S.2(46) of the Sales Tax Act, 1990, which levy sales tax on supplies made under S.3 of the Sales Tax Act, 1990---As compared to notional concept of assessable value for central excise purposes under S.4(1) of the Central Excises Act, 1944, S.2(46) of the Sales Tax Act, 1990, provides for the duty-paid transaction concept of value by stating that it means "consideration in money, including all Federal and Provincial duties and taxes if any which the supplier receives from the recipient for that supply but excluding, the amount of tax"---Such distinction has to be borne in mind by the Department, while assessing the excise duty and sales tax simultaneously.

Abdul Wahab Qureshi for Appellants.

Pir Alam Shah, D.R., Al-Haj Gul, D.R., Ishtiaq Ahmad, Law Officer, Ahmad Nawaz Shah, S.I.O. and Jangi Khan, D.S. for Respondents.

Dates of hearing: 9th,. 22nd January; 14th February; 11th March; 8th, 17th April and 14th May, 2002.

2003 P T D (Trib.) 1844

[Customs, Excise and Sales Tax Appellate Tribunal N.-W.F.P.]

Before Raj Muhammad Khan Member (Judicial) and S.M. Kazimi, Member (Technical)

S.T.A. No. 588/PB of 2002, decided on 17th April, 2003.

(a) Sales Tax Act (VII of 1990)---

----S. 7---Levy and Collection of Extra Tax Rules, 1990, R.4 ---S.R.O. 795(I)/99, dated 30-6-1999---Determination of tax liability---Claim of inadmissible 5% extra amount on purchases---Recovery of, with additional tax ---Assessee contended that adjustment of "extra amount of tax" related to Notification No. S.R.O. 795(I)/99, dated 30-6-1999 which had since been rescinded vide S.R.O. 444(I)/2000, dated 1-7-2000 and show-cause notice issued after rescission of S.R.O. 795(I)/99, dated 30-6-1999 was nullity in eye of law and barred by limitation---Validity-­Irrespective of the fact that S.R.O. 795(I)/99, dated 30-6-1999 was rescinded by S.R.O. 444(I)/2000, dated 1-7-2000, the liability to extra amount of sales tax incurred during the validity and currency of S.R.O. 795(I)/99, dated 30-6-1999 was not affected as the rescission under S.R.O. 444(I)/99, dated 1-7-2000 was prospective---Since the rescission Notification No. S.R.O. 444(I)/2000, dated 1-7-2000 had not been given retrospective effect the liability accrued under S.R.O. 795(I)/99, dated 30-6-1999 was not diminished---Order of the Adjudicating Officer was confirmed by the Appellate Tribunal in circumstances.

(b) Sales Tax Act (VII of 1990)---

----Ss. 26, 2(9) & 34---General Clauses Act (X of 1897), S.10---Monthly Return---Due date---Late filing of returns only by one day---Levy of additional tax---Validity---Due date was defined under S.2(9) of the Sales Tax Act, 1990---Any delay in payment of tax due beyond the said due date involved additional tax under S.34 of the Sales Tax, Act, 1990--­Although, the delays were nominal, yet these were accepted and deliberate except for the delay on account of Muharam holidays and Sunday subject to verification, by the Collectorate---Appellate Tribunal confirmed the portion of impugned order relating to liability of additional tax on account of late payment of tax due as against the prescribed due date read with S.10 of the, General Clauses Act, 1897.

(c) Sales Tax Act (VII of 1990)---

----Ss. 3, 22, 34 & 33---Companies Ordinance (XLVII of 1984), S.255--­Levy of tax---Scope---Records---Difference in amounts of sales as per sales tax records as against Financial Statement and Annual Accounts--­Levy of sales tax on suppressed sales alongwith additional tax and penalty---Assessee contended that Financial Statement was prepared for purposes of Bank loan and income-tax and could not be relied upon for sales tax purposes---Sales tax Return's were filed as per Sales Tax Act, 1990, on taxable supplies defined under S.2(46) of the Sales Tax Act, 1990 and this had no nexus with the Income Tax Returns under the Income Tax Ordinance, 1979.---Validity---Records for sales tax purposes were prescribed under S.22 of the Sales Tax Act, 1990 and were maintained on day-to-day basis or as-and-when occurring basis or, on monthly basis and were micro, in nature---Financial Statement and Annual Statement (a micro account) was prepared and audited by Chartered Accountant for purpose of Companies Ordinance, 1984 and used by shareholders, income-tax assessors, Banks, Sales Tax Officers or others---Unlike an Income-tax Return, such Financial Statement and Annual Account was not a confidential document under law ---Assessee had not produced any certificate from the-Chartered Accountant that the Financial Statement and Annual Account was false or untrue and to what extent---Business enterprises should not be allowed to prepare and prescribe varying accounts, to suit their interest, for presentation before various persons and agencies and that the agency should not reconcile and satisfy the truthfulness of the account submitted before him with the other public document containing similar accounts or similar-basis accounts---Audited figures given, at free will and without coercion, in Financial Statement and Annual Account falsify the Sales Tax Accounts prepared by or for the assessee---Every prudent shareholder or tax official or auditor or investigator was bound to look into such accounts and reconcile them with a view to detecting tax evasion or misdeclaration, if any---Appellate Tribunal confirmed the order of the Adjudicating Officer.

1992 PTD 739; GST 2002 CL 236 and 153/IB of 2000 ref.

Zahid Idrees Mufti and Shahid Parvez Jami for Appellant.

Ishtiaq Ahmad, Law Officer and Fawwad Saeed, Senior Auditor for Respondents.

Dates of hearing: 27th May; 19th June; 3rd July; 18th November and 18th December, 2002.

2003 P T D (Trib.) 1857

[Customs, Central Excise and Sales Tax Appellate Tribunal]

Before Raj Muhammad Khan, Member (Judicial) and S.M. Kazimi, Member. (Technical)

Appeals Cases Nos. Cus. A-190/Transfer/PB of 2002 to Cus. A-199/Transfer/PB of 2002, 679/Transfer/PB/2002 to 688 and Cus. A-689/ Transfer/PB/2002 to 698, decided on 17th April, 2003.

(a) Customs Act (IV of 1969)---

----S. 3--Appointment of Officers of Customs---Officers of Customs were specified under S.3 of the Customs Act, 1969, which include Chief Collector, Assistant Collector, Additional Collector, Deputy Collector and any other Officer of Customs with any other designation--­Superintendents of Customs, Inspectors of Customs, Preventive Officers of Customs, Principal Appraisers of Customs, Appraisers of Customs and Examiners of Customs were Customs Officers within the meaning of S.3 of the Customs Act, 1969---To become the appropriate Officers of Customs under S.2(b) of the Customs Act, 1969, such Officers had to be assigned the functions for which they were appropriate Officers of Customs---Such assignment of functions may come from the provisions of the Customs Act, 1969 or the Rules made thereunder or under a notification to be issued by the Central Board of Revenue.

(b) Customs Act (IV of 1969)---

----Ss. 3, 4 & 6---Appointment of Officers of Customs---Officers of Directorate General of Inspection & Audit (Cus. & CE) and/or Directorate General of Intelligence and Investigation (Customs & CE), irrespective of their designation and grade, were Officers of Intelligence & Investigation (Cus. & CE) and not the Officers of the Customs in the ordinary sense and had to be specifically assigned functions in terms of Ss.3, 4 and/or 6 of the Customs Act, 1969, or under the relevant provisions of the Customs Act, 1969 for being empowered to exercise those functions.

(c) Customs Act (IV of 1969)---

----Ss. 3, 2(b), 4 & 6---Appointment of Officers of Customs---Examiner of Intelligence & Investigation---Status---Examiner of Intelligence & Investigation was neither an Appropriate Officer of Customs nor an Officer of Customs nor an Officer entrusted with the powers to exercise functions of a Customs Officer under Ss.2(b), 3, 4 & 6 of the Customs Act, 1969---All acts performed by the said officer as an Officer of Customs were invalid, void and ultra vires and of no legal consequence.

(d) Customs Act (IV of 1969)---

-----S. 156(1), Cl. (82)---Punishment for offences---Jurisdiction--­Provision of Cl. (82) of S.156(1) of the Customs Act, 1969 could be invoked only by the Court of Special Judge, and not by the Departmental Adjudicating Officer.

(e) Customs Act, (IV of 1969)---

----Ss. 2(s), 86, 87, 89, 116, 157, 161, 162, 163, 178 & 156(1), cis. (1), (8), (49), (50), (51), (57), (82) and (89)---S.R.O. 517(I)/89---dated 20-9-1984--S.R.O. 388(I)/82, dated 22-4-1982---S. R. O. 805(I)/84, dated 20-9-1984---S.R.O. 806(I)/84, dated 20-9-1984--S.R.O. 806(I)/94--­S.R.O. 491(I)/85, dated 23-5-1985---S.R.O. 371(I)/2002, dated 15-6-2002---Customs General Order No. 10 of 1991---Customs General Order No.9 of 1981---Criminal Procedure Code (V of 1898), S. 161--­Smuggling---Warehousing bond---Forwarding of goods to warehouse--­Exemption--Search, seizure and arrest in violation of Safe Transportation Scheme and evasion of customs duty, sales tax and advance income---Allegation of misuse of safe transportation facility by dumping into bonded goods in an unauthorized godown and goods never transported to the destination in spite of admission by the Customs Department that goods were shown as duly entered in Bond Register of appellant at the destination and duly accounted for under Customs supervision, for its storage and ex-bonding and also accounted for in the prescribed excise records of. RG-1, RG-2, Ars, G.Ps., etc. and finally accounted for as fully consumed in terms of the Consumption Certificates issued by the Assistant Collector Central Excise ---Validity--­Goods cleared from Karachi Port Trust under Safe Transportation Scheme were duly warehoused under Customs supervision at the destination Gadoon and there was no breach of the safe transportation provision, exemption provision, warehousing provision or any other provision by the appellants, as also certified and authenticated by the Customs and Central Excise Officer---Investigation was lacking and evasive enough, besides the legal and factual infirmities, and did not establish any case against the appellants---Order was set aside and appeal was disposed of as accepted.

Crescent Textile Mills Ltd. v. Central Board of Revenue NLR 1982 Tax-I and State v. Muhammad Nawaz Criminal Appeals Nos. 103 to 107 of 1994 ref.

Issac Ali Qazi on behalf of Appellant No. 1 (in 10 Appeals Cases Nos. Cus. A-190/Transfer/PB. to Cus. A-199/Transfer/PB of 2002).

Anwar Shah on behalf of Appellants Nos.2 and 3 in Appeals Cases Nos. 679/Transfer/PB to 688 of 2002 and Appeals Cases Nos. Cus. A-689/Transfer/PB to 698 of 2002).

Moeen Sethi, M.D. for Appeal No.1 (in Appeals Cases Nos. Cus. A-190/Transfer/PB of 2002 to Cus. A-199/Transfer/PB of 2002).

Pir Alam Shah, D.R.; Al-Haj Gul, D.R.; Azam Khan, D.S. (Godoon); Muhammad Naeem, E.O., Muhammad Zaman, D.S., Abdul Latif, I.O., Rana Zahid Hussain, Ex-Examiner, Shabih Haider, I.O. and Zaman, Inspector from Gadoon Customs for Respondent No.2.

Dates of hearing: 30th January; 20th February; 28th March; 25th April; 23rd, 28th May; 11th June; 4th July of 2002 and 8th January, 2003.

2003 P T D (Trib.) 1881

[Customs, Central Excise and Sales Tax Appellate Tribunal]

Before S. M. Kazimi, Member (Technical) and Raj Muhammad Khan, Member (Judicial)

S.T.A.-808/PB of 2002, decided on 19th April, 2003.

Sales Tax Act (VII of 1990)---

----Ss. 3(5), 3(1A), 8(1), 66 & 71---S.R.O. 795(I)/99, dated 30-6-1999 [Levy and Collection of Extra Tax Rules, 1999, R.41 --- S. R. O. 551(I)/96, dated 1-7-1996---Filing of Monthly Return Rules, 1996--­Demand of extra tax, to be paid separately, as the same had been paid in violation of R. 5 of the Levy and Collection of Extra Tax Rules, 1999--­Validity---Payment of extra tax of 5% on output separately and distinctly from the output tax of 15% for the same tax period by due date would not have made any material difference---No provision in Sales Tax Act, 1990 existed which authorized Federal Government/Central Board of Revenue to make subordinate Legislation to negate the adjustment of extra tax of 5% on output from :the input tax of 15% ---No loss to the exchequer and no undue benefit to the registered person would accrue if the lawful procedure was adopted by the registered person in terms of Sales Tax Act, 1990---Rule 5 of the Levy and Collection of Extra Tax Rules, 1999 transgressesed the authorizations vested by the relevant provisions of Sales Tax Act, 1990---Requirement of filing of return and payment of tax (including the extra tax) by the due date had been substantially complied with by the tax payer in a bona fide manner--­Non-compliance of requirement of unnecessary and superfluous R.5 of the Levy and Collection. of Extra Tax Rules, 1999 had not caused any breach of, law or loss to the exchequer or undue benefit to the appellant/registered person---Even if the procedure outlined in R.5 of the Levy and Collection of Extra Tax Rules, 1999 were literally adhered to the net result would not have been any different---Amount of tax due had been paid by the due date, nothing extra could be demanded from the appellant/registered person---Order was set aside by" the Appellate Tribunal to the extent of liability to extra amount of tax in terms of S.3(5) of the Sales Tax Act, 1990 and appeal was accepted accordingly to that extent.

PLD 1989 SC 222 ref.

Issac Ali Qazi for Appellant.

Hussain Muhammad, Inamul Haq and Qadeerullah for Respondents.

Dates of hearing: 11th June; 29th July; 31st October; 19th December. 2002, 20th January; 15th and 17th April, 2003.

2003 P T D (Trib.) 1888

[Customs, Central Excise and Sales Tax Appellate Tribunal]

Before S. M. Kazimi, Member (Technical) and Raj Muhammad Khan, Member (Judicial)

S.T.A. 1057/PB of 2002, decided on 17th April, 2003.

(a) Sales Tax Act (VII of 1990)---

----S. 59---Registration, Voluntary Registration and De-registration Rules, 1996, R. 3(3)---C.B.R. Letter C. No. 2(2). STP/99, dated 10-8-2002---Tax paid on stocks acquired before registration---Provisions of S.59 of the Sales Tax Act, 1990 were a relaxation to newly-registered persons, the person already registered had an inherent right under the VAT Scheme to claim input tax adjustment on the stocks of tax-paid inputs held at the close of the day on which the exemption on their output expired or ceased.

Appeal No.994 of 2001 (GST 2002 CL 94) ref.

(b) Sales Tax Act (VII of 1990)---

----S. 33---General penalties---Levy of penalty not based on a quantified/determined amount of tax was remitted by the Appellate Tribunal besides being in excess of the limit proposed in the show-cause notice.

(c) Sales Tax Act (VII of 1990)---

----S. 13 & 16---S.R.O. 561(I)/94, dated 9-6-1994---Exemption--­Registration of branches, divisions etc.---Tax on supply made from another godown during exemption period ---Validity---Godown of the appellant located out of Province was not a separately or independently registered person, independent of the appellant, in terms of S.16 of the Sales Tax Act, 1990---Appellant was a legal person being a limited company---Registration of the appellant covered the activities of all branches, divisions, units of the said company irrespective of its location--- Notification No. S.R.O. 561(I)/94, dated 9-6-1994 exempted" "supplies'' made by manufacturers and producers of industrial units set up in the Province and it did not restrict the exemption to supplies only in the same Province---Supplies made by the appellant through its own branches and godowns, anywhere in the country, were not denied of exemption---No tax could be levied on such supplies during the period of exemption.

(d) Sales Tax Act (VII of 1990)---

----S. 3 & 8---S.R.O. 578(I)/78, dated 12-6-1998---Levy of tax---Scope--Tax credit not allowed---Tax on sale of fixed assets (motor vehicles)---Validity--Appellant was not liable to pay sales tax on the sale of such fixed assets which were not admissible to input tax adjustment under S.8 of the Sales Tax Act, 1990 read with S.R.O. 578(I)/98, dated 12-6-1998.

2002 PTD 976; 2002 PTD (Trib.) 1455 and STA-2495/LB of 2001 ref.

(e) Sales Tax Act (VII of 1990)---

----S. 3, 33 & 34--Levy of tax---Scope---Tax on sale of scraps and wastes---Validity---Determination and demand of sales tax and additional tax on wastes and scraps was confirmed by the Appellate Tribunal--­Penalty imposed was remitted as there was no intent to evade such levy.

Hussain Sugar Mills v. Collector Sales Tax, Faisalabad Appeal Case No. 183/LB of 2001 distinguished.

S.T. Appeals Nos. 52 to 63 of 2001 rel.

(f) Sales Tax Act (VII of 1990)---

----S. 2(44)---Time of supply---Advances---Reasons for advance of money.

(g) Sales Tax Act (VII of 1990)---

----S. 3, 2(44), 6(2), 22(d), 33(2)(cc) & 34---Levy of tax---Scope---Time of supply---Advances---Tax on advances received---Validity---Appellant had not been able to show plausible reason to determine the exact nature of money which was otherwise termed an "advance" by everyone including the appellant and against which taxable goods were supplied on a date subsequent to such receipt of advances---Advances attract the term "time of supply" in terms of S.2(44) of the Sales Tax Act, 1990 and tax on such receipts of advances had to be paid accordingly and not as per the period of actual supply of the goods---Additional sales tax on such advances would accrue from the tax period that these were received by the appellant to the tax period 'that these were paid in the shape of tax on the total value of supply at the time of actual delivery to the customers--­Appellant was liable to additional tax under S.34 and penalty under S.33(2)(cc) of the Sales Tax Act, 1990 on account of said tax payments delayed as against the statutory requirements of S.6(2) read with S.2(44) of the Sales Tax Act, 1990---Imposition of penalty was remitted as a special case by the Appellate Tribunal with a stern warning to be careful in future.

1999 PTD 3907; 2002 PTD 2440 and 2002 PTD (Trib.) 2241 Asim Zulfiqar Ali, ACA, Shahzad Hussain, FCA and Saeed Iqbal for Appellant.

Al-Haj, D.R., Hussain Muhammad and Phool Badshah for Respondents.

Dates of hearing: 19th December, 2002 and 4th February, 2003.

2003 P T D (Trib.) 1930

[Customs, Excises and Sales Tax Appellate Tribunal]

Before Ms. Yasmin Abbasey, Member (Judicial-III)

Custom Appeal No.K-3 of 2002, decided on 17th January, 2003.

Customs Act (IV of 1969)---

----S. 18-B---Service charge---Fee, levy of---Validity---Service charge levied by virtue of S. 18-B of the Customs Act, 1969 was not a fee as it was neither meant for benefit of payees nor its collection enabled the Government to carry out expenses for the benefit of importer---With the advancement of information and media technology the determination of prices was an easy task, arid the quality of goods to be exported or imported could be checked through the machinery provided by the Customs Act, 1969---Imposition of service charge under S.18-B of the Customs Act, 1969 towards the pre-shipment inspection was ultra vires of the powers of the Federal Legislature---Order was set aside and appeal was allowed by Appellate Tribunal.

M. Afzal Awan for Appellant.

Islam Jan, Appraiser for Respondent.

Date of hearing: 17th January, 2003.

2003 P T D (Trib.) 1931

[Customs, Central Excises and Sales Tax Appellate Tribunal]

Before Zafar Iqbal, Member (Technical) and Abdur Rashid A. Shaikh, Member (Judicial)

Central Excise Appeal No.K-41 of 2002, decided on 2nd December, 2002.

(a) Central Excises Act (I of 1944)---

---S. 2(25)---Manufacture---Ingredients---In order to bring an article within the framework of word "manufacture" such article must change the shape emerged as a new product be identifiable and commercially marketable and be an altogether different product.

Civil and Military Press Ltd. v. Pakistan 1985 CLC 1021; Municipal Council, Domoh v. Vrajlal Manilal & Co. AIR 1982 SC 844; Union of India v. Delhi Cloth and General Mills AIR 1963 SC 79; Words and Phrases, Vol. 26 and Mewa Lal v. Tara Ram AIR 1973 All. 165 rel.

(b) Central Excises Act (I of 1944)---

----S. 2(25)---Manufacture---Conversion of tea and filter paper into tea bags in a continuous process---Levy of excise duty---Validity--­Treatment of tea bag/paper bag as an act of "manufacture" was wrong as in fact no independent product ever came into existence from the process of inserting the paper with the blended tea which in fact was a necessary act to use the paper pouches---Intervening act never assumed the status of manufacture---Demand of duty on paper bags used in the packing of tea as a result of a continuous process was not justified--­Appeal was allowed and order was set aside by the Appellate Tribunal.

Collector of Customs v. Abdul Majid Khan and others 1977 SCMR 371; Messrs Ilirjina & Co. (Pakistan) Ltd. v. Commissioner of Sales Tax, Central Karachi 1971 SCMR 128; Muhammad Ali v. State Bank of Pakistan, Karachi 1973 SCMR 140 and Madina Ghee Mills (Pvt.) Ltd. v. The Collector of Customs Adjudication, Faisalabad (2002) 85 Tax 263 ref.

Sattar Silat for Appellant.

S. Aftab Hussain, D.R. for Respondent.

Date of hearing: 2nd December 2002.

2003 P T D (Trib.) 2165

[Customs, Excise and Sales Tax Appellate Tribunal Pakistan]

Before Yasmeen Abbasey, Member (Judicial) and Zafar Iqbal, Member (Technical)

Sales Tax Appeal No. K-342 of 2002, decided on 29th May, 2003.

(a) Sales Tax Act (VII of 1990)-----

----S. 2(33) & (44)---Supply---Time of supply---Transaction of supply--­Ad hoc deposits/part payment, taxation of---If after coming into existence of the transaction of sale, any part payment is received by the supplier from the buyer, the supplier shall be liable to account for the part payment in the return of tax for that tax period and the sales tax shall be charged accordingly.

(b) Sales Tax Act (VII of 1990)-----

----S. 2(33) & (44)---Supply---Time of supply---No transaction of supply---Ad hoc deposits or advances, taxation of---Validity---If no transaction of supply had taken place and the supplier received any advances or deposits from the buyers, such advances/deposits were not liable to the charge of sales tax---Contract of sale or agreement to sell having been executed with the stipulation of adjustment of full or part payment from the advances/deposits, the said adjustment in full or in part shall be deemed to be in pursuance of the transaction of supply and such amount shall immediately become liable to the imposition of sales tax.

(c) Sales Tax Act (VII of 1990)-----

----Ss. 2(44), 36 & 45---Sales of Goods Act (III of 1930), S.4---Time of supply---Demand was raised for non-deposit of sales tax on advance payments against further supplies to be made as the same were not accounted for in the Monthly Sales Tax Return ---Assessee contended that tax under the sales tax law was leviable only on supplies, whereas in the present case no supply ever took place in respect of disputed advances--­Validity---Department had neither stated that any contract of sale or further supply of the goods existed between the assessee and the depositors, nor there was any evidence on record on the basis of which it could be inferred that the deposits with the assessee/appellants were in possession of the assessee/appellants as an outcome of a contract of sale or an agreement to sell---Treating such deposits as a sale within the framework of Sales Tax Act, 1990 and creating a sales tax liability was not legal in circumstances---Interpretation placed by the Department through the impugned letter/instruction show-cause notice and the assessment order passed in pursuance thereof were illegal.

Maple Leaf Cement Factory Ltd. v. Federation of Pakistan 1999 Taxation 41; Pakistan Suzuki Motors Co. Ltd. v. Federation of Pakistan 2002 PTD 2440 and Nigel Mansell Sports Co. Ltd.'s case LON/90/613Y (VTD 6116) rel.

Gulistan Power Generation Limited v. Collector, Adjudication Sales Tax Appeal No. K-84 of 2002; Elahi Cotton Mills Ltd. v. Federation of Pakistan and others PLD 1997 SC 582; B. N. Syed v. Afzal Jahan Begum PLD 1970 SC 29; Siraj Din v. Sardar Khan 1993 SCMR 745 and Mehran Associates Limited v. The Commissioner of Income-tax, Karachi 1993 SCMR 274 = 1993 PTD 69 ref.

(d) Sales Tax Act (VII of 1990)---

----S.2 (33) & (44)---Supply---No provision of Sales Tax Act, 1990 had purported to deem the receipt of money to be a saled.

(e) Sales Tax Act (VII of 1990)-----

----S. 2 (33) & (44)---Supply---Bailment of money---In none of the provisions of the Sales Tax Act, 1990, bailment of money could be deemed to be a sale or a supply of the goods.

(f) Sales Tax Act (VII of 1990)---

----S. 2(30)(22) & (3)---Scope and application of.

Muhammad Naseem for Appellant.

Ishaq Hussain, D.R. for Respondent.

Date of hearing: 29th May, 2003.

2003 P T D, (Trib.) 2233

[Custom, Central Excise and Sales Tax Appellate Tribunal]

Before Mian Abdul Qayyum, Member (Judicial) and Zafar-ul-Majeed, Member (Technical)

Appeal No. CA. 1538/LB of 2001, decided on 28th January, 2002.

Customs Act (IV of 1969)---

----Ss. 25 & 156(1), Cls. (9) & (14)---S.R.O. 1374 (1)/98, dated 17-12-1998---Value of imported and exported goods---Import of BOPP Film of PCT Hdg. No. 3920-2012---Declared value was found less and the same was enhanced on the basis of photocopy of a computer print resulting in determining the value of consignment ---Validity--­Confession was made by the reprehensive of the Department that value was determined only on the, sis of computer print without examining the original bills of entry--Order was set aside by the Tribunal for a fresh decision according to law after hearing the parties and receiving the documents which they may like to produce.

Malik Muhammad Arshad for Appellant.

Imran Tariq, D.R. for Respondent.

Date of hearing: 28th January, 2002.

2003 P T D (Trib.) 2257

[Customs, Central Excise and Sales Tax Appellate Tribunal]

Before Mian Abdul Qayyum, Member (Judicial) and Zafar-ul-Majeed, Member (Technical)

Custom Appeal No.723/LB of 2001, decided on 2nd May, 2002.

(a) Customs Act (IV of 1969)---

----Ss. 156(1), 8, 89 & 178---Prohibition (Enforcement of Hadd) Order (4 of 1979), Arts.3 & 4---Confiscation---Appeal barred by limitation--Appellants in judicial lock-up ---Condonation of delay--­Validity---Power of attorney, application for interim injunction as well as affidavit of the appellants for filing of appeal was attested by Jail Superintendent after lapse of time for filing appeal---Delay in filing the appeal was condoned and appeal was held to be within time by the Appellate Tribunal in circumstances.

(b) Customs Act (IV of 1969)---

----Ss. 156(1), 8, 89 & 178---Prohibition (Enforcement of Hadd) Order (4 of 1979), Arts.3 & 4---Confiscation---Notices for hearing---Appellants in judicial lock-up---Non-service of notices---Order for confiscation of goods---Validity---Notices of hearing claimed to have been issued by the Adjudicating Officer may not gave been received by the appellants--­Appellants appear to have been condemned unheard---Order was not sustainable in law in the circumstances and the same was set aside by the Appellate Tribunal for a fresh decision in accordance with law after hearing the parties and after receiving the evidence which they may like to produce.

Yasoob Mufti for Appellant.

Imran Tariq, D.R. for Respondent.

Date of hearing: 23rd April, 2002.

2003 P T D 2264

[Customs, Central Excises and Sales Tax Appellate Tribunal]

Before Pir Akhtar Hussain Bodla, Member Judicial and Zafar Iqbal Member Technical

Customs Appeals Nos. 274 to 277/LB of 2000, decided on 27th May, 2003.

(a) Customs Act (IV of 1969)----

-----S. 209---Principal and agent---Liability---Within the framework of S.209 of the Customs Act, 1969, an agent represents the principal or the importer or an exporter, and accordingly for all his acts including making of statement and for submission of documents, the principal is responsible---Agent could be held liable for a criminal act under the relevant provisions of law or for misconduct under the governing, rules relating to Licensing of Agents.

(b) Customs Act (IV of 1969)---

----S. 209---Principal and agent---Collusion liability of agent with the principal---Standard of proof---Agent was charged on an. assumed collusion with the exporter/principal---No linkage between the actions of the agent and that of his principal was established ---Validity-- Collusion means an agreement or understanding between the parties to make someone believe in the existence of a truth which the parties know to be in non-existent---Use of the word "collusion" suggested that a person knew what he was about and that he did it secretly or fraudulently---Standard of proof required for the proceedings which were criminal in nature was that beyond all reasonable doubt the culprit be found to be linked with the crime committed---If that is not there, then the action of the concerned Authorities would be without jurisdiction, illegal void and ab initio wrong.

(c) Customs Act (IV of 1969)---

----S. 32---Sea Customs Act (VIII of 1878), S.39---Penal Code (XLV of 1860), S.26---Untrue statement, error, etc.---Mens rea---Reason to believe---Explanations and principles.

(d) Customs Act (IV of 1969)---

----S. 209---Principal and agent---Liability---Fraudulent transaction and misdeclaration---Exporter was accordingly penalised and punished--­Agent of the exporter was also held guilty of the same offences as those of the exporter and was imposed heavy penalties---Department contended that the agent/appellant, after obtaining permission for making an amendment in the shipping bill, filed a new bill of export rather than amending the same, and this act of the agent/appellant cast a shadow of doubt regarding his conduct---Validity---No direct role could be attributed to the agent for the commission of crime---After having obtained necessary permission for making an amendment in the shipping documents, presentation of a new bill was a procedural lapse and the same could not create a criminal liability in absence of a strict liability of principal---Act of the agent/appellant did not constitute the alleged offences---Order was set aside by the Appellate Tribunal to the extent it applied to the appellant/customs agent.

Pakistan v. Hardcastle Waud (Pakistan) Ltd. PLD 1967 SC 1

Muhammad Sami Hayat for Appellant.

M.B. Tahir, D.R. for Respondent.

Date of hearing: 27th May, 2003.

2003 P T D (Trib.) 2272

[Customs, Central Excise and Sales Tax Appellate Tribunal]

Before Mian Abdul Qayyum, Member (Judicial) and Zafar-ul-Majeed, Member (Technical)

S. T. A. No. 1223/LB of 2001, decided on 2nd April, 2002.

Sales Tax Act (VII of 1990)---

----Ss. 3, 6, 7, 11, 22 & 26---Scope of tax---Tax was levied on the basis of photo copies of invoices, provided by the informer, allegedly issued by the appellant to show that it had made supplies to unregistered- person, collected sales tax but did not deposit the same in the treasury--­Validity---Appellant was not confronted with any original record during the adjudication proceedings and reference to invoices was incorrectly made in the order---On several requests by the Appellate Tribunal, Department failed to produce the same---In the absence of original record Appellate Tribunal was not in a position to finally determine as to whether findings of the Adjudicating Officer were based on any record or not and for same reason as, to whether the reference to original invoices was factually correct or not---In order to safeguard the interest of both the sides, Appellate Tribunal set aside the order and remitted the same for fresh decision in accordance with law after hearing the parties and after receiving the evidence which they may like to produce.

Imran Anjum Alvi and Hassan Anwari for Appellant.

Imran Tariq, D.R. with Riaz Hussain Tahir, S.A.

Date of hearing: 2nd Appeal, 2002.

2003 P T D (Trib.) 2280

[Customs, Central Excise and Sales Tax Appellate Tribunal]

Before Mian Abdul Qayyum, Member (Judicial) and Zafar-ul-Majeed, Member (Technical)

Custom Appeal No.933/LB of 2001, decided on 19th March, 2002.

Customs Act (IV of 1969)---

----Ss. 156(1) & 89---Confiscation of vehicle being nun-duty paid without giving any opinion for its redemption---Validity---Original chassis number was grinned and chassis place was filled with welding rods and chassis number was engraved on upper portion of the grinned place of chassis frame which allegedly was self-punched and not in sequence condition---Reports of Laboratory and company, were that vehicle was locally assembled---Validity---In view of reports, there was no doubt about the fact that the confiscated vehicle was locally assembled---Forensic Science Laboratory, had not mentioned that chassis was tampered---Chassis code number indicated that it was in respect of vehicle which was imported in CKD condition and was locally assembled---Order confiscating the vehicle was not sustainable in law and the same was set aside---Appeal was accepted by the Appellate Tribunal and confiscated vehicle was directed to be released to its lawful owner without any condition.

Muhammad Aslam Khan Babar for Appellant.

Imran Tariq, D.R. with Rahat Pirzada, D.S.

Date of hearing: 19th March, 2002

2003 P T D (Trib.) 2296

[Customs, Central Excise and Sales Tax Appellate Tribunal]

Before Mian Abdul Qayyum, Member (Judicial) and Zafar-ul-Majeed, Member (Technical)

S.T.A. No.433/LB of 2000, decided on 18th March, 2002.

Sales Tax Act (VII of 1990)---

----Ss. 10 & 34---Excess input tax---Claim of refund---Deduction from such refund on account of additional tax and against invoice ---Validity--­Admittedly order was an ex parte order and the same was cyclostyled pro forma wherein some entries had been filled in with ball point pencil--­Adjudicating Officer signed the order which was prepared by the office without applying his independent judicial mind to the facts involved--­Department did not offer, any explanation as to how and under what circumstances, the additional tax and amount against invoice had been deducted---No show-cause notice was issued---No material was brought on record to show that these deductions were made on the basis of admission or were due on account of any proper and legal adjudication orders---Order was set aside by the Appellate Tribunal for a fresh decision according to law after hearing the parties and after receiving the evidence, which they may like to produce.

Ch. Abdul Waheed for Appellant.

Rana Shabbir Ahmad, S.A.

Date of hearing: 18th March, 2002.

2003 P T D (Trib.) 2306

[Customs, Central Excise and Sales Tax Appellate Tribunal]

Before Mian Abdul Qayyum, Member (Judicial) and Zafar-ul-Majeed, Member (Technical)

S.T.A. No. 2755/LB of 2001, decided on 27th March, 2002.

(a) Sales tax---

---- Speaking order---An order to be valid and binding must contain the reasons on the basis of Which the same had been passed and in the absence of any reason it could not be said to be a speaking order.

PLD 1998 Lah. 100 rel.

(b) Sales Tax Act (VII of 1990)----

----Ss. 11, 34 & 33---Assessment of tax---Demand of evaded sales tax, in the opinion of Adjudicating Officer, on supply of cotton seed and oil cake alongwith additional tax and penalty---Ex parte order ---Assessee/tax payer contended that audit report did not show any outstanding amount of sales tax for the relevant year---Validity---Audit report had categorically stated that no amount on account of sales tax was outstanding against the assessee/taxpayer---Appellate Tribunal, in order to safeguard the interests of both the parties set aside the order and remitted the case for fresh decision in accordance with law after hearing the parties and after receiving the evidence which they may like to produce.

Mirza Muhammad Waheed for Appellant.

Imran Tariq, D.R. for Respondent.

Date of hearing: 27th March, 2002.

2003 P T D (Trib.) 2315

[Customs, Central Excise and Sales Tax Appellate Tribunal]

Before Mian Abdul Qayyum, Member (Judicial) and Zafar-ul-Majeed, Member (Technical)

C.A. No.95/LB of 2002, decided on 1st April, 2002.

Customs Act (IV of 1969)------

----Ss. 156(1) & 89---S.R.O. 1374(1)/98, dated 17-12-1998--­Confiscation of cloth being foreign origin and non-duty paid without examination from the Textile Engineering Institute---Option for redemption was also not allowed---Validity---Appellant raised a serious dispute regarding the confiscated cloth being of local origin and also taking into consideration the fact that Adjudicating Officer did not have the same examined from the Textile Engineering Institute---Adjudicating Officer was directed to have the confiscated cloth examined from the Textile Engineering Institute in order to determine its origin, after associating the appellant or his representative and a representative of the detecting agency---Case was remanded for fresh decision according to law after hearing the parties and after receiving the evidence which they .may like to produce.

Jawwad Mehmood for Appellant.

Imran Tariq, D.R.

Date of hearing: 1st April, 2002.

2003 P T D (Trib.) 2353

[Customs, Central Excises and Sales Tax Appellate Tribunal]

Before Mian Abdul Qayyum, Member (Judicial) and Zafar-ul-Majeed, Member (Technical)

Appeal No.C.A. 2312/LB of 2001, decided on 11th March, 2002.

Customs Act, (IV of 1969)---

----Ss. 32(2), 156(1) 14 & 81---S.R.O. 1374(I)/98, dated 17-12-1998--­Untrue statement, error, etc. ---Misdeclaration---Confiscation of goods--­Redemption fine---Validity---Excess quantity detected by the Customs Authorities as a result of 100% weighment of the consignment and chargeability of customs duty and taxes thereon was admitted---Value of goods being on weight basis, false declaration of weight in the bill of entry was obviously made with the intention of evading payment duty and taxes---Charge of misdeclaration stood established---Adjudicating Officer had rightly ordered confiscation of offending goods 'and their release against redemption fine equal to 100% of the duty and taxes attempted to be evaded in terms of SA.O. 1374(I)/98, dated 17-12-1998.

Rana M. Arshad, for Appellant.

M. Amjad Akhtar for Respondent.

Date of hearing: 4th February; 2002.

2003 P T D (Trib.) 2358

[Customs, Central Excises and Sales Tax- Appellate Tribunal]

Before Mian Abdul Qayyum, Member (Judicial) and Zafar-ul-Majeed, Member (Technical)

Appeal No. 1474/LB of 2000, decided on 14th February, 2002.

Sales Tax Act (VII of 1990)---

----S. 36---S.R.O. 1307(I)/97, slated 20-12-1997---S.R.O. 461(I)/1999--­Recovery of tax not levied or short-levied. or erroneously refunded--­Amount of short payment of tax which caused violation of S.36 of the Sales Tax Act, 1990, recoverable alongwith additional, was not determined---Validity---Adjudicating Officer observed that "the sales tax Department may verify the claim of principal amount of sales tax demanded had been deposited and adjusted recovery accordingly"--­Instead of determining the amount payable as required under S.36 of the Sales Tax Act, 1990, the exercise had left to be done by the detecting agency---Order passed did not meet the requirements of speaking order to be passed in terms of S.36 of the Sales Tax Act, 1990---without going into the merits, Appellate Tribunal set aside the order for fresh decision according to law giving judgment on each issue after giving due consideration to the contentions raised and determine the amount of tax to be payable.

Tariq Najib Chaudhry for Appellant.

Imran Tariq D.R. for Respondent.

Date of hearing: 2nd February, 2002

2003 P T D (Trib.) 2364

[Customs, Central Excise and Sales Tax Appellate Tribunal]

Before Mian Abdul Qayyum, Member (Judicial) and Zafar-ul-Majeed, Member (Technical)

Appeal No.2241 /LB of 2001, decided on 6th February, 2002.

Sales Tax Act (VII of 1990)---

----Ss. 7(1) & 8(1)(b)---S.R-O. 1307(I)/97, dated 20-12-1997--­Determination of tax liability---Demand of sales tax alongwith additional tax for claiming inadmissible input tax credit against purchase/ import of spare parts of loader in violation of S.R.O. 1307(I)/97, dated 20-12-1997---Appellant contended that S.R.O. 1307(I)/97, dated 20-12-1997 issued under S.8(1)(b) of the Sales Tax Act, 1990 was in conflict with the provisions of S.7 of the Sales Tax Act, 1990 which allowed input tax credit in respect of a tax period on all goods acquired for purpose of making taxable supplies and demand of sales tax and imposition of penalty was without lawful authority ---Validity---S.R.O. 1307(I)/97, dated 20-12-1997 issued under S,8(1)(b) of the Sales Tax Act, 1990. disallowed input tax credit on all goods which did not form direct consistently or integral part of the taxable goods produced---On examination of provisions S.7(1) and 8(1)(b) of the Sales Tax Act, 1990 and S.R.O. 1307(I)/97, dated 20-12-1997, Appellate Tribunal found that S.R.O. 1307(I)/97, dated 20-12-1997 was not in conflict with any substantive provision of Sales Tax Act, 1990---Order was upheld to the extent of demand of sales tax alongwith additional tax and penalty was remitted by the Appellate Tribunal.

Writ Petition No. 9272 of 1998 and Civil Petitions Nos. 1986-L, 1987-L, 1995-L, 1996-L and 2012-L of 1998 ref.

1999 PTD 2174 rel.

Zaheer Ahmed Khan for Appellant.

Imran Tariq D.R. for Respondent.

Date of hearing: 30th January, 2002.

2003 P T D (Trib.) 2369

[Customs, Central Excises and Sales Tax Appellate Tribunal]

Before Zafar-ul-Majeed, Member (Technical) and Mian Abdul Qayyum, Member (Judicial)

Appeal,No.527 and 528 of 2001, decided on 15th January, 2002.

Sales Tax Act (VII of 1990)---

----Ss. 3, 6, 11, 22, 26, 33 & 34---Scope of tax---Penalty for non filing of returns and non-payment of sales tax due in violation of Ss.3,6,11,22,26,33 and 34 of the Sales Tax Act, 1990---No narration of facts--Non-speaking order---Validity---Order did not contain any "narration of relevant facts" in respect of the asses see/taxpayer nor did it describe the "points in issue" between the parties----"Reasons" inflicting penalty were also not given in the order ---Assessee/taxpayer was also not served with any notice of hearing---Order was nullity in the eye of law having been passed without heating the Assessee/taxpayer and also for reason that the same did not come up to the requirements of the "speaking order" which could be legally sustained---Order was set aside by the Appellate Tribunal for fresh decision in accordance with law after hearing the parties and after receiving the evidence which they may like to produce.

Muhammad Zulfiqar Khokhar for Appellant.

Imran Tariq, D.R. for Respondent.

Date of hearing: 15th January, 2002.

2003 P T D (Trib.) 2374

[Customs Appellate Tribunal]

Before Zafar-ul-Majeed, Member (Technical) and Mian Abdul Qayyum, Member (Judicial)

C. A. No. 1998/LB of 2001, decided on 24th January, 2002.

Customs Act (IV of 1969)---

----Ss. 17 & 156(1)(8)---Detention and confiscation of goods, imported in breach of section 15 or section 16 of the Customs Act, 1969--­Recovered car was confiscated---Ex parte decision on merits---No opportunity of being heard---Validity---Representative of the department himself suggested that since prima facie no opportunity of being heard was provided to the appellant, the order may be set aside for fresh decision according to law after hearing the parties and after receiving the evidence which the parties may like to produce---Order was set aside by the Appellate Tribunal accordingly.

Suleman Ghazi for Appellant.

Imran Tariq D.R. for Respondent.

Date hearing: 24th January, 2002.

2003 P T D (Trib.) 2379

[Customs, Central Excises and Sales Tax Appellate Tribunal]

Before Zafar-ul-Majeed, Member (Technical) and Mian Abdul Qayyum, Member (Judicial)

S.T.A. No.2443/LB of 2001, decided on 17th April, 2002.

(a) Sales Tax----

---- Service of notice---Non-production of relevant record by the Department---Presumption---If a party fails to produce the record which it claims to be .in its possession then the presumption is raised against it and the presumption is that if the said record was produced then it would go against it.

(b) Sales Tax Act (VII of 1990)---

----S. 7---S.R.O. 698(I)/96, dated 22-8-1996---Determination of tax liability---Service of notice---Non-production of record regarding such service of notice before the Appellate Tribunal---Validity---Either the department was not in possession of any of notices or it was deliberately avoiding to produce' the same before the Appellate Tribunal--­Assumption would be that notices might not have, been issued and might not have been served on the Assessee/tax payer---Ex parte order would militate against the basic law that no one is to be condemned unheard--­Order was set aside and the case was remanded for fresh decision in accordance with law after hearing the parties and after receiving the evidence which they might like to, produce.

Rana Muhammad Afzal for Appellant.

Imran Tariq for Respondent.

Date of hearing: 17th April, 2002.

2003 P T D (Trib.) 2385

[Customs, Central Excise and Sales Tax Appellate Tribunal]

Before Mian Abdul Qayyum, Member (Judicial) and Zafar-ul-Majeed, Member (Technical)

S.T.A. No. 1334/LB of 2001, decided on 5th April, 2002.

(a) Sales Tax Act (VII of 1990)---

----S. 3A(2)---Turnover tax---Benefit of turnover scheme---Appellant admittedly did not apply for registration under the turnover tax regime as required under subsection (2) or 3(a) of the Sales Tax Act, 1990---In absence of any application for registration under the Turnover Tax Scheme, the appellant could not claim benefit of the said scheme.

(b) Sales Tax Act (VII of 1990)---

----S. 3---Scope of tax---Adjudicating Officer reduced the amount of sales tax by accepting the plea of the appellant that sales tux was to be charged on actual value of the supply and not on the volume of the total "project cost"--Appellant contended that he could not pay the same as the Department, to whom supply was made, did not pay the amount of sales fax involved---Validity---Appellant, admittedly, was registered with the Sales Tax Department and could not be de-registered before the expiry of two years from the date of registration---Adjudicating Officer passed a balanced and speaking order keeping in view all the relevant provisions of law---While maintaining the order to the extent of sales tax alongwith additional tax, Appellate Tribunal remitted the amount of penalty as the conduct of the appellant was not such as to invite its imposition---Order was modified accordingly by the Appellate Tribunal.

Hashmat Ali for Appellant.

Imran Tariq, D.R. for Respondent.

Date of hearing: 28th March, 2002.

2003 P T D (Trib.) 2392

[Customs, Central Excise and Sales Tax Appellate Tribunal]

Before Mian Abdul Qayyum, Member (Judicial) and Zafar-ul-Majeed, Member (Technical)

S.T.A. No. 2569/LB of 2001, decided on 3rd June, 2002.

Sales Tax Act (VII of 1990)---

----Ss. 3, 2(3)(a), 2(9), 6, 7, 11, 22, 26 & 33(2)(cc)----Customs Act (IV of 1969), Ss. 79 & 104---S.R.O.No.1185(I)/90, dated 18-11-1990--­S.R.O No. 112(I)/90, dated 1-11-1990---Scope of tax---input tax adjustment---Disallowance of input tax adjustment on purchase of raw material from an importer on the ground that supplier being unregistered could not issue a sales tax invoice which the appellant had to possess to be entitled to claim input tax adjustment in view of S.7(2)(1) of the Sales Tax Act, 1990---Validity---Supplier was an importer/wholesaler---Provisions of Ss.2(3)(a) & 2(9) of the Sales Tax Act, 1990 (as these sections existed during May, 1996) show that sales tax paid by wholesaler whose suppliers were not liable to sales tax being exempt under S.R.O. No.1185(I)/90, dated 18-11-1990 at previous stage will be input ax for a registered person who subsequently purchased these goods from the wholesaler---Importer or a wholesaler was not required to be registered under S.14 of the Sales Tax Act, 1990 in view of S.R.O. No.112(I)/90, dated 1-11-1990---Since, suppliers were making exempt supplies, they were not legally bound to issue sales tax invoice which was only required under S.23 of the Sales Tax Act, 1990 where taxable supplies had been made-Neither supplier could issue nor appellant could obtain sales tax invoice about the disputed supply---Provision of S.7 of the Sales Tax Act, 1990 as it stood in May, 1996, provided that the appellant could claim input tax in case of goods imported into Pakistan if he held the bill of entry duly cleared by the Customs under S.79 or 5.104 of the Customs Act, 1969---Appellant had bill of entry duly cleared under the Customs Act, 1969 and input tax had been paid at the import stage---Appellant thus had rightly claimed input-tax adjustment---Claim of input-tax adjustment being valid and legal, appellant could neither be asked to pay this amount nor could he be charged with payment of any additional tax or penalty---Order for payment of tax alongwith additional tax and penalty was illegal and the same was set aside---Appeal was accepted.

Shahbaz Butt for Appellant.

Imran Tariq, D.R. for Respondent.

Date of hearing: 23rd May, 2002.

2003 P T D (Trib.) 2439

[Customs, Central Excise and Sales Tax Appellate Tribunal]

Before Mian Abdul Qayyum, Member (Judicial) and Zafar‑ul‑Majeed, Member (Technical)

Appeal No. 1359/LB of 2001, decided on 6th February, 2002.

Central Excises Act (I of 1944)‑‑‑

‑‑‑‑S. 3‑B‑‑‑Central Excise Rules, 1944, R.10‑‑‑Goods partially composed of dutiable articles‑‑‑Demand raised on the ground that appellant under‑valued the goods supplied by him not including miscellaneous charges in assessable value of goods and paid short central excise duty‑‑‑Appellant contended that incidental expenses i.e. transportation, octroi, loading/unloading and packing etc. were incurred by them on behalf of buyers which do not form part of value as defined, in Central Excises Act, 1944 and show‑cause notice was also barred by time‑‑Validity‑‑‑Contention that amount received on account of incidental charges did not form part of the assessable value of goods had no force‑‑‑Show‑cause notice was issued 5 years and 8 months after the clearance of goods‑‑‑Rule 10(3) of the Central Excise Rules, 1944 provided for a period of 10 years for issuing notice but said sub‑rule could be invoked only in cases where short levy had taken place by reason of false documents, counterfeit seal or impression, fraud or any other heinous offence while in the show‑cause notice there was no such allegation to that effect or specific mention of R.10(3)‑‑‑Show‑cause notice having been issued after the time period of one year/three years as prescribed under R.10(1) & (2) of the Central Excise Rules, 1944, was time‑barred and the order issued in consequence thereof was not sustainable in the eye of law‑‑‑Appeal was accepted and order was set aside by the Appellate Tribunal.

Tariq Rashid for Appellant.

Miss Kausar Akhtar for Respondent.

Date of hearing: 6th February, 2002

2003 P T D (Trib.) 2460

[Customs, Central Excise and Sales Tax Appellate Tribunal]

Before Mian Abdul Qayyum, Member (Judicial) and Zafar‑ul‑Majeed, Member (Technical)

Appeal No. 1968/LB of 2001, decided on 11th March, 2002.

(a) Sales Tax Act (VII of 1990)‑‑‑--

‑‑‑‑S. 66‑‑‑Finance Act (III of 1998)‑‑‑Refund to be claimed within one year‑‑‑Scope‑‑‑Section 66 of the Sales Tax Act, 1990 provided for a period of one year for claiming refund of tax paid or over paid through inadvertence, error or misconstruction‑‑‑Scope of S.66 was admittedly broadened by including in it the "refund on account of input adjustment not claimed within the relevant tax period" vide Finance Act, 1998 but it did not imply in any way that before the said amendment there was no limit for claiming refund of such amount.

(b) Sales Tax Act (VII of 1990)‑‑‑

‑‑‑‑Ss. 3‑B, 7, 66 & 3‑B‑‑‑Constitution of Pakistan (1973), Art. 24(1)‑‑­Refund to be claimed within one year‑‑‑Appellant could not claim input tax adjustment inadvertently in terms of S.7 of the Sales Tax Act, 1990‑­‑Claim of such refund‑‑‑Refund claim was rejected being barred by time‑‑‑Validity‑‑‑Appellant admittedly supplied auto harnest wire produced by them to the manufacturers/assemblers of vehicles and by not claiming input tax adjustment, they had passed on the incidence of entire amount of output tax to their buyers who in turn, were entitled to its adjustment against the output tax on their end product‑‑‑Appellants were not entitled to claim refund of such tax under S.3‑B of the Sales Tax Act, 1990, incidence of which had been passed on to the consumer‑‑Appeal was rejected by the Appellate Tribunal.

Messrs Pfizer Laboratories Limited v. Federation of Pakistan and others Civil Appeal No. 48 of 1993 distinguished.

Abdul Rahim Bhatti for Appellant.

Imran Tariq, D.R. for Respondent.

Date of hearing: 24th January, 2002.

2003 P T D (Trib.) 2463

[Customs, Central Excise and Sales Tax Appellate Tribunal]

Before Mian Abdul Qayyum, Member (Judicial) and Zafar‑ul‑Majeed, Member (Technical)

Ex. A. No. 1671 /LB of 2001, decided on 1st March, 2002.

Sales Tax Act (VII of 1990)‑‑‑

‑‑‑‑Ss. 34, 3, 6, 22, 23, 35, 35‑A, 36 & 39‑‑‑‑Central Excise Rules, 1944, Rr. 7, 52, 52‑A, 210; 226, 237, 238, 241 & 246‑‑‑Additional tax‑‑‑Payment of principal amount of sales tax and central excise duty on an assurance that additional tax would not be levied‑‑‑Levy of additional tax‑‑‑Validity‑‑‑Imposition of additional was within the discretion of Adjudicating Officer in view of the provision contained in S.34 of the Sales Tax Act, 1990 as, it existed earlier to the amendment introduced in the year 1996‑‑‑Such was purely within the discretion of Adjudicating Officer to impose any additional tax or not but, after 1996, the words "liable to pay." had been substituted with the words "shall pay" which indicated that prima facie the discretion with the Adjudicating Officer had been taken away‑‑‑Despite such change in the phraseology of S.34 of the Sales Tax Act, 1990 there may be cases which may call for judicial review of the amount adjudged on account of additional tax in case there were any compelling reasons for that‑‑‑Present case having started in the year 1994 when the Adjudicating Officer had the discretion, it was not a case which was hit by the amendment introduced in the year 1996‑‑‑Such was a fit case in which the discretion should have been exercised in favour of the assessee/tax payer‑‑‑Additional tax was remitted by the Appellate Tribunal‑‑‑Penalty and redemption fine will be paid by the appellant.

Muhammad Saleem for Appellant.

Imran Tariq, D.R. for Respondent.

Date of hearing: 26th February, 2002.

2003 P T D (Trib.) 2477

[Customs, Central Excise and Sales Tax Appellate Tribunal]

Before Mian Abdul Qayyum, Member (Judicial) and Zafar‑ul‑Majeed, Member (Technical)

Appeal No. 2180/LB of 2001, decided on 15th March, 2002.

(a) Sales Tax Act (VII of 1990)‑‑--­

‑‑‑‑S. 34‑‑‑Additional tax‑‑‑Payment of tax not to time‑‑‑Word "shall pay" and "shall be liable to‑pay"‑‑‑Connotation‑‑‑If a registered person did not pay the tax due or any part thereof in time, he shall, in addition to the tax due, and prescribed penalties, pay additional tax at the rate prescribed therein‑‑‑Words "shall ....pay" used in S.34 of the Sales Tax Act, 1990, in contradiction to the words "shall ....be liable to pay"‑ as used in the said section prior to its amendment in 1996 made it manda­tory for a registered person to pay the amount of additional tax due in case of late payment of sales tax prima facie leaving no discretion with the Adjudicating Authorities to remit or reduce the same.

Mamy Beverage v. Naseem 1995 PTD 91 and Constitutional Ideal Glass (Pvt.) Ltd. v. Federation of Pakistan Petition No. D‑368 of 1995 rel.

(b) Sales Tax Act (VII of 1990)‑‑‑

‑‑‑‑S. 33‑‑‑General penalties‑‑‑Penalties should not be imposed in cases where default was not wilful or deliberate.

Appeal No. 1671 /LB of 2001 rel.

(c) Sales Tax Act (VII of 1990)‑‑‑

‑‑‑‑S. 34‑‑‑Additional tax‑‑‑Additional tax was levied on account of payment of sales tax after due dates‑‑‑Contention of the appellant was that it was not a case requiring imposition of additional tax as the default was not deliberate and intentional‑‑‑Validity‑‑‑Additional tax must be distinguished from penalties‑‑‑Adjudicating Officer had already taken a lenient view by not imposing penalty‑‑‑Additional tax was not remitted by the Appellate Tribunal as no explanation was provided for late deposit of sales tax‑‑‑Appeal was rejected being without merit.

Abdul Waheed for Appellant.

Imran Tariq, D.R. for Respondent.

Date of hearing: 7th January, 2002.

2003 P T D (Trib.) 2480

[Customs, Central Excise and Sales Tax Appellate Tribunal]

Before Mian Abdul Qayyum, Member (Judicial) and Zafar‑ul‑Majeed, Member (Technical)

S.T.A. No.2806/LB of 2001, decided on 8th March, 2002.

(a) Sales Tax Act (VII of 1990)‑‑‑

‑‑‑‑Ss. 3, 33 & 34‑‑‑Scope of tax‑‑‑Sale of fixed assets‑‑‑No furtherance of ordinary business‑‑‑Taxability‑‑‑Sale of fixed assets which was not in furtherance of ordinary business of registered person was not leviable to sales tax ‑‑‑Assessee/taxpayer was engaged in manufacturing of yarn and sale of fixed assets was not in furtherance of ordinary business activity and the same was neither "taxable activity" nor "taxable supply" to make it liable for payment of sales tax‑‑‑Adjudicating Officer erred in law in levying sales tax on account of sale of fixed assets alongwith additional tax and penalty which was remitted by the Appellate Tribunal.

Collector, Customs, Central Excise and Sales Tax v. Messrs Novartis Pakistan Ltd. Sales Tax Appeals Nos. 52 to 63 of 2001 rel.

(b) Sales Tax Act (VII of 1990)‑‑‑--

‑‑‑--Ss. 36(3), 6, 7, 8, & 23‑‑‑S.R.O. 124(I)/2000, dated 15‑3‑2000‑‑­Recovery of tax not levied or short‑levied or erroneously refunded‑‑­Determination of tax liability‑‑‑Adjusted input tax on electricity bills without the bill bearing registration number was disallowed‑‑­Assessee/tax‑payer contended that amount payable was not determined and order to such extent was in violation of S.36(3) of the Sales Tax Act, 1990‑‑‑Validity‑‑‑Appellate Tribunal directed the Adjudicating Officer to keep in mind the claim of asses see/taxpayer that it had applied to the WAPDA Authorities for entering its registration number on the relevant electricity bills‑‑ ‑Adjudicating Officer obtained necessary information from WAPDA Authorities himself in case of need‑‑‑If any amount was found recoverable then the same shall be finally determined keeping in view the provisions contained in S.36(3) of the Sales Tax Act, 1990‑‑­Matter was remitted by the Appellate Tribunal for fresh decision according to law after hearing the parties and after receiving the evidence which they may like to produce.

Faisal Zaman for Appellants.

Imran Tariq, D.R. for Respondent.

Date of hearing: 4th March, 2002.

2003 P T D (Trib.) 2486

[Customs, Central Excise and Sales Tax Appellate Tribunal]

Before Mian Abdul Qayyum, Member (Judicial) and Zafar‑ul‑Majeed, Member (Technical)

C.A. No.2567/LB of 2001, decided on 8th March, 2002.

Customs Act (IV of 1969)‑‑‑

‑‑‑‑S.156‑‑‑C.B.R. Letter No.1/1/Mach/Mist/2001, dated 30‑4‑2001‑‑‑Ministry of Commerce's Letter No. 1(29)/2001‑R.O. (Imp), dated 10‑4‑2001‑‑‑Punishment of offence‑‑‑Penalty‑‑‑Surcharge‑‑‑Import of goods not notified for import‑‑‑Imposition of penalty equal to 30% of the assessed value‑‑‑Validity‑‑‑Appellate Tribunal directed to pay 10% surcharge at the invoice value instead of penalty equal to 30% of the assessable value of goods in view of the letters issued by the Central Board of Revenue and Ministry of Commerce and in view of law decided earlier on the issue.

Malik Muhammad Arshad for Appellant.

Imran Tariq, D.R. for Respondent.

Date of hearing: 25th February, 2002.

2003 P T D (Trib.) 2494

[Customs, Central Excise and Sales Tax Appellate Tribunal]

Before Mian Abdul Qayyum, Member (Judicial) and Zafar‑ul‑Majeed, Member (Technical)

C. A. No. 1550/LB of 2001, decided on 26th February, 2002.

Customs Act (IV of 1969)‑‑‑

‑‑‑‑Ss. 17 & 156(1)(8)‑‑‑Detention and confiscation of goods, imported in breach of S.15 or S.16 of the Customs Act, 1969‑‑‑Confiscation of foreign origin goods from donkey cart‑‑‑Auto‑parts‑‑‑Ownership disowned ,by the person initially claiming ownership of such goods‑‑­Rahriban subsequently, claimed ownership of such goods and contended that auto parts were in fact old scrap which be had purchased from a Kabaria Market and he was not heard as he was kept away from the proceedings by the person who initially claimed ownership of such goods by saying that he would himself look after the case of the appellant‑‑‑­Validity‑‑‑Appellant should be given an opportunity to prove his ownership of the confiscated goods during the proceedings to be held afresh by the Adjudicating Officer‑‑‑If appellant established his claim of ownership, then the Adjudicating Officer will attend to the question as to whether the confiscated goods were in fact foreign origin spare‑parts (old and used) and if so whether these had been legally imported‑‑‑Order to the extent of confiscation of goods was set aside and case was remitted to Adjudicating Officer by the Appellate Tribunal for a fresh decision in accordance with law.

Muhammad Akram Nizami for Appellant.

Imran Tariq D.R. with Haider Ali, S.I.O. for Respondents.

Date of hearing: 26th February, 2002.

2003 P T D (Trib.) 2518

[Customs, Central Excise and Sales Tax Appellate Tribunal]

Before Mian Abdul Qayyum, Member (Judicial) and Zafar‑ul‑Majeed, Member (Technical)

S.T.A. No.35/LB of 2001, decided on 8th March, 2002.

Sales Tax Act (VII of 1990)‑‑‑

‑‑‑‑Ss. 3, 33 & 34‑‑‑Scope of tax‑‑‑Sale of fixed assets‑‑‑Sugar manufacturing business‑‑‑Disposal of motor vehicle, steel Burada, mud sale and sale of old vehicle tyres‑‑‑Taxation‑‑‑Validity‑‑‑Sale of motor vehicle, steel Burada, mud sale and sale of old vehicle tyres admittedly was riot the ordinary business of assessee/taxpayer‑‑‑Disposal of such assets could neither be a taxable activity nor taxable supply for the purposes of Sales Tax Act, 1990‑‑‑Amount received against shortage of sugarcane and refund of amount recovered against shortage of sugar‑cane in 1997‑98 was also not liable for payment of any sales tax‑‑‑Order was not sustainable and the same was set aside by the Appellate Tribunal.

2002 PTD 976 rel.

Muhammad Hafeez for Appellant.

Imran Tariq, D.R. for Respondent.

Date of hearing: 25th February, 2002.

2003 P T D (Trib.) 2525

[Customs, Central Excise and Sales Tax Appellate Tribunal]

Before Mian Abdul Qayyum, Member (Judicial) and Zafar‑ul‑Majeed, Member (Technical)

Custom Appeal No. 1600/LB of 2001, decided on 8th March, 2002.

Customs Act (IV of 1969)‑‑‑

‑‑‑‑Ss. 17 & 156(1)(8)‑‑‑Detention and confiscation of goods, imported in breach of S.15 or S.16 of the Customs Act, 1969‑‑‑Confiscation of Fork Lifter‑‑‑Benefit of doubt‑‑‑No Bill of Entry was available with the Department for verification since the record had been destroyed‑‑‑Bill of entry was produced during the proceedings in order to prove valid import of confiscated fork lifter‑‑‑Levy of redemption fine of Rs.10,000 in addition to duty and taxes leviable thereon on the ground that benefit of doubt could not be given as the same would tantamount to jeopardizing Government's legitimate revenue‑‑‑Validity‑‑‑Fact that relevant record was destroyed and Bill of Entry could not be verified led the Adjudicating Officer to hold the view that it was a case in which benefit of doubt could be extended but by ignoring the settled law that benefit of doubt always goes in favour of the accused/respondent and never to the prosecution, the same was extended to the prosecution on the ground that if the same was allowed in favour of the appellant then the Government's legitimate revenue would be jeopardized‑‑‑Such approach was absolutely illegal and without any foundation‑Benefit of doubt in any case had to go to the appellant‑‑‑Appellate Tribunal gave the benefit of doubt to the appellant and directed to release the confiscated Fork Lifter to its lawful owner without any condition.

1987 SCMR 1840 rel.

Malik Muhammad Arshad for Appellant.

Imran Tariq, D.R for Respondent.

Date of hearing: 25th February, 2002.

2003 P T D (Trib.) 2527

[Customs, Central Excise and Sales Tax Appellate Tribunal]

Before Mian Abdul Qayyum, Member (Judicial) and Zafar‑ul‑Majeed, Member (Technical)

Custom Appeal No. 2068/LB of 2001, decided on 8th March, 2002.

(a) Customs Act (IV of 1969)‑‑‑

‑‑‑‑S.215‑‑‑Service of order, decisions, etc.‑‑‑Service of notices‑‑‑No record‑‑‑Presumption‑‑‑In absence of any record regarding service of notices, it could not be presumed that the appellant was duly notified about the dates of hearing having been fixed.

(b) Customs Act (IV of 1969)‑‑‑

‑‑‑‑S. 215‑‑‑Ex parte order without reason‑‑‑Validity‑‑‑In case of an ex parte order, reasons have to be given by the Adjudicating Officer in support of the order‑‑‑Mere fact that party concerned did not appear to contest the show‑cause notice did not prove the fact that the charges levelled in such show‑cause notice stood proved.

PLD 1998 Lah. 100 and 2001 CLC 903 rel.

(c) Customs Act (IV of 1969)‑‑‑

‑‑‑‑Ss. 17, 156(I)(8) (9), 168(2) & 180‑‑‑S.R.O. 1374(I)/98, dated 17‑12‑1998‑‑‑S.R.O. No.913 (I)/86, dated 5‑10‑1986‑‑‑Detention and confiscation of goods, imported in breach of S.15 or S.16 of the Customs Act, 1969‑‑‑Confiscation of car on the ground that no one appeared to attend the hearing nor any written reply to show‑cause notice had been received and charges stated in show‑cause notice stood established‑‑­Validity‑‑‑‑Mere fact that party concerned did not appear to contest the show‑cause notice did not prove the fact that the charges levelled in such show‑cause notice stood proved‑‑‑Order was set aside for fresh decision according to law after hearing the parties and after receiving documents which they may like to produce‑‑‑Adjudicating Officer was directed by the Appellate Tribunal to pass speaking order supported with sound reasons dealing with all the points raised by the parties.

PLD 1998 Lah. 100 and 2001 CLC 903 rel

Muhammad Akram Nizami for Appellant.

Imran Tariq, D.R. with Manzoor Hussain, D.S. for Respondent.

Date of hearing: 26th February, 2002.

2003 P T D (Trib.) 2538

[Customs, Central Excise and Sales Tax Appellate Tribunal]

Before Mian Abdul Qayyum, Member (Judicial) and Zafar‑ul‑Majeed, Member (Technical)

Appeal No.2676/LB/2001, decided on 13th March, 2002.

Sales Tax Act (VII of 1990)‑‑‑

‑‑‑‑Ss. 2(24), 34, 33 & Sixth Sched., Sl. No.3‑‑‑Value of supply‑‑‑Sugar mill‑‑‑Production. of bagasse for domestic use‑‑‑Non‑payment of sales tax‑‑‑Determination of value of bagasse by applying value of Rs.1,100 per M. Ton for purpose of payment of sales tax alongwith additional tax and penalty‑‑‑Validity‑‑‑Appellate Tribunal directed to re‑determine the amount of sales tax on the basis of value of bagasse notified by the Central Board of Revenue under S.2(46) of the Sales Tax Act, 1990‑‑‑­Issue regarding additional tax and imposition of penalty may also be considered afresh in accordance with law‑‑‑Order was set aside by the Appellate Tribunal for de novo consideration.

Appeal No.1352/LB of 2001; Civil Appeals Nos. 1805‑1811 of 1998, 1392, 1417, 1418 of 1999; 2, 22, 129, 488, 489 of 2000; C.P.S. No.386‑L and 700‑L of 2000 rel.

Ch. Abdul Waheed for Appellant.

Imran Tariq, D.R. for Respondent.

Date of hearing: 13th March, 2002.

2003 P T D (Trib.) 2541

[Customs, Central Excise and Sales Tax Appellate Tribunal]

Before Mian Abdul Qayyum, Member (Judicial) and Zafar‑ul‑Majeed, Member (Technical)

Custom Appeal No.2442 of 2001, decided on 24th January, 2002.

Customs Act (IV of 1969)‑‑‑

‑‑‑‑Ss. 194‑A, 17 & 156(1)(8)‑‑‑Appeal to Appellate Tribunal‑‑­Jurisdiction ‑‑‑Scope‑‑‑Confiscation of goods‑‑‑Appeal dismissed by the Full Bench of the Appellate Tribunal in respect of admitted smuggled character of the confiscated vehicle and request' for its release on payment of duty and taxes could not be dealt with by the Division Bench of the Appellate Tribunal.

Nemo for Appellant.

Imran Tariq, D.R. for Respondent.

Date of hearing: 24th January, 2002.

2003 P T D (Trib.) 2545

[Customs, Central Excise and Sales Tax Appellate Tribunal]

Before Mian Abdul Qayyum, Member (Judicial) and Zafar‑ul‑Majeed, Member (Technical)

Appeal No.2827/LB of 2001, decided on 12th March, 2002.

Customs Act (IV of 1969)‑‑‑

‑‑‑‑S. 156(1)(89)‑‑‑Import Policy Order, 2001‑2002, Appendix C. Sl. No. 8‑‑‑PTC Hdg. No.8408.9000‑‑‑S.R.O.1374(I)/98, dated 17‑12‑1998‑­Confiscation‑‑‑Diesel engines‑‑‑Customs Authorities allowed clearance of generators and confiscated diesel engines on the ground that the same were separate and being old and used machinery parts banned under the Import Policy Order. 2001‑‑‑Validity‑‑‑Diesel engines for generators falling under PTC Hdg. No.8408.9000 were independent machines as clarified in Explanatory Notes to Harmonized Commodity and Coding System at SI. No.(2) in Part (B) concerning general arrangement of Chap. 84‑Diesel engines though used to operate generators, could not be treated as parts of machinery and not covered by S. No. 8 of Appendix C to the Import Policy Order, 2001‑2002‑‑‑Machines of Hdg. 8408.9000 were also not listed in Appendix A or C of the Import Policy Order‑‑‑No restriction existed on the import of second hand diesel engines of PCT Hdg. No. 8408‑9000‑‑‑Order for confiscation was illegal and the goods were entitled to be released on payment of leviable duty and taxes‑‑‑Appeal was accepted.

Muhammad Akram Nizami for Appellant.

Imran Tariq, D.R. for Respondent.

Date of hearing; 12th March, 2002.

2003 P T D (Trib.) 2560

[Customs, Excise and Sales Tax Appellate Tribunal]

Before Mian Abdul Qayyum; Member (Judicial) and Zafar‑ul‑Majeed, Member (Technical)

Custom Appeal No. 195/LB of 2002, decided on 30th April, 2002.

Customs Act (IV of 1969)‑‑--

‑‑‑‑Ss. 17 & 156(1)(8)‑‑‑Current Import Policy Order, 2000‑2001, Chap. 87‑‑‑S.R.O. No. 1374(I)/98, dated 17‑12‑1998‑‑‑Detention and confiscation of goods, imported in breach of S.15 or S.16 of the Customs Act, 1969‑‑‑Old and used auto parts of vehicles‑­Confiscation of‑‑‑Release of such confiscated goods on fulfillment of requirements of S.R.O.‑‑‑Appellate Tribunal set aside the order and directed the release of the confiscated goods to their lawful owners on payment of leviable duty and taxes subject to condition that these goods will be cut into pieces/de‑shaped according to requirements of S.R.O. No.1374(I)/98, dated 17‑12‑1998 at the expense of the appellant before their release.

Muhammad Akram Nizami for Appellant

Imran Tariq, D.R. for Respondent.

Date of hearing: 30th April, 2002.

2003 P T D (Trib.) 2562

[Customs, Excise and Sales Tax Appellate Tribunal]

Before Mian Abdul Qayyum, Member (judicial) and Zafar‑ul‑Majeed, Member (Technical)

Appeal No.703/LB of 2000, decided on 20th March, 2002.

(a) Central Excises Act (I of 1944)‑‑‑

‑‑‑‑Ss.22 & 9‑‑Vexatious search seizure, etc. by Central Excise Officer‑­Offences and penalties‑‑‑Excess quantity of goods of what was shown in excise record‑‑‑Confiscation of‑‑‑Validity‑‑‑Quantity of 455 bundles weighing 23 kgs. each was admittedly found in excess of the balance shown in the Central Excise records at the time of visit by the detecting staff‑‑‑Explanation given by the appellant that excess of the balance shown in the RG‑1 Register was previous day's production duty paid clearance, which had to be taken inside the Mills premises due to heavy rains was not convincing‑‑‑Goods once cleared on payment of duty could not be taken back into the Mills without permission of the Central Excise Authorities‑‑‑Order of the Adjudicating Officer to the extent of confiscation of the goods in question was declared lawful by the Appellate Tribunal.

(b) Central Excises Act (I of 1944)‑‑‑

‑‑‑‑Ss. 9 & 22‑‑‑Offences and penalties‑‑‑Vexatious search, seizure, etc. by Central Excise Officer‑‑‑Production capacity‑‑‑Determination‑‑­Demand of excise duty, in respect of previous production‑‑‑Validity‑‑­Department had re‑determined the production capacity of the unit at 16 bundles weighing.368 kgs. per hour‑‑‑Demand adjudged by the Adjudicating Officer was not correct‑‑‑Department was directed to re­ determine the liability on the basis of Mill's production capacity of 16 bundles weighing 368 kgs. per hour and recover the same from it‑-­Redemption fine was reduced from Rs.50,000 to Rs.10,000 while personal penalty imposed was totally remitted by the Appellate Tribunal‑‑‑Order was modified accordingly.

Mudassar Azam alongwith Shahid Pervaze Jami for Appellant.

Imran Tariq, D.R and Zawar Hussain, D.S. for Respondent.

Date of hearing: 5th March, 2002.

2003 P T D (Trib.) 2580

[Customs, Central Excise and Sales Tax Appellate Tribunal]

Before Mian Abdul Qayyum, Member (Judicial) and Zafar‑ul‑Majeed Member (Technical)

C.A. No.2404/LB of 2001, decided on 2nd May, 2002.

Customs Act (IV of 1969)‑‑‑

‑‑‑‑Ss. 17 & 156(1)(8)‑‑‑Detention and confiscation of goods, imported in breach of S.15 or S.16 of Customs Act, 1969‑‑‑Confiscation of vehicle‑‑‑Tampering with chassis number‑‑‑Genuine chassis number reported by the Laboratory was proved that the vehicle was imported with the same chassis number‑‑‑Confiscated vehicle bore genuine chassis number and was a legally imported vehicle‑‑‑Import documents had already been verified from the Customs House and that the unidentified dacoits who snatched the vehicle on pistol point might have made an unsuccessful attempt to tamper with the last three digits during the period the vehicle remained in their possession‑‑­Appellate Tribunal in circumstances directed that the confiscated vehicle be released to its lawful owner without any conditions‑‑‑Appeal was accepted.

Muhammad Akram Nizami for Appellant.

Imran Tariq D.R. for Respondent.

Date of hearing: 20th March, 2002.

2003 P T D (Trib.) 2592

[Customs, Central Excise and Sales Tax Appellate Tribunal]

Before Mian Abdul Qayyum, Member (Judicial) and Zafar‑ul‑Majeed, Member (Technical)

S.T.A. No.314/LB of 2001, decided on 21st February, 2002.

Sales Tax Act (VII of 1990)‑‑‑

‑‑‑‑Ss. 3, 33 & 34‑‑‑Scope of tax‑‑‑Ex parte assessment‑‑‑Non‑service of notice‑‑‑Demand of sales tax alongwith additional tax and penalty‑‑­Validity‑‑‑No record showing service of any notices of hearing on appellant had been brought on file and in the absence of any such record it could be said with confidence that none of these notices were served on the appellant and this being the position, the ex parte order passed by the Adjudicating Officer was out right illegal which could not be sustained‑‑‑Assessment was set aside and the case was remitted by the Appellate Tribunal for fresh decision according to law after hearing the parties and after receiving the evidence which they may like to produce.

Muhammad Yaqoob for Appellant.

Imran Tariq, D.R. for Respondent.

Date of hearing: 21st February, 2002

2003 P T D (Trib.) 2594

[Customs, Central Excise and Sales Tax Appellate Tribunal]

Before Mian Abdul Qayyum, Member (Judicial) and Zafar‑ul‑Majeed, Member (Technical)

C.A. No.958/LB of 2001, decided on 4th March, 2002.

(a) Customs Act (IV of 1969)‑‑‑-

‑‑‑‑S. 194‑‑‑Adjournment without plausible explanation ‑‑‑Validity‑‑­Request for adjournment by the representative of Department without plausible explanation was declined by the Appellate Tribunal.

(b) Customs Act (IV of 1969)‑‑‑

‑‑‑‑Ss. 17 & 156(1)(8)‑‑‑Detention and confiscation of goods, imported in breach of S.13 or S.16 of the Customs Act, 1969‑‑‑Car plying with registration number of a tractor‑‑‑Upper side of chassis was also welded­‑‑Confiscation of in favour of Government on the ground of its being non‑duty paid‑‑‑Validity‑‑‑Report of the Laboratory showed that chassis plate had been cut and welded but no other chassis number was deciphered except the present one on the chassis‑‑‑Fact that vehicle was not got registered with the Excise and Taxation Department for several years and was found to be plying with registration number allotted to a tractor by itself would not be a ground for holding that the vehicle was non‑duty‑paid specially when the import status of the same was duly confirmed by the Competent Authority‑‑‑Report of Chemical Examiner did not advance the case of the prosecution because no other chassis number could be deciphered even after chemical treatment except the one which was mentioned in the import documents and which the seized vehicle carried on the chassis plate which though found to be cut and welded on the upper side would not by itself be a ground for holding that the entire chassis plate was replaced‑‑‑Order was set aside with the direction that confiscated vehicle be released to its lawful owner without any condition‑‑‑Appeal was accepted.

Mian Abdul Ghaffar and Malik Muhammad Arshad for Appellant.

Imran Tariq, D.R. for Respondent.

Date of hearing: 21st February, 2002.

2003 P T D (Trib.) 2599

[Customs, Central Excise and Sales Tax Appellate Tribunal]

Before Mian Abdul Qayyum, Member (Judicial) and Zafar‑ul‑Majeed, Member (Technical)

Appeal No. Cus‑2208/LB of 2001, decided on 29th January, 2002.

Customs Act (IV of 1969)‑‑‑

‑‑‑‑S. 25‑‑‑S.R.O. 722(I)/89, dated 7‑10‑1989‑‑‑Value of imported and exported goods‑‑‑Business of export having been closed due to slump in export market goods imported were not disposed of in accordance with the terms and conditions of S.R.O. 722(I)/89, dated 7‑10‑1989‑‑­Determination of duty and taxes payable on balance quantity of raw material not consumed according to provisions of S.R.O. 722(I)/89, dated 7‑10‑1989‑‑‑Appellate Tribunal observed that determination of correct amount of duty and taxes payable by the appellants would require detailed exercise including factual verifications of payments made by them/reconciliation of accounts of the appellants‑‑‑Such exercise could be done more effectively and conveniently only at the original stage of the adjudication‑‑‑Order was set aside and case was remanded for fresh decision in accordance with law after hearing the parties and receiving the evidence which they may like to produce.

Muhammad Akram Nizami for Appellant.

Imran Tariq, D.R. And Kazim Ali Shah, Inspector for Respondent.

Date of hearing: 29th January, 2002:

2003 P T D (Trib.) 2603

[Customs, Central Excise and Sales Tax Appellate Tribunal]

Before Mian Abdul Qayyum, Member (Judicial) and Zafar‑ul‑Majeed, Member (Technical)

C.A.No. 1253/LB of 2001, decided on 2nd May, 2003.

Customs Act (IV of 1969)‑‑‑

‑‑‑‑Ss. 17 & 156(1)(8)‑‑‑Detention and confiscation of goods, imported in breach of S.15 or S. 16 of the Customs Act, 1969‑‑‑Confiscation of foreign origin goods‑‑‑Request for release on payment of leviable duty and taxes plus moderate amount of redemption fine. ‑‑‑were confiscated without allowing any option for their redemption‑‑­ Validity‑‑‑Appellant failed to produce any documents to show the lawful import or his legal possession of the confiscated goods before the Adjudicating Officer or even before the Appellate Tribunal‑‑‑Appellate Tribunal was unable to accept the request for release of the confiscated goods on payment of leviable duty and taxes in view of the fact that the confiscated goods were admittedly of foreign origin, their confiscation had rightly been ordered without any option for their redemption and Appellate Tribunal although had earlier allowed the release of such‑like goods on payment of leviable duty and taxes plus moderate amount of redemption fine but was no longer possessed of the same jurisdiction as its exercise had been held to be illegal by the High Court‑‑Appeal was dismissed.

Appeal No.4 of 1998 rel.

Mian Muhammad Siddique for Appellant.

Imran Tariq, D.R. for Respondent.

Date of hearing: 2nd May, 2002.

2003 P T D (Trib.) 2608

[Customs, Central Excise and Sales Tax Appellate Tribunal]

Before Mian Abdul Qayyum, Member (Judicial) and Zafar‑ul‑Majeed, Member (Technical)

Custom Appeal No. 1099/LB of 2001, decided on 5th April, 2002.

Customs Act (IV of 1969)‑‑‑

‑‑‑‑Ss. 83(2) & 202‑‑‑S.R.O. 818(I)/89, dated 9‑8‑1989‑‑‑Clearance for home consumption‑‑Surcharge‑‑‑Levy of surcharge on balance goods riot re‑exported which were imported under S.R.O. 818(1)/89, dated 9‑8‑1989 for re‑export‑‑‑Validity‑‑‑No doubt goods were imported under the provisions of S.R.O. 818(I)/89, dated 9‑8‑1989 but the bill of entry was filed showing said goods for home consumption and since the appellant could not utilize the whole quantity of the goods within the specified period under S.R.O. 818(I)/89, dated 9‑8‑1989, he was legally bound to pay not only the leviable tax but also the surcharge and this was what had been clarified by the Central Board of Revenue vide letter dated 20‑11‑1999‑‑‑Appeal was dismissed by the Appellate Tribunal.

Shahid Pervaiz jami for Appellant.

Imran Tariq, D.R. and Obaid‑ur‑Rehman, D.S. for Respondent.

Date of hearing: 5th March, 2002.

2003 P T D (Trib.) 2615

[Customs, Central Excise and Sales Tax Appellate Tribunal]

Before Mian Abdul Qayyum, Member (Judicial) and Zafar‑ul‑Majeed, Member (Technical)

Appeal No.2751/LB of 2000, decided on 14th March, 2002.

Customs Act (IV of 1969)‑‑‑

‑‑‑‑Ss. 156(1)(89), 14, 16 & 32‑‑‑Imports and Exports (Control) Act (XXXIX of 1950), S.3(1)‑‑‑S.R.O. 489(1)/2000, dated 17‑7‑2001‑‑­Customs General Order No. 10 of 1999, dated 22‑4‑1999‑‑‑Import Trade and Procedure Order, 2000‑‑‑Confiscation‑‑‑Liner Craft Paper of secondary quality was confiscated, import of which was banned under the relevant Import Policy Order‑‑‑Validity‑‑‑Goods were admittedly of substandard/ stock lot quality, import of which was banned vide Cl. 1 of the Negative List ‑(Appendix A) of the. Import Trade and Procedure Order, 2000‑‑‑Reference to the provisions of Customs General Order No.10 of 1999, dated 22‑4‑1999 was not relevant as it pertained to assessment and valuation of imported goods and not to provisions of Import Policy‑‑‑Goods being substandard/stock‑lot quality were‑liable to confiscation under S.16 of the Customs Act, 1969 read with S.3(1) of the Imports and Exports (Control) Act, 1950‑‑‑Under S.R.O. 489(1)/2000, dated 17‑7‑2001, Adjudicating Officers were barred from exercising their discretion to allow release of such goods against redemption fine‑‑‑Order passed on legal as well as valid grounds was not interfered by the Appellate Tribunal‑‑‑Appeal was rejected.

Malik Muhammad Arshad for Appellant.

Imran Tariq, D.R. for Respondent.

Date of hearing: 12th March, 2002.

2003 P T D (Trib.) 2623

[Customs, Central Excise and Sales Tax Appellate Tribunal]

Before Mian Abdul Qayyum, Member (Judicial) and Zafar‑ul‑Majeed, Member (Technical)

Appeal No. 20/LB of 2001, decided on 12th March, 2002.

Customs Act (IV of 1969)‑‑‑

‑‑‑‑Ss. 32(3) & 89‑‑‑C.B.R. Letter C. No.14/5 (T&W)/91, dated 24‑6‑1996‑‑‑Show‑cause notice after expiry of stipulated period‑‑‑Levy of surcharge‑‑‑Goods were ex‑bonded after expiry of stipulated period‑‑­Validity‑‑‑Show‑cause notice issued was barred by time as the same was issued after a period of six months as prescribed under S.32(3) of the Customs Act, 1969‑‑‑Order was not sustainable alone on this ground‑‑­Appeal was accepted and order was set aside by the Appellate Tribunal.

1992 SCMR 1898; 1984 MLD 562; Appeal No. 15 of 2001 and Messrs Nishat Mills Ltd. v. The Collector of Customs, Dry Port, Faisalabad and Appeal No. 514 of 1997 ref.

Messrs Nishat Mills Ltd. v. The Collector of Customs, Dry Port, Faisalabad Appeal No. 514 of 1997 rel.

Malik Muhammad Arshad for Appellant

Imran Tariq, D.R. with Obaid‑ur‑Rehman, D.S. for Respondent

Date of hearing: 22nd January, 2002.

2003 P T D 9

[Federal Tax Ombudsman]

Before Justice (Retd.) Saleem Akhtar, Federal Tax Ombudsman

Messrs BOARD OF INTERMEDIATE AND SECONDARY EDUCATION, BANNU

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 1369 of 2001, decided on 6th November, 2001.

Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑Ss.52‑A, 52, 50(2A), 56, 138 & Second Sched., Part I, Cl. (86)‑‑­Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.9‑‑‑S.R.O. 594(I)/91, dated 30‑6‑1991‑‑‑C. B. R. Letter C. No. (37)/WHT/91, ‑dated 2‑6‑2002‑‑‑Recovery from the person from whom tax was not deducted or collected‑‑‑Assesses; in default‑‑­Exemption‑‑‑Deduction of tax at source‑‑‑Exemption certificate was issued by the Commissioner of Income‑tax in terms of S.R.O. 594(I)/91 dated 30‑6‑1991 to assessee/Board of Intermediate and Secondary Education‑‑‑Assessee's tax was not deducted by the National Saving Centre on profits paid on its deposits on the basis of such exemption certificate‑‑‑Subsequently, exemption certificate was withdrawn by the Commissioner of Income‑tax and Assessing Officer was directed to recover the tax that was deductible under S.50(2A) of the Income Tax Ordinance, 1979‑‑ Validity‑‑‑Maladministration was evident on several counts, firstly it was advisable for the Central Board of Revenue to follow the ratio of the decision of the apex Court in Central Insurance Co. and others v. C.B.R. 1993 SCC 1049 and to abstain from issuing directives based on their interpretation ,of law; secondly, the Commissioner of Income‑tax had no authority under law to withdraw the certificate issued in pursuance of S.R.O. 594(I)/91, dated 30‑6‑1991 retrospectively and it amounted to gross injustice to the payer‑‑‑Issuance of a certificate by the Commissioner of Income‑tax that any provision of S.50 of the Income Tax Ordinance, 1979 was inapplicable to the payee did not amount to grant of exemption from tax to the income from‑such receipts‑‑‑During the course of assessment proceedings it was the exclusive discretion of the Assessing Officer to decide whether receipts from a particular source was exempt or not‑‑‑Neither the payer nor the payee had committed any default under S.50(2A) of the Income Tax Ordinance, 1979 because payments had been made without deduction of tax on the authority of the Commissioner of Income‑tax who certified that no tax was deductible‑‑‑Either no action had been taken under S.52 of the Income Tax Ordinance, 1979 against the National Saving Centre or proceedings initiated against them had not been pursued and concluded‑‑‑Assessing Officer by pursuing recovery of alleged liability under S.50(2A) of the Income Tax Ordinance, 1979 against the complainant/payee, had foreclosed the proceedings under S.61 of the Income Tax Ordinance, 1979 conferring the legal right to an assessee to present his case, for exemption under Cl. (86) of Part I of the Second Sched. to the Income Tax Ordinance, 1979 in a proper manner‑‑‑Federal Tax Ombudsman recommended that the Commissioner of Income‑tax, to invoke jurisdiction under S.138 of the Income Tax Ordinance, 1979 to allow appropriate relief to the complainant/assessee suo motu; and that notices may be issued to the complainant/assessee under S.56 of the Income Tax Ordinance, 1979 requiring them to submit their returns of incomes and to consider their claim of exemption of their incomes under Cl. (86) of Part I of the Second Sched. to the Income Tax Ordinance, 1979 in the course of assessment proceedings.

Central Insurance Co. and others v. C.B.R. 1993 SCC 1049 ref.

S. M. Sibtain, Secretary, Dealing Officer.

2003 P T D 23

[Federal Tax Ombudsman]

Before Justice (Retd.) Saleem Akhtar, Federal Tax Ombudsman

JEHANZEB FATEHJANG

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 1388 of 2001, decided on 5th November, 2001.

(a) Wealth Tax Act (XV of 1963)‑‑‑

‑‑‑‑S.16(2)‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.9‑‑‑Assessment‑‑‑First Appellate Authority declared assessment order as void ‑‑‑Re‑assessment‑‑­Jurisdiction‑‑‑Assessee contended that when an assessment order had been declared void the Assessing Officer had no power to make re­assessment and such re‑assessment order be declared void and unlawful‑­Validity ‑‑‑Assessee's argument was based on misconception‑‑‑Order could be declared void where the Authority passing the order had no jurisdiction ab initio and also in cases where having jurisdiction, the Authority commits such illegality in the proceeding which affects its jurisdiction to pass legal order‑‑‑In such cases the Authority passing the order had jurisdiction but due to fatal irregularity like passing order without notice to the party had made the entire proceedings leading to the order as void‑‑‑Authority, in such a situation, passing the order had jurisdiction to re‑hear the case.

(b) Wealth Tax Act (XV of 1963)‑‑‑

‑‑‑‑S.16(2) & (4)‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.9‑‑‑Assessment‑‑‑Non‑service of notice‑‑­Assessment order was declared void on the ground that notice under S.16(2) of the Wealth Tax Act, 1963 was not served on the assessee‑‑­Re‑assessment‑‑‑Assessee contended that where an assessment order had been declared void the Assessing Officer had no power to make re­assessment and such re‑assessment order be declared void and unlawful‑­Validity‑‑‑Re‑assessment had been made but again notice under S.16(2) of the Wealth Tax Act, 1963 was not served instead, notice under S.16(4) of the Wealth Tax Act, 1963 was issued service of which was denied by the assessee/complainant‑‑‑Both the parties agreed that re­assessment order be set aside and fresh assessment be made‑‑‑Such being a reasonable solution particularly as the service of notice was disputed and the complainant had documents in his support to substantiate his case before the Assessing Authority‑‑‑Federal Tax Ombudsman recommended that Commissioner of Income Tax and Wealth Tax to set aside the re­assessment order and remand the case to Assessing Officer for fresh assessment and the Assessing Officer shall serve notice under S.16(2) of the Wealth Tax Act, 1963 on the complainant and after giving opportunity of being heard to frame fresh assessment.

Ghulam Sarwar alongwith Jehanzeb for the Complainant.

Malik Muhammad Ashraf, D.C.I.T. for the Department.

2003 P T D 27

[Federal Tax Ombudsman]

Before Justice (Retd.) Saleem Akhtar, Federal Tax Ombudsman

Messrs NISAR ICE & COLD STORAGE (PVT.) LTD., ISLAMABAD

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 350 of 2002, decided on 7th June, 2002.

Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑S.138 & Second Sched., Cl. (118C)‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)‑‑­Exemption ‑‑‑Failure to take suo motu notice of arbitrary refusal to allow exemption on recommendation of Federal Tax Ombudsman ‑‑‑Assessee claimed exemption from tax for its profits and gains under Cl. (118‑C) of the Income Tax Ordinance, 1979 for a period of 8 years‑‑‑Claim of exemption from tax was rejected by the Assessing Officer‑‑‑First Appellate Authority set aside the orders but the remanded issue was again decided against the assessee who tiled a complaint for arbitrary refusal of exemption‑‑‑Federal Tax Ombudsman recommended grant of exemption‑from tax by invoking provisions of S.138 of the Income Tax Ordinance, 1979 suo motu‑‑‑Commissioner of Income‑tax complied with the direction and allowed exemption from tax to profits and gains but failed to take suo motu notice of arbitrary refusal to allow exemption‑‑­Maladministration having been established, Federal 'Tax Ombudsman recommended that Commissioner of Income Tax rectified his order passed under S.138 of the Income Tax Ordinance, 1979 dismissing assessee's petition on point of limitation while the issue warranted suo motu notice to grant the relief arbitrarily denied to the assessee/petitioner.

Muhammad Shafqat for the Complainant.

Taj Hamid, D.C.I.T., Company, Circle‑12, Peshawar for Respondent.

2003 P T D 46

[Federal Tax Ombudsman]

Before Justice (Retd.) Saleem Akhtar, Federal Tax Ombudsman

Messrs GHAUSIA METAL CLOSURES, FAISALABAD

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 169 of 2002, decided on 7th May, 2002.

Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑Ss. 100, 102, 13(1)(aa), 50(4) & 50(5)‑‑‑Refund on assessment and appeal etc. ‑‑‑Assessment‑Addition‑‑‑Setting aside of assessment by First Appellate Authority‑‑‑Appeal by Department‑‑‑Appellate Tribunal dismissed the department's appeal as the appeal was not found to be competent and was found to have been filed without legal authority‑‑­Reference to High Court‑‑‑Complainant alleged non‑issuance of income­tax refund of amount deducted and claimed compensation under S.102 of the Income Tax Ordinance, 1979 by stating that addition was deleted by the First Appellate Authority‑‑‑Validity‑‑‑Complainant was not right in stating that the First Appellate Authority had deleted the addition when in fact it had only been set aside‑‑‑Assessment stood set aside but the reassessment proceedings could not be taken up because of the Department's Reference to High Court‑‑‑Department was quite right in stating that S.100 of the Income Tax Ordinance, 1979 specifically excludes from its purview "an order setting aside an assessment" and no refund was considered to be due as a result of setting aside of an assessment‑‑‑Section 102(4) of the Income Tax. Ordinance, 1979 also excludes from the purview of the said section any such refund as had become due as a result of the setting aside of an assessment‑‑‑While it was observed by the Ombudsman that the Department should have explained the legal position to the complainant instead of just keeping the refund application pending, as far as the claim of the refund itself was concerned no intervention was found possible‑‑‑Complaint was accordingly dismissed by the Federal Tax Ombudsman.

N. Naeem Rao, A.R. for the Complainant.

Ahmad Hussain Khan, D.C.I.T., Circle 19, Faisalabad for Respondent.

2003 P T D 63

[Federal Tax Ombudsman]

Before Justice (Retd.) Saleem Akhtar, Federal Tax Ombudsman

Messrs J. K. BROS. (PVT.) LTD., FAISALABAD

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 275 of 2002, decided on 11th June, 2002.

(a) Sales Tax Act (VII of 1990)‑‑‑

‑‑‑‑S.10(4)‑‑‑Sales Tax Refund Rules, 2000, R.7(4)‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.9‑‑­Excess amount to be carried forward or refunded‑‑‑Extent of payment of refund claimed‑‑‑Time limit for verification of refund claimed‑‑­Suspected invoices‑‑‑Investigation of‑‑‑Time limit ‑‑‑Refund‑‑­Withholding of‑‑‑Validity‑‑‑Department was right that the law provides for necessary verification in the case of suspected invoices etc. and that no specific time frame had been provided for completing the investigation which did not, however, mean that he Department could withhold refunds indefinitely on the plea that investigation was being made‑‑‑No investigation could be continued for unreasonably long period‑‑‑Dependent on the facts and circumstances of the case a reasonable time had to be fixed‑‑‑Department did not in fact clearly show on what lines the investigation was now being made considering that the parties involved were statedly not traceable at their given addresses, it was also not made clear as to whether in the case of cross cheques issued by the complainant, an attempt was made to identify the bank accounts through which the cheques were encashed‑‑­Apart from one unit, all the alleged suspected units, belong to relevant Collectorate and there was no reason why the Department should not be able to expeditiously finalize inquiries regarding these units‑‑­Department, in circumstances, could not be allowed itself to withhold the refund without, apparent, any specific investigation being in progress.

(b) Sales Tax Act (VII of 1990)‑‑‑

‑‑‑‑S.10‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.9‑‑‑Excess amount to be carried forward or refunded‑‑‑Complainant assessee had purchased raw material from various registered sellers against valid sales. tax invoices and payment was made through cheques ‑‑‑Complainant/assessee utilized the same material in manufacturing of its products which were duly exported and filed its refund claims against such valid sales tax returns‑‑‑Department withheld refund of certain input tax invoices of certain suspected units till their verification 'as the amount of tax collected by such registered person had not been deposited in the Government treasury ‑‑‑Validity‑‑­Contention of the Department that the amount of tax collected by registered person had not been deposited in the Government treasury could not be a ground for withholding the refund‑‑‑If it was proved that manufacturer had purchased from the registered person who had collected tax from him then as the registered person who under law acts as an agent of the Department it was the responsibility of the said agent to deposit the tax within specified period as required by law‑‑‑Purchaser manufacturer could not be held liable for non‑deposit of such tax in the Government Treasury‑‑‑Department should regularly monitor and take action against registered person who having recovered and collected the tax fail to deposit in the Government Treasury‑‑‑Person who had already paid the tax as required by law he could not be held liable for such‑tax for the default of the Department and its agent‑‑‑If it was established, in the present case, that tax had been paid by the manufacturer which they claimed to have made through cross‑cheques then only question remained to be ascertained was whether the transactions were genuine or not‑‑‑If payment through cross‑cheques was established presumption would be that the transaction genuine unless rebutted by the Department by strong evidence ‑‑‑On the mere ground of non‑deposit of tax by the registered person in Government Treasury, refund could not be with­held‑‑‑Federal Tax Ombudsman recommended that verification process be finalized within 90 days in which the complainant should also be associated and if as a result of investigation the invoices are not found to be fake and fraudulent the refund 'amount be paid to the complainant/assessee within 15 days of completion of investigation.

Saood Nasrullah Cheema and Naveed Suhail Malik for the Complainant.

Muhammad Ismail, Deputy Collector Sales Tax for Respondent.

2003 P T D 68

[Federal Tax Ombudsman]

Before Justice (Retd.) Saleem Akhtar, Federal Tax Ombudsman.

DIAMOND POLYMERS (PVT.) LTD., LAHORE

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 109‑L of 2002, decided on 10th June, 2002.

Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑S.50(5)‑‑‑C.B.R. Circular No.13 of 1998, dated 2‑10‑1998‑‑‑Establishment of Office of Federal Tax Ombudsman. Ordinance (XXXV of 2000), S.9‑‑‑Deduction of tax at source‑‑‑Import‑‑‑Tax deducted on import from assessee of Azad Jammu and Kashmir had not been transferred to the Government of Azad Jammu and Kashmir‑‑‑Tax authorities of Azad Jammu and Kashmir refused to give credit of such tax deducted being not credited in the Treasury of Government of Azad Jammu and Kashmir‑‑‑Complaint for either to refund the same or to transfer the said amount to Government of Azad Jammu and Kashmir‑‑­Validity‑‑‑As far as quantum of tax collected under S.50(5) of the Income Tax Ordinance, 1979 was concerned, there was no dispute and the only problem was with, regard to the obtaining of credit for this amount in Azad Jammu and Kashmir which according to the authorities there was only possible when the amount was remitted by the Government of Pakistan to Azad Jammu and Kashmir‑‑‑Such was a matter between the two Governments who had to take steps to resolve the problem relating to tax collection made under S.50(5) of the Income Tax Ordinance, 1979 from assessees from Azad Jammu and Kashmir' prior to the Central Board of Revenue Circular No. 13 of 1998, dated 2‑10‑1998‑­Tax had been collected from assessees of Azad Kashmir under S.50(5) of the Income Tax Ordinance, 1979 and they were entitled to the credit in one way or the other‑‑‑Federal Tax Ombudsman recommended that Revenue Division may take up the matter with the concerned Ministry so that the problem of Azad Jammu and Kashmir importers relating to collection under S.50(5) of the Income Tax Ordinance, 1979 prior to Central Board of Revenue Circular No.13 of 1998, dated 2‑10‑1998, is solved satisfactorily.

Shahbaz Butt and Nazir Ahmad, General Manager for the Complainant.

Muhammad Tahir, D.C.I.T., Companies Zone I for Respondent.

2003 P T D 71

[Federal Tax Ombudsman]

Before Justice (Retd.) Saleem Akhtar, Federal Tax Ombudsman

UMAIR IBRAHIM PROPRIETOR MESSRS USMAN WEAVING FACTORY, HAFIZABAD

Versus

SECRETARY REVENUE DIVISION, ISLAMABAD

Complaint No. 328 of 2002, decided on 5th June, 2002.

(a) Income‑tax‑‑‑

‑‑‑‑Assessment made on the basis of return signed by the brother of the assessee was invalid.

(b) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑Ss. 63 & 132‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S. 9‑‑‑Best judgment assessment‑‑­Inspector's report‑‑‑Power looms in a premises belonging to other 7 persons, existing assessee in the status of individual at their own NTN, was considered to be of the assessee and income of the assessee was assessed accordingly‑‑‑Validity‑‑‑Assessment for the assessment years 1996‑97 stated that according to the Inspector's report there were 28 power looms at the premises which were claimed to be owned by 7 persons but according to the Inspector's report mentioned in the order of the re‑assessment, the number of looms had suddenly increased to 52‑‑‑Even if there were in fact 52 looms at the premises it was not clear from the assessment order as to how 28 of these looms were considered to be belonging to assessee who was not even specifically mentioned in the original assessment order for the assessment year 1996‑97‑‑‑Appellate order also showed that even the department had acknowledged by implication that demand notice and assessment order for the assessment year 1996‑97 had not been served properly in the case and that the complainant learnt about the order after commencement of tax recovery proceedings at which stage a duplicate demand notice was served‑‑‑First Appellate Authority in its order did not mention the date of service of demand notice but only observed that the appeal was late by 10 months and 25 days‑‑‑Assessments for the assessment years 1996‑97 and 1997‑98 were found to be invalid and Federal Tax Ombudsman recommended that (i) the assessments for the years 1996‑97 and 1997‑98 be cancelled by the Commissioner of Income Tax under section 138 of the Income Tax Ordinance, 1979 with appropriate directions (ii) that if the directions include the making of fresh inquiry the number of power looms be ascertained by the Assessing Officer in the presence of the assessee/complainant and if it is found that 52 power looms were wrongly shown by the Inspector in his report, disciplinary proceedings may be commenced against him.

Complainant in person.

Muazzam Bashir, D.C.I.T. for Respondent.

2003 P T D 99

[Federal Tax Ombudsman]

Before Justice (Retd.) Saleem Akhtar, Federal Tax Ombudsman

Messrs SPECIAL FABRICS LIMITED, LAHORE

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 528‑L of 2001, decided on 30th October, 2001.

Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑Ss.156, 62/138, 143‑B, 80‑B & 12(18)‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.9‑‑­Rectification of mistake‑‑‑Interest income‑‑‑Assessment under S.62 of the Income Tax Ordinance, 1979 and addition 'had also been made under S.12(18) of the said Ordinance‑‑‑Complaint for rectification under S.156 of the Income Tax Ordinance, 1979 on the ground that the interest income was covered in its statement under S. 143‑B of the Income Tax Ordinance, 1979‑‑‑Department contended that the provision of S.80‑B of the Income Tax Ordinance, 1979 were not applicable in case of interest earned by a limited company and therefore, the assessment of the interest income under normal law was quite valid and addition made under S.12(18) was also correctly made because such amount was received as a cash loan to which the said section was applicable ‑‑‑Validity‑‑­Regardless of the validity or otherwise of the complainant's contentions, present case was not the one in which the provisions of S.156 of the Income Tax Ordinance, 1979 could be invoked‑‑‑Provision of S.156 of the Income Tax Ordinance, 1979 could be invoked only to "rectify any mistake apparent from the record" and there was no such obvious mistake‑‑‑Complainant's prayer was not accepted and the complaint was dismissed by the Federal Tax Ombudsman.

None for the Complainant.

Wajid Akram, D.C.I.T. for Respondent.

2003 P T D 106

[Federal Tax Ombudsman]

Before Justice (Retd.) Saleem Akhtar, Federal Tax Ombudsman

MUHAMMAD ASGHAR

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 325 of 2002, decided on 30th May, 2002.

Sales Tax Act (VII of 1990)‑‑‑

‑‑‑‑S.11‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss.9 & 10(14)‑‑‑Maladministration‑‑‑Complainant was a registered manufacturer and was notified as suspected fake unit to various chambers and trade bodies in spite of removing objection of auditors regarding adjustment of input tax i.e. payment of tax‑‑­Department stated that the name of complainant's unit had been deleted from the list of suspects‑‑‑Validity‑‑‑Though the grievance had been redressed but maladministration was established‑‑‑Issues raised in the contravention report would be contested before the concerned authority and none of the issues identified in contravention report warranted inclusion of the name of complainant's registered unit in the list of units suspected to be fake‑‑‑Federal Tax Ombudsman recommended that Member (Sales Tax), Central Board of Revenue to issue advice to the concerned officers to be careful in future and to further scrutinize the list of already notified suspected units with a view to detect any other such units wrongly included in the list and to exclude any such unit forthwith.

Bashir Tahir, Mazhar Hussain Shah for Complainant.

Jamil Nasir Khan D.C. (Refunds) Sales Tax for Respondent.

2003 P T D 111

[Federal Tax Ombudsman]

Before Justice (Retd.) Saleem Akhtar, Federal Tax Ombudsman

Messrs ASIA TRADE AGENCIES, KARACHI

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. C‑236‑K of 2002, decided on 14th May, 2002.

Customs Act (IV of 1969)‑‑‑

‑‑‑‑S.25(10)‑‑‑Customs Valuation Rules, 1999, Rr. 109 & 112‑‑‑Customs Rule, 2001, 8.119‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance' (XXXV of 2000), S.9‑‑‑Valuation of imported and exported goods‑‑‑Customs Authorities loaded the declared value by 150% on the basis of some market enquiry of the imported Vulcanized Fibre Discs from Holland‑‑‑Complainant pleaded that Customs Authorities neither accepted the transaction value nor applied the other methods of customs valuation in sequential order as provided in subsection (10) of section 25 of the Customs Act, 1969 and valuation of the goods was not determined correctly under S.25 of the Customs Act, 1969 as arbitrary loading was not allowed under the said section‑‑‑Validity‑‑‑Customs Authorities did not have any evidence to support the contention that the value applied by them for assessment was justified‑‑‑Copy of the computation sheet submitted by the Customs Authorities showed the market value of the three sizes of discs and, after deducting profit margin of retailers, wholesalers and importers, the expenses and the duty and taxes, the difference between the ascertained value and the declared value had been arrived at 114%, 130% & 100%‑‑‑Deputy Collector on such computation ordered that the declared value be loaded by 150% and such action was not justified even if the value difference was correct‑‑‑Customs Authorities had no solid evidence to ascertain the assessable value and did not refer matter to the Valuation Department for thorough scrutiny and possible audit of the records of the importers to check the genuineness or otherwise of the declared values‑‑‑Prices calculated by the Customs officials .were further loaded by the Deputy Collector arbitrarily without assigning any reason‑‑‑Customs Authorities did not confront the importer with the alleged huge difference between landing cost and the market value; the various steps of calculation and the considerable gap in the ascertained value and the declared value‑‑­Contention that the importer himself did not approach the Customs Authorities was not acceptable because it was the duty of the Customs officials to discuss the valuation dispute with him before confronting him with a fait accompli‑‑‑Customs Authorities did not act in accordance with the provisions of Customs Valuation Rules, 1999, now incorporated in Rr.109, 112 and the Explanation of the Deductive value method given under R.119 of the Customs Rules, 2001‑‑‑Federal Tax Ombudsman recommended that the Central Board of Revenue direct the Collector of Customs (Appraisement) (i) to re‑examine the valuation of Gelva brand grinding discs/sheets strictly in accordance with the principles of valuation laid down in S.25 of the Customs Act, 1969; (ii) to carry out proper market enquiries, verify the prices through the Pakistan Embassy in Holland, and also take into account the decision of the Appellate Tribunal if available soon (iii) the importer should be given the opportunity to examine the customs calculation, submit valuation evidence and represent his case in support of the declared values and (iv) determine the assessable value, in accordance, with the provisions of S. 25(7) of the Customs Act, 1969 in the manner and the procedure prescribed in the Customs Rules, within thirty days.

Revision Application No. 1(118) Cus‑App. of 1986 ref.

Syed Mahmood Alam for the Complainant.

Ashir Azeem, Deputy Collector of Customs (Appraisement) for Respondent.

2003 P T D 125

[Federal Tax Ombudsman]

Before Justice (Retd.) Saleem Akhtar, Federal Tax Ombudsman

Messrs AHMAD JAUHARABAD (PVT.) LTD., FAISALABAD

Versus

SECRETARY, REVENUE‑DIVISION, ISLAMABAD

Complaint No. 322 of 2002, decided on 12th June, 2002.

Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑S.103‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss‑9 & 10(4)‑‑‑Withholding of refund‑‑­Power to withhold refund in certain cases ‑‑‑Complainant/assessee contended that the proposal of Assessing Officer to withhold the refund was vindictive with a view to deprive the complainant of his legitimate claim to refund due after the decision of First Appellate Authority and refund could only be withheld, if there was an apprehension that the assessee might disappear after disposing of its assets and rendering the recovery impossible if the departmental appeal against the order, giving rise to refund ultimately succeeded‑‑‑Complainant was a private limited company running a huge industry with a lot of capital and fixed assets and there was no apprehension that the assessee will disappear after obtaining the refund‑‑‑Validity‑‑From examination of facts and contentions of the parties, it was clear that the department had filed appeal before the Tribunal and the matter was sub judice‑‑‑Central Board of Revenue had taken note of the fact that at times, appeals without merit were filed either to forestall any claim or to avoid the responsibility of taking decision involving refund and other contentious matter‑‑‑Central Board of Revenue was obliged to scrutinize such cases to avoid hardship to the assessee‑‑‑Central Board of Revenue was advised by the Federal Tax Ombudsman to scrutinize the case and decide as to whether department was justified in filing appeal and issue necessary instructions before 15‑7‑2002‑‑‑Complaint/Case was closed by the Federal Tax Ombudsman.

Masood Ishaq for the Complainant.

Manzur Ahmed, D.C.I.T. for (respondent.

2003 P T D 132

[Federal Tax Ombudsman]

Before Justice (Retd,) Saleem Akhtar, Federal Tax Ombudsman

MUHAMMAD SALEEM

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 311‑L of 2002, decided on 17th July, 2002.

Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑S.50(7B) & First Sched., Part I para. A, Cl. (iii), Part IV, Cl. (46)‑‑­S.R.O. 1130(I)/91, dated 7‑11‑1991‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.9‑‑‑Deduction of tax at source‑‑‑Senior citizen allowance‑‑‑Rental income‑‑‑Complainant/assessee applied to curtail the deduction in view of the provision of law entitling him to 50% rebate as per sub‑clause (iii) to proviso in Para. A of Part I of the First Sched. to the Income Tax Ordinance, 1979‑‑‑As par S.R.O. 1130(I)/91, dated 7‑11‑1991 non‑deduction certificate could be issued by the Assistant Commissioner of Income‑tax to those (a) whose "income during the income year was exempted from tax" or (b) "income during the income year was not likely to exceed to minimum amount chargeable to tax..."‑‑‑Proviso to S.50(7B) of the Income Tax Ordinance, 1979 was deleted vide Finance Act, 1991, with the result that S.R.O. issued exercising power ‑conferred by the proviso stood deleted‑‑­Complainant was not entitled to the benefit of a certificate of non-­deduction as provided in Cl. (46) of Part‑IV of the First Sched. to the Income Tax Ordinance, 1979 because that eligibility was available to those whose income during the income year was "exempt from tax"‑‑­Complainant did not fall under the category of those whose income was exempt because his income was taxable though it might be below the taxable limit‑‑‑Such tax liability was likely to be meagre and marginal considering the extent of monthly rent and the rebate admissible to a senior 'citizen‑‑‑Federal Tax Ombudsman recommended that the Commissioner of Income‑tax was to direct the Assessing Officer to complete the assessment for the year 2001‑2002 on priority basis and to issue refund voucher, as determined, alongwith the assessment order, IT‑30 and the Demand Notice.

Complainant in person.

Nemo for the Respondent.

2003 P T D 134

[Federal Tax Ombudsman]

Before Justice (Retd.) Saleem Akhtar, Federal Tar Ombudsman

Mrs. SARWARY BEGUM

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.450 of 2002, decided on 17th September, 2002.

Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑Ss.92 & 12(18)‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss.2(3) & 9‑‑‑Recovery of tax from person holding money on behalf of an assessee‑‑‑Complainant/assessee blamed the Department of heartlessness in initiating recovery measure for attachment of her salary by action under S.92 of the Income Tax Ordinance, 1979 and denied having received any notice for re‑assessment and alleged that the signatures on the record were all fake/forged although notice could be easily served on her because her residence was just a few yards away from the Income‑tax Office‑‑‑Validity‑‑‑Scrutiny of record revealed several deficiencies, which fell under the definition of 'maladministration' as per S.2(3) of the Establishment of Office of Federal Tax Ombudsman Ordinance, 2000‑‑‑Said deficiencies were Original assessment framed on 30‑5‑1996 was set aside for de novo treatment by the A.A.C. on 29‑6‑1999, ex parte re‑assessment was made after more than six month (i.e. on 25‑1‑2000); reassessment order was served on the Complainant on 26‑3‑2001 that is after 14 months and for this long delay no plausible reason could be offered; Appellate Assistant Commissioner had set aside the assessment dated 30‑5‑1996 with the clear direction to consider the applicability of S.12(18) of the Income 'Fax Ordinance. 1979 which was on the statute book for the relevant assessment year and had also directed to ascertain whether an amount of Rs.50,000 was repaid out of the loan of Rs.150,000 "and what was the actual figure of loan at the close of assessment year under reference" assistant Commissioner of Income‑tax made no endeavour, to look into these points and repeated the original figures of the assessed income by passing an effortless order under S.63 of the Income Tax Ordinance, 1979, directions by the A.A.C. were completely ignored rendering the dispensation unsustainable‑‑‑Such lapses, fell under 'maladministration, Federal Tax Ombudsman recommended that Commissioner of Income­tax to amend the reassessment framed on 25‑1‑2000 by resort of S.122 of the Income Tax Ordinance, 2001 and amended assessment for 1993‑94 he reframed de novo following the directions by the A.A.C. and the Central Board of Revenue instructions on the subject.

Complainant in person.

Zubair Bilal, D.C.I.T. for Respondent.

2003 P T D 141

[Federal Tax Ombudsman]

Before Justice (Retd.) Saleem Akhtar, Federal Tax Ombudsman

PERAC RESEARCH & DEVELOPMENT FOUNDATION, KARACHI

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. C‑93/K of 2002, decided on 14th April, 2002.

Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑Ss.156, 50(4) & 92‑‑‑Rectification of mistake‑‑‑Loss assessed‑‑­Refund was not determined by non‑incorporation of tax deducted under S.50(4) of the Income Tax Ordinance, 1979 in the IT‑30 Form‑‑­Application for rectification‑‑‑Non‑disposal of such application within time‑‑‑Loss of record by the Department‑‑‑Withholding of refund‑‑­Validity‑Without any shadow of doubt this was a case of gross maladministration and needed immediate attention of the concerned Authority to redress the grievances of the complainant‑‑‑Federal Tax Ombudsman recommended that (i) the credit for deductions made under S.50(4) of the Income Tax Ordinance be allowed after verification and after making adjustment of any outstanding demand, the resultant refund be issued within 30 days of the receipt of this order; (ii) appropriate disciplinary action be taken against the officers responsible for nor passing order under S.156 of the Income Tax Ordinance, 1979 within the prescribed time and (iii) the responsibility of the officials for the loss of records be fixed and appropriate disciplinary action be taken against them.

Haider Naqi for the Complainant.

Chaudhry Muhammad Tariq, D.C.I.T. for Respondent.

2003 P T D 145

[Federal Tax Ombudsman]

Before Justice (Retd.) Saleem Akhtar, Federal Tax Ombudsman

Messrs AZIM DYEING & BLEACHING WORKS, PROPRIETOR MOHAMMAD

SAMI, KARACHI

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. C‑251/K of 2002, decided on 1st July, 2002.

(a) Income‑tax‑‑‑

‑‑‑‑Establishment of Office f& Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss.2(3) & 9(2)(b)‑‑‑Maladministration‑‑‑Disregarding the applications of the complainant and apathy shown to the problems of the taxpayers amounts to maladministration.

The Complaint No. 1433 of 2001 rel.

(b) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑S.65‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.10(3)‑‑‑Limitation‑‑‑Delay in filing of complaint ‑‑‑Condonation of‑‑‑Delay in filing the complaint was due to the time spent in approaching the concerned authorities of Department‑‑­Reasons given were cogent and convincing‑‑‑Delay in making the complaint was condoned by the Federal Tax Ombudsman.

(c) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑S.65‑‑‑Tax Amnesty Scheme, 2000‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.9‑‑‑Declarations were filed in respect of machinery and immovable property‑‑‑Notice under S.65 was issued in respect of concealed rental income for the previous years from, such immovable property ‑‑‑Assessee/Complainant contended that since the declaration filed was accepted, it attained finality and the assessment for the relevant period could not be reopened under S.65 of the Income Tax Ordinance, 1979 and further asserted that undisclosed income from all sources was invested in the acquisition of assets shown in the declaration filed under the Tax Amnesty Scheme, 2000‑‑‑Validity‑‑‑Contentions of complainant were supported by the provisions of the relevant circulars issued regarding the Tax Amnesty Scheme, 2000‑‑‑Federal Tax Ombudsman recommended that Assessing Officer be directed to drop the proceedings initiated under S.65 of the Income Tax Ordinance, 1979 for the assessment years 1997‑98 and 1998‑99 and if any assessments had been framed in consequence of the action under S.65, those be cancelled under S.138 of the Income Tax Ordinance, 1979.

Khaliquzzaman, I.T.P. for the Complainant.

Sheikh Muhammad Hanif, I.A.C. and Muhammad Aslam A.C.I.T. for Respondent.

2003 P T D 155

[Federal Tax Ombudsman]

Before Justice (Retd.) Saleem Akhtar, Federal Tax Ombudsman

Messrs SWEETY EXPORTS, FAISALABAD

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 189 of 2002, decided on 13th June, 2002.

Sales Tax Act (VII of 1990)‑‑‑

‑‑‑‑Ss.10, 4 & 7‑‑‑Sales Tax Refund Rules, 2000, Rr.2(1)(iv), 7(4), 13, 8(2) & 9(1)(v)‑‑‑STGO of 2000‑‑‑C.B.R. Instruction No.10 of 2002 dated 31‑1‑2002‑‑‑C.B.R. Circular No.1/20‑STB/2000, dated 19‑6‑2000‑‑‑Customs General Order No. 18 of 1995 and Customs General Order No.2 of 1996‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.9‑‑‑Claim of refund‑‑­Excess amount to be carried forward of refunded‑‑Extent of payment of refund claimed‑‑‑Department withheld refund against the invoices of those concerns who had not discharged their sales tax liability and an amount was still outstanding against them‑‑Input tax against the invoices claimed by the complainant having not been paid into Government exchequer, the refund against those invoices could not be made and there was reason to believe that the invoices were fake ‑‑‑Assessee contended that a notice had to be served under R.8 of the Sales Tax Refund Rules, 2000 on the claimant requiring him to show cause in writing as to why the claim should not be rejected‑‑‑If the refund claimed by the complainant was found inadmissible the Revenue was under legal obligation to inform the claimant under R.7(4) and R.8 within one month of the filing of claim‑‑‑No such notice, either under R.7(4) or R.8 of the Sales Tax Refund Rules, 2000 was served‑‑‑Refund could only be refused after affording a reasonable opportunity of hearing and through an adjudication order specifying reasons, therefore, as provided under R.8(2) of the Sales Tax Refund Rules, 2000‑‑‑Validity‑‑‑Regarding the unsettled refund claimed, it was found that there was substance in the submissions of the complainant that formal proceedings under para. (1) of R.8 of the Sales Tax Refund Rules, 2000 should be initiated and concluded under para. (2) of said rules so that the complainant, if so advised may approach appropriate, judicial forum for redress, if any‑‑­Maladministration on account of delay in circumstances, was clearly established‑‑ ‑Regarding the refund claim based on invoices which were claimed to be fake and no tax had been deposited in Government Treasury, there was substance in the submission of the complainant that there was no valid reason not to take up the proceedings under R.8 of the Sales Tax Refund Rules, 2000 on merits‑‑‑Undue delay in these cases was established‑‑‑Delay in settling the refund claim based on invoices was blatantly perverse and arbitrary; which was based on irrelevant considerations as was evident from facts, and was due to neglect, incompetence and inaptitude in discharge of duties‑‑‑Concerned officers instead of enforcing recovery from the defaulter‑collecting‑agent had withheld the genuine refund claim of the complainant‑‑‑Federal Tax Ombudsman recommended (i) Deputy Collector of Sales Tax concerned to take up proceedings under R.8 o‑f the Sales Tax Refund Rules, 2000 and decide about the refund claim of Rs.515,296 within 30 days, (ii) Deputy Collector of Sales Tax concerned to take up proceedings under R.8 of the Sales Tax Refund Rules, 2000 regarding refund claims on the basis of invoices and verify if the payments against such invoices were verified and if so it should be sufficient evidence to allow the claim and decide the claims within 30 days and (iii) Deputy Collector of Sales Tax concerned to allow the claim against specific invoices within seven days.

Silver Cotton Mills Ltd. v. C.S.T., Karachi 1984 PTD 216; Fazal Shafiq Textile Mills v. C.S.T., Karachi 1985 PTD 44 and Abbasi Textile Mills Ltd. v. C.S.T., Karachi 1983 PTD 53 ref.

Syed Sagheer Tirmizi and Syed Ali Adrian, A.C.A. for the Complainant.

Fawad Nasir Khan, D.C.S.T. for Respondent.

2003 P T D 167

[Federal Tax Ombudsman]

Before Justice (Retd.) Saleem Akhtar, Federal Tax Ombudsman

MUHAMMAD AMJAD, Messrs RAWALPINDI METAL CORPORATION (PVT.)

LTD., RAWALPINDI

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 401 of 2001, decided on 31st May, 2002.

(a) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑S.50(4)(a) & Expln.‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.9‑‑‑Deduction of tax at source‑‑‑Explanation added to S.50(4)(a), Income Tax Ordinance, 1979‑‑‑Scope‑‑‑By insertion of Explanation to S.50(4)(a) of the Income Tax Ordinance, 1979, the shape of the Income Tax Ordinance, 1979 had not been changed from procedural to substantive‑‑‑Explanation in the section clarified and explained the provision and did not extend the scope‑‑‑Explanation was inserted by Finance Ordinance, 1998 w.e.f. 1‑7‑1984 and therefore, question of retrospective operation did not arise.

(b) Income Talc Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑S.50(4) & Expln.‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000, S.9‑‑‑Deduction of tax at source‑‑‑Supply of goods‑‑‑Purchases on cash or credit‑‑‑Purchases on cash or credit were covered under the term "supply of goods"‑‑‑No new meaning/law was introduced by the Explanation in the existing S.50(4) of the Income Tax Ordinance, 1979 and the Explanation as such was retrospective in effect.

1999 PTD 4147 rel.

(c) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑Ss.52, 86, 50(7A) & 50(4)‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.9‑‑‑Liability of person failing to deduct or pay tax‑‑‑Charge of additional tax for failure to deduct and pay tax‑‑‑Tax was deducted under S.50(7A) of the Income Tax Ordinance, 1979 on the purchases made by the assessee‑complainant and assessee did not deduct tax under S.50(4) of the Income Tax Ordinance, 1979 on payment of such purchases‑‑‑Department contended that the assessee company while making payment for its purchases of scrap should have deducted tax under S.50(4) of the Income Tax Ordinance, 1979 as the exclusion of purchases covered by S.50(7A) of the Income Tax Ordinance, 1979 was not available under S.50(4) of the Income Tax Ordinance, 1979‑‑‑Assessee pleaded that since the seller/payer had already paid tax on the transaction in question the assessee purchaser/prayer could not be treated as an assessee in default‑‑­Validity ‑‑‑Complainant/assessee by not deducting tax on payment made to supplier, violated the provision of S.50(4) of the Income Tax Ordinance, 1979 and rendered itself liable to action under S.86 of the Income Tax Ordinance, 1979‑‑‑Federal Tax Ombudsman recommended that (i) the additional tax under S. 86 of the Income Tax Ordinance, 1979 is chargeable from the date of payment from the purchases of scrap made by the complainant till the date tax was paid in respect of the said transaction and (ii) if the additional tax charged by the Assessing officer is at variance with the quantum of tax as required to be computed it may be rectified to that extent.

(1996) 73 Tax 75 and (1999) 79 Tax 267 distinguished.

1999 PTD 4147 and 2001 PTD 570 rel.

Muhammad Aslam Sheikh for the Complainant.

Farooq Nasir, D.C.I.T. for Respondent.

2003 P T D 179

[Federal Tax Ombudsman]

Before Justice (Retd.) Saleem Akhtar, Federal Tar Ombudsman

MUHAMMAD IRFAN SATTAR

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 305 of 2002, decided on 30th May, 2002.

Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑S.56‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.9‑‑‑Notice for furnishing return of total income‑‑­Commencement of business ‑‑‑Complainant/assessee leased out shop on 1‑9‑2001 and voluntarily applied for NTN on 5‑2‑2001‑‑‑Notice under S.56 of the Income Tax Ordinance, 1979 was issued requiring the complainant to file return of income for assessment year 2001‑2002 and preceding three years‑‑‑Validity‑‑‑Inaptitude in the discharge of duties by the Inspector as well as the Special Officer was established from the fact that the Inspector reported without any basis that the assessee was conducting business for three or four years and the Special Officer instead of demanding from Inspector to substantiate this report, proceeded to issue notices under S. 56 of the Income Tax Ordinance, 1979 for four years to a person who had voluntarily applied for NTN‑‑­Federal Tax Ombudsman recommended that Regional Commissioner of Income Tax concerned to issue direction to the relevant Commissioner of Income Tax, to reprimand the Special Officer and the Inspector concerned in writing on their administrative excesses against the complainant.

Sh. Abdul Sattar for the Complainant.

Mehmood Aslam, Secretary, C.B.R. for Respondent.

2003 P T D 187

[Federal Tax Ombudsman]

Before Justice (Retd.) Saleem Akhtar, Federal Tax Ombudsman

Messrs RAHIM ELECTRIC STORE, FAISALABAD

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaints Nos. 1652 to 1742, of 2001, decided on 15th May, 2002.

Sales tax‑‑‑

‑‑‑ Establishment of Office of Federal Tax Ombudsman (XXXV of 2000), S.14(1) & (2)‑‑‑Suggestion for reforms of sales tax‑‑‑Federal Tax Ombudsman in exercise of powers vested under S.14(1) & (2) of the Establishment of Office of Federal Tax Ombudsman Ordinance, 2000, required the State Bank of Pakistan to furnish the (i) List of exporters who were issued refunds during the last five years alongwith amount paid and the dates on which such payments were made out and (ii) particulars of valuation and remittances received through each exporter by the State Bank of Pakistan during the last five years‑‑‑Such information may be useful for and relevant to the subject‑matter of investigation.

Muhammad Ashraf Hashmi for the Complainant.

Nazim Saleem, Chief (Sales tax) C.B.R. with Pervez Esbhani, Secretary (Sales Tax) C.B.R. for Respondent.

2003 P T D 190

[Federal Tax Ombudsman]

Before Justice (Retd.) Saleem Akhtar, Federal Tax Ombudsman

Mst. ISMAT JAHAN

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.241 of 2002, decided on 6th June, 2002.

Finance Act (V of 1989)‑‑‑

‑‑‑‑S. 7(8A)‑‑‑Wealth Tax Act (XV of 1963), S.25‑‑‑Capital Value Tax Rules, 1990, R.8‑‑‑C.B.R. Circular No.9 of 1997, dated 24‑7‑1997‑‑­Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss.3(1)(a), (b) & 9(2)‑‑‑Capital Value Tax‑‑‑Levy of‑‑­Revision application‑‑‑Demand of fee for revision‑‑‑Commissioner of Wealth Tax demanded revision fee amounting to Rs.1,000 under S.25 of the Wealth Tax Act, 1963‑‑‑Validity‑‑‑Subsection (8A) of S.7 of the Finance Act, 1989 empowered Commissioner of Wealth Tax to revise any order made under S.7 of the Finance Act, 1989‑‑‑No clause existed in S.7 of the Finance Act, 1989 or the Capital Value Tax Rules, 1990 for payment of revision fee amounting to Rs.1,000‑‑‑Even in C.B.R. Circular No.9 of 1997 dated 24‑7‑1997, it had not been clarified that revision fee under S.25 of the Wealth Tax Act was payable‑‑‑Only Ss.30, 31 & 32 of the Wealth Tax Act have been referred in S.7 of the Finance Act, 1989 and the Capital Value Tax Rules, 1990‑‑‑Said section deals only with recovery proceedings ‑‑‑Section..25 of the Wealth Tax Act, 1963 was not applicable in the matter relating to Capital Value Tax‑‑‑Act of the Commissioner of Wealth Tax was contrary to law and rules, hence fell within the definition of maladministration ‑‑‑Federal Tax Ombudsman recommended that the Commissioner of Wealth Tax should decide the revision application of the complainant dated 1‑11‑2001 on merits without asking for revision fee.

Saeed Rana for the Complainant.

Manzoor Ahmad, D.C.I.T. Circle 2, Sargodha for Respondent.

2003 P T D 194

[Federal Tax Ombudsman]

Before Justice (Retd.) Saleem Akhtar, Federal Tax Ombudsman

Messrs NISAR HAMEED WEAVING (PVT.) LTD., FAISALABAD

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.273 of 2002, decided on 5th June, 2002.

Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑Ss. 61, 62, & 54, Expln.‑‑‑C.B.R. Letter No.7(55) S. Asstt./29 dated 27‑9‑1999‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000); S.9 & (2)(b)‑‑‑Mal­administration‑‑‑Universal Self‑Assessment Scheme‑ ‑Assessment year 1999‑2000‑‑‑Assessee, a private limited company‑‑‑Loss declared for the assessment year 1998‑99 was not accepted and income was assessed‑‑­Assessee paid tax more than 30% as compared to tax payable on last assessed income and the requirement of the Universal Self‑Assessment Scheme 1999‑2000 was thus fulfilled‑‑‑Copy of the return filed in duplicate was received back by the Assessee from the department which constituted the assessment order under S.59(1) as provided in para. 12(b) of the Universal Self‑Assessment Scheme of the assessment year 1999‑2000‑‑‑Assessing Officer issued notice under S.61 of the Income Tax Ordinance, 1979 by excluding the return of the assessee from Universal Self‑Assessment Scheme on the ground that return did not qualify for acceptance under the Universal Self‑Assessment Scheme in the light of the clarification made by the Central Board of Revenue under Letter C. No.7(55) S.Asstt/29 dated 27‑9‑1999 although the assessment already stood completed‑‑‑Validity‑‑‑Said letter of Central Board of Revenue was addressed to the President, Income Tax Bar Association. Karachi and the clarification quoted by the Assessing Officer did not appear anywhere in the said letter and during the hearing the representative of the department was unable to show as to where the clarification had been taken from‑‑‑Furthermore, even if it was assumed that the said clarification was contained in some other Circular and was valid in the context of the Universal Self‑Assessment Scheme for the assessment year 1999‑2000 it was evident that according to said clarification turn over tax (i.e. tax under S.80(D) of the Income tax Ordinance, 1979) could be made the basis for comparison "where tax was payable or paid on income last declared or assessed due to loss"‑‑­Factual position, was that in the complainant's case, although loss had been declared for the assessment year 1998‑99 but the income was assessed at Rs.98,012 and the tax payable by the complainant consisted of tax on Rs.98,012 plus tax under S.80‑D of the Income Tax Ordinance, 1979 consisting of tax @ of 0.5 % of the complainant's total turnover minus tax on the assessed income thus it could not be said that for the year 1998‑99 turnover tax (viz. tax under S.80‑D of the Income Tax Ordinance, 1979) was payable on account of loss and that such tax under S.80‑D of the Income Tax Ordinance, 1979 formed the basis for comparison with the tax for the assessment year 1999‑2000‑‑‑Even the alleged disqualification contained in the Central Board of Revenue clarification did not apply in the complainant's case‑‑‑No valid basis existed for any attempt to exclude the Complainant/assessee's return for the assessment year 1999‑2000 from the purview of the Universal Self­-Assessment Scheme‑‑‑Since such an attempt amounted to maladministration, there was no merit in the preliminary objections of the department‑‑‑Federal Tax Ombudsman recommended that the proceedings relating to normal assessment for the year 1999‑2000 be dropped and the complainant's return be accepted under the Universal Self‑Assessment Scheme.

Ch. Abdul Ghafoor, ITP and Imran Rashid, A.Rs. for the Complainant.

Mian Munawar Ghaffar, IAC, for Respondent.

2003 P T D 203

[Federal Tax Ombudsman]

Before Justice (Retd.) Saleem Akhtar, Federal Tax Ombudsman

M. ISLAM QURESHI, PROPRIETOR MESSRS QURESHI CLOTH HOUSE, LAHORE

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

C‑complaint No. 359 of 2002, decided on 28th August. 2002.

Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑Ss.66(1), 66(2)(i), 65 & 13(1)(aa)‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.9‑‑‑Limitation for assessment in certain cases‑‑‑Addition made being relevant to 'earlier assessment year was directed to be deleted by the First Appellate Authority and Appellate Tribunal also agreed with the contention of the assessee that "if any addition has to be made, it should be made first in the earlier assessment year "and confirmed the findings of the First Appellate Authority which had resulted in the deletion of addition made under S.13(1)(aa) of the Income Tax Ordinance, 1979‑‑‑Department issued notice under S.65 of the Income Tax Ordinance, 1979 by invoking S.66(2)(i) of the Income Tax Ordinance, 1979‑‑‑Complaint against issuance of such notice was contrary to law‑‑‑Validity‑‑‑Section 66 of the income Tax Ordinance, 1979 provides that whereas a consequence of or to give effect ‑to any finding or direction contained in any order made by the authorities mentioned therein including the Tribunal an assessment was to be made on any firm, partner, assessee or any other person such assessments could be made within two years from the end of the financial year in which such order was received by the Assessing Officer Section 66 of the Income Tax Ordinance, 1979 contemplates three independent situations in which it could be applied; one of them being that if in consequence of an order assessment was to be made the limitation provided by subsection (1) of S.66 of the Income Tax Ordinance, 1979 will apply‑‑‑Such was an independent and separate from finding or direction which could be made basis of assessment‑‑In consequence of the order of Tribunal the Assessing Officer was justified in initiating proceedings for making the assessment‑‑‑ No maladministration having been established the case was closed by the Federal Tax Ombudsman.

Muhammad Shahid Abbas for the Complainant.

S.M. Ali, D.C.I.T. for Respondent.

2003 P T D 205

[Federal Tax Ombudsman]

Before Justice (Retd.) Saleem Akhtar, Federal Tax Ombudsman

Messrs PUNJAB TEXTILES, GOJRA, FAISALABAD.

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 318 of 2002, decided on 30th May, 2002.

Sales Tax Act (VII of 1990)‑‑‑

‑‑‑‑S. 17‑‑‑Certificate of Registration‑‑‑Registration, Voluntary Regist­ration and De‑Registration Rules, 1996, R. 3‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.10(4)‑‑­S.R.O. 550(I)/96 dated 1‑7‑1996‑‑‑Standing Order No. 4/2001 issued by the Collector Sales Tax‑‑‑Voluntary registration‑‑‑Demand of information/documents in addition to these required in the prescribed application form for registration through standing order issued by the Collector of Sales Tax‑ ‑Validity‑‑‑Rule 3 of the Registration, Voluntary Registration and De‑Registration Rules, 1996 prescribed the application Form at Annex. A' to he submitted to Collector in pursuance of S. 15 of the Sales Tax Act, 190‑‑‑Prescribed Rule did not require even any information on the points stipulated in the Standing Order and demand of documentary evidence on the points was an extralegal instruction‑‑­Collector's view that the law did not prescribe any time limit to grant registration was also misconceived‑‑‑Section 17 of the Sales Tax Act, 1990 as well as F. 3(2) of the Registration, Voluntary Registration and De‑Registration Rules, 1996 provide that if Collector or such other officer as may be authorized by him in his behalf was satisfied that the application for registration was complete in all respects, he shall register the applicant and issue a certificate of registration in the prescribed Form Annex.B'‑‑‑Cut off time to issue registration certification was the moment the Assessing Officer was satisfied that the prescribed application was comply to in all respects‑‑‑Once existence of the application for registration complete in all respects was available on record, the dealing officer was accountable for each day by which the issuance of registration certificate was delayed thereafter‑‑‑No evidence was available to the effect that application in the present case was not complete in any of the respects on the ‑date it was filed ‑‑‑Mal­administration was established‑‑‑Federal Tax Ombudsman recommended that the Chairman Central Board of Revenue direct the Collector Sales Tax to withdraw the Standing Order No. 4 of 2001‑‑‑Revenue Division may, in their discretion, consider insertion of such requirements in the prescribed Form Annex 'A' as are reasonable and as are being contemplated in compliance of recommendations dated 8‑4‑2001 in Complaint No. 149‑K of 2002 (2002 PTD 2346) filed on behalf of Messrs Faisal Engineering, Karachi to ensure bona fides of the applicant so that the requirements are known to the applicant in advance.

Muhammad Saleem Malik for the Complainant.

Masood Sabir, A. C. S. T. for Respondent.

2003 P T D 213

[Federal Tax Ombudsman]

Before Justice (Retd.) Saleem Akhtar, Federal Tax Ombudsman

Messrs SPECIALITY PRINTERS (PVT.) LTD.

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Review Application No. 28 of 2002 in Complaint No.C‑1743 of 2001, decided on 26th June, 2002.

Customs Act (IV of 1969)‑‑‑

‑‑‑‑Ss. 25 & 25‑B‑‑‑Inspection, Valuation and Assessment of Imported Goods Rules, 1996, R.8(2)(c)‑‑‑S.R.O. 1108(I)/94 dated 14‑11‑1996‑‑­C.G.O: No.5/96 dated 21‑3‑1996‑‑‑Customs House Circular No.32/69‑‑­Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.9‑‑‑Value of imported and exported goods‑‑‑Fixation of value for imports and exports‑‑‑C. R. F. price‑‑‑Price quoted in the Polymer scan magazine‑‑‑Review application against the recommendation of Federal Tax Ombudsman to finalize the refund claims on the basis of assessment, in accordance with the Inspection, Valuation and Assessment of Imported Goods Rules (PSI Rules) notified by the Central Board of Revenue vide S.R.O. 1108(I)/94 dated 14‑11‑1996, at the CRF prices quoted by the PSI Company and against the implementation of the valuation of goods under the notified Rules and the implementation of the Federal Export Promotion Board to accept the CRF prices or refer the value dispute to the Working Committee, adopted by Central Board of Revenue in C.G.O. No.5/96 mainly on the ground that PSI Rules notified under S.R.O. 1180(I)/94 were not binding on the customs to the extent of accepting the CRF and PSI companies, had no knowledge, no competence, and no authority to ascertain and report customs values etc.‑‑‑Validity‑‑‑Was unbelievable that the Revenue Division would take the stand that its own notified rules were not legally valid and the Collector's Authority prevailed upon the existing law and rules made thereunder‑Views expressed by the Collector and the Deputy Collector frankly, forthrightly and in blunt terms lent considerable credence to the general perception that the field officers of the Tax Department do not comply with the, provisions of laws, rules and regulation in force, and ignore the directives of the Revenue Department/Central Board of Revenue as a matter of routine‑‑‑Revenue Division seems not only allowing defiance of law but also providing it full support to the contention that valuation of plastic moulding compound was the exclusive domain of Collector‑‑‑Review application not only lacked in substance but aimed at justifying and supporting patent illegality and accordingly was rejected.

Shabbir Ahmad Project Manager.

Muhammad Irfan Sarfraz, Deputy Collector of Customs.

2003 P T D 225

[Federal Tax Ombudsman]

Before Justice (Retd.) Saleem Akhtar, Federal Tax Ombudsman

Messrs HASSAN EHSAN COTTON GINNERS

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. C‑1513‑L of 2001, decided on 30th May, 2002.

Sales Tax Act (VII of 1990)‑‑‑

‑‑Ss. 34 & 33(2)(c)‑‑‑Establishment of Office of Federal Tax Ombudsman ordinance (XXXV of 2000), S.9‑‑‑S.R.O. 461(I)/1990 of 9‑4‑1999‑‑‑Additional tax and penalties‑‑‑Amnesty from Additional tax and penalties‑‑‑Payment of sales tax within due date‑‑‑Levy of Additional x and penalty‑‑‑Validity‑‑‑Order passed was manifestly unjust and arbitrary as it failed to take into account the payments made and the consequent eligibility for amnesty from additional tax and penalties granted by the Central Board of Revenue‑‑‑Clearly this was case of maladministration on account of the illegal order passed by the Assistant Collector‑‑‑Collector casually and curtly disposed of the complaint without looking into its merits and offering comments‑‑‑Federal Tax Ombudsman recommended that Central Board of Revenue (i) in exercise of powers under S.45‑A of the Sales Tax Act set, aside the order in original passed by the Assistant Collector (ii) direct the Collector to ensure that the sales tax paid by the complainant is properly accounted for and (iii) warn the Collector for sending an incomplete reply to the complaint.

Sh. Ghulam Asghar for the Complainant.

Dr. Aftab Bhatti, Dy. Collector of Sales Tax.

2003 P T D 246

[Federal Tax Ombudsman]

Before Justice (Retd.) Saleem Akhtar, Federal Tax Ombudsman

Messrs ITTEFAQ GINNING FACTORY, TOBA TEK SINGH

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 250 of 2002, decided on 8th June, 2002.

Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑Ss.50(4), 80‑C, 143‑B, 52, 51, 86 & 156‑‑‑Income Tax Rules, 1982, Rr.49, 50 & 64‑A‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss.3(2), 9 & 10(4)‑‑‑Deduction of tax at source‑‑‑Tax on supplies by the complainant/assessee was deducted‑‑‑Tax deducted by the parties was neither deposited in Government treasury nor certificate of deduction was issued to the complainant/assessee‑‑­Complainant/assessee filed statement under S. 143‑B of the Income Tax Ordinance, 1979 without treasury challan/certificate of tax deduction at source and attached the details of parties with complete addresses who deducted the tax‑‑‑‑Assessing Officer created demand of same against complainant/ assessee in spite of the fact that proceedings were also initiated for the tax deducting against the complainant and demand was recovered on gun‑point by the Tax Recovery Officer causing harassment, disrespect and injury to the complainant instead of recovering taxes withheld by their agents on behalf of the State but not deposited into treasury as required under the law‑‑‑Validity‑‑‑Was extremely distressing that despite detailed findings and recommendations in several complaints, the senior officers in the Revenue Division as well as at Regional and Zonal levels have not been able to ensure that all assessees under statutory obligation to act as tax withholding agents deducted, collected and deposited the taxes so deducted and collected into the exchequer in accordance with law in time; that they issued prescribed certificate to assessees from whom such taxes were deducted or collected; and that they did file duly filled in monthly statements required under the rules prescribed under the law‑‑‑Such agents did not realize that it was their obligation to ensure that taxes paid by the assessee in various manners stipulated under the law were properly accounted for and posted in the cash books of the circles where they were assessed and copies of challans were placed in the miscellaneous cover of their respective assessment records for the relevant year‑‑‑Entire department suffers from the misconception that it was the onus of the assessees to produce evidence of payment of tax for which credit had been claimed in the return of income‑‑‑Responsibility falls upon the officers in the Central Board of Revenue. to dispel this totally unfounded belief of their subordinates effectively, they must realize that it was the most common irritant for taxpayers‑‑‑No efforts were made to take the remedial measures for lapses in the computerized tax accounting system recommended in the report laid before the President of Pakistan in January, 2002‑‑‑Such apathy was highly detestable‑‑‑Multidimensional maladministration identified in consequence of investigation in the present complaint warranted a serious consideration by the Secretary, Revenue Division himself‑‑‑Withholding agent, in the present case, had the audacity to tell the department that the tax withheld on behalf of State from the suppliers had been adjusted against the short supplies by the vendor‑‑‑Concerned officers instead of taking all possible legal actions against the withholding agent for admitted embezzlement of State funds kept on harassing the assessee who had already discharged its liability‑‑‑Had the two Special Officers who dealt with complainant's statement under S.143‑B of the Income Tax Ordinance, 1979 and the application under S.156 of Income Tax Ordinance, 1979 adopted the proper course of attempting to verify the claim on account of taxes withheld from the circles where the withholding agents were being assessed, the infringement of law and embezzlements of State revenue committed by them would have been exposed in 1994‑‑‑Order passed under S.52 of the Income Tax Ordinance, 1979 by the concerned Assessing Officer, holding complainants to be the assessee in default too was not effectively pursued; the appellate forums too, did not give a clear verdict through the issue neither had any accounting riddle nor any legal ambiguity‑‑­Such was indeed a matter of serious concern that the answer of the withholding agent before the Income Tax Appellate Tribunal on 16‑2‑2000 that they were no more in default because the amount of tax had already been recovered from the supplier was taken too lightly by the Assessing Officer, after the issue was remanded for fresh decision‑‑­Reason why the Federal tax administration remains very busy doing little was obvious, they neither demonstrated effectively nor proved convincingly that they took their job seriously and neither made example of black-sheep among the taxpayers even where they had the audacity to proclaim defiance not against such tax functionaries among their folds even when they exposed their negligence, inattention, delay, incompetence, inefficiency, inaptitude and arbitrariness in the discharge of their duties and responsibilities‑‑‑Since there was no visible attempt on their part as a class to distinct themselves from such rogue elements in society, the common perception that they were in league with them was gaining ground‑‑‑It was being reinforced by the enthusiasm of the senior officers to defend and support their delinquent subordinates in their written replies to the complaints filed in this office‑‑Was time for the conscientious persons among them to stand high and firm over and above such functionaries and be identified as a distinct class‑Federal Tax Ombudsman recommended that the Secretary, Revenue Division, ensured that the issue remanded by the Income Tax Appellate Tribunal vide order dated 16‑9‑2000 in I.T.A. No.2274/KB of 1996 was decided by July 15, 2002; that the State revenue amounting to Rs.298,588 deducted from the bills of complainant during the period referred to in the present complaint alongwith other such withholdings of State revenue identified in the order under S.52 passed in the cases of tax agent who deducted the tax but failed to deposit and embezzled were recovered alongwith the additional tax charged under S.86 of\the Income Tax Ordinance, 1979; that notices were issued under S.116 for default under S.108 for non­-filing of statements prescribed under the Rules framed in pursuance of S.51 of the Income Tax Ordinance, 1979 and imposed penalties chargeable under the law and directed the Commissioner of Income Tax concerned to refer the matter of default committed by the company who deducted the tax but failed to deposit, to the Legal Advisors for prosecution to be filed against them; that direct the concerned Regional Commissioner of Income Tax (a) to ensure that the amount of Rs.298,588 unduly collected from the complainant on June 27, 1999 was refunded by June 27, 2002 alongwith compensation equal to the amount of additional tax calculated under S.86 of the Income Tax Ordinance, 1979 for the corresponding period and recoverable from the Collecting agent and (b) to direct the Competent Authority in the Zone where the said Special Officers were posted to initiate proceedings against them under Government Servants (Efficiency & Discipline) Rules, 1973 on account of their incompetence and inaptitude in discharge of their duties. Manner in which the officers processed on 20‑3‑1996 the statement filed by the complainant under S. 143‑B of the Income Tax Ordinance, 1979 as well. as its application under S.156 of the Income Tax Ordinance, 1979 on 3‑5‑1997 and secondly, by the explanation of their conduct offered by them personally during the course of hearing of the present complaint on 9‑5‑2002; that direct Regional Commissioner of Income Tax Central Region, particularly and all other senior officers subscribing their signatures‑to the written replies filed in response to notices issued under subsection (4) of section 10 of the Establishment of the Officer of the Federal Tax Ombudsman Ordinance, 2000 generally to ensure that the allegations in the complaint had been examined both factually and legally by the supervising and controlling officers of the functionary alleged to have caused the grievance; that explanation offered by the concerned officer personally or the factual position as evident from the record should be forwarded without making any attempt to defend the action of a subordinate (unless the action was taken on the orders of such senior officer himself) because while doing so they would render themselves responsible for the alleged maladministration that, in consequence of investigation, may turn out to be valid; that direct the Regional Commissioner of Income Tax, Central Region, to ensure that an enquiry was instituted; (a) to identity the DIT who issued certificate to the Tax Recovery Officer (TRO) specifying the amount of tax due from the complainant; (b) to offer the identified officer an opportunity to explain his conduct under the circumstances; (c) to offer an opportunity to the TRO to answer the allegations of highhandedness in performing his duties of recovering the amount certified by the DCIT; (d) to ensure that the Enquiry Officer submitted his report by July‑31, 2002 and (e) to ensure that the Competent Authority took the decision under the Rules by o August 30, 2002 and that direct the Member, Income Tax Central Board of Revenue to ensure implementation by PRAL of the recommendation made in the Special Report on Accounting System of Income Tax Collection, to give wide, publicity to the provisions of law as well, as the procedure prescribed under the rules regarding the duties and obligations of assessees in their capacity as the statutory tax withholding agents of State; to create awareness of their privileges among those from whose proceeds the taxes were deducted or on whose transactions taxes were collected at source by various withholding agents under the provisions of S.50 of the Income Tax Ordinance, 1979; to issue directions to the Inspecting Offers to conduct thorough inspection of one circle each month covering all aspects of performance including monitoring of taxes to be withheld by concerned assessees in that circle and the obligations to be fulfilled by them and to submit report by the 7th day of the following month to the Commissioner of Income Tax of the Zone with a copy to the Director, Inspection & Audit; and to ensure that entries of all taxes paid by or deducted or collected from each assessee are duly reported to the circle or any other authority holding jurisdiction over the assessment records of such assessee and he is allowed due credit at the time of assessment.

Sagheer Tirmizey for the Complainant.

S. M. Athar, Muhammad Ashraf, Muhammad Akram, Safdar Hussain, Syed Shujjat Hussain, Mian Munawar Ghafoor and Ijaz Ahmad Faizi for the Respondent.

2003 P T D 266

[Federal Tax Ombudsman]

Before Justice (Retd.) Saleem Akhtar, Federal Tax Ombudsman

MUSHTAQ AHMAD, KHARIAN CANTT.

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 347 of 2002, decided on 8th June, 2002.

Wealth Tax Act (XV of 1963)‑‑‑

‑‑‑‑S. 16‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.9‑‑‑Assessee was living abroad‑‑‑Wealth Tax was levied and recovered from the bank account of the assessee in respect of a house which belonged to the son and son‑in‑law of the assessee‑‑‑Validity‑‑‑No proper service of notice was made in the case prior to. the notice by affixture and there was no material on record to show how the property in question was attributed to the complainant‑‑‑Federal Tax Ombudsman recommended that the wealth tax assessments for the years 1995‑96 be cancelled by the Commissioner under S.25 of the Wealth Tax Act, 1963 with the directions that fresh inquiry be made particularly with regard to the ownership of the property in question and if the complainant is not found to be the owner of the property proceedings be filed in his case and the amount of Rs.134,000 recovered from his bank account be refunded to him.

Muhammad Bashir for the Complainant.

Jafar Nawaz, D.C.I.T. for Respondent.

2003 P T D 271

[Federal Tax Ombudsman]

Before Justice (Retd.) Saleem Akhtar, Federal Tax Ombudsman

MUHAMMAD ASHRAF HASHMI, ADVOCATE, PRESIDENT ALL PAKISTAN

TAX BAR ASSOCIATION, FAISALABAD and another

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaints Nos. 188 and 751 of 2001, decided on 12th June, 2002.

Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑S. 5‑‑‑Establishment of Officer of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss.9 & 10(4)‑‑‑Jurisdiction of Income‑tax Authorities‑‑‑Creation of Special Zone in Lahore and Karachi for assessment of cases of Textile and Cement Industries‑ Plea taken was that creation of Special Zones in Lahore and Karachi for the assessment of cases of Textile and Cement Industries was without any justification as it would badly affect the, members of the Bar as well as the taxpayers besides creating inconvenience and hardship in addition to increase in expense as well as wastage of time‑‑‑Further contention was that decision was meant to serve ulterior motives of senior officers either to remain posted at Lahore and Karachi instead of moving out to centers of the industry outside the two aforementioned cities or aspiring to be posted there because they have established their relations with the big business and their children had opportunities to have quality education in those cities‑‑‑Income of nine out of eleven cement units had been assessed by Special Zone, Lahore at net loss‑‑‑Specialists, Assessing Officer have failed to detect that the cement units were showing lower rate of sales to customers who were not registered under Sales Tax Act as compared to the rates at which cement was being sold to registered customers‑‑­Validity‑‑‑Allegation of ulterior motive of senior officers to stay at Lahore and Karachi hardly had any substance on the foregoing facts‑‑­Continuous stay for periods over three years in certain cases at multi‑zonal stations was not unusual particularly in cases of rankers and female officers/staff‑‑‑Besides, none of the allegations had any relevance to the Special Zones set up for the areas falling in Sindh and Balochistan Provinces based at Karachi because the total cases pertaining to mills/factories locate outside Karachi ate 22 only which included five cases of Directors‑‑‑Five companies out of 17 had their Head Officer at Karachi and one out of five Directors, lived in Karachi one having its factory located at Nooriabad‑‑‑Seven out of remaining 12 were located at Kotri and five were located at Hyderabad ‑‑‑Lapses in examination of accounts were not expected even normally‑‑‑Nevertheless, such instances were not enough to deny the benefits of adopting the policy of specialization‑‑‑Comparative improvement reflected by the figures of disposal and . collections submitted by the two zones supported the wisdom of the policy‑‑‑Wisdom of the choice of Lahore as the base of Special Zone for textile and cement industry of Punjab and N.‑W.F.P. was certainly questionable considering the locations of mills/factories and their head offices as reflected from the statement‑‑‑Allegation, on the facts and figures that the obvious choice for locating the base of such a specialized zone had been ignored denying the officials chosen for specialization, the benefit of first hand direct interface with the industry on the one hand and jeopardizing the professional interests of the members of tax bar belonging to the areas where textile and cement industry was located had substance‑‑‑Besides, the representatives of the industry were also not happy with the choice of Lahore as the base for specialized zone for obvious reasons‑‑‑Regarding the written submissions made on behalf of the Revenue Division, merit had been found in the policy of creating ‑specialized cadres to improve standard of audit and assessment based on better understanding of specialized officers handling such cases‑‑‑Decision to choose Lahore as the base of specialized zone for textile and cement industry in Punjab and N.‑W.F.P. were found arbitrary unreasonable, unjust, biased and discriminatory, falling under the definition of maladministration ‑‑‑Federal Tax Ombudsman recommended that Central Board of Revenue review the decision and shift the base to Faisalabad in order to give impetus to specialization policy.

Muhammad Ashraf Hashmi for the Complainant.

M. Abdul Rauf, C.I.T. Special Zones for Respondent.

2003 P T D 288

[Federal Tax Ombudsman]

Before Justice (Retd.) Saleem Akhtar, Federal Tax Ombudsman

Ch. ALLAH RAKHA

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 3237 of 2002, decided on 18th July, 2002.

Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000)‑‑‑

‑‑‑‑S.10(10)‑‑‑Procedure and evidence‑‑‑Issue decided by the President of Pakistan‑‑‑Same relief was claimed in complaint‑‑‑Validity‑‑‑Issue having been decided a‑ the level of President of Pakistan could not be reconsidered at any forum‑‑‑No further investigation was warranted‑‑­Federal Tax' Ombudsman closed the file under S.10(10) of the Establishment of Office of Federal Tax Ombudsman Ordinance, 2000.

2003 P T D 289

[Federal Tax Ombudsman]

Before Justice (Retd.) Saleem Akhtar, Federal Tax Ombudsman

Mian MUHAMMAD ARSHAD

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 52 of 2002, decided on 23rd August, 2002.

(a) Wealth Tax Act (XV of 1963)‑‑‑

‑‑‑‑S.35‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.9‑‑‑Wealth Tax Rules, 1963, R.8(2)‑‑‑Rectification of mistake‑‑‑Valuation of shares‑‑‑Private Limited Company‑‑‑Face value was accepted‑‑‑Assessing Officer subsequently initiated proceedings under S.35 of the Wealth Tax Act, 1963 to determine the higher of the break up value or face value‑‑‑Validity‑‑‑Action under S.35 of the wealth Tax Act, 1963 for assessment years 1999‑2000 and 2000‑2001 as correct as the Assessing Officer had to adopt the higher of the break up value or face value in case of shares of private limited companies‑‑Assessing Officer was justified in ascertaining the break up value of these shares, which in fact he should have done at the time of assessments‑‑‑Assessment order showed that the relevant balance sheets sere available with the Department the process should not have taken up‑‑‑Federal Tax Ombudsman recommended that action under section 35 of the Wealth Tax Act for assessment years 1999‑2000 and 2000‑2001 be finalized within 30 days.

(b) Wealth Tax Act (XV of 1963)‑‑‑

‑‑Ss.13‑D, 31‑B & 35‑‑‑Establishment ,of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.9‑‑‑Advance payment of ax‑‑‑Rectification of mistake‑‑ ‑Additional wealth tax‑‑‑Refund‑‑assessee adjusted determined refund for the previous year against the tax payable for the current year 2000‑2001 and claimed balance amount of refund ‑‑‑Assessing Officer charged additional tax under S.31‑B of the Wealth Tax Act, 1963 for non‑payment of admitted tax liability‑‑C­omplaint for non‑payment of refund amount and levy of additional tax under S.31‑B of the Wealth Tax Act, 163‑‑‑Validity‑‑‑As‑ regards the charge of additional tax under S.31‑B for assessment year 2000‑2001, it was seen that original wealth tax assessment for the year 1998‑59 was made under S.16(3) on as far back as 14‑4‑1999 and it was not the complainant's fault if despite filing an application for rectification dated 9-6‑1999 no credit was given for the total payment of Rs.350,000 made under S.13‑D of the Act on 15‑11‑1997, 30‑4‑1998 anal 12‑6‑1998 till 21‑6‑2001 when finally a refund of Rs.200,000 was created vide order under S.35 of the Wealth Tax Act, 1963‑‑‑Perusal of wealth tax return for assessment year 2000‑2001 showed that complainant had claimed in it refund adjustment for assessment year 1998‑99‑‑‑No justification was available for levying additional tax for alleged short payment/non­payment of admitted tax liability with the wealth tax return for the assessment year 2000‑01‑‑‑Federal Tax Ombudsman recommended that (i) the wealth tax refund if (any) found still due after the completion of the said proceedings under S.35 of the Wealth Tax Act, 1963 be issued within 15 days of the finalization of the proceedings under S.35 of the Wealth Tax Act, 1963; (ii) additional tax under S.31‑B of the Wealth Tax Act, 1963 be deleted by the Commissioner under S.25 of the Wealth Tax Act, 163 and (iii) as regards the refund of income‑tax for assessment year 2000‑01, the Inspecting Additional Commissioner may consider the Income‑tax Appellate Tribunal's decision in the complainant's case for the years 1998‑99 and 1999‑2000 before taking further action under ­S.66‑A of the Income Tax Ordinance, 1979.

Malik Muhammad Naeem, Deputy Chief Accountant, A.R. for the Complainant.

Naseer Butt, DCIT for Respondent.

2003 P T D 296

[Federal Tax Ombudsman]

Before Justice (Retd.) Saleem Akhtar, Federal Tax Ombudsman

Messrs PAKISTAN MOBILE COMMUNICATION, ISLAMABAD

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 259 of 2002, decided on 23rd July, 2002.

Customs Act (XV of 1969)‑‑‑

--‑S.19‑‑‑Sales Tax Act (VII of 1990), Ss.3(3A)(6), (8)(1)(b), 13(2)(9) & 71‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.9‑‑‑S.R.O. 390(I)/2001, dated 18‑1‑2001‑‑‑General power to exempt from custom duties ‑‑‑Assessee, a cellular company‑Notification No.390(I)/2001 dated 18‑1‑2001 was issued exempting same from customs duty and sales tax on the condition that importer shall bring the sets free of duty and tax at import stage but pay such tax at the stage of activation‑‑‑Complainant did not want to avail such exemption as he was not an importer and pleaded that importer could be charged with liability to pay duty at the time of import but under the notification the liability to pay and collection had been shifted to the cellular company whether they have imported or not‑‑‑Department was contended to be directed not to force the complainant to avail exemption under the said notification and allow them to pay duty and tax under the normal regime of the Customs Act, 1969 and Sales Tax Act, 1990‑‑‑Department pleaded that Government had not encroached upon the right of the complainant as it had only changed the mode of collection for this particular sector, in view of its special nature‑‑­Validity‑‑‑Contention that the S.R.O. 390(I)/2001, dated 18‑1‑2001 way, in violation of the provision of law did not seem to be justified‑‑‑Said notification was issued under S.19 of the Customs Act, 1969 and Ss.(3A)(6), 8(I)(b), 3(2)(a) & S.71 of the Sales Tax Act, 1990‑‑‑By this notification the exemption in sales tax and customs duty was allowed on certain conditions‑‑‑Under S.19 of the Customs Act exemption could be granted subject to such conditions, limitations or restrictions as the Federal Government thinks fit to impose; similar was the case under the sales Tax Act, 1990‑‑‑Section 71 of the Sales Tax Act, 1990 further provides that the Federal Government may by notification prescribe the special procedure for payment of tax‑‑‑Impugned notification while granting the exemption had imposed eight conditions one of which was that no customs duty and sales tax shall be collected on cellular telephone sets at the time of import or at the time of supply but it will be charged collected and paid by the cellular company operator at the times the sets were presented to the Company operator for activation or energizations Such amount shall be charged and collected from the customer require energization and activation, therefore, the cellular company was only collecting agent and special procedure provided by the said S.R.O, was legal and proper ‑‑‑S.R.O. having been issued under a delegated authority could be challenged on the ground that it was in contravention of the provision of law‑‑‑No such illegality had been found as shifting of recovery of customs duty and sales tax was not contrary to the provisions of law‑‑‑If a law provides levy of tax or exemption from tax or duty, it was not left to the option of any party to accept it or not to accept it‑‑­Where law was validly made its obedience was not optional maladministration having been established in implementing the said S.R.O. the case was closed by, the Federal Tax Ombudsman.

Ayaz Shoukat Asif Saeed Khan and Mumtaz Ali for the Complainant.

Ashfaq Ahmed Tunio, Secretary, Sales Tax, C.B.R., Dr. Zulfiqar Ahmad Malik, Secretary Customs, C.B.R. for Respondent.

2003 P T D 312

[Federal Tax Ombudsman]

Before Justice (Retd.) Saleem Akhtar, Federal Tax Ombudsman

Messrs PRIME CHROMIUM (PVT.).LTD., HATTAR

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 173 of 2002, decided on 16th May, 2002.

Sales Tax Act (VII of 1990)‑‑‑

‑‑‑S.13(2)(a)‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S. 9‑‑‑S.R.O. No. 529(I)88, dated 26‑6‑1988‑‑‑S. R. O. No.561(I)/94, dated 9‑6‑1994‑‑‑Exemption‑‑‑Exemption was available for 5 years to new industrial units set up to 30th June, 1996 provided letters of credit or firmed up financial arrangements with the banks or financial institutions were registered with Central Board of Revenue before 15th July, 1994‑‑‑Assessee informed the Department regarding commencement of trial production w.e.f. 6‑6‑1994 in compliance with prevailing rules and practice of Sales Tax Department ‑‑‑Application for registration under S.R.O. No. 561(I)/94 dated 9‑6‑1994 was made to Central Board of Revenue through the local Sales Tax Authorities as on 3‑7‑1994‑‑‑Secretary (STT) informed the assessee that its registration application under S.R.O. No.561(I)/94, dated 9‑6‑1994 was received late in Central Board of Revenue viz after the permissible period for registration which was up to 15‑7‑1994‑‑­Department demanded sales tax and additional tax due to non­ availability of Registration Certificate with the assessee/complainant‑‑­Validity‑‑‑Notification dated 9‑6‑1994 provided that the exemption which was originally allowable to the industrial units set up up to 30‑6‑1996 was now allowable to such units set up up to 30‑6‑1994‑‑‑In order to obviate hardship to intending investors who had already made arrangements. for setting up their units in accordance with the original date of 30‑6‑1996, proviso was added, however; to the said S.R.O. according to which if a letter of credit had been opened up to 20‑6‑1994 for import of machinery or firmed up financial arrangements had been made with banks or financial institutions for the new units to be set up up to 30‑6‑1995 the said letters of credit or firmed up financial arrangements were to be registered with the C.B.R. before 15th July, 1994 and the C.B.R. after verifying the facts would intimate in writing whether the applicant was entitled to exemption under the notification; it was thus obvious that the requirement of such registration with the C.B.R. was only for such units as had not actually been set up by 30‑6­1994 but regarding which firmed up financial arrangements had been made; in such cases it was necessary for the C.B.R. to verify whether the financial arrangements were such as would entitle the applicant to exemption under the S.R.O. dated 9‑6‑1994, thus the requirement of registration with the C.B.R. did not apply in cases where the industrial units had already been set up up to 30‑6‑1994 as in the complainant's case‑‑‑Federal Tax Ombudsman concluded that (i) the complainant was not required to apply for registration with the C.B.R. under S.R.O. 516(I)/94 dated 9‑6‑1994; (ii) in any case the complainant had submitted an application for registration with the local Sales Tax Authorities for forwarding to C.B.R. on 3‑7‑1994 i.e. much before the cut off date of 15‑7‑1994, the complainant was, therefore, not responsible for the purported delay in the receipt of the‑application in the C.B.R. and recommended that and (iii) the order in original dated 26‑2‑2002 now passed by the Additional Collector (Adj.), be cancelled by the Competent Authority under S.45‑A of the Sales Tax Act and compliance be reported within 30 days.

Muhammad Nazir Ch., Chief Executive and Shafqat Mehmood Chauhan, A.R. for the Complainant.

M. Saleem, Deputy Collector for Respondent.

2003 P T D 329

[Federal Tax Ombudsman]

Before Justice (Retd.) Saleem Akhtar, Federal Tax Ombudsman

Messrs UNITED IMPEX, KARACHI

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. C‑155/K of 2002, decided on 29th April, 2002.

Customs Act (VI of 1969)‑‑‑

‑‑‑‑S. 21‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.9‑‑‑Duty drawback‑‑‑Non‑payment of duty draw‑back‑‑‑Complaint against‑‑‑Three duty drawback claims filed in 1995, 1997 and 1999 remained unpaid till March, 2002‑‑‑On receipt of the complaint, the Department obtained duplicate papers from the complainant and promptly made the payment‑‑‑Original claim‑papers were not available with the Department‑‑‑Personal efforts ‑ of the complainant and his letters received were not responded by the Authorities‑‑‑Collector's reply characteristically did not offer any explanation for wrong adjustment, inordinate delay, failure to reply to the exporter's letters and the only excuse offered was about recovery campaign which was belied by the letter of his own office‑‑‑Such was clearly a case of maladministration on account of neglect, inattention, inefficiency and failure in discharge of duties and brought in to sharp focus how casually and on‑seriously the complaints referred by this forum were processed‑‑‑Federal Tax Ombudsman recommended that Central Board of Revenue (i) depute the Director‑General Enquiries to carry out an inquiry and identify the dealing officials and senior officers responsible for the gross maladministration and (ii) initiate appropriate disciplinary proceedings against those found guilty and suitably penalize Item.

M. Mubeen Ahsan, Dealing Officer.

Kausar Ansari, Manager.

M. Amir Thahim, Assistant Collector of Customs (Exports).

2003 P T D 335

[Federal Tax Ombudsman]

Before Justice (Recd.) Saleem Akhtar, Federal Tax Ombudsman

LIAQAT ALI

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 1430/1, of 2001, decided on 30th May, 2002.

(a) Income‑tax‑‑‑

‑‑‑‑Silence maintained by the concerned officer and not replying the letters leads to the presumption, that the allegations made were correct unless rebutted legally.

(b) Income‑tax‑‑‑

‑‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss.2(3) & 9‑‑‑Maladministration‑‑‑Ignoring of direction of senior officials‑‑‑Direction of the Regional Commissioner of Income‑tax to dispose of assessee's representation under intimation to his office was obviously ignored' and not complied with by the Commissioner of Income‑tax‑‑‑Such conduct of the Commissioner of Income‑tax fell under the definition of maladministration as contained S.2(3)(ii) of the Establishment of Office of Federal Tax Ombudsman Ordinance, 2000.

(c) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑S. 65‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.9‑‑‑Tax Amnesty Scheme, 2000‑‑‑Show­cause notice for initiation of proceedings under S.65 of the Income Tax Ordinance, 1979‑‑‑Filing of declaration of such concealment under Tax Amnesty Scheme‑‑‑Validity‑‑‑Allegation that the Assessing Officer illegally issued notice under S. 65 of the Income Tax Ordinance, 1979 deliberately ignoring the Tax Amnesty Scheme, 2000 did carry weight because declaration was filed on 4‑6‑2000 when no proceedings were pending against the declarant in respect of years to which declaration related‑‑‑Show‑cause notice asking why proceedings should not be initiated under S. 65 issued/served on 31‑5‑2000 had no validity in law‑‑­Notice under S. 65 of the Income Tax Ordinance, 1979 had been served on 24‑6‑2000 after filing of declaration‑‑‑Declaration was validly filed.

(d) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑Ss. 65, 59 & 62‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.9‑‑‑Tax Amnesty Scheme, 2000‑‑‑C.B.R. Circular No.4 of 2000, dated 1‑3‑2000 para. 10(1)---C.B.R. Circular No.6 of 2000, dated 28‑3‑2000‑‑‑Assessee had not declared income from supplies‑‑‑Show‑cause notice was issued by the Assessing Officer for initiation of proceedings under S.65 of the Income Tax Ordinance, 1979‑‑‑Assessee filed declaration under Tax Amnesty Scheme, 2000‑‑‑Assessing Officer still issued statutory notice under S.6.5 of the Income Tax Ordinance, 1979‑‑‑Assessee reiterated that after filing of declaration under Tax Amnesty Scheme, 2000, the issuance of notice under S.65 of the Income Tax Ordinance, 1979 was illegal ‑‑‑Validity‑‑­Para. 10(1) of Tax Amnesty Scheme, 2000 provide for preliminary examination of all the declaration filed under the Scheme‑‑‑Preliminary examination by no stretch of imagination would include fishing and roving enquiries and scrutiny required while completing an assessment under S.62 of the Income Tax Ordinance, 1979‑‑‑Not to speak of the declaration filed under Tax Amnesty Scheme, 2000 which provided immunity in para. 8 of Circular No.4 of 2000, even a normal assessment made under S.59 or S.62 of the Income Tax Ordinance, 1979 could not be reopened on the basis of mere presumption without having substantial evidence regarding the quantum of income declared‑‑‑Such presumptions would not constitute definite information while issuing notice under S. 65 of the Income Tax Ordinance, 1979 for reopening the assessment‑­Preliminary examination of declaration as provided in para. 10 of C.B.R. Circular No.4 of 2000 was further explained by C.B.R. Circular No.6, dated 28‑3‑2000 by providing examples of mistake/deficiency in the declarations filed under the Amnesty Scheme‑‑‑No such example existed would enable the Assessing Officer to question the quantum of undisclosed income without having positive and definite evidence--Proceedings initiated under S. 65 of the Income Tax Ordinance, 1979 after complainant had filed declaration under the Tax Amnesty Scheme. 2000 were unjust and unlawful‑‑‑Federal Tax, Ombudsman recommended that (i) the Commissioner of Income‑tax by resort to S.138 of the Income Tax Ordinance cancel the Additional Assessments framed under S.65 for the years 1996‑97 to 1998‑99; (ii) the declaration filed under Tax Amnesty Scheme, 2000 be accepted by the Assessing Officer as it had become "final" in terms of C.B.R. Circular No.1 of 2001, dated 29‑1‑2001 and (iii) the Regional Commissioner of Income‑tax call the explanation of the Commissioner for ignoring his directions contained in letter, dated 2‑3‑2001.

Ahmad Shuja Khan for the Complainant.

Mujtaba Bhatti, I.A.C. and Nabeel Rana, A.C.I.T. for Respondent.

2003 P T D 343

[Federal Tax Ombudsman]

Before Justice (Retd.) Saleem Akhtar, Federal Tax Ombudsman

SAMEER HAMID DODHY, PROPRIETOR, INDUS BASIN COMPANY, KARACHI

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 329/K of 2002, decided on 3rd June, 2002.

Income Tax Ordinance (XXXI of 1979)‑‑‑‑

‑‑‑Ss. 102, 99(3), 100 & 156‑‑‑C.B.R.'s Letter No.ITB 3(5) 86, dated 3‑7‑1994‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.9‑‑‑Additional payment for delayed refunds‑‑‑Refund was determined under S.156 of the Income Tax Ordinance, 1979‑‑‑Assessee contended that compensation under 5.102 of the Income Tax Ordinance, 1979 became due after the expiration of three months from the date on which the assessment order was rectified under 5.156 of Income Tax Ordinance, 1979 and 'refund was determined‑‑­Department contended that compensation was to be paid after the expiration of three‑months from the date of refund order under S.99(3) read with S.102(2) of the Income Tax Ordinance, 1979‑‑‑Validity‑‑­Section 100 of the Income Tax Ordinance, 1979 had been amended and taxpayers were no longer required to file application for refunds and therefore, the provision of subsection (3) of S.99 was not applicable in the cage of determined refund‑‑‑Assessing Officer had not been following the directions of the Central Board of Revenue issued time and again on the subject which created undue hardship to the taxpayers‑‑‑Federal Tax Ombudsman recommended that compensation under 5.102 of the Income Tax Ordinance, 1979 for the assessment years 1998‑99, 1999‑2000 & 2000‑2001 be calculated from 4‑12‑2001 to the date of payment viz. 18‑4‑2002 and paid to assessee within 30 days of the receipt of this order.

Haider Naqi for the Complainant.

Haider Ali Dharejo, D.C.I.T., Circle E‑16, Zone E, Karachi for Respondent.

2003 P T D 352

[Federal Tax Ombudsman]

Before Justice (Retd.) Saleem Akhtar, Federal Tax Ombudsman

MUHAMMAD ASLAM

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 369 of 2002, decided on 9th September, 2002.

Income Tax Ordinance (XLIX of 2001)‑‑‑

‑‑‑‑S.122(5)‑‑‑Income Tax Ordinance (XXXI of 1979),S.138‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.9‑‑‑Amendment of assessment‑‑‑Incorrect assessment‑‑­Department from the very beginning conceded that `mal‑administration' had been committed and assessment was made incorrectly ‑‑‑Regional Commissioner of Income Tax found ,himself helpless to amend ‑the same on the ground that there was no corresponding provisions for S.138 of the repealed Income Tax Ordinance, 1979 in the new Income Tax Ordinance, 2001 and, in fact, power of revision was withdrawn by omission of section 135 of the Income Tax Ordinance, 2001 which was initially enacted in the new Ordinance‑‑‑Validity‑‑‑Provision of S.122 of the Income Tax Ordinance, 2001 confers wider power on the Regional Commissioner than were available in the repealed Income Tax Ordinance, 1979, now an assessment order where (a) the Ordinance was incorrectly applied, or (b) definite information acquired from an audit or otherwise that the assessment was incorrect, could be amended by. The Commissioner‑‑‑Department itself having accepted that the assessment was incorrect, there should be no difficulty in invoking the powers conferred by subsection (5) of S.122 of the Income Tax Ordinance, 2001 to remedy the situation‑‑‑Federal Tax Ombudsman recommended that Commissioner to conduct an inquiry as already proposed in the respondent's reply and pass consequential order under S.122 of the Income Tax Ordinance, 2001.

Complainant in person.

Zafar Abbas, A.C.I.T. for Respondent.

2003 P T D 361

[Federal Tax Ombudsman]

Before Justice (Reid.) Saleem Akhtar, Federal Tax Ombudsman

Mrs. SHAHNAZ ASHRAF

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 928‑L of 2002, decided on 22nd November, 2002.

(a) Income Tax Ordinance (XXXI of 1979)‑‑‑-

‑‑‑‑S. 59‑‑‑C.B.R. Circular No. 4 of 2001, dated 18‑6‑2001, para. 9(a)(ii)‑‑‑C.B.R. Circular Letter No. 7(7)S. Asst/2001, dated 26‑3‑2002‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.9‑‑‑Self‑assessment‑‑‑Department contended that setting apart of a case for total audit was a matter relating to assessment which was subject to appeal/revision‑‑‑Validity‑‑‑Selection of the case for audit made by the Regional Commissioner of Income Tax under para. 9(a)(ii) of C.B.R. Circular No.4 of 2001 was neither a matter relating to assessment of income nor any remedy in the shape of appeal/revision against his decision to select the case was available to the complainant.

(b) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑S. 59‑‑‑C.B.R. Circular No. 4 of 2001, dated 18‑6‑2001, para. 9(a)(ii)‑‑‑C.B.R. Circular Letter No. 7(7)S. Asst/2001, dated 26‑3‑2002‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.9‑‑‑Self‑assessment‑‑‑Prejudice caused to assessee‑‑‑Denial of privilege available to assessee i.e. acceptance of return under Self‑Assessment Scheme, without valid reason, would be a prejudice caused to the complainant.

(c) Income Tax Ordinance (XXXI of 1979)‑‑‑-

‑‑‑S.59‑‑‑C.B.R. Circular No.4 of 2001, dated 18‑6‑2001, para.9(a)(ii)‑­C.B.R. Circular Letter No.7(7)S.Asst/2001, dated 26‑3‑2002‑‑­Establishment of Officer of Federal Tax Ombudsman Ordinance (XXXV of 2000), S. 9‑‑‑Self‑assessment‑‑‑Guidelines by the Central Board of Revenue for total audit‑‑‑Decline in income‑‑‑Assessment year 2001‑2002‑‑‑Basis for setting apart of case for total audit under para. 9(a)(ii) of the C.B.R. Circular No.4 of 2001, dated 18‑6‑2001 were exaggeration of expenses; filing of declaration under S.59‑D of the Income Tax Ordinance, 1979; purchase of assets by the family members of the assessee; non‑filing of statement under S.139 of the Income Tax Ordinance, 1979 and comparison of income with assessment year 1997‑98 in respect of decline in income‑‑‑Validity‑‑‑Complainant/ assessee had explained the issues that was confronted with by the Regional Commissioner of Income Tax through his notice and sufficient cause had been shown on its behalf as to why not to compare income declared in the present year with income assessed in assessment year 1997‑98‑‑‑Plea had the substance that such course would stretch the guidelines beyond the reasonable limits‑‑‑If the Assessing Officer had any evidence of suppression of receipts on the basis. of assessment made for assessment year 1997‑98 it would be equally applicable to the intervening assessment years‑‑‑Selection of return of income filed by the complainant/assessee for audit was arbitrary and alleged maladministration was established‑‑‑Federal Tax Ombudsman recommended that the Central Board of Revenue should direct exclusion of return from the list of cases selected under para. 9(a)(ii) for audit and for its acceptance under Self‑Assessment Scheme.

Chaudhry Muhammad Aslam for the Complainant.

Shahid Jamil Khan, Legal Adviser for Respondent.

2003 P T D 400

[Federal Tax Ombudsman]

Before Justice (Retd.) Saleem Akhtar, Federal Tax Ombudsman

Messrs IQBAL & CO., FAISALABAD

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 1353 of 2001, decided on 26th October, 2002.

(a) Survey for Documentation of National Economy Ordinance (XV of 2000)‑‑‑

‑‑‑‑S.3(1)‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.9‑‑‑Signature of an assessee on the Survey Form could not be treated as an agreement‑‑‑In view of the provisions of the Survey for Documentation of the National Economy Ordinance, 2000 the signature of an assessee on the Survey Form could not be treated as an agreement by the assessee‑‑‑Federal Tax Ombudsman observed that where any party objected to the veracity/correctness of the entries trade during third survey, he must file such objection to the relevant Assessing Authority within a reasonable time who may take necessary action as provided by law and where any assessee did not object to the evaluation made by the Survey Team within a reasonable time from the date of decision given by the Federal Tax Ombudsman, such evaluation shall be deemed to be accepted by the assessee‑‑‑Stock‑taking and investigation shall be conducted by the Survey Team selected for the purpose and also representative of trade be associated with this exercise‑‑‑Team shall prepare a comprehensive inspection report with full particulars and details copy of which be supplied to the assessee on the spot.

(b) Sales Tax Act (VII of 1990)‑‑‑

‑‑‑S.19‑‑‑Establishment of Office of Federal‑Tax Ombudsman Ordinance (XXXV of 2000), S. 9‑‑‑C.B.R. Letter No. 1(6)STR/98, dated 18‑7‑2001‑‑‑Compulsory registration‑-‑Survey Team estimated the stock of assessee more than Rs.10,00,000 and obtained his signature on the form‑‑‑In consequence of such evaluation the complainant had been served with a notice requiring it to be enrolled and pay turnover tax at the rate of 2%‑‑‑Complainant/assessee objected that the signature on the Survey Form was obtained by threats and evaluation was unrealistic and incorrect as Income‑tax Authorities had never assessed his sales in exces­s of amount estimated by the Survey Team‑‑‑Validity‑‑‑Case being covered by the decision of the Federal Tax Ombudsman in Complaint No.582 of 2001 it was strange that in spite of communication of such order, the Collector had justified the illegal action by referring the instructions of the Central Board of Revenue, dated 19‑7‑2001‑‑‑In. view of such decision Central Board of Revenue had issued circular for its. implementation, therefore, the circular issued earlier stood superseded and cancelled‑‑It was high time that the concerned officers be aware of and keep themselves abreast with the decisions which were delivered by Federal Tax Ombudsman and the superior Courts‑‑‑Federal Tax Ombudsman recommended that evaluation and assessment made by the Survey Team and the signature obtained on it could not be treated as an agreement and binding upon the complainant particularly as it had protested and objected to it; that if the relevant authority recommended for stock‑taking and investigation, it shall be conducted by the Survey Team selected for the purpose and a representative of trade be also associated with such exercise‑‑‑Team shall prepare a comprehensive inspection report with full particulars and details copy of which be supplied to the assessee on the spot and the notice inviting for enrolment issued in pursuance of the survey report be withdrawn.

Nemo for the Complainant.

Dr. Akhtar Hussain, Deputy Collector (Sales Tax), Faisalabad.

2003 P T D 442

[Federal Tax Ombudsman]

Before Justice (Retd.) Saleem Akhtar, Federal Tax Ombudsman

Messrs ANSA TRADERS, KARACHI

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. C‑194‑K of 2002, decided on 30th April, 2002.

Customs Act (IV of 1969)‑‑‑

‑‑‑‑S. 41‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXV of 2000), Ss.2(3) & 9‑‑‑Declaration by parties claiming drawback‑‑‑Non‑payment of duty drawback claims for the last two to eight years and those sanctioned were deposited in the account of another firm‑‑‑Complaint against‑‑‑Claims not decided for two to eight years had not been replied‑‑‑Processing of the drawback claims was initiated when the complainant approached the forum of the Federal Tax Ombudsman and it was then that the forfeited amount was restored, the amount paid to another firm was recovered and paid to the claimant‑‑‑Such was blatant manifestation of arbitrary, unreasonable and oppressive actions arising out of sheer neglect, inattention, incompetence and inefficiency and evidence of administrative excesses, clearly within the meaning of maladministration as defined under S.2(3) of the Establishment of Office of Federal Tax Ombudsman Ordinance, 2000‑‑‑Federal Tax Ombudsman recommended that Central Board of Revenue to depute the Director­ General Inquiries (Central Board of Revenue) to conduct' a detailed inquiry in the above maladministration with the aim of identifying the officials responsible for wrong forfeiture of refundable amounts and failure to decide the drawback claims, and the senior officers who failed to take action on the verbal and written entreaties and allowed the injustice to prevail, and initiate disciplinary proceedings for suitable action against the guilty; (ii) direct the Collector of Customs (Export) to ensure that the replies to the complaints referred by Ombudsman Secretariat should be comprehensive, responsive to all the issues raised, and furnish copies of all the legal provisions, notifications, notices and decisions, and the correspondence referred to therein, and state complete reasons/explanation to the allegations made; (iii) look into the working of the Export Collectorate and conduct a thorough house‑cleaning at .senior level to identify the backlog and devise an efficient procedure ,to deal with the problems of the exporters (instead of leaving this task to the Collector) and (iv) Collectorate Officers should better look into the reasons of the complainant instead ,of targeting them which would be very seriously viewed.

Kausar Ansari, Manager.

M. Amir Thahim, Assistant Collector of Customs.

2003 P T D 451

[Federal Tax Ombudsman]

Before Justice (Retd.) Snleem Akhtar, Federal Tax Ombudsman

CYNAMID PAKISTAN LTD.

Versus

SECRETARY, REVENUE DIVISION, KARACHI

Complaint No. C‑1568‑K of 2001 (C‑10‑K of 2001), decided on 30th October, 2001.

Customs Act (IV of 1969)‑‑‑‑

‑-‑‑S. 35‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S. 9‑‑‑Constitution of Pakistan (1973), Art. 37(d)‑‑‑General Clauses Act (X of 1897), S. 24‑A‑‑‑Import Export Procedure Order, 1998, para. 19.16‑‑‑Pakistan Custom Tariff, Hdg. 9904.0010‑‑‑S.R.O. 1147(I)/89‑‑‑Drawback of the export on imported goods‑‑‑Goods were re‑exported being defective with the permission of Central Board of Revenue and Ministry of Commerce‑‑­Same quality of goods were imported and duty was paid and Bank guarantee was also furnished‑‑‑Customs Authorities refused to refund the custom duty paid on the re‑exported defective consignments and Bank guarantees had also not been refunded and returned by the Customs Authorities being import of such goods on other port and due to non-­furnishing of consumption certificate of such goods‑‑‑Validity‑‑‑Customs Authorities had accepted the position that the imported goods would be re‑exported with the approval of the Central Board of Revenue and Ministry of Commerce‑‑‑Complainants had submitted an Indemnity Bond that they shall import the same material of the same grade at the same port i.e. Port Muhammad Bin Qasim within 180 days from the date of re‑export‑‑‑Customs Authorities maintained that they should have imported replacement consignment free of duty under S.R.O. 540(I)/98 from the same port whereas the complainants imported the goods from Karachi Port and either did not claim or were not allowed exemption by the Appraisement Collectorate‑‑‑Complainants had not explained the circumstances under which they did not comply with the undertaking of importing replacement consignment from Port Muhammad Bin Qasim‑‑­Fact remained that the imported goods were re‑exported and replacement goods were also imported in the country through another Customs station‑‑‑Since the exemption from duty was not availed on import of replacement consignment, the duty charged and Bank guarantee ought to have been refunded and released‑‑‑No justification was available with the Customs Authorities to require the importer to furnish consumption certificate of goods, whose re‑export they themselves allowed, for release of Bank guarantee‑‑‑Complainants were entitled to duty drawback under S.35 of the Customs Act; 1969 in circumstances‑‑­Federal Tax Ombudsman recommended that Central Board of Revenue shall direct the Collector, Customs Port Muhammad Bin Qasim to repay seven eighth of the duty as drawback under S.35 of the Customs Act, 1969 and to release the Bank guarantee within 30 days.

Aziz A. Shaikh for the Complainant.

Jawed Iqbal, Assistant Collector of Customs, Port Qasim.

Abdul Majid, Principal Appraiser.

2003 P T D 459

[Federal Tax Ombudsman]

Before Justice (Retd.) Saleem Akhtar, Federal Tax Ombudsman

MUHAMMAD ASIF and others

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 468 of 2002, decided on 29th June, 2002.

Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑Second Sched. Part III, Cl. 1‑B(2)‑‑‑C.B.R. Circular No. 16 of 2000, dated 3‑7‑2000 (No. 15(1) ITP/2000‑SAL, dated 3‑7‑2000)‑‑C.B.R. Letter No. 16(1) ITP/2000‑SAL, dated 14‑11‑2000‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.9‑‑­Reduction in tax liability‑‑‑Teaching staff of the Government College for elementary teachers‑‑‑Non‑admissibility of further 50% tax relief‑‑­Further 50% relief in tax was refused to the teachers of Elementary Teachers Training College, in the context of Central Board of Revenue Letter No.16(1) ITP/2000‑SAL, dated 14‑11‑2000 addressed to the Accountant‑General, Government of the Punjab, in which it was stated that the reduction in tax liability under sub‑clause (2) of Cl. (1B) of Part II of the Second Sched. to the Income Tax Ordinance, 1979 was not admissible to teachers employed in Government educational institutions‑­Validity‑‑‑Central Board of Revenue on its own interpretation of Cl. (2) of Cl. (1B) of Part III of the Income Tax Ordinance, 1979 prior to amendment by Finance Ordinance, 2001 had held Government training and research institutions to be covered by it‑‑‑Circular was a beneficial circular and did not suffer from any illegality; however, the Legislature by amendment clarified the doubt if any‑‑‑No need existed to issue letter, dated 14‑12‑2000 without any valid reason or justification which amounted to maladministration ‑‑‑Excess tax deducted at source from the salary of the complainant for the period July, 2000 to June, 2001 was refundable‑‑‑Department contended that the complaint was barred by time‑‑‑Validity‑‑‑Undisputed facts created special circumstances justifying condonation of delay, which was condoned by the Federal Tax Ombudsman‑‑‑Objection that the complaint was not competent as there was no maladministration had no merit‑‑‑Action of the Central Board of Revenue suffered from maladministration being arbitrary, unreasonable and without any justifiable ground‑‑‑Federal Tax Ombudsman recommended that Central Board of Revenue Letter No. 16(1) ITP/2000-­SAL, dated 14‑11‑2000 addressed to the Accountant‑General, Punjab be withdrawn and that further relief equal to 50% be allowed to the complainants in their income‑tax assessments in accordance 'with' sub-­clause (2) of Cl. (1B) of the Second Sched., Part II to the Income Tax Ordinance, 1979 after taking steps for early finalization of the assessments.

Muhammad Waseem for the Complainants.

Syed Nadeem Hassan, Secretary C.B.R. for Respondent.

2003 P T D 471

[Federal Tax Ombudsman]

Before Justice (Retd.) Saleem Akhtar, Federal Tax Ombudsman

SHAFFAT RASOOL CHAUDHARY

Versus

SECRETARY, REVENUE DIVISION, CENTRAL BOARD OF REVENUE, ISLAMABAD

Complaint No. C‑354‑K of 2002, decided on 15th August, 2002.

Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑-Ss.120, 59(b), 50(4), 100, 99(1), 62, 63 & 156‑‑‑C. B. R. Letter No.ITB‑3(5)/86, dated 3‑7‑1994‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.9‑‑‑Additional payment for delayed refund‑‑‑Amount deducted under S.50(4) of the Ordinance was not allowed by the Assessing Officer despite repeated requests in writing letters during the years 1994, 1997 & 1998‑‑‑Refund order was passed on 15‑3‑2002‑‑‑Date for determination of additional payment‑‑‑Department contended that the refund became due on the date on which refund order was passed under S.99(3) of the Income Tax Ordinance, 1979 and since refund order was passed on 15‑3‑2002, the compensation would become due w.e.f. 15‑6‑2002‑‑‑Validity‑‑‑Section 100 of the Income Tax Ordinance, 1979 was amended by Finance Act, 1985, whereby filing of refund application under S.99(1) of the Income Tax Ordinance, 1979 was dispensed with in cases where refund was created on assessments under Ss. 59, 59(a), 62 & 63 of the Income Tax Ordinance, 1979 or by giving appeal effect‑‑‑Imperative on the part of the Assessing Officer to make verification of deductions under S.50 of the Income Tax Ordinance, 1979 promptly ‑‑‑Assessee made a request to the Assessing Officer vide his letter, dated 19‑10‑1994 to allow credit for deduction under S.50(4) of the Income Tax Ordinance, 1979 and issue the resultant refund immediately‑‑‑Departmental representative had conceded that the said application was available on record‑‑‑Since no order was passed on that application within the statutory limit of time as provided in S.156 (3) of the Income Tax Ordinance, 1979 the mistake pointed out by the complainant was deemed to have been rectified w.e.f. 30‑6-1996 and the complainant was, therefore, entitled for compensation under S.102 of the Income Tax Ordinance, 1979, w.e.f. 1‑10‑1996‑‑­kcal‑administration stood established‑‑‑Federal Tax Ombudsman recommended that additional payment under S.102 of the Income Tax Ordinance, 1979 be worked out w.e.f. 1‑10‑1996 till 14‑4‑2002 and paid within 30 days of the receipt of the order.

Haji Yousaf for the Complainant.

Mrs. Shaista Abbas, IAC Range‑III, Zone‑A and Riaz Ali Shah, I.T.O. for Respondent.

2003 P T D 478

[Federal Tax Ombudsman]

Before Justice (Retd.) Saleem Akhtar, Federal Tax Ombudsman

Messrs DELUX DYEING INDUSTRIES, LAHORE

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 852‑L of 2002, decided on 2nd October, 2002.

(a) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑S.59‑‑‑C.B.R. Circular No.4 of 2001 dated 18‑6‑2001, para. 9(a)(ii)‑­C.B.R. Circular Letter No.7(7) S. Asst/2001, dated 26‑3‑2002‑‑­Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.9‑‑‑Self‑assessment‑‑‑Department contended that setting apart of a case for total audit was a matter relating to assessment which was subject to appeal/revision‑‑‑Validity‑‑‑Selection of the case for audit by the Regional Commissioner of Income‑tax under para. 9(a)(ii) of C.B.R. Circular No.4 of 2001 being neither a matter relating to assessment of income nor any remedy in the shape of appeal/revision against his decision to select the case, was available to the complainant.

(b) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑S.59‑‑‑C.B.R. Circular No.4 of 2001 dated 18‑6‑2001, para. 9(a)(ii)‑‑­C.B.R. Circular Letter No.7(7) S.Asst/2001, dated 26‑3‑2002‑‑­Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.9‑‑‑Self assessment‑‑‑Prejudice caused to assessee‑‑‑Denial of privilege available to assessee, i.e. acceptance of return under Self­Assessment Scheme, without valid reason would be a prejudice caused to the complainant.

(c) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑S.59‑‑‑Central Board of Revenue Circular No.4 of 2001 dated 18‑6‑2001, para. 9(a)(ii)‑‑‑C.B.R. Circular Letter No.7(7) S.Asst/2001 dated 26‑3‑2001‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.9‑‑‑Self‑assessment‑‑‑Guidelines by the Central Board of Revenue for total audit‑‑‑Decline in income‑‑‑Net income of the assessee had not increased in proportion to the increase in turnover‑‑‑Setting apart of case for total audit under para.9(a)(ii) of the C.B.R. Circular No.4 of 2001, dated 18‑6‑2001‑‑‑Validity‑‑‑Despite improvement in turnover and history of the case in respect of G.P: rate as a normal indicator, the net income of the assessee had not increased in proportion to the increase in turnover even if the cost saving in terms of input of dyes and chemicals and other economies of scale were ignored‑‑­Proportionately, there was evident decline in income which was one of the specified factors in the guidelines circulated by Central Board of Revenue for selection of cases for audit‑‑‑Term "evident decline in income" as used in the guidelines could not be construed as decline per se because if it was so the return would not qualify under Self­Assessment Scheme‑‑‑Such term was to be interpreted to mean a decline in proportion to turnover‑‑‑Selection of return for audit was justified‑‑­No maladministration was found in the ultimate decision as such the investigation was ordered to be closed by the Federal Tax Ombudsman.

Abrar Naqvi for the Complainant.

Shahid Jamil, Legal Adviser for Respondent.

2003 P T D 489

[Federal Tax Ombudsman]

Before Justice (Retd.) Saleem Akhtar, Federal Tax Ombudsman

ZAFAR ALI through Sakhawat Ali Gulbahar, Karachi

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. C‑497/K of 2002, decided on 26th August; 2002.

Customs Rules, 2001‑‑‑

---‑R.13(b)‑‑‑Baggage Rules, 1985, R.10(13)‑‑‑Import Export Policy Order, 1999‑2000‑‑‑Customs General Order No.5 of 1998‑‑‑Establishment of Office, of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.9‑‑‑Levy of‑‑‑Personal Customs Duty‑‑Professional goods or household effects‑‑‑Photostat machines‑‑‑Photostat machines were confiscated rather than to release them on payment of customs duty on the ground that the same were neither an item of personal wear nor a household effect as this was not professional equipment or a tool and in the trade parlance it was known as office equipment which action was confirmed by the Appellate Authority‑‑‑Validity‑‑‑Customs General Orders were meant to prescribe procedures for specific work situations and the job descriptions and the duties and functions of officials of the Department‑‑‑Said orders (or the Standing Orders issued by the Collectors) were not meant to amend, modify or restrict application of rules notified under the customs law; where it was intended to issue a ruling for guidance of the staff as well as the public, notice was issued‑‑­Restrictions on imports in the baggage should have been incorporated in the Baggage Rules because the passengers were not expected to know the Departmental instructions‑‑‑Ruling, vide Customs General Order No.5 of 1966, without issue of public notice and without incorporating its restrictive policy in the Baggage Rules, was not justified specially in the liberal import regime‑‑‑With the introduction of liberalized dutiable allowance, clearly it came in direct conflict with the notified Baggage Rules and Central Board of Revenue rescinded same on 18‑6‑2001‑‑­Department significantly observed that complainant did not seek clearance of the Photostat Machines as regular imports; he had instead filed a baggage declaration but the fact remained that baggage declaration too was a legal and recognized clearance document on the basis of which the adjudication process was set in motion‑‑‑Customs Authorities should have released the machines on payment of duty and taxes‑‑‑If the Authorities felt uncomfortable merely because the Photostat Machines were declared as a baggage item, they should have advised the passenger to file a bill of entry‑‑‑Appellate Authority could have directed the appellant to do so instead of upholding the unjust order of confiscation‑‑‑Clearly the administrative restriction under Customs General Order No.5 of 1988 (eventually rescinded) was in conflict with the notified Baggage Rules as it was not incorporated in the Rules‑‑‑Such course was inconsistent with the liberalization of (import policy) and the Baggage Rules which allowed the international passengers to bring personal or professional or household effects on payment of duty and taxes without limit‑‑‑Application of this outdated restriction caused avoidable hardship to the complainant ‑‑‑In order to redress the genuine grievance of an expatriate Pakistan; Federal Tax Ombudsman recommended that Central Board of Revenue may re‑consider its decision and take appropriate action.

Syed Sakhawat Ali, Representative for the Complainant.

Muhammad Iqbal Muneeb, Deputy Collector of Customs (Preventive).

Saleem Akhtar, Chief Law Officer.

2003 P T D 525

[Federal Tax Ombudsman]

Before Justice (Retd.) Saleem Akhtar, Federal Tax Ombudsman

S. H. FARUQI, RETIRED CHIEF GEOLOGIST, PMDC, DIRECTOR, EASTERN TECHNIQUE LTD., ISLAMABAD

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 1229 of 2001, decided on 31st October, 2001.

Wealth Tax Act (XV of 1963)--‑

‑‑‑‑Second Sched., Cl.(12)(1) & First Sched., Para. A(2)(a)‑‑‑Wealth Tax Rules, 1963, R.8(1)(1A) & (3)‑‑‑Income Tax Ordinance (XXXI of 1979), S.19(3)‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.9‑‑‑Exemption‑‑‑Complainant/assessee declared value of his residential house for, wealth tax purpose on the basis of Annual Letting Value being rented out according to the first proviso to sub‑rule (3) of R.8 of the Wealth Tax Rules, 1963‑‑‑Assessing Officer rejected the declared value and assessed the value of such house on the basis of its cost ‑‑‑Complainant/assessee contended that decision of the Assessing Officer besides, being contrary to rules was perverse, arbitrary and unreasonable because no assessee would bargain the exemption of a house property of unlimited value available under Cl. 12(1) of Second Sched. of the Wealth Tax Act, 1963 with an exemption limited to Rs. 25,00,000 allowed under proviso (a) to sub­-para. (2) of para. A of the First Sched. to the Wealth Tax Act, 1963‑‑‑Validity‑‑‑Provision of S.19(3) of the Income Tax Ordinance, 1979 and Cl. 12(1) of the Second Sched. to the Wealth Tax Act, 1963 were in parameteria insofar as the requirement of occupation of the house property by the owner for the purposes of his own residence, in regard to exemption of its Annual Letting Value from Income Tax and its value from Wealth Tax, were concerned‑‑‑But for the Explanation added by the Finance Act, 1996 to S.19(3) of the Income Tax Ordinance, 1979 that the exemption had been subjected to the condition of property being in occupation of the occupant in the capacity of owner for his own residence‑‑‑No such condition had been added to the exemption under Cl.12(1) of the Second Sched. of the Wealth Tax Act, 1963, accordingly, exemption was available to the house of the complainant/assessee under Cl. 12(1) of the Second Sched. of the Wealth Tax Act, 1963‑‑‑While adopting the value of house property in accordance with sub‑rule (1A) of R.8 of the Wealth Tax Rules, 1963 instead of its declared value worked out under sub‑rule (3) of R. 8 of the Wealth Tax Rules, 1963, the complainant/assessee was entitled to an opportunity to exercise his option under proviso to Cl.12(1) of the Second Sched. to the Wealth Tax Act, 1963‑‑‑Federal Tax Ombudsman recommended that Commissioner of Wealth Tax, by invoking his suo Motu jurisdiction under S.25 of the Wealth Tax Act, 1963, may consider allowing the complainant exemption under Cl.12(1) of the Second Sched. of the Wealth Tax Act, 1963 instead of exemption under proviso to para. A(2)(a) of the First Sched. of the Wealth Tax Act, 1963.

1989 PTD (Trib.) 917 and Hirjina Company Pakistan Limited v. Commissioner, Sales Tax 1971 PTD 2000 ref.

S.M. Sibtain, Secretary, Dealing Officer.

2003 P T D 530

[Federal Tax Ombudsman]

Before Justice (Retd.) Saleem Akhtar, Federal Tax Ombudsman

JAVED AKHTAR GOHAR (MEMBER OF THE A.O.P.), Messrs HARAM

RECRUITING AGENCY LAHORE

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 1379‑L of 2001, decided on 22nd September, 2001.

Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑Ss. 63 & 132‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss.2(3) & 9‑‑‑Best judgment assessment‑‑­Maladministration‑‑‑Transgression of jurisdiction and outrageously ill--­arranging of assessment record‑‑‑First Appellate Authority directed to frame revised assessment "as per history of the case"‑‑‑Assessing Officer repeated the original assessment‑‑‑Assessee contended, that against gross receipts declared at Rs.27,600 in the assessment year 1994‑95 income was assessed at Rs.31,000 but in the assessment year 1997‑98 despite the declared gross receipts being exactly the same at Rs.27,600, income was arbitrarily assessed under S.63 of the Income Tax Ordinance, 1979 at a net amount of Rs.1,20,000 for which no basis whatsoever was mentioned and the same figure was repeated with impunity in the revised assessment framed under Ss.62/132 of the Income Tax Ordinance, 1979‑‑‑Validity‑‑­Assessing Officer could not controvert any of the insinuations‑‑‑Federal Tax Ombudsman concluded that the dispensation was arbitrary, unjust, oppressive, unlawful in addition to total disregard of the limited scope of the authority given by the First Appellate Authority and defiance of the instructions by his own Zonal Commissioner of Income‑tax‑‑‑Such transgression of jurisdiction clearly amounted to "maladministration" as defined in S.2(3) of the Establishment of Office of Federal Tax Ombudsman Ordinance, 2000‑‑ Assessment record was also outrageously ill‑arranged‑‑‑Situation appeared still more grave when viewed in the context that none of the concerned officers/officials bothered to bring it into a presentable shape even when summoned by the Federal Tax Ombudsman Secretariat at least some efforts should have been made to arrange the record before its submission to a higher investigation forum‑­Was not difficult to diagnose the cause of this malady and the persistent indifference on the part of the functionaries manning the income‑tax circles which was due to the lack of supervision by the Inspecting Additional Commissioner whose job description required him to monitor the working of the officers in his range‑‑‑Unless the higher echelon of the Revenue Division realize the importance of effective supervision and strict monitoring of field officers, it may not be possible to pass on the benefits of arty proclaimed reforms or restructuring to the taxpayers and the public at large‑‑‑Federal Tax Ombudsman recommended that the Commissioner of Income‑tax, concerned may call for record of the case for suo motu action under S.138(1) of the Income Tax Ordinance, 1979, that stringent warning and the appropriate guidelines be issued to the Special Officer for the present dereliction of duty and for corrective action in future; and that task force be nominated to go through the entire record of the Circle to ensure that not only file but registers also are brought in conformity with the requirement of Office Procedure for maintenance of record in the offices.

Muhammad Aslam Tabassum, F.C.A., A.R. for the Complainant.

Mrs. Laila Ghafoor, D‑C.I.T., and Aamir Bashir, Special Officer for Respondent.

2003 P T D 602

[Federal Tax Ombudsman]

Before Justice (Retd.) Saleem Akhtar, Federal Tax Ombudsman

MUHAMMAD TUFAIL

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 518 of 2002, decided on 2nd September, 202.

(a) Income Tax Rules, 1982‑‑‑

‑‑‑‑Rr.158 & 159‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.9‑‑‑Appointment of Receiver for business and immovable property‑‑‑Duties and liabilities of Receiver‑‑‑Under R.158 of the Income Tax Rules, 1982 where the property of a defaulter consists of a business the Tax Recovery Officer might attach the business and appoint a person as "Receiver" to manage the business while under R.159 of the Income Tax Rules, 1982 where immovable property was attached the Tax Recovery Officer instead of directing a sale of the property, appoint a person to manage such property‑‑‑Rule 158 of the Income Tax Rules, 1982 provides for appointment of a "Receiver" of business whereas under R.159 of the Income Tax. Rules, 1982 "Receiver" could be appointed for immovable property which had been attached for its management‑‑‑Contention of the assessee that management could be of business and not of immovable property did not hold sound‑‑‑Immovable property once attached would come under the control of the attaching Authority‑‑‑Duty of a "Receiver" was to preserve the property and save it from damage, destruction or transfer to any party‑‑‑Such duty of the "Receiver" fell under the category of managing the property‑‑‑Receiver, in performance of his duty can look after the residential house, preserve and protect it and appointment of the Receiver on such ground could not be challenged.

(b) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑S.93(2)‑‑‑Income Tax Rules, 1982, R.159‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.9‑‑­Appointment of Receiver‑‑‑Conduct of Receiver‑‑‑Realization of dues from the lady members of the assessee in his absence by harassment‑‑­Subsequently appeal of the assessee was allowed and order of Assessing Officer was vacated with the direction to accept nil income as declared‑‑­Validity‑‑‑Important and relevant contention of the assessee was about the behaviour of the "Receiver" in realizing the dues from the lady members of the assessee in his absence‑‑‑Department had not controverted the allegation made against the "Receiver" and admitted recovery of Rs.20,000 by him‑‑‑"Receiver" was considered to be an officer of the Court and he should not exceed the normal limits of courtesy and respect which demands from such office‑‑‑"Receiver" should not have realized the dues from the family members particularly as the property had been under his control as there was no apprehension of its being transferred or damaged‑‑‑At best he' could have demanded from the assessee himself and not to realize from his family members‑‑­Conduct of the "Receiver" in this regard was beyond his authority and was depreciated‑‑‑Federal Tax Ombudsman recommended that (i) the amount recovered as tax if not refunded be refunded to the complainant within 30 days; (ii) the Central Board of Revenue to issue instructions to Commissioner of Income‑tax to maintain a list of persons of integrity for appointment of "Receivers" according to serial number.

Bashir Ahmad with Shakil Ahmad‑ for the Complainant.

Sajjad Haider Khan, I.A.C. for Respondent.

2003 P T D 611

[Federal Tax Ombudsman]

Before Justice (Retd.) Saleem Akhtar, Federal Tax Ombudsman

GHULAM MUHAMMAD

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 507 of 2002, decided on 25th June, 2002.

Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑Ss. 129 & 156‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.9‑‑‑Appeal to the Appellate Additional Commissioner‑‑‑Delay in filing of appeal ‑‑‑Condonation of delay‑‑­Federal Tax Ombudsman recommended that complainant should file appeal against the order passed by the Assessing Officer within a period of 30 days from the date of decision on complaint and the Commissioner of Income Tax (Appeals) may condone the delay and pass an order on merits‑‑‑Appellate Authority had held that appellant was unable to give any plausible reason for non‑filing of appeals within the time allowed by the Federal Tax Ombudsman, in spite of the explanation that delay in filing of appeal was beyond his control because the order of the Federal Tax Ombudsman dated 19‑2‑2001 was dispatched from Federal Tax Ombudsman Office on 14‑3‑2001 and it was received by him on 16‑3‑2001‑‑‑Validity‑‑‑Appellate Authority had not mentioned .in his order the reason shown by the complainant for the late filing of appeal and had summarily found that no plausible reason had been given for late filing of appeal‑‑‑Order of the Appellate Authority suffered from error of omission insofar as reason offered by appellant for delay in filing of appeal and the plea for condonation of delay had been overlooked‑‑‑Federal Tax Ombudsman recommended that the Appellate Authority might recall his order, invoking his jurisdiction under S.156 of the Income Tax Ordinance, 1979 and consider the reason given for delay in filing of appeal as well as the plea for condonation of delay on merits and to proceed in accordance with law in consequence of his findings‑‑­Registrar of the Office of Federal Tax Ombudsman was required to fix the responsibility for delay in dispatching the decision and to serve notice upon the person responsible for delay to explain why action should not be taken against him under the Rules.

Complainant in person.

Raza Muhammad, I.A.C. and Mazhar Iqbal, D.C.I.T. for Respondent.

2003 P T D 619

[Federal Tax Ombudsman]

Before Justice (Retd.) Saleem Akhtar, Federal Tax Ombudsman

MUHAMMAD ARSHAD

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 183‑L of 2002, decided on 7th June, 2002.

Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑Ss. 93 & 63‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss.2(3) & 9‑‑‑Recovery of tax‑‑‑Best judgment assessment‑‑‑Illegalities and irregularities in the assessment‑‑­Undue pressure for recovery of tax from successor of business created against the predecessor in spite of there being no nexus between the two‑‑‑Validity‑‑‑Department neither had any plausible explanation for these irregularities nor could justify pressure on the complainant for the payment of demand without establishing any link or relationship of the business conducted in two different names‑‑‑Assessment proceedings right from issuance of notice under S.56 of the Income Tax Ordinance, 1979 up to the service of Demand Notice had been conducted in an extremely irresponsible and casual manner which betrayed "neglect, inattention, incompetence, inefficiency" in the discharge of duties and responsibilities‑‑‑As no legal basis existed to pressurize the complainant for the recovery of the demand the assessment as well as recovery proceedings were totally unreasonable, unjust and arbitrary falling within the definition of "maladministration" as provided in the Establishment of Office of Federal Tax Ombudsman Ordinance, 2000‑‑‑Federal Tax Ombudsman recommended that the Commissioner of Income Tax, be directed to set aside the consolidated assessments framed under S.63 for the years 1997‑98 to 2000‑2001 by invoking the provisions of S.138 of the Income Tax Ordinance, 1979 the recovery proceedings be immediately stopped and the Officers and the Inspector involved in the assessment proceedings be put under "counselling" and be directed to improve their performance.

Syed Sajid Ali, I.T.P. for the Complainant.

Mrs. Nabeela Iqbal, D.C.I.T. for Respondent.

2003 P T D 632

[Federal Tax Ombudsman]

Before Justice (Retd.) Saleem Akhtar, Federal Tax Ombudsman

Messrs MIRZA ASSOCIATES ENGINEERING SERVICES (PVT.) LTD.

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 142‑L, of 2002, decided on 20th June, 2002.

Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑S. 96‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.9‑‑‑Refunds‑‑‑Department issued refund vouchers on complaint to Federal Tax Ombudsman ‑‑‑Assessee expressed his satisfaction about the effectiveness of the Office of Federal Tax Ombudsman which had resulted in alerting the rank and file of the tax administration, an example of which was the prompt delivery of refund voucher and the commitment to sort out the refund matter for the year 1995‑96 for issuance within a fortnight‑‑‑Both the parties affirmed that there now remained no grievance‑‑‑Since the grievance stood redressed, the case was closed by the Federal Tax Ombudsman.

Zafar Iqbal for the Complainant.

Khadim Hussain Zahid, D.C.I.T. for Respondent.

2003 P T D 643

[Federal Tax Ombudsman]

Before Justice (Retd.) Saleem Akhtar, Federal Tax Ombudsman

Ch. SHAH DIN

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 697 of 2002, decided on 22nd August, 2002.

Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑‑Ss.63, 85 & 116‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.9‑‑‑Best judgment assessment‑‑‑Demand and penalty‑‑‑Time‑barred assessment was finalized in back date‑‑‑Overwriting in the notice‑‑‑Service of notice on deceased assessee‑‑‑Complaint against‑‑‑Assessment order was in fact passed much after 3‑6‑2001 and cuttings etc. were made quite blatantly without any serious attempt to cover up‑‑‑Such was evident from examination of the demand notice under S.85 of the Income Tax Ordinance, 1979 which showed that initially the assessment year written in the notice was incomplete "2001‑2002" and this was scored out and Overwritten as " 1998‑99"‑‑‑Concerned person had begun to write the assessment year as "2001‑2002" which was not even the current year on the purported date 3‑6‑2001‑‑‑Current assessment year at that time was 2000‑2001 and someone could possibly make a mistake by mentioning the then current year on the demand notice but it was unacceptable that somebody would indicate the next assessment year viz. 2001‑2002 by mistake unless the demand notice was actually being prepared when the said assessment year was the current, year‑‑‑Date on demand notice clearly appeared as 3‑6‑2002 but the "2" was overwritten by " 1 " to make the date read as 3‑6‑2001‑‑‑Assessment order available with the complainant also showed that the date was clearly readable as "3‑6‑2002" which was obviously overwritten to make it appear as "3‑6‑2001 "‑‑‑Assessment order available on the tax record did not, however, show any such overwriting which showed that the order was changed by the Assessing Officer, who could not, however, change the assessment order sent to the complainant‑‑‑Notice under S.116 of the Income Tax Ordinance, 1979 was also dated 3‑6‑2002 which was later made to look as 3‑6‑2001‑‑‑Assessee had died on 15‑2‑2000 and the purported service of statutory notices relating to assessment proceedings was obviously quite fake‑‑‑Not a single report was available by the notice server or any other official that the assessment order and demand notice could not be served as assessee had expired‑‑‑In fact, the file was totally silent regarding any attempt to serve the demand notice before it was served on the legal heirs more than a year after its purported date of issue‑‑‑All this showed that the assessment order and demand notice were in fact, prepared much after the assessment had become time‑barred‑‑­Federal Tax Ombudsman recommended that (i) steps be taken by the Revenue Division to have the assessment for the year 1998‑99 annulled and (ii) disciplinary proceedings be initiated against the then Deputy Commissioner of Income‑tax on account of his obvious manipulation of records and compliance report be submitted within specified term.

Malik Abdul Haq, A.R. for the Complainant.

Muhammad Asif, A.C.I.T. for Respondent.

2003 P T D 656

[Federal Tax Ombudsman]

Before Justice (Retd.) Saleem Akhtar, Federal Tax Ombudsman

ZAFAR FARHAT INDUSTRIES (PVT.) LTD., RAJANPUR

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 1596 of 2001, decided on 10th June, 2002.

Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑Ss. 96 & 50‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss.2(3) & 9‑‑‑Refund‑‑‑Deduction of tax at source ‑‑Maladministration‑‑ Non‑approach to withholding agents‑­Unfair motives ‑‑‑Assessee alleged that Department deliberately avoided to give complete credit claimed on account of tax deducted from their proceeds, in order to delay refund of amount deducted in excess of their assessed liability‑‑‑Department contended that balance claim was unverified and required verification from various DPCs and DPUs/Treasuries and as soon as the process of verification was completed the refund will be issued to the complainant ‑‑‑Validity‑‑­Functionaries dealt with the tax withholding agents very casually and, quite obviously, did not attach due importance to the fact that millions of rupees deducted on behalf of the State by the Textile Mills and several others were unlawfully retained by them for indefinite periods to be employed in their own business at the cost of public‑‑­Such an act amounted to embezzlement of Government funds by the withholding agents‑‑‑In the present case four mills had deducted Rs.454,365 only from the complainant as far back as 1997‑98 and paid these into Government Treasury after almost four years, on 8‑2‑2002 and that too when the complainant pressed them to give copies of the treasury challans‑‑‑Complainant claimed to have furnished a long list of other tax deducting agencies who deliberately did not deposit amounts into the exchequer‑‑‑Assessee furnished photo copy of letter dated 3‑3‑2002 written by him to the Commissioner of Income‑tax pointing out this embezzlement‑‑­Maladministration having been established, Federal Tax Ombudsman recommended that the concerned Regional Commissioner of Income-­tax to ensure that the refund of the remaining amount due to the complainant be issued within 15 days of the date of the order; that the additional tax be charged under S.86 of the Income Tax Ordinance, 1979 on the delayed deposits; that notices be issued to all the defaulters under S.116 of the Income Tax Ordinance, 1979 for default under S.108 of the Income Tax Ordinance, 1979 for non‑filing of statement prescribed under the Rules framed in pursuance of section 51 of the Ordinance and initiate proceedings for imposing penalties chargeable under the law that Regional Commissioner of Income‑tax should direct the Commissioner of Income‑tax concerned to refer the matter of default committed by the mills to the Legal Advisors for prosecution proceedings to be initiated against them‑‑­Ombudsman further recommended that Member, Income‑tax Central Board of Revenue to ensure implementation by PRAL of the recommendation made in the Special Report on Accounting System of Income‑tax Collection; to give wide publicity to the provisions of law as well as the procedure prescribed under the rules regarding the duties and obligations of assesses in their capacity as the statutory tax withholding agents of the State; to create awareness of their privileges among those from whose proceeds the taxes are deducted or on whose transactions taxes are collected at source by various withholding agents under the provisions of S.50 of the Income Tax Ordinance, 1979, to issue directions to the Inspecting Officers to conduct thorough inspection of one circle each month covering all aspects of performance including monitoring of taxes to be withheld by concerned assessees in that circle and the obligations to be fulfilled by them and to submit report by the 7th day of the following month to the Commissioner of Income‑tax of the Zone with a copy to the Director, Inspection and Audit and to ensure that entries of taxes paid by or deducted or collected from each assessee are duly reported to the circle or any other authority holding jurisdiction over the assessment records of such assessee and he be allowed due credit at the time of assessment.

Sh. Ghulam Asghar for the Complainant.

Zubair Bilal, D‑CIT for Respondent.

2003 P T D 679

[Federal Tax Ombudsman]

Before Justice (Retd.) Saleem Akhtar, Federal Tax Ombudsman

Messrs EASTERN PRODUCTS LTD., HAROONABAD through Haji Muhammad

Yasin

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 76 of 2002, decided on 6th June, 2002.

Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑S. 50(5)‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.9‑‑‑Deduction of tax at source‑‑­Exemption certificate, non‑issuance of ‑‑‑Maladministration‑‑­Complainant/assessee fulfilled all the requirements of law and qualified for issuance of exemption certificate under S.50(5) of the Income Tax Ordinance, 1979, as their deposits exceeded the requisite amount and they had prayed that the surplus be either refunded or adjusted against demand‑‑ Validity‑‑‑Representative of Revenue could not rebut the factual position and had no basis to disagree with such calculation ‑‑‑Complainant/assessee was illegally deprived of his right to get an exemption certificate under S.50(5) of the Income Tax Ordinance, 1979 and such a denial was not the first occasion of such nature in the complainant/assessee's case thus making "Maladministration" more glaring‑‑‑Federal Tax Ombudsman recommended Central Board of Revenue to direct (i) the Regional Commissioner of Income Tax to issue exemption certificate within two weeks; (ii) the Regional Commissioner of Income‑tax to issue instructions emphasizing that where requirements of law stood fulfilled, as in the present complainant/ assessee's case, requisite exemption certificates should invariably be issued promptly.

M.A. Hadi, Chartered Accountant for the Complainant.

Habib Ahmad, D‑C.I.T. for Respondent.

2003 P T D 686

[Federal Tax Ombudsman]

Before Justice (Retd.) Saleem Akhtar, Federal Tax Ombudsman

Messrs DAWOOD TEXTILE PRINTING INDUSTRIES (PVT.) LTD., FAISALABAD

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 335 of 2002, decided on 28th November, 2002.

Sales Tax Act (VII of 1990)‑‑‑

---Ss. 38, 40‑A & 25‑‑‑Establishment of Office of Federal Tax ombudsman Ordinance (XXXV of 2000), S.9‑‑‑Authorised Officers to have access to premises, stocks, accounts and records‑‑‑Search without warrant‑‑‑Access to record, documents, etc. ‑‑‑Allegation‑‑‑Raid on factory by large contingent of officers/officials, threatening and Intimidating the management, trying to seal the godown and forcing the management to sign the stock statement‑‑‑Huge presence of Government functionaries on the premises of the mills created an atmosphere of fear‑‑‑Department denied the allegations and pleaded that no physical check of stock was, made and it was considered sufficient to sign the stock statement by the Chief Executive which was the only requirement of law‑Validity‑‑‑Held, it was unbelievable that after raiding the complainants, the staff members would not have made any physical check and would be satisfied on the statement of the Chief Executive‑‑‑If the Department did not count and measure the stock, reliance could not be placed entirely on the signed statement, which had been challenged on valid ground and had made it a disputed document‑‑‑Department did not have any work sheet or lot-wise measurement/counting details for such a huge stock otherwise it would have been produced‑‑‑Complainant/ assessee apparently had a visual look and without any checking estimated the stock and prepared the report on which Chief Executive's signature was obtained‑‑‑Counting and measurement was not carried out and the possibility of obtaining the signature of the Chief Executive and his Chief Accountant against their will could not be ruled out‑‑­Reconciliation of stocks statement with the accounts/records were necessary‑‑‑Element of fear, intimidation and coercion could not be ruled out in presence of large number of public functionaries and armed sepoyes‑‑‑Statement showing one crore metres cloth in the stock would need to be verified by the Department against entries made in the relevant books of accounts maintained by the complainant/assessee‑‑ ­Complainant/assessee was required to maintain all sorts of accounts of purchases, processes being carried out by them, supplies made, invoices issued ‑‑‑Complainant/assessee and Department would need to undertake a formal exercise for reconciliation of the stock‑‑Probe was needed to ascertain the truth of such serious allegation of the complainant/assessee that the Departmental officials were armed with weapons and conducted an illegal raid on the factory, sealed the godown, used intimidating tactics and forced the management to sign the stock statement under threat of detention and arrest‑‑‑Federal Tax Ombudsman recommended that Revenue Division to appoint D.G. (Inquiries), Central Board of Revenue to hold an inquiry into the allegations of coercion, intimidation, sealing of godown and if allegations are proved against the officers/officials responsible for misconduct appropriate action against them be taken and direct the relevant Tax Authority to decide the case instituted against the complainant on merit but after the completion of inquiry of D.G. (Inquiry), Central Board of Revenue and providing the complainant the opportunity of presenting its case before the Adjudicating Officer.

Zia Harder Rizvi for the Complainant.

Muhammad Tahir, A.G. Sales Tax for Respondent.

2003 P T D 779

[Federal Tax Ombudsman]

Before Justice (Retd.) Saleem Akhtar, Federal Tax Ombudsman

Messrs GOLDEN PLASTICS (PVT.) LTD., KARACHI

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 1180‑K of 2002, decided on 26th November, 2002.

Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000)‑‑‑

‑‑‑‑S.2(3)‑‑Income Tax Ordinance (XXXI of 1979), S.156‑‑‑Maladministration‑‑ Non‑compliance of Appellate Authority's order‑‑­Failure of Assessing Officer to give effect to the orders passed in appeal‑‑‑Disregarding and disobeying such order amounted to indiscipline, insubordination and maladministration ‑‑‑Assessing Officer failed to carry out the orders and directions of the superior officers which not only amounted to dereliction of duties but also was an act of insubordination which should be taken due notice of by the supervisory officers of the Department‑‑‑Complainant had suffered harassment and hardship due to inaptitude, inefficiency and incompetence of the Assessing Officer who failed to carry out his duties under the law‑‑­Federal Tax Ombudsman recommended that suitable disciplinary action be taken against the Assessing Officer for his failure to give effect to the orders in appeal and for not having complied with the directions of the Commissioner of Income‑tax (Appeal) in respect of addition under the head "financial expenses"‑‑‑Service of rectified orders for the assessment years from 1993‑94 to 1999‑2000 on the authorized representative of the complainant might also be confirmed.

Zulfiqar Haider, I.T.P. for the Complainant.

Sajidullah Siddiqui, D.C.I.Ts., Circle‑8, Cos.II, Karachi and Ansar Ali, D.C.I.Ts., Circle‑4, Cos.II, Karachi for Respondent.

2003 P T D 791

[Federal Tax Ombudsman]

Before Justice (Retd.) Saleem Akhtar, Federal Tax Ombudsman

Messrs KOHINOOR INDUSTRIES LIMITED, KARACHI

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. C‑914/K of 2002, decided on 26th November, 2002.

Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000)‑‑‑

‑‑‑S.2(3)‑‑‑Customs Act (IV of 1969), S.21‑‑‑Maladministration‑‑Export‑‑‑Claim of duty draw hack‑‑‑Undertaken through Bank guarantee that import documents duly attested by a Notary Public of the importing country shall be furnished and failing which the Bank guarantees would be surrendered in favour of the Collectorate‑‑‑Department encashed such Bank guarantee and stopped payment of rebate on the ground that complainant/exporter attempted to export 100% cotton yarn in garb of blended yarn and intended to defraud the public exchequer‑‑‑Demand of notarized import documents, encashment of Bank guarantee and stoppage of payment of rebate was alleged to be maladministration ‑‑‑Validity‑‑­Department alleged that the claim of rebate was not genuine but fraudulent‑‑‑Question should he considered and decided because mere encashment of the Bank guarantee did not lead to the conclusion that action taken by the Department withholding the claim of rebate and releasing same on condition of furnishing Bank guarantee was in pursuance of a conclusive finding given about the fraud allegedly committed by the complainant/assessee‑‑‑Maladministration existed in withholding the rebate without deciding the question of fraud and appropriating the Bank guarantee in final settlement of the charges‑‑‑If there would have been no allegation of fraud the rebate would have been paid which could be refused if the allegations of fraud were proved according to law which was not done‑‑‑Federal Tax Ombudsman recommended that the Collector of Customs should decide the question of fraudulent transaction as alleged against the complainants after notice to them and in the light of the decision the question of encashment of guarantees be also decided.

Mirza Muhammad Awais for the Complainant.

Feroze Junejo, Deputy Collector of Customs (Exports).

Ali Zaman Gardezi, Assistant Collector.

Ajaz Ahmad, Principal Appraiser.

2003 P T D 795

[Federal Tax Ombudsman]

Before Justice (Retd.) Saleem Akhtar, Federal Tax Ombudsman

Messrs MUHAMMADI CLEARING CORPORATION through Nadeem & Co., Karachi

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.C‑1000/K of 2002, decided on 26th November, 2002.

Customs Act (IV of 1969)‑‑‑

‑‑‑‑Ss.16 & 202‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.9‑‑‑Power to prohibit or restrict importation and exportation of goods‑‑‑Penalty‑‑‑Imposition of personal penalties without issuing show‑cause notices to clearing agent and without confirming and establishing the charge of mis-declaration of PCT heading with collusion of the importers‑‑‑Validity‑‑‑Notices were issued in the name of the importers and only copies of such notices were endorsed to the clearing agent‑‑‑Show‑cause notice clearly showed that charge of violation of S.16 of Customs Act, 1969 was levelled against the importers only‑‑‑Although it had been stated by the Department that incorrect PCT heading was declared in the bills of entry in collusion with the importers, no evidence to this effect had been produced nor was any mention of collusion made in the order‑‑‑Show‑cause notice was issued to and the charge of contravention of law was made against the importers and the clearing agent had been penalized without being charged of any violation of the Customs Act, 1969‑‑‑Proper show‑cause notice briefly stating the facts of the case, the offence committed and the evidence on which offence was based should have been issued to the clearing agent before imposing a penalty on him‑‑‑Decision td impose the penalty held was arbitrary and without lawful authority and clearly amounted to maladministration and imposition of penalty was illegal‑‑‑Federal Tax Ombudsman recommended that the Collector of Customs (Adjudication) to remit the penalties to the complainants.

Nadeem Ahmed Mirza, Consultant for the Complainant.

Imtiaz Ahmed Sheikh, Deputy Collector (Appraisement) for Respondent.

2003 P T D 865

[Federal Tax Ombudsman]

Before Justice (Retd.) Saleem Akhtar, Federal Tax Ombudsman

Sh. SHAMAS ALI, MULTAN

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 850‑L of 2002, decided on 5th November, 2002.

Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑S. 12(18)‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.9‑‑‑Deemed income‑‑‑Gift‑‑‑Cash payment‑‑‑Claim that genuineness of transaction of gift could not be doubted‑‑‑Validity‑‑‑Any payment of loan/advance/gift, not made through a cross cheques on any Bank, or through banking channel by a NTN holder was to be treated as income chargeable to tax in the hands of recipients‑‑‑Contention that the brothers were identifiable persons, holding NTN's, lends no strength to the case of the complainant because the very purpose of the enactment was to compel the payment `through banking channel even by those who held NTN‑‑‑Insistence of Income Tax Authorities for adherence to the provisions of a valid enactment could not be characterized as "maladministration" under S.2(3) of the Establishment of Office of Federal Tax Ombudsman Ordinance, 2000‑‑‑Complaint was without merit and the same was closed by the Federal Tax Ombudsman:

2002 PTD 63 and 2000 PTD 2594 distinguished.

1971 PTD 200; 1973 SCMR 445 and 1962 SCMR 663 ref.

Sirajuddin Khalid for the Complainant.

Qaiser Mehmood for Respondent.

2003 P T D 874

[Federal Tax Ombudsman]

Before Justice (Retd.) Saleem Akhtar, Federal Tax Ombudsman

Messrs CHIEF STORES, SAHIWAL and 6 others

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaints Nos. 276, 385, 521, 722, 834, 840 and 883 of 2002, decided on 26th November, 2002.

(a) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑S. 59(1)‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S. 9‑‑‑Self‑assessment‑‑‑Assessment year 2001‑2002‑‑‑Selection of cases for Total Audit‑‑Allotment of new National Tax Number‑‑‑Errors and discrepancies enumerated.

(b) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑S. 59(1)‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.9‑‑‑C.B.R. Circular No.4 of 2001, dated 18‑6‑2001, para. 9(a)(i)‑‑‑Self‑assessment‑‑‑Selection of cases through computer ballot ‑‑‑Maladministration was alleged in selection of returns for total audit by assigning new National Tax Number with prefix "Z", arbitrarily either substituting already allotted National Tax Number with prefix "Z": or substituting TR Numbers through manipulation of ballot programme‑‑‑Validity‑‑‑No human element design or choice was involved either in allocation of new National Tax Number with prefix "Z" or in ballot results‑‑‑No. maladministration was thus found‑‑­Selection of returns for audit was declared to be in accordance with law by the Federal Tax Ombudsman.

Munir Ahmad, Kashif Dildar Bhatti, Riaz Mohay‑ud‑Din, Ghias Ahmed Malik and Mr. Zafar for the Complainants.

Asghar Ali Ch., Senior Project Manager, Lahore, Mujahid Naeem, Manager, Faisalabad, Ahsanul Haq, Manager DPU (Faisalabad) and Iftikhar Ahmad, Manager, Sargodha for Respondent.

2003 P T D 895

[Federal Tax Ombudsman]

Before Justice (Retd.) Saleem Akhtar, Federal Tax Ombudsman

PAKCOM LTD., ISLAMABAD

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaints Nos. 256 and 257 of 2002, decided on 28th October, 2002.

Central Excises Act (I of 1944)‑‑‑

‑‑‑‑Ss. 12‑A & 3‑‑‑Diplomatic and Consular Privileges Act (IX of 1972), First Sched., Art. 34(a)‑‑‑S.R.O. 455(I)/96, dated 13‑6‑1996‑‑‑Central Excise Rules, 1944, Rr.10 & 96‑ZZJ ‑‑‑Ministry of Foreign Affairs (Protocol Division) Letter No. P(3)‑II/8/99, dated 12‑10‑1999‑‑­Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.9‑‑‑Expressions "realizing of duty and not depositing" and "not realizing at all"‑‑‑Distinction‑‑‑Failure of complainant/assessee to realize Central Excise Duty on telecommunication service billed to Diplomatic Missions, U.N. Agencies and other International Organizations‑‑‑Demand‑‑‑Validity‑‑‑Department had not categorically stated that the complainant had realized the duty and not deposited‑‑‑Lot of difference existed in realizing the duty and not depositing and not realizing at all‑‑‑In the first situation duty if realized whether legal or not must be deposited with the Government Treasury irrespective of the period of limitation provided under R. 10 of the Central Excise Rules, 1944‑‑‑Where the duty had not been realized the limitation as provided under R. 10, of the Central Excise Rules,, 1944 would be attracted‑‑‑Notice was not clear about realization and deposit and there was no allegation in the notice to attract any provision of R. 10 of the Central Excise Rules, 1944‑‑‑Federal Tax Ombudsman recommended that Collector (Adj.) to determine whether the complainant had realized Central Excise Duty, if so, to what amount; if answer to the first question was in the affirmative then the amount found realized be deposited by the complainant and if the duty had not been realized then the Collector (Adj.) to decide the case on question of limitation after affording hearing to the complainant before giving decision on merits.

Ayaz Shaukat for the Complainant.

Khan Sarwar, Additional Director, Customs Audit for Respondent.

2003 P T D 903

[Federal Tax Ombudsman]

Before Justice (Retd.) Saleem Akhtar, Federal Tax Ombudsman

MUHAMMAD SHABIR

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 372‑L of 2002, decided on 16th July, 2002.

(a) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑Ss. 92 & 156‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)‑‑‑Refund‑‑‑Wilful error in determination of ‑‑‑Maladministration‑‑‑ Rectification‑‑‑Wilful/deliberate error in determination of refund amounted to maladministration and it had to be corrected through rectifying order under S.156 of the Income Tax Ordinance, 1979.

(b) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑Ss. 96 & 156‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)‑‑‑Refund‑‑‑Rectification‑‑‑Dishonour of refund voucher‑‑‑Department was obliged to get completed the assignments for issuance of refund voucher during the office hours‑‑­Federal Tax Ombudsman recommended that the Commissioner of Income Tax should see that commitments made by the representative of the Revenue were carried out as promised and that signatures of the officer issuing the refund, or any other necessary intimation required by the procedure is sent to the State Bank of Pakistan to avoid possibility of dishonour of the Refund Voucher.

Muhammad Aslam, A.R. for the Complainant.

Ms. Nabeela Iqbal, DCIT for Respondent.

2003 P T D 919

[Federal Tax Ombudsman]

Before Justice (Retd.) Saleem Akhtar, Federal Tax Ombudsman

Messrs M.B. DYES CHEMICAL & SILK INDUSTRY (PVT.) LTD., SWABI

Versus

SECRETARY, REVENUE DIVISION ISLAMABAD

Complaint No. 1080 of 2002, decided on 30th October, 2002.

Customs Act (IV of 1969)‑‑‑

‑‑‑‑S. 202‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.9‑‑‑S.R.O.108(I)/95, dated 12‑2‑1995‑‑­Regulatory duty‑‑‑Recovery of Government dues‑‑‑Disputed demand‑‑­Detention of consignment‑‑‑Such goods would become ‑ useless, if consignment was not immediately released ‑‑‑Complainant/assessee accepted the offer of Department that consignment will be released on an undertaking by the complainant that duty shall be paid, if subsequently, it was found that the Regulatory Duty was payable on such consignment‑‑‑Interim recommendation was made by the Federal Tax Ombudsman that consignment detained at the Airport for the demand of Rs.8,04,652 be released immediately on submitting an undertaking by the complainant that if it was found that the Regulatory Duty as demanded was payable, the complainant would pay the same, as regard the demurrage charges Department would advise the Airline not to charge the same as the matter was under litigation‑‑‑Complaint, the intervening action of detention of goods, its bona fides and liability to pay demurrage will be considered and decided after the case was finally heard on a date to be intimated to the parties.

Dr. Maqbool Islam for the Complainant.

Dr. Sadiqullah Khan, D.C. Customs, Peshawar for Respondent.

2003 P T D 950

[Federal Tax Ombudsman]

Before Justice (Retd.) Saleem Akhtar, Federal Tax Ombudsman

Mrs. HAMEEDA AFZAL

Versus

SECRETARY, REVENUE. DIVISION, ISLAMABAD

Complaint No. 675 of 2001, decided on 18th August, 2001.

(a) Survey for Documentation of National Economy Ordinance (XV of 2000)‑‑‑

‑‑‑‑S. 3(1) & First Sched.‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S. 9‑‑‑Filing of question­naires‑‑‑Survey of business‑‑‑Signatures on survey form‑‑‑Effect‑‑‑Signatures against items A, B & C of the Survey Form which was to be filled in by the survey team was a legal requirement and every assessee had to sign the same‑‑‑Signatures of the assessee done under the legal command could not be treated as an agreement by the assessee‑‑‑Mere affixing signatures against the entries of the form did not create any valid and binding agreement between the parties‑‑‑If, however, the assessee disagreed then proper investigation and stock‑taking was recommended by the relevant authority which followed that assessee's signature did not create any agreement‑‑‑If no objection was made, then it will be binding upon the party but not as an agreement.

(b) Survey for Documentation of National Economy Ordinance (XV of 2000)‑‑‑

‑‑‑‑S. 3(1) & First Sched.‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.9‑‑‑Filing of questionnaires‑­Survey of business‑‑‑Signature on Survey Form by husband of the assessee‑‑‑Without binding on the assessee‑‑‑Signature obtained or made by the husband of the assessee was not binding on her as her husband was not an attorney or authorized to sign such documents on her behalf‑‑‑Federal Tax Ombudsman recommended that Survey Form on which signature of assessee's husband appeared was illegal, void and not binding on the parties.

(c) Survey for Documentation of National Economy Ordinance (XV of 2000)‑‑‑

‑‑‑‑S. 3(1) & First Sched.‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S. 9‑‑‑Filing of question­naires ‑‑‑Survey of business‑‑‑Signature on Survey Form‑‑‑Filing of complaint was sufficient to establish that assessee had not agreed to the amount recommended by the Survey Team.

(d) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑S. 3‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.9‑‑‑Income‑tax Authorities‑‑‑Commissioner was an "authority" under the law was bound to give correct information, otherwise if he tries to justify the illegal act, that will reflect upon his efficiency and knowledge.

Masood Ishaq for the Complainant.

DCIT, Faisalabad for Respondent.

2003 P T D 958

[Federal Tax Ombudsman]

Before Justice (Retd.) Saleem Akhtar, Federal Tax Ombudsman

IQBAL HAIDER, COST & MANAGEMENT ACCOUNTANT, BAHAWALPUR

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 975 of 2001, decided on 23rd August, 2001.

(a) Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000)‑‑‑

‑‑‑‑S. 2(3)‑‑‑Maladministration‑‑‑Ignoring the letters and not replying for months in spite' of reminders and personal visits, amounts to mal­administration on the part of Department.

(b) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑S.4‑A‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.9‑‑‑Appointment of firms of accountants‑Non-payment of fee/commission due to non‑availability of funds‑‑‑Department stated that Administrative Officer had asked the office to pay to the claimant but with no progress‑‑‑Federal Tax Ombudsman recommended that Central Board of Revenue to finalize and pay the fee to the complainant within one month.

2003 P T D 970

[Federal Tax Ombudsman]

Before Justice (Retd.) Saleem Akhtar, Federal Tax Ombudsman

Messrs ZARCO CHEMICALS (PVT.) LIMITED, FAISALABAD

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 1300/L of 2002, decided on 13th January, 2003.

(a) Sales Tax Act (VII of 1990)‑‑‑

‑‑‑‑Ss. 73 &, 7‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000)‑‑‑Certain transactions not admissible‑‑‑Input tax credit‑‑‑Admissibility‑‑‑Under S.73 read with S.7 of the Sales Tax Act, 1990 any transaction/taxable supplies involving payment exceeding Rs.50,000 otherwise than by a crossed cheque or crossed Bank draft or pay order or any other banking instrument showing transfer of payment in favour of seller from the business account of the buyer was not admissible for purposes of input tax credit, adjustment or deduction, or refund, repayment or drawback or zero rating etc.

(b) Sales Tax Act (VII of 1990)‑‑‑

‑‑‑‑S.73‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000)‑‑‑Certain transactions not admissible‑‑‑Cash payments deposited in the account of seller by the purchaser‑‑‑Input tax credit‑‑­Requirement of law‑‑‑Payment was deposited in cash by the complainant in the account of seller whereas the legal requirement was the transfer of the payment in favour of the seller from the business account of the buyer ‑‑‑Complainant/assessee could not produce any evidence showing payment from their business account to that of the seller nor was it shown that the payment was made by crossed cheque, crossed draft, pay order or any other banking instrument‑‑‑Cash deposit receipts held did not serve he purpose of S.73 of the Sales Tax Act, 1990.

(c) Sales Tax Act (VII of 1990)‑‑‑

‑‑‑‑S.2(46)(e)‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000)‑‑‑Value of supply‑‑‑Value addition to cost of purchase for determining supply value according to the agreement with the trade association‑‑‑Validity‑‑‑Collector under S.2(46)(e) of the Sales Tax Act, 1990, for purposes of determining value of supply, could appoint a Valuation Committee comprising representative of trade and the Sales Tax Department if there was sufficient reason to believe that the value of supply was not being correctly declared‑‑‑Committee constituted by the Collector decided a value addition of 16% which value was accepted by the Trade Association and which decision was largely accepted by the dealers‑‑‑Value addition, in circumstances, was correctly applied‑‑‑No Maladministration had occurred and complaint was dismissed by the Federal Tax Ombudsman.

2002 PTCL 2 ref.

Muhammad Ashraf Hashmi and Ghaffar Hussain for the Complainant.

Fazal‑ur‑Rehman, A.C., Sales Tax, Multan for Respondent.

2003 P T D 1010

[Federal Tax Ombudsman]

Before Justice (Retd.) Saleem Akhtar, Federal Tax Ombudsman.

Ch. MERAJ‑UD‑DIN & CO., LAHORE

Versus

SECRETARY, REVENUE DIVISIQN, ISLAMABAD

Complaint No. 1057/L of 2001, decided on 12th September, 2001.

(a) Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000)‑‑‑

‑‑‑‑S. 2(3)‑‑‑Income Tax Ordinance (XXXI of 1979), Ss.96, 80‑C, 143‑B & 129‑‑‑Maladministration‑‑‑Failure to refund an amount claimed, without giving any proper reason certainly falls for action by the Federal Tax Ombudsman in the light of S.2(3) of the Establishment of Office of Federal Tax Ombudsman Ordinance, 2000 as S.80‑C of the Ordinance was not specifically mentioned in S.129 of the Income Tax Ordinance, 1979 to approach the appellate forum.

(b) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑Ss. 96, 80‑C & 143‑B‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)‑‑‑S.R.O. 600(I)/94, dated 2‑7-1991‑‑‑C B.R. Circular No.18 of 1993, dated 30‑10‑1993‑‑­Refund‑‑‑Excess deduction of tax‑‑‑Carriage contract‑‑‑Tax deducted @ 5% on payment of transportation of goods through goods .transport vehicles was termed as final discharge of tax liability instead of 2% duly notified‑‑‑Validity‑‑‑Federal Tax Ombudsman recommended that the matter be examined by the Commissioner of Income Tax and if excess deductions had been made from any payment to the complainant/assessee which qualified for the lower rate of 2% prescribed by S.R.O. 600(I)/94, dated 2‑7‑1991, the excess amount deducted be refunded to the complainant/assessee.

Muhammad Saleem for the Complainant.

Malik Ghulam Rasool, DCIT, Circle 27, Zone‑B, Lahore for Respondent.

2003 P T D 1044

[Federal Tax Ombudsman]

Before Justice (Retd.) Saleem Akhtar, Federal Tax Ombudsman

Messrs AADIL CERAMICS, GUJRANWALA

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 816 of 2001, decided on 22nd August, 2001.

Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑S. 59‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.9‑‑C.B.R. Circular No. 21 of 2000, dated 11‑9‑2000, para. 2 (vi)‑‑‑Self‑Assessment Scheme 2000‑2001, para. 2(vi)­‑Assessment year 2000‑2001‑‑‑New taxpayer‑‑‑Refusal to accept return under Self‑Assessment Scheme for the reason that declared income was less than 1/3rd of the declared capital‑‑‑Complainant/asses see contended that para. 2(vi) of the Self‑Assessment Scheme, 2000‑2001 was contrary to law and rules, departure from establishment practice, perverse, arbitrary, unreasonable, unjust, oppressive, discriminatory and also did not exist in the previous Self‑Assessment Schemes‑‑‑Central Board of Revenue had also agreed to waive such condition ‑‑‑Complainant/assessee was quite wrong in stating that the provision contained in para. 2(vi) of Self‑Assessment Scheme 2000‑2001 did not exist in any of the earlier Self‑Assessment Schemes‑‑‑According to para. 6 of Universal Self­Assessment Scheme for assessment year 1999‑2000, the Scheme applied to only such new taxpayers who declared the income at least 30% of the investment or capital employed in the business‑‑‑Para. 2(vi) of Self-­Assessment Scheme 2000‑2001 could by no means be considered as perverse or arbitrary‑‑‑Federal Tax Ombudsman rejected the complaint being devoid of merit.

Siddique Ahmad Chaudhry for the Complainant.

Zulfiqar Ali, DCIT, Circle 20, Gujranwala for Respondent.

2003 P T D 1303

[Federal Tax Ombudsman]

Before Justice (Retd.) Saleem Akhtar, Federal Tax Ombudsman

Messrs KARIM P.V.C. PIPE FACTORY, FAISALABAD

Versus

SECRETARY, REVENUE'DIVISION, ISLAMABAD

Complaint No. 659 of 2002, decided on 22nd August, 2002.

(a) Sales Tax Act (VII of 1990)---

----S. 13(2)(a)---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000)---S.R.O. 392(I)/01, dated 18-6-2001--­Simplified Sales Tax Rules, 1999---Exemption---S.R.O. 392(I)/01, dated 18-6-2001 exempts whole amount of sales tax in excess of what was liable to be paid at the rates specified under any applicable fixed Sales Tax Rules up to 30-6-1998, the simplified Sales Tax Rules, 1999 or under any written instructions from Central Board of Revenue or supplies made by a manufacturer up to 30-6-2000 subject to conditions stipulated in the notification.

(b) Sales Tax Act (VII of 1990)---

----S. 13(2)(a)---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000)---S.R.O. 392(I)/01, dated 18-6-2001--­Simplified Sales Tax Rules, 1999---Exemption---S.R.O. 392(I)/01, dated 18-6-2001 may not be in the nature of fixed tax but it did exempt tax in excess of what was paid under fixed sales tax schemes or simplified rules or other instructions.

(c) Sales Tax, Act (VII of 1990)---

----S. 13(2)(a)---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.9---S.R.O. 392(I)/01, dated 18-6-2001--Sales Tax General Order No.2 of 2001, dated 30-6-2001---Simplified 'Sales Tax Rules, 1999---Exemption---Fixed sales tax---Facility of payment of sales tax under S.R.O. 392(I)/O1, dated 18-6-2001 for the period from July, 1999 to 30-6-2000 despite submission of application for availing the rates notified under the said notification---Validity---Best course of action would be to decide on merit the application of the complainant/assessee for relief under S. R.O. 392(I)/01, dated 18-6-2001, and if the relief under the said notification was found to be due it should be given for the period covered under S.R.O. 392(I)/01, dated 18-6­-2001---No action was taken to dispose of the complainant/assessee's application for availing the facility of- S.R.O. 392(I)/01, dated 18-6­-2001---Department proceeded to issue a show-cause notice asking for payments of tax, which the complainant/assessee's claim was in excess of that payable under S.R.O. 392(I)/01, dated 18-6-2001---Just and fair action was that the complainant's application for paying tax under the S.R.O. 392(I)/01 dated 18-6-2001 was considered and decided by the Department in line with the spirit of the Sales Tax General Order No.2 of 2001, dated 30-6-2001 issued by the Central Board of Revenue which the Department failed to do---Maladministration in circumstances was established-Federal Tax Ombudsman recommended that Revenue Division should direct the Collector Sales Tax, Faisalabad to take a decision on the complainant/assessee’s application, dated 8-12-2001 in the light of the provisions of the Notification S.R.O. 392(I)/01, dated 18-6-2001 and in keeping with the spirit of the Sales Tax General Order No.2 of 2001, dated 30-6-2001 after giving the complainant/assessee the opportunity of being heard.

Anwar Bhatti for the Complainant.

Muhammad Tahir, A.C., Sales Tax for Respondent.

2003 P T D 1460

[Federal Tax Ombudsman]

Before Justice (Retd.) Saleem Akhtar, Federal Tax Ombudsman

HAZIR ZAMAN

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 591 of 2002, decided on 1st August, 2002.

(a) Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000)---

----S. 2(3)---Maladministration---Defence arguments, non-consideration of---Effect---Deciding a case without taking into consideration the defence arguments. whether submitted in writing or made orally, was an act of maladministration as the same was against principles of natural justice.

(b) Sales Tax Act (VII of 1990)---

----Ss. 26 & 15---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000)---Monthly return---Application for registration---Despatch/delivery of registration documents to enable assessee to file return---Burden of proof --- Department had to prove whether the complainant/assessee was informed about Sales Tax Registration of his, unit and whether the relevant documents of registration were dispatched/delivered enabling him to file the returns.

(c) Sales Tax Act (VII of 1990)---

----S. 33---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000)---General penalties---Imposition of penalty for not filing returns despite Department's own failure to inform the complainant/assessee that he had been registered under the Sales Tax Act; 1990---Validity---Department need to appreciate the complainant,' assessee's case for absolving him from penalty and for deregistering his unit by closely examining two certificates both issued by Principal Company---One certificate verifies the cancellation of distributionship and the other confirms that no supplies were ever made to him up to the time of cancellation of his distributionship---Federal Tax Ombudsman recommended that Revenue Division may direct the concerned Collector Sales Tax and Central Excise, to cancel the order passed by the Assistant Collector, under S.45(A(4) of the Sales Tax Act, 1990 and advise the Competent Authority to pass a fresh, speaking adjudication order on merits taking into. consideration the submissions of the complainant, after providing him the opportunity of being heard.

Complainant in person.

M. Saleem, D.C. (Sales Tax) for Respondent.

2003 P T D 1482

[Federal Tax Ombudsman]

Before Justice (Retd.) Saleem Akhtar, Federal Tax Ombudsman

Mian ASGHAR ALI

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.918-L of 2002, decided on 28th November, 2002.

(a) Income Tax Ordinance (XXXI of 1979)---

----Ss. 77, 74 & First Sched., Part IV, Para. B(2), Cl. ,(2)---Companies Ordinance (XLVII of 1984), S.2(28) & 2(30)---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S:9---Liability in the case of deceased person---Liability for payment of tax in the case of private companies, firm and Association of Persons---Tax liability against public companies---Recovery-from deceased Director ---Validity-­Tax due from the public companies could- not be recovered from the deceased Director by resort to S.77 of the Income Tax Ordinance; 1979, which could be pressed into service for recovery of tax from a former Director, only when `tax payable by a private company could not be recovered'---Section 77 of the Income Tax Ordinance, 1979 neither even remotely authorizes recovery of tax outstanding against a public company, from its former Directors, nor does-it spell out any condition 'under which a public company could be deemed to be a private company---Steps initiated for recovery of tax liability of public companies from the assets of deceased Director were from the 'very beginning, contrary to law, arbitrary and unjust.

(b) Income Tax Ordinance (XXXI of 1979)---

----Ss. 74, 77 & First Sched., Part IV, Para. 13f2), Cl.(2) --- Companies Ordinance (XLVII of 1984), S.2(28) & 2(30)----West. Pakistan Urban Rent Restriction Ordinance (VI of 1959)---Income Tax Rules, 1982, Rr.159 & 74---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.9---Liability in the case - of deceased person---Liability for payment of tax in the case of private companies, firms and Associations of Persons---Tax liability against public companies---Legal heirs ---Assessee in default---Recovery of arrears from legal heirs without service of notice showing intention to treat them as assessee in default and also recovery of tax liability against public companies from the property of deceased Director ---Validity---Mal­administration was evident by continuing recovery proceeding ignoring that on the death of an assessee who was treated as a defaulter', the efficacy of Recovery Certificate had come to an end and recovery proceedings could not continue against legal heirs without service of notice showing intention to treat them as 'assessee' orassessee-in­default'---Recovery Certificate originally issued included the tax arrears in respect of public company completely forgetting that in absence of definition of public company' andprivate company' in the Income Tax Ordinance, 1979; 'the definition as obtaining in the Companies Ordinance, 1984 were applicable with the result that -recovery from a former Director could not be made of tax arrears outstanding against a public company---Recovery action was contrary to taw, rules and regulations thus perverse, arbitrary and unreasonable resulting in "maladministration" as per S.2(3) of the Establishment of Office of Federal Tax Ombudsman Ordinance, 2000---Federal Tax Ombudsman recommended that Recovery Certificate be withdrawn and the Official Receiver recalled that amount recovered in excess of the demand against the deceased and the two private limited companies be refunded alongwith compensation as admissible under S.171 of the Income Tax Ordinance, 2001 and enquiry be conducted to identify those who failed to take appropriate legal action as respects recovery of tax demand outstanding against the two public limited companies report of inquiry be furnished.

In re: Habib Bank Ltd. 1999 PTD 2940 and In re: Begum Nusrat Bhutto 1981 SCMR 1192 ref.

Syed Ghulam Abbas Shah's case 1985 CLC 1582. rel.

Zahid Parvez for the Complainant.

Abdur Rehman Warraich for Respondent.

2003 P T D 1492

[Federal Tax Ombudsman]

Before Justice (Retd.) Saleem Akhtar, Federal Tax Ombudsman

Messrs SAHIB JEE

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.786-L of 2002, decided on 26th November, 2002.

Income Tax Ordinance (XXXI of 1979)---

----S. 59(1)---C.B.R. Circular No.4 of 2001, dated 18-6-2001---Self ­Assessment Scheme, Para. 9(a)(ii)---C.B.R. Circular Letter No.7(7) S. Asstt/2001, dated 26-3-2002---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Self-assessment--­Setting apart of case for total audit on the ground that net profit of 6% of sales was very low in view of the line of business of the assessee--­Validity---Pre-conditions for total audit include suppression of income; evidence of Revenue potential of the case; clear evidence of decline in income; creation of new assets not covered by the declared income and disparity in expenses on utilities---None of the conditions/factors were found in the complainant's return of income, there was thus no valid reason or justification for selection of the case for total audit---Such infirmity had rendered the decision arbitrary, unreasonable and illegal--­Confronting with supposed deficiencies not covered by the ratio of guidelines would clearly tantamount to ".maladministration" and where "maladministration" was identifiable the matter fell in the jurisdiction of Federal Tax Ombudsman---Even if the allegation of `mala fides was discounted, the complainant/assessee's return deserved to be accepted under Self-Assessment Scheme especially when none of the criteria laid down for 'selection of cases for audit was identifiable---Federal Tax Ombudsman recommended that return be accepted under Self­ Assessment Scheme.

Siraj-ud-Din Khalid for the Complainant.

Aftab Fahim, Taxation Officer for Respondent.

2003 P T D 1498

[Federal Tax Ombudsman]

Before Justice (Retd.) Saleem Akhtar, Federal Tax Ombudsman

Messrs TECH SOCIETY LTD.

Versus

SECRETARY REVENUE DIVISION ISLAMABAD.

Complaint No.932-L of 2002, decided on 25th March, 2002

(a) Income Tax Ordinance (XXXI of 1979)---

----S. 96---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Refund---Assessee a Co operative Housing Society---Status---Refund was determined by giving effect to the order of First Appellate Authority---Refund was withheld on the ground that judgment of the Supreme Court was awaited on the issue of `status' of the assessee as such refund created as a consequence of appeal to First Appellate Authority could not be issued---Validity---Refund created in consequence of relief by First Appellate Authority could not be withheld even by resort to 5.103 of the Income Tax Ordinance, 1979 because order for those years "was not subject-matter of appeal or further proceedings" ---Issue of status stood decided against Department up to High Court which had been challenged in Supreme Court and the same had no concern with the relevant assessment years---Matter sub judice before Supreme Court did not relate to the assessment years for which refund had been determined and claimed---Deliberate withholding or non-payment of refund falls under definition of "maladministration"--­Withholding of refund in absence of any order under 5.103 of the Income Tax Ordinance, 1979 aggravates "maladministration" due to an act of omission which was contrary to law, rules or regulations---Delay in issuance of refund, had entitled the taxpayer to sufficient compensation as per S.177 of the Income Tax Ordinance, 2001 and S.102 of the Income Tax Ordinance, 1979---Federal Tax Ombudsman recommended that undisputed refund of Rs.4,446,153, together with additional payment for delayed refund, be issued that it should be identified as to which authority was responsible for the unauthorized withholding of refund, which burdened the Government with additional payment under S.171 of the Income Tax Ordinance, 2001 that person. responsible for the infraction be suitably warned to be careful in future and that C.B.R. to direct the Tax Officers to file full particulars of any pending proceeding referred by them including the duly attested memo. of appeal, application or petition with the date of filing ofsuch proceeding and its present status.

(b) Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000)---

----S. 9----Jurisdiction, functions and powers of the Federal Tax Ombudsman---Bar of jurisdiction---Applicability---Bar of jurisdiction will apply only in cases where the subject-matter of complaint filed before the Federal Tax Ombudsman was the same in respect of which appeal before a Court of competent jurisdiction was pending on the date of presentation of complaint.

(c) Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000)-----

----S. 2(3)---Maladministration---Allegation---Proper hearing before entertaining complaint---Validity---Objection that allegation of mal­administration be properly heard and conclusively established before entertaining complaint was frivolous and devoid of merit---Where allegation of maladministration was made and prima facie a case was made out on the facts stated in the complaint, notice was issued to the Department---No complaint could be considered and allegations of mal­administration be properly heard and conclusively decided without issuing notice to the Revenue Division nor it could be decided without hearing-the Department.

(d) Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000)----

----S. 9(2)---Jurisdiction, functions and powers of the Federal Tax Ombudsman---Appeal before a Court of competent jurisdiction or Tribunal---Where. any party refers to any pending proceeding it will be required to supply full particulars including copy of the memo. of appeal, application or petition, date of filing and the present status of the proceedings.

Abrar H. Naqvi for the Complainant.

Nawab Khan, D-CIT for Respondent.

2003 P T D 1513

[Federal Tax Ombudsman]

Before Justice (Retd.) Saleem Akhtar, Federal Tax Ombudsman

AKHLAQ CLOTH, HOUSE, FAISALABAD.

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 706 of 2002, decided on 26th January 2003.

Income Tax Ordinance (XXXI of 1979)-----

----S. 59(1)---C.B.R. Circular No.4 of 2001 dated 18-6-2001---Self­ Assessment Scheme, Para. 9(a)(ii)---C.B.R. Circular No.1/69/STS/2002, dated 8-12-2000, Para. IX ---C.B.R. Circular C..No.1 (8)STS/2001, dated 8-6-2002---C.B.R. Circular. Letter No.7(7) S. Asstt/2001, dated 26-3-2002---Survey of Documentation of National Economy Ordinance (XV of 2000)---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.9---Self-assessment---Setting apart of return---Return was set apart by invoking Para. 9(a)(ii) of Central Board of Revenue's Circular No.4 of 2001, dated 18-6-2001 on the ground that sales declared were not commensurate with the sales agreed/assessed as per profile of Survey for Documentation- of Economy---Assessee contended that Army led Survey Team got the survey form signed under duress on sales which were highly unjustified and unfair---Sales declared were commensurate with the capital---Validity---Reasons confronted with by the Department to believe that complainant/assessee's case had more Revenue potential than already declared in the return of income were not valid---None of the criteria set forth by the Central Board of Revenue in the guidelines issued for selection of cases had been identified to be applicable to the case of complainant/assessee-Selection of return for audit thus was arbitrary and alleged "maladministration" was proved--­Federal Tax Ombudsman recommended that Central Board of Revenue direct exclusion of return from the list of cases selected under Para. 9(a)(ii) for audit and fox its' acceptance under Self-Assessment Scheme.

Siraj-ud-Din Khalid for the Complainant.

Muhammad Asif, ACIT for Respondent.

2003 P T D 1576

[Federal Tax Ombudsman]

Before Justice (Retd.) Saleem Akhtar, Federal Tax Ombudsman

Messrs ALI PACKAGES, FAISALABAD

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 384 of 2002, decided on 8th October, 2002.

Sales Tax. Act (VII of 1990)-----

----S. 7---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000)---Determination of tax liability---Non-speaking order--­Input tax credit was disallowed on the ground of fake invoices without considering the complainant/assessee's contention that material was purchased from the suppliers registered with the Sales Tax Department---Validity---Case had been dismissed summarily without taking into consideration the assessee's point of view and without examining the registers/documents presented by the complainant/ assessee in support of their contentions---Certain critical aspects of the case had not been examined and, analyzed by the Department before arriving at a decision---Well reasoned speaking order ought to have been passed in the case on its merits---Federal Tax Ombudsman recommended the Revenue Division to direct the Collector Sales Tax, to re-open the order under S.45A(4) of the Sales Tax Act, 1990, to examine the record of the departmental proceedings and to decide the case afresh on its merits keeping in view of the foregoing observations, the contentions of the complainant and valid admissible evidence.

Muhammad Hamayun for the Complainant.

Ch. Muhammad Javed, D.C. Adjudication, Faisalabad for Respondent.

2003 P T D 1604

[Federal Tax Ombudsman]

Before Justice (Retd.) Saleem Akhtar, Federal Tax Ombudsman

Messrs AZEEM HOSIERY FINISHING PLANT, FAISALABAD

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 778 of 2002, decided on 22nd August, 2002.

Income Tax Ordinance (XXXI of 1979)-----

----S. 65---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.9---Additional assessment ---Expenses--­Non-claiming of---Re-opening of assessment on the ground that expenditure incurred on account of social security payments was not claimed in statement of account---Validity---Initiation of proceedings under S.65 of the Income Tax Ordinance, 1979 was against the law and. thus maladministration ---Federal Tax Ombudsman recommended that Commissioner of Income-tax, to take suo motu cognizance of the case and annul the order based on proceeding under S.65 of the Income Tax Ordinance, 1979 which were ab initio void in law.

2000 PTD (Trib.) 2905; I.T.A. No. 3414/LB of 1998 and 1988 PTD (Trib.) 973 ref.

Malik Abdul Haq for the Complainant.

Muhammad Saleem, D.C.I.T. for Respondent.

2003 P T D 1611

[Federal Tax Ombudsman]

Before Justice (Retd.) Saleem Akhtar, Federal Tax Ombudsman

MUHAMMAD ISHAQ MUHAMMAD ALTAF

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 681/L of 2002, decided on 26th December, 2002.

(a) Income Tax Ordinance (XXXI of 1979)-----

----Ss. 66(1)(c), 59, 54 & 96---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Limitation for assessment in certain cases---Self-assessment---Refund---Order setting aside the assessment became barred by time, entailed necessary and unavoidable consequence that the return of income came to be. accepted under S.59 of the Income Tax Ordinance, 1979, by operation of law, which carried the. implication that any amount of tax paid, which exceeded the liability admitted under. S.54 of the Income Tax Ordinance, 1979, became refundable to the complainant/assessee---Department's plea that fresh "assessment will be finalized in accordance with law and facts in the shortest possible time" was not possible in law except that an IT-30 was to .be .prepared showing refund" for posting in the relevant record---Such having been denied, maladministration was manifest in multidimensional ways viz. (a) neglect in allowing the assessment to get time-barred; (b) inattention to the complainant/assessee's correspondence with regard to the payment of refund as evidenced by letters by the assessee addressed to, the TRO, ITO and CIT respectively; (c) loss 'of record some part of which was classified 'permanent' were all acts betraying inefficiency.

(b) Income Tax Ordinance (XXXI of 1979)--------

----Ss. 96, 66(1)(c), 54 & 59---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Refund---Non­payment of---Assessment was set aside by the Appellate Tribunal which had not been finalized in accordance with law and became barred by time---Claim of refund by the assessee---Non-availability of record of Department---Effect---If the Department was not able to trace out the record, there was no way but to accept the assessment record presented by the complainant/assessee, as a basis to take further action to carry the matter to its logical and legal end---Federal Tax Ombudsman recommended that the complainant's tax liability be worked out on the basis of income declared in the Return and refund determined and paid promptly that tax liability of partners on the basis of their Returns be worked out to determine final liability refund and that additional payment for delayed refund he also worked out in the case of the complainant and its partners, and disbursed forthwith.

S. Athar Raza for the Complainant.

S.M. Ali, D.C.I.T, for Respondent.

2003 P T D 1615

[Federal Tax Ombudsman]

Before Justice (Rend.) Saleem Akhtar, Federal Tax Ombudsman

Messrs E.C.S. EHSAN, LAHORE

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 687-L of 2002, decided on 11th December, 2002.

(a) Income Tax Ordinance (XXXI of 1979)---

----S. 85---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.9---Payment of tax on demand--­Demand "---Period of payment---Allowing just one week for payment of demand was highly unjustified and arbitrary.

(b) Income Tax Ordinance (XXXI of 1979)-----

----S. 62-Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---C.B.R. Circular No.13-ITP/1951, dated 28-5-1951---Assessment on . production of accounts, evidence, etc.---.Estimation of sales, GP rate and overhead expenses---Wide variation---Wide variation in figures adopted to estimate sales, to apply GP rate and to fix overhead expenses resulting in income at Rs.9.3 (M), then reduced for proposing `agreement' at Rs.3.5 (M), and finally jumped tip to Rs.5.9,(M)---Validity---Glaring deficiencies i.e. whimsical/ arbitrary order, disregard of Central Board of Revenue's instructions and, unnecessary lengthy assessment order exhibiting incompetence fell in the realm of maladministration ---Due to highhandedness, arbitrary conduct, non-adherence to law and rules, maladministration' was established which was cognizable .under Establishment of Office of Federal -Tax Ombudsman Ordinance; 2000 and Federal Tax Ombudsman had jurisdiction in the matter--­Federal Tax. Ombudsman recommended that the Central Board of Revenue in exercise of power under subsection (2) of S.209 of the Income Tax .Ordinance, 2001 confer upon. or assign to any taxation officer of integrity to amend the assessment orders under S. 122 of the Income Tax Ordinance, 2001 to ensure that the complainant is liable for the correct' amount of tax, that Inspecting Additional Commissioner concerned and Assistant Commissioner of Income Tax be transferred from the Zone and disciplinary action against ACTT be initiated under the Efficiency and Discipline Rules, 1973 in which amongst other witnesses one specified witness be also examined.

Haroon Ghazi for the Complainant.

Khawaja Imran Raza, A-CIT for Respondent.

2003 P T D 1632

[Federal Tax Ombudsman]

Before Justice (Retd.) Saleem Akhtar, Federal Tax Ombudsman

Messrs LAQA INTERNATIONAL, LAHORE

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 1094-L of 2002, decided on 7th February, 2003.

Income Tax Ordinance (XXXI of 1979)---

----Ss. 103, 65 & 66-A---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Power to withhold refund in certain cases---Additional assessment---Withholding refund on the pretext of initiation of proceedings under S.65 of the Income Tax Ordinance, 1979---Validity---Legislature enacted S.103 of the Income tax Ordinance, 1979 to preclude the loss of Revenue in those cases where it was feared that taxpayer, after obtaining refund, might divest himself of all assets or may disappear thus render recovery impossible--­Fact that despite initiating action under S.66-A of the Income Tax Ordinance, 1979 and, later under S.65 of the Income Tax Ordinance, 1979, no order under S.103 of the Income Tax Ordinance, 1979 was passed was indicative that there was no apprehension about the complainant/assessee disappearing or divesting himself of assets--­Withholding payment of refund, even after verification of challans, showed mala fides falling under the domain of 'maladministration'. as per S.2(3) of the Establishment of Office of Federal Tax Ombudsman Ordinance. 2000---Federal Tax Ombudsman recommended that the refund having accrued from the date of assessment on 23-8-1999 be issued forthwith under S. 170 of the Income Tax Ordinance, 2001 and that additional payment for delayed refund be. worked out under S.171 of the said Ordinance w.e.f. 2-4-2002 when the refund was created through rectification under S.156 of the Income Tax Ordinance, 1979.

In re: Inayat Ullah's case 1989 PTD 876 and 2002 PTD 2734 rel.

Latif Ahmad Qureshi for the Complainant..

Yasir Pirzada, DCIT for Respondent.

2003 P T D 1639

[Federal Tax Ombudsman]

Before Justice (Retd.) Saleem Akhtar, Federal Tax Ombudsman

KHALID MAHMOOD

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD.

Complaint No. 1028/L of 2002, decided on 20th January, 2003.

(a) Income Tax Ordinance (XXXI of 1979)-----

----Ss. 65 & 59(1)---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000)---Additional assessment---Property gifted to the sons of the assessee by their uncle was assessed in the hands of the complainant/assessee---Validity---No provision existed in the Income Tax Ordinance, 1979 burdening a taxpayer with the responsibility to offer explanation for the conduct of his sons or their maternal uncle---What the Income Tax Authorities could legally do was to question the donor, to explain the sources from which he initially purchased the shops---1f he failed to explain the sources of investment, the explained investment could be treated as `deemed income' in his hands---Re-opening of complainant/assessee's assessment was absolutely irrelevant and illegal resulting ill "maladministration"---Federal Tax Ombudsman recommended that notices under S.65 of the repealed Income Tax Ordinance, 1979 for the years 1997-98 and 2001-2002 be withdrawn.

(b) Income Tax Ordinance (XXXI of 1979)-----

----Ss. 65 & 59(1)---Establishment of Office of Federal Tax Ombudsman (XXXV of 2000)---Additional assessment---Property/house was purchased by the wife of the assessee from the amount gifted by her father through hearer cheque---Gift was rejected and addition was made in the hands of complainant assessee---Validity---Investment could be investigated, under the law, in the assessment of the complainant/ assessee's wife, and not in the complainant/assessee's assessment particularly when it was acknowledged that complainant/assessee's wife was herself a Wealth Tax Assessee---If she had claimed that her father gifted the amount, effort should have been made to verify the passing of money from the father to the daughter---Money was passed through gift deed---Proper course was to enquire into the sources of father of assessee's wife, who made gift to her daughter and if that explanation was not found satisfactory, the amounts should have, been taxed in his hands as `income from explained sources'---Taxability of such amount as deemed income in the hands of complainant/assessee was in any case uncalled for, unwarranted and without any justification---Re-opening of assessment was not on valid ground resulting in "maladministratiori"--­Federal Tax Ombudsman recommended that notices under S. 65 of the repealed Income Tax Ordinance, 1979 for the years .1997-98 and 2001-20,02 be withdrawn.

Shahid Umar for the Complainant.

Malik Khalid and Attique-ur-Rehman for Respondent.

2003 P T D 1647

[Federal Tax Ombudsman]

Before Justice (Retd.) Saleem Akhtar, Federal Tax Ombudsman

Messrs LEATHER INN, SAHIWAL and 8 others

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaints Nos. 449, 520, 571/L, 572/L, 624/L, 626/L, 646/L to 648/LB of 2002, decided on 17th January, 2002.

Income Tax Ordinance (XXXI of 1979)-----

----S. 59(1)---Establishment of Office of Federal. Tax Ombudsman Ordinance (XXXV of 2000)---C.B.R. Circular No. 4 of 2001, dated 18-6-2001---Self-Assessment Scheme, para 9(a)(i)---Assessment year 2001-2002---Computer random ballot---Selection of cases with temporary NTN having prefix "Z" instead of actual NTN---Validity---Regional Commissioner of Income Tax was found factually correct to the extent that no mala fide NTN specific or name specific feature was found in the programme---Allotment of NTN with prefix Z' to return's of AOP, RF/URF due to mistake in matching NIC numbers of member/partner with NTN of AOP/RF/URF was found unwarranted and the proposition that the returns of complainant/assessees would not have been picked in ballot had their NTN not been changed validly raises the question of benefit of doubt---Where two interpretations/eventualities were possible the one beneficial to the assessee should be adopted---Selection of returns for audit in complainant/assessee's cases, fell under the definition ofmaladministration'---Federal Tax Ombudsman recommended that the Central Board of Revenue' directs exclusion of return from the list of cases selected under para. 9(a)(i) of the Self-Assessment Scheme for audit and for its acceptance under Self-Assessment Scheme--­Discrepancies found in allocation of NTN through computer programme overlooking such discrepancies in designing the ballot software by PRAL and failure of concerned tax employees to check such programmes and monitor the operations fall in the category of maladministration warranting remedial action---Federal Tax Ombudsman further .recommended (i) that 'Central Board of Revenue to put nationwide networking of their computerized operations on top priority; (ii) that officers well-versed with laws, rules, regulations and procedures be designated for briefing the software designers/ programmers and for evaluating the software designed by them (iii) that resource persons/agencies, where a project is to be out sourced, to be selected with, utmost care and thereafter their performance be diligently monitored by competent tax employees.

Complainants in person

Asghar Ali, Senior Project Manager, Lahore, Mujahid Naeem, Manager, Faisalabad, Ahsanul Iraq, Manager DPU, Faisalabad and Iftikhar Ahmad, Manager, Sargodha for Respondent.

2003 P T D 1655

[Federal Tax Ombudsman]

Before Justice (Retd.) Saleem Akhtar, Federal Tax Ombudsman

Messrs ARSHAD CONSTRUCTION CO., LAHORE

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 1095-L of 2002, decided on 23rd January 2003.

Income Tax Ordinance (XXXI of 1979)—­

----Ss.80-C(7), 143-B, 59(A) & 156---Income Tax Ordinance (XLIX of 2001.), S.122---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.9---Mobilization advance was refunded to concerned Department---Tax deducted at source on such receipts was claimed as refund by way of rectification, submitting proof about reversal of receipt entry---Department contended that assessment had been finalized by operation of law under S.59-A of the Income Tax Ordinance, 1979 and that any provision corresponding to S.156 of the Income Tax Ordinance, 1979 did not exist in the Income Tax Ordinance, 2001---Validity---Reading of provision of S.122 of the Income Tax Ordinance, 2001 left no room for doubt that prime concern of the Legislature was "to ensure that the taxpayer is liable for the correct amount of tax" ---Commissioner had been vested with the 'authority to make "such alternations or additions" as many times as necessary, specially when `definite information' was acquired---No difficulty existed to alter/amend the assessment when it was evident that the principal amount having been returned to the client the same deposited as tax by way of withholding, had become refundable to the complainant---Denial to pass necessary order was evidently an act falling under the definition of "maladministration" as per S.2(3) of the Establishment of Office of Federal Tax Ombudsman Ordinance, 2000---Federal Tax Ombudsman recommended that Commissioner, by resort to S.122 of the Income Tax Ordinance, 2001 modify the assessment framed under S.59A of the Income Tax Ordinance, 1979 and refund the amount falling due to the complainant/assessee.

Koh-i-Noor Industries Ltd.'s case 1994 PTD 994 and Metropolitan Steel Corporation's case 2002 PTD 87 rel.

Latif Ahmad Qureshi for the Complainant.

Ms. Saddia Gillani, DCIT for Respondent.

2003 P T D 1666

[Federal Tax Ombudsman]

Before Justice (Retd.) Saleem Akhtar, Federal Tax Ombudsman

Messrs KHURRAM INTERNATIONAL, LAHORE

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 1386/L of 2002, decided on 20th March. 2003.

Customs Act (IV of 1969)---

----Ss. 25, 205, 32 & 156(14)---Establishment of Office of Federal Tax Ombudsman Ordinance. (XXXV of 2000), S.9---Customs General Order No.25 of 1973---Standing Orders Nos.6 of 1991, dated 9-2-1991 and 17 of 1991, dated 15-5-1991---S.R.O. 412(I)/1, dated 18-6-2001--­Value of imported and exported goods---Duty drawback ---Only five pieces out of total consignment were weighed---Examination Officer observed that weight of consignment was less by 20% and copy of shipping bill was detained for action on weight variation---Validity---Samples for possible valuation check could be drawn if total/composite rate of rebate was 10% or more---Normally samples could not be drawn on 44e pretext of mis-declaration of value from goods consigned to high tariff countries but these could be drawn in cases of indirect export on suspicion---According to Customs General Order No-5 of 1994, where total rebate on items did not exceed 10 % such items would not be ordinarily subjected to valuation check and the declared value would be accepted---Customs .General Order No.6 of 1991, dated 2-9-1991 laid. down that in cases involving valuation dispute' a sample could be forwarded to the Price Control Committee for determination. of normal value but where valuation was, objected to there had to be an evidential data on record for perusal of the aggrieved party---Department would be justified in drawing samples if the composite rate of rebate was 10% or more and the goods were not consigned to a high tariff country and if there was sufficient evidence of comparable, price to .draw samples for submission to the Price Control Committee for a price check--­Department needed to demonstrate whether or not the goods of the complainant were exported to a high tariff country, whether or not the composite rate of rebate duty drawback was 10% or more, whether the Department had sufficient evidence on the basis of which the samples were drawn and sent to Price Control Committee and whether Price Control Committee was legally empowered to determine values in cases referred to them; it was only after doing such exercise that a clear picture of the case would emerge---If on the basis of such parameters, the Department succeeded in showing that the samples were justifiably drawn for valuation check by Price Control Committee and that price was determined in accordance with S.25 of the Customs Act, 1969 and that there was wilful and false declaration of value, deliberate over ­invoicing to get undue payment of rebate, then Department would have a prima facie evidence to finalize the contravention case for initiating adjudication proceedings---Federal Tax Ombudsman recommended that Revenue Division to direct the concerned custom Authority, not to institute a case of contravention against the complainant in respect of weight variation, which was determined by the Department in violation of and contrary to the manner prescribed in rules and procedures and to re-examine the valuation aspects of the case on the lines as indicated through an enquiry, with which the complainant should also be associated, to determine whether the complainant had indeed indulged in over-invoicing and whether the actions of the Department to draw valuation samples. and the subsequent determination of value by the Price Control Committee were lawful and then proceed in the matter on its merits for taking action in accordance with provisions of law.

Nadeem Ahmad Mirza for the Complainant.

Feroze A Junejo, D.C., Customs. (Export), Karachi for Respondent.

2003 P T D 1683

[Federal Tax Ombudsman]

Before Justice (Retd.) Saleem Akhtar, Federal Tax Ombudsman

AL-HABIB NYLON CORPORATION, LAHORE

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 10-L of 2003, decided on 20th March, 2003.

Customs Act (IV of 1969)-----

----Ss. 33 & 30---Finance Ordinance (XII of 1982)---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.9--­Refund---Surcharge---Refund claimed on the ground that surcharge was levied @ 10% instead of 5% which was actually leviable, was not decided after lapse of about 10 years---Validity---Without going into the question whether or not the correct rate of surcharge was applied or whether refund was due or not, it was observed that it was a case of maladministration in that the application for refund filed for more than 10 years back was still pending disposal---Department was not even sure whether or not the case had been processed in past or whether it was rejected or accepted---Department should reconstruct the refund claim with the help of the complainant by associating him in the task of its reconstruction and case should then be decided on its merit forthwith--­Delay caused also called for an enquiry to determine the case of delay and to pinpoint the responsibility for the same---Federal Tax Ombudsman recommended that Revenue Division was to direct the Customs Authority, to reconstruct the relevant files of the complainant in the manner as indicated and decide the refund claim of the complainant on its merits, in accordance with the provisions of-law, without loss of time and initiate an enquiry to investigate the causes of inordinate delay that had occurred in the processing/deciding of the refund claim filed by the complainant long ago and identify the persons responsible for delay for taking appropriate action against them for causing inexcusable delay in the disposal of the claim.

Muhammad Aslam for the Complainant.

Zulfiqar Ali Chaudhry, DC (Customs), Lahore for Respondent.

2003 P T D 1694

[Federal Tax Ombudsman]

Before Justice (Retd.) Saleem Akhtar, Federal Tax Ombudsman

QADIR AGRO INDUSTRIES (PVT.) LIMITED, MULTAN

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 1371-L of 2002, decided on 24th February, 2003.

Sales Tax Act (VII of 1990)---

----Ss. 3, 33, 34 & 2(33)---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.9---Demand of sales tax alongwith additional tax and penalty on cotton seed oil cake, despite the fact that assessee did not manufacture oil seed cake (Khal)---Validity--­Adjudicating Officer after listing out the manufacturing processes involved had given finding that oil cake was produced in the expeller by a mechanical process, which was liable to sales tax and did not accept the contention of the complainant/assessee that they did not manufacture oil cake---Other issues raised by the complainant/assessee before the Adjudicating Officer had been discussed and dealt with in the Order-in­-Original---Proper Order-in-Original had been passed---No maladministration was involved ---Complainant/assessee had also filed an appeal before the Appellate Tribunal and he had right to defend his case before the Appellate Tribunal and may pursue it there---Complaint was filed by the Federal Tax Ombudsman.

Mujahid Eshai, FCA and Riaz Ahmad, Tax Consultant for the Complainant.

Dr. Muhammad Adnan Akram, D.C, (Adjudication) for Respondent.

2003 P T D 1702

[Federal Tax Ombudsman]

Before Justice (Retd.) Saleem Akhtar, Federal Tax Ombudsman

KHAWAJA BASHIR & SONS, MULTAN

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaints Nos. 1369 and 1370-L of 2002, decided on 24th February, 2003.

Sales Tax Act (VII of 1990)-----

----S. 3, 33, 34 & 2(33)---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.9---Demand of sales tax alongwith additional tax and penalty on cotton seed oil cake without trying to analyze the manufacturing processes of complainant/assessee and without determining whether or not oil cakes were being produced in the process involved in the complainant/assessee's manufacturing plants-­Validity---Order-in-Original passed did not deal with the basic issue raised by the complainant/assessees that they did not manufacture oil cakes either as intermediary product or as a final product---Was necessary that all the issues, especially the complainant/assessee's contention that they did not manufacture oil cakes were required to be considered and, definitive findings given' after proper verification of the process involved one way or the other on the merits of cases---Orders were improper in that these failed to deal with basic issues raised by the complainants/asses sees, especially the issue that no oil cake was produced during the process of extraction of oil--Federal Tax Ombudsman recommended that the Central Board of Revenue should open the Order-in-Original No.827 of 2002, dated 19-8-2002 and 692 of 2002, dated 6-7-2002 under S.45A of the Sales Tax Act, 1990 and direct the concerned Collectors of Adjudication to pass fresh speaking orders in accordance with law based on proper examination and discussion of the arguments/issues, especially the issue whether or not the complainants produced oil cakes, raised by the complainants and after giving them the opportunity of being heard.

2001 SCMR 1375 ref.

Mujhaid Eshai, FCA Riaz Ahmad; Tax-Consultant for the Complainants.

Dr. Muhammad Adrian Akram, D.C. Sales Tax (Adjudication), Multan for Respondent.

2003 P T D 1723

[Federal Tax Ombudsman]

Before Justice (Retd.) Saleem Akhtar, Federal Tax Ombudsman

MUAMAR RANA

versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 775/L of 2002, decided on 17th January, 2003.

(a) Income Tax Ordinance (XXXI of 1979)---

----S. 59---C. B. R. Circular No. 4 of 2001, dated. 18-6-2001, para. 9(a)(ii)---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.9---Self-assessment---Setting apart of a case for total audit---Matter relating to assessment---Validity---Neither the process employed by the Regional Commissioner of Income 'fax under para. 9(a)(ii) of Central Board of Revenue's Circular No.4 of 2001, dated 18-6-2001 nor his decision to select the case for audit is a matter relating to assessment of income nor any remedy in the shape of appeal/revision against his decision, to select the case is available to the complainant/assessee.

(b) Income Tax Ordinance (XXXI of 1979)---

----S. 59---C.B.R Circular No. 4 . of 2001, dated 18-6-200-1, para. 9(a)(ii)--Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.9---Self-assessment---Setting apart of cases for total audit-- -Prejudice caused to assessee--­Complainant/assessee having earned privilege when his return of income qualified' for acceptance under Self-Assessment Scheme, denial of such privilege without valid reason would be a prejudice caused to the complainant/assessee.

(c) Income Tax Ordinance (XXXI of 1979)---

----S. 59---C.B.R. Circular No. 4 of 2001, dated 18-6-2001, para. 9(a)(ii)---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000)., S.9---Self-assessment---Setting apart of case for total audit---Loss of return---Assessee in collaboration with officials of the Department managed to get his Return replaced in the record of the office and tampered with the original return to post his modeling receipts therein-- -Complaint against setting apart of the case of assessee-­Validity---Without prejudice to the departmental enquiry leading to loss of genuine return from the record, there was sufficient evidence on record to believe that the version of return produced, before the authorized dealing officer, on behalf of the complainant/assessee was not the true copy of the original return---Complainant/assessee had not approached the office of Federal Tax Ombudsman with clean hand and as such no interference with decision of Regional Commissioner of Income Tax for selection of return for audit was warranted---Federal Tax Ombudsman recommended that Commissioner was to ensure completion of enquiry into the loss of original return from the file within 90 days and take action' under relevant rules against all those found guilty of substituting the original return with another and to ensure that the Taxation Officer having jurisdiction over the complainant's case proceeds to conduct the audit in accordance with law.

Muhammad Mansoor Ahmad, I.T.P. for the Complainant.

Ms. Nabila Iqbal, Taxation Officer for Respondent.

2003 P T D 1739

[Federal Tax Ombudsman]

Before Justice (Retd.) Saleem Akhtar, Federal Tax Ombudsman

IFTIKHAR AHMAD MALIK

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 709/1, of 2002, decided on 16th October, 2002.

(a) Establishment of Office of Federal Tax Ombudstdan Ordinance (XXXV of 2000)-----

----S. 9---Jurisdiction, functions and powers of the Federal Tax Ombudsman---Matter relating to Provincial Excise and Taxation Department, Government of Punjab---Jurisdiction of Federal Tax Ombudsman did not extend to the acts of omission and commission of the officials of the Provincial 'Excise and Taxation Department, Government of Punjab---No direction to the Provincial Excise Authorities thus could be given by Federal Tax Ombudsman--­Complainant should better. approach the relevant Provincial Authorities for redress of his grievances.

(b) Customs Act (IV of 1969)-----

----S. 168---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2 (3)---Seizure of things liable to confiscation---Complaint purchased car after seeing verification report regarding payment of customs duty and taxes issued to the Excise and Taxation Department by the Customs Authorities---Said verification was subsequently withdrawn---Show-cause notice by the Registration Authority for cancellation of. registration and visit by the Customs Officials for seizure of car---Validity---Fraudulent activity about the sale of car seemed to include the car dealer, the Motor Registration Authority, Clearing Agent; the Customs Officials and Customs Intelligence Staff---When sale of car was arranged, the Motor Registration Authority showed to the buyer/complainant one set of documents to satisfy him that import duty and taxes had been paid and the documents were in order---After having been satisfied about the genuineness of the documents, transaction was completed and thereafter buyer was told that in subsequent customs report, the documents had been found to be forged---Motor Registration Authority's notice for cancellation of new registration numbers and the Customs Intelligence Officials visit to seize the car seemed to be a pre-planned scheme aimed at blackmailing the bona fide buyer for extorting money after selling him the car---Noticeable maladministration thus existed on the part of the Customs Authorities, which required serious investigation to unearth the malpractices and fraudulent activities of the Customs Department--­Federal Tax Ombudsman recommended that Revenue Division to initiate a proper investigation/enquiry into the case, also identify other cases of similar nature and take punitive action against those found responsible for forging and tampering with official documents/records and for committing fraud and that till the investigation is completed the complainant be allowed to keep possession of the car on the condition that he will not sell, transfer or create any third party interest in it and shall furnish a security or Bank guarantee in the sum of Rs.500,000 to the satisfaction of the Collector of Customs, Karachi.

Iftikhar Ahmad Malik for the. Complainant.

Azhar Hussain Merchant, A.C. Appraisement-for Respondent.

2003 P T D 1767

[Federal Tax Ombudsman]

Before Justice (Retd.) Saleem Akhtar, Federal Tax Ombudsman

Haji MUHAMMAD ABDULLAH, GUJRANWALA

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 1321-L of 2002, decided on 20th March, 2003.

(a) Sales Tax Act (VII of 1990)-----

----S. 19---Survey for Documentation of National Economy Ordinance (XV of 2000), Preamble---Establishment of Office of Federal Tax Ombudsman - Ordinance (XXXV of 2000), S.9---Compulsory registration---Non-service of enrolment certificate---Show-cause for payment of sales tax and penalty---Validity---Since. the Department had failed to establish that the enrolment certificate was served on the complainant/assessee. the show-cause notice for the period involved recovery of an amount of sales tax and penalty alongwith additional tax, based on enrolment of the complainant/assessee was ab initio void and unsustainable.

(b) Survey for Documentation of National Economy Ordinance (XV of 2000)---

----S. 3---Sales, Tax Act (VII of 1990), S.19---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.9---Compulsory registration on the basis of .sales assessed by the Survey Team---Demand of sales tax---Complainant denied signature on survey form ---Validity--­Was necessary to investigate whether the complainant/assessee had signed the entries of the survey form---If investigation proved that complainant had not signed the relevant entry them the turnover shown on .the survey form could not be made the basis of assessment---If it was found that complainant or his representative had indeed signed the relevant entry and was aware of it, the Department could then argue that complainant failed. to file objection against the assessment made by the Survey Team within a reasonable time and proceed further in the matter---Complainant even then had right to file objection against the veracity or correctness of the entries made in the survey form and his objection regarding estimate of sales/turnover by the Survey Team will have to be considered by the Competent Authority on its merits---Federal Tax Ombudsman recommended that Central Board of Revenue had to cancel the show-cause .notice, dated 17-7-2002 as the complainant could. not be saddled with the liability of which he was not made aware and to investigate, through an independent :officer, the claim of the complainant that he neither himself nor his representative signed the survey form entry regarding annual sales/turnover determined by the Survey Team and proceed in the matter as indicated.

Iftikhar Ahmad and Tariq Mehmood for the Complainant.

Mrs. Mona Aslam, A.C. Sales Tax, Gujranwala for Respondent.

2003 P T D 1936

[Federal Tax Ombudsman]

Before Justice (Retd.) Saleem Akhtar, Federal Tax Ombudsman

Messers FAZAL DIN & SONS (PVT.) LTD., LAHORE

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No., 1226-L of 2002, decided on 19th March, 2003.

Income Tax Ordinance (XXXI of 1979)---

----S. 59(1)---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.3(2)---C.B.R. Circular No. 4 of 2001, dated 18-6-2001---Self-Assessment Scheme, Para. 9(a)(ii)---Assessment year 2001-2002---Assessee, a chemist and druggist---"Revenue potential" case--Factors leading to 'reasonable belief' about the "revenue potential" of the present case were expansion in business reflected by opening new outlets; nature of business extending to supplies, sales, dispensing or prescriptions at numerous new outlets and utilization of imports for sales as well as supplies---Any possibility or vague ground could not be a basis for "reasonable belief" about the "revenue potential" of the case--­No discrimination appeared to have been meted out with the result that there was no "maladministration" as defined by S.3(2) of the Establishment of Office of Federal Tax Ombudsman Ordinance, 2000--­Complaint being without any merit was filed and case was closed by the Federal Tax Ombudsman.

Yousaf Saeed (FCA) for the Complainant.

Sirdar Ahmad Jamal Sukhera, Bar-at-Law for Respondent.

2003 P T D 1943

[Federal Tax Ombudsman]

Before Justice (Retd.) Saleem Akhtar, Federal Tax Ombudsman

MIAN BROTHERS RICE MILLS, KANGANPUR

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 1030-L of 2002, decided on 20th March, 2003.

Income Tax Ordinance (XXXI of 1979)---

----Ss. 63, 59(1) & 5(1)(c)---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.3(2) & 9(2)(d)---C.B.R. Circular No.4 of 2001, dated 18-6-2001---Self-Assessment Scheme, Para. 9(a)(i)---Assessment year 2001-2002---Computer random ballot--­Best judgment assessment---Not providing proper opportunity of hearing to the assessee---Assessee was allowed two days for compliance of notice under S.62 of the Income Tax Ordinance, 1979 demanding details--­Validity---Such was a typical example of harsh, unjust, unreasonable and perverse assessment framed in complete disregard of the rule to the effect that even when proceeding ex parte the assessment should be based on "best judgment" and should not be vindictive or punitive---Act of omission, like undue haste and unimaginative assessment without caring to carry out legal obligations, amounted to "maladministration" under S.3(2) of the Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000) and where "maladministration" crept in, the Federal Tax Ombudsman had the jurisdiction to investigate and S.9(2)(d) of the Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), did not stand in the way---Federal Tax Ombudsman recommended the concerned Commissioner of Income Tax to amend the assessment framed under S.63, dated 20-6-2002 by resort to S.122 of the Income Tax Ordinance, 2001 so as to make alternations, as he considered necessary, to ensure that "the taxpayer was liable for the correct amount of tax for the tax year to which the assessment order related and the concerned Inspecting Additional Commissioner be counselled to refrain from framing assessments with undue haste which may render the assessment unreasonable or arbitrary.

Ahmad Shuja Khan for the Complainant.

Mirza Nadeem Munawar Baig, IAC for Respondent.

2003 P T D 1962

[Federal Tax Ombudsman]

Before Justice (Retd.) Saleem Akhtar, Federal Tax Ombudsman

Messrs SUNBEAM CORPORATION, LAHORE

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 1189-L of 2002, decided on 17th March, 2003.

Income Tax Ordinance (XXXI of 1979)---

----S. 96---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.9---Income Tax Ordinance (XLIX of 2001), S.171---Refund---Non-issuance of refund of the assessment year 1980-81 clue to change of status of assessee from registered firm to a company and also for changes of circles due to change in jurisdiction--­Validity---Department agreed to issue refund voucher for Rs.16,502 if the complainant furnished original documents/challan and further promised to release additional payment for delayed refund as per S.171 of the Income Tax Ordinance, 2001---Both the parties had put their signatures on the Order Sheet where the undertaking had been recorded-­Federal Tax Ombudsman recommended that Revenue Division should ensure that "Refund Voucher of Rs. 16,520 as per undertaking of the Representative of the respondent, alongwith additional payment for delayed refund' as per S.171 of the Income Tax Ordinance, 2001 was issued promptly.

M. Iqbal Hashmi for the Complainant.

Dr. Ishtiaq Ahmad (DCIT) for Respondent.

2003 P T D 1969

[Federal Tax Ombudsman]

Before Justice (Retd.) Saleem Akhtar, Federal Tax Ombudsman

Messrs NEW FINE ART JEWELLERS, HASSAN ARCADE, MULTAN CANTT., MULTAN

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 1395 of 2002, decided on 28th March, 2003.

Income Tax Ordinance (XXXI of 1979)---

----S. 59(1)---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S. 3(2)---Survey for Documentation of National Economy Ordinance (XV of 2000), preamble ---C.B.R. Circular No.4 of 2001, dated 18-6-2001---Self-Assessment Scheme, Para. 9(a)(ii)---Assessment year 2001-2002---Assessment of sales by survey team---Objections---Limitation---Survey was conducted in August, 2000---Protest to Commissioner about the estimation and entries made by the Survey Team was made on 1-1-2001---No time limit had been fixed for filing objection at that time---Held, objection could be filed within 90 days from the date of decision in Complaint No.582 of 2001, which was made on 16-8-2001 and therefore, objection filed before 16-8-2001 will not be hit by the rule of 90 days--­Objection was filed on 1-1-2001, which had not been decided as yet--­Federal Tax Ombudsman recommended the Commissioner to decide the objection and thereafter the assessment proceedings be completed.

Muhammad Zulfiqar Khokhar for the Complainant.

Aftab Alam (A-CIT) for Respondent.

2003 P T D 2057

[Federal Tax Ombudsman]

Before Justice (Retd.) Saleem Akhtar, Federal Tax Ombudsman

Messrs UNITED FINISHING MILLS LIMITED, FAISALABAD

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. C-97 of 2003, decided on 12th May, 2003.

Customs Act, (IV of 1969)---

----S. 18---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)(i)(a)---S.R.O. 1050(I)/95-Goods dutiable---Levy of regulatory duty---Legality of---Release of goods on interim orders of High Court against Bank guarantee--High Court declared the imposition of regulatory duty as unlawful---Supreme Court accepted the appeals of the Department after a lapse of two years and declared the imposition of regulatory duty as lawful---Notice for payment of amount in terms of lapsed guarantees alongwith compensation--­Complainant contended that Supreme Court judgment setting aside the High Court's judgment did not revive the liability of the bank or the complainant to make payments in terms of the lapsed bank guarantees--­Validity--Customs authorities were responsible to demand payment and press for recovery of customs duty and sales tax when the decision was taken in their favour---Noh-enforcement of guarantees suited the complainant as well as the Bank as the customs authorities did not pursue the recovery of duty and taxes due to collusion or neglect---When appeals of both the sides were decided by the Supreme Court maintaining the levy of the customs duty, sales tax and the regulatory duty, it was the responsibility of the Customs Authorities to effect recovery and it was also obligatory on the part of the Bank to fulfil its liabilities and meet the conditions of the guarantee---Inaction and inefficiency on the part of the customs officials in not recovering the dues, could not be overlooked or condoned---Contention that the Bank was absolved of the responsibility of paying dues, for which they had submitted the guarantees and encashment notices were first issued on 5-8-1996 and subsequently in 1999, 2001 and 2002, was not accepted---Claim that bank, guarantees furnished by the complainant had lost validity was not established---Notice issued was not accepted being illegal, improper, of no legal effect---Complaint lacked merit and was rejected by the Federal Tax Ombudsman.

Riaz Hussain Naqvi, Consultant.

Ashhad Jawad, Deputy Collector of Customs (Appraisement).

2003 P T D 2151

[Federal Tax Ombudsman]

Before Justice (Retd.) Saleem Akhtar, Federal Tax Ombudsman

Messrs METLA ASSOCIATES (PVT.) CO. LTD. CARE OF MIAN ASHIQ HUSSAIN, ADVOCATE

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 1334-L of 2002, decided on 12th June, 2003.

(a) Income Tax Ordinance (XXXI of 1979)---

----Ss. 86 & 52---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S. 2(3)---Additional tax---Liability of payment---Liability of additional tax could not be passed on to the parties from whom the assessee had failed to recover tax.

(b) Income Tax Ordinance (XXXI of 1979)---

----Ss. 96, 52, 52A 86, 50 (7A) & 62---Income Tax Rules, 1982, R.49---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Refund---Department by resort to S.52 of the Income Tax Ordinance, 1979 passed order determining tax and additional tax against Civil Aviation Authority for non-deduction and payment of tax from various parties---Civil Aviation Authority deducted' such tax from the security deposited by the assessee---Assessee already assessed under S.62 of the Income Tax Ordinance, 1979, and paid his tax liability---Claim of refund from Income Tax Department by the assessee-- Department refused to pay such refund on the ground that it had created demand against the Civil Aviation Authority and not against the assessee---Validity---Demand payable was not relevant to the complainant/. assessee alone ---Complainant/assessee may claim damages from Civil Aviation Authority for unauthorized recovery from its security, deposits---Application for refund was to be processed--­Taxation Officer was to ascertain how much amount deposited related to the complainant/assessee---Association of the Civil Aviation Authority was necessary as the arrears created against them under S.52 of the Income Tax Ordinance, 1979 were to be recovered from the Civil Aviation Authority alone---Federal Tax Ombudsman recommended that the challan for Rs.53,822 may be verified to determine as to how much of this amount pertain to deduction from the security deposit of the complainant/assessee so that credit under S.50(8) of the Income Tax Ordinance, 1979, be given, while disposing of the refund application and that the arrears on the basis of order, dated, 20-5-1995 should be recovered from the Civil Aviation Authority keeping in view that there should be no double recovery of tax in respect of complainant/assessee .i.e. tax actually paid by them.

1997 PTD (Trib.) 1771 and , PLD 1990 SC 1156 = 1990 PTD 768 ref.

Mian Ashiq Hussain for the Complainant.

Karamatullah Chaudhry, D-CIT for Respondent.

2003 P T D 2159

[Federal Tax Ombudsman]

Before Justice (Retd.) Saleem Akhtar, Federal, Tax Ombudsman

Messrs BARYAR TEXTILE MILLS, SIALKOT

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 181 of 2003, decided on 11th June, 2003.

Income Tax Ordinance (XXXI of 1979)---

-----S. 59(1)---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---C.B.R. Circular No.7 of 2002, dated 15-6-2002, para.9(a)(ii)---Assessment year 2002-2003---Substantial wholesale for the first time---Minor improvement in income---Setting apart for total audit---Validity---Although the factors specifically spelled out in the policy guidelines were not obtaining in the complainant/ assessee's case, yet the adventure in 'wholesale dealings of cloth' was of substantial quantum which enhanced the turnover manifolds still the declared income showed only a marginal improvement over last year which was sufficient ground for a reasonable belief that this was a 'revenue potential case'---No discrimination or "maladministration" appeared to have taken place which could be taken note of under S.2(3) of the Establishment of Office of Federal Tax Ombudsman Ordinance, 2000---Complaint was filed and case was closed by the Federal Tax Ombudsman.

Pirzada Syed Saeed for the Complainant.

Ch. Jaafar Nawaz, D-CIT for Respondent.

2003 P T D 2162

[Federal Tax Ombudsman]

Before Justice (Retd.) Saleem Akhtar, Federal Tax Ombudsman

Messrs NATIONAL SECURITY INSURANCE CO., LAHORE

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.67-L of 2003, decided on 13th June, 2003.

Income Tax Ordinance (XXXI of 1979)---

----Ss. 102, 103 & 100---Income Tax Ordinance (XLIX of 2001), S.171---Compensation for delayed refund, non-payment of--­Department was willing to issue refund but the complainant/assessee was guilty of concealment inasmuch as despite maintaining accounts on "accrual basis"; the income becoming 'receivable' on account of compensation under S.102 of the Income Tax Ordinance, 1979 was never declared in the relevant returns and adjustment would be possible after determination of tax on that income---Validity---Department was guilty of withholding validly due compensation which, in all fairness, should have been issued alongwith the aggregated refund---Issue whether the amount of compensation as a 'receipt' would be taxable in the hands of the complainant/assessee, was a different and independent matter--­Aspects such as the suspension of operation and the complainant/ assessee having heavy accumulated losses with lack of funds to liquidate the anticipated tax liability should have been considered at the time of issuing the principal amount of refund which could be validly withheld under S.103 of the Income Tax Ordinance, 1979 if reasonable grounds existed---Compensation under S.102 was a corollary of refund and unavoidable in terms of S.171 of the Income Tax Ordinance, 2001 as it was under S.100 of the Income Tax Ordinance, 1979---Postponing issuance of compensation on the pretext of adjusting it against a possible tax demand was clearly an afterthought to cover up an act of omission falling in the realm of 'mal administration'---Federal Tax Ombudsman recommended that additional payment for delayed refund as admitted to be due be promptly worked out as per S. 171 of the Income Tax Ordinance, 2001 and issued and those responsible for delay in issuance of refund for over 5 to 15 years be identified and admonished for burdening the Exchequer with cost for delay.

Shaukat Amin Shah, FCA for the Complainant.

Muhammad Arshad, D-CIT for Respondent.

2003 P T D 2172

[Federal Tax Ombudsman]

Before Justice (Recd.) Saleem Akhtar, Federal Tax Ombudsman

TEHSEEN ANJUM

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 1346 of 2002, decided on 9th June, 2003.

Survey for Documentation of National Economy Ordinance (XV of 2000)-----

----S. 3---Income Tax Ordinance (XXXI of 1979), S.62---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Objection against assessed sales by the survey team was pending---Assessment of sales on the basis of third survey by the Tax Department---Validity---Department had impliedly conceded the receipt of representation made by the assessee to the concerned Authorities which had not been decided as yet---Commissioner of Income Tax had contacted the Military Authorities for disposal of all such pending applications---Estimate made during third survey was not binding on the complainant/assessee and it could not be made basis for assessment--­Any valid and binding survey estimate could be used as a reference and the assessee had a history of assessment which should be given due consideration---Such facts established maladministration--­Federal Tax Ombudsman recommended that the complainant/assessee's representation on the issue pending with the concerned Authorities be decided strictly on merit after physical inspection within 30 days of the receipt of this order.

Complaint No.938 of 2002 and Complaint No.582 of 2001 ref.

Saeed Ahmad Shah for the Complainant.

Muhammad Arif, Additional Commissioner, Sialkot Range and Muhammad Younas, I.T.O. for Respondent.

2003 P T D 2203

[Federal Tax Ombudsman]

Before Justice (Retd.) Saleem Akhtar, Federal Tax Ombudsman

Messrs AGRIAID INDUSTRIES, GUJRANWALA

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD.

Complaint No. 1014 of 2002, decided on 15th March, 2003.

(a) Sales Tax Act (VII of 1990)---

----S.65---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss. 9 & 2(3)---Jurisdiction, functions and powers of the Federal Tax Ombudsman---Exemption of tax not levied or short ­levied as a result of general practice ---Maladministration---Proceedings under S.65 of the Sales Tax Act, 1990 was completely independent of the proceedings in appeal---Pendency of appeal will not be a bar to the filing of complaint seeking relief against maladministration in deciding application under S.65 of the Sales Tax Act, 1990.

(b) Sales Tax Act (VII of 1990)-----

----S. 65---Establishment of the Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Exemption of tax not levied or short-levied as a result of general practice---Act of not charging sales tax continued for quite some time considering the duties of the officials who ought to have noticed within few months, but it was allowed to continue for more than 16 months---Said process continued for such period without any let or hindrance and non-action on the part of the Sales Tax Authorities confirmed the belief in the mind of the assessees that they were not liable to charge of sales tax.

(c) Sales Tax Act (VII of 1990)---

----Ss. 13, 65, 3, 33, 34 & 2(25)---S.R.O. 600(I)/90, dated 7-6-1990--­S.R.O. 562(1)/94, dated 9-6-1994---PTC Hdgs. 84.24 & 81.0--­Establishment of the Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Exemption---Agricultural knapsack sprayers-­General practice---Not charging of sales tax---Demand of previous five years sales tax alongwith additional tax and penalties even after close of business---Claim of exemption---Validity---Object of S.65 of the Sales Tax Act, 1990 was to provide relief to the persons who had not wilfully defaulted in charging sales tax but it happened due to inadvertence and as a general practice in the area---Where any ambiguity was noticed it was resolved in favour of the assessee---Section 65(c) of the Sales Tax Act, 1990 was not restricted to a person who was registered but it referred to both categories of persons mentioned in the definition of `registered person'---Exemption could not be refused on the plea that complainant/assessee was not a registered person ---Complainant/assessee closed its unit on 13-4-1995, the question of charging from the date it was known that the tax was chargeable did not arise---Order was contrary to law based on no evidence and amounting to mal­administration---Federal Tax Ombudsman recommended that notification under S.65 of the Sales Tax Act, 1990 can be issued exempting the complainant from payment of sales tax for the period of 9-t;-1994 to 30-4-1995 when the business was closed.

1957 All. LJ 343; AIR 1957 All. 340; Ghulam Muhammad v. State PLD 1969 Lah. 767; Black's Law Dictionary and Words and Phrases by Gabardine Gondola, Vol. 18 ref.

Syed Mansoor Ali Shah for the Complainant.

Ahmad Kamal, A.C. Sales Tax for Respondent.

2003 P T D 2230

[Federal Tax Ombudsman]

Before Justice (Retd.) Saleem Akhtar, Federal Tax Ombudsman

Messrs ALLIED IMPEX, KARACHI

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. C-145 of 2003, decided on 7th May, 2003.

Sales Tax Act (VII of 1990)---

----Ss. 10 (2) & 73---C.B.R. Letter C. No. 2(7)STP/ 99-PT, dated 1-1-2002---S.R.O. 417(1)/2000, GO-3/2000---S.R.O, 2(I)/2003, dated 1-1-2003---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Refund of excess amount of input tax---Inordinate delay for issuance of refund---Department admitted that in respect of invoices where refund had not yet been paid, no notice had been given and invoices were still being examined ---Validity--­Department had not submitted any convincing reason to justify as to why no action was taken to decide the refund claims against exports during the whole year-Allegation of inordinate delay had been established--­ Substantial amount was released to the complainant when they filed the complaint---Department had the right to carry out the requisite verification and audit but this should had been done within a reasonable period of time soon after the claims were filed---Guidelines provided in Central Board of Revenue's Letter C. No.2(7)STP/99-PT, dated 1-1-2002 regarding the process of the cases where a few invoices were found to be fake or issued by, suspected units had not been followed---Present instance was a clear case of maladministration on the part of Sales Tax Authorities---Federal Tax Ombudsman recommended that Central Board of Revenue may direct the Collector of Sales Tax and Central Excise to examine the remaining refund claims without further delay and in respect of invoices whose genuineness is not established, issue show-cause- notice to the complainant/assessee and afford them opportunity of hearing and representing their claim and decide the refund claims within thirty days.

M. Mubeen Ahsan, Advisor, Dealing Officer.

Khalid Siddiqui for the Complainant.

Zahid Habib, Assistant Collector of Sales Tax East) Karachi.

2003 P T D 2236

[Federal Tax Ombudsman]

Before Justice (Retd) Saleem Akhtar, Federal Tax Ombudsman

MUHAMMAD ASHRAF MUGHAL, LAHORE

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.589-L of 2002, decided on 24th February, 2003.

(a) Income Tax Ordinance (XXXI of 1979)---

----S. 138---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Revision by Commissioner--­Duplicate assessment---Since assessment had already been made under Self-Assessment Scheme, this had to be cancelled, being a 'duplicate assessment, when revision petition was filed under S.138 of the Income Tax Ordinance, 1979 to Zonal Commissioner.

(b) Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000)---

----S. 2(3)---Income Tax Ordinance (XXXI of 1979)---Maladministra­tion---Transfer of documents---Duty of the Assessing Officer of the Circle who received the documents, to transfer these documents was to the relevant circle.

(c) Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000)---

----S. 2(3)(ii)---Maladministration---Negligence---Effect---Negligence deprives a taxpayer of his vested legal right to be judged fairly and, at the same time betrays unjust conduct of tax functionaries.

(d) Income Tax Ordinance (XXXI of 1979)---

----S. 63---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Best judgment assessment---Ex parte assessment did not vest the Assessing Officer with the authority to be arbitrary or vindictive---Ex parte assessment had to be a "best judgment assessment" having an imprint that effort was made to determine the income as nearly as possible to correct figure.

(e) Income Tax Ordinance (XXXI of 1979)---

----S.63---Income Tax Ordinance (XLIX of 2001), S.122---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Best judgment assessment---Ex parte assessment---Income was determined by a rule of thumb' at net figures, without any computation or working---Assessment order was a cyclostyled in which blanks had been blindly filled---Neither there was discussion of past history nor an enquiry was conducted to determine the extent and volume of business--­Validity---Department's plea that orders were notperverse, arbitrary or unreasonable' or that these were not "contrary to law" and a departure from established practice or procedure as per provision of S.2(3) of the Establishment of Office of Federal Tax Ombudsman Ordinance, 2000 could not be accepted---Federal Tax Ombudsman recommended that Commissioner of Income Tax by suo motu resort to S.122 of the Income Tax Ordinance, 2001 amend the impugned assessments for the years 1994-95 and 1995-96, so as to levy "the correct amount of tax for the tax year" and .the then Assistant Commissioners of Income Tax (wherever posted now) be given a warning, placing a copy thereof on their character rolls, for being arbitrary and negligent in the discharge of their duties.

A.A. Zubari, Adviser.

Nemo for the Complainant.

Syed Muhammad Ali, D-CIT for Respondent.

2003 P T D 2252

[Federal Tax Ombudsman]

Before Justice (Recd.) Saleem Akhtar, Federal Tax Ombudsman

Messrs GINO'S PIZZA, LAHORE

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaints Nos. 1524-L and 1525/L of 2002, decided on 30th April, 2003.

Income Tax Ordinance (XXXI of 1979)---

----S. 66-A, 65, 59(4), 19, 20, 30, 31, 62 & 129---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order---Additional assessment---Rejection of declared lease money---Estimation on the basis of prevalent Annual Letting Value-Disallowance of legal expenses---Irregularities in determining income and disallowing expenses---Validity---Scrutiny of record reveals that the assessment, from the very beginning, was replete with innumerable deficiencies such as Assessing Officer at no stage realised that the business had ceased and its assets [i.e. premises, furniture and fixture] 'were let out for which income fell under S.30(2)(d) of the Income Tax Ordinance, 1979 as "income from other sources" for letting out of building alongwith furniture; in the assessment order, dated 22-4-1999 Assessing Officer offered a confused dispensation, which was neither under S.19/20 (Income from Property) nor under S.30/31 (Income from other sources) the act of estimating tent and allowing deduction for depreciation were relatable to Ss.30/31 whereas, allowance for repair at 1/5th was an item in S.20(1)(a) of the Income tax Ordinance, 1979. the Commissioner of Income Tax (Appeals) also seems to have overlooked that income should have been placed either under S.19 or S.30 and deduction allowed under S.20 or S.31 whichever applicable; the Inspecting Additional Commissioner's reference to S.20(1)(g) in the context of legal expenses was indicative that he had placed the income under S.19 but a contradiction emerged because the show-cause notice and subsequent order under S.66-A, assailed the mandatory Repair Allowance at 1/5th of Annual Letting Value---All these deficiencies had flowed into the re-assessment framed on 30-6-2002 under Ss.62/66-A of the Income Tax Ordinance, 1979 thus contaminating the same as well---All the lacunae in the process of assessment, appeal, revision and re-assessment under Ss.62, 129, 66-A and under Ss.62/66-A of the Income Tax Ordinance, 1979 left no room for doubt that such acts of omission and commission were committed which were contrary to law arbitrary or unreasonable; exposing neglect, inattention, inaptitude or inefficiency, which all fell under the category of "maladministration" as defined in S.2(3) of the Establishment of Office of Federal Tax Ombudsman Ordinance, 2000---Federal Tax Ombudsman recommended that it should be decided as to under which section of the repealed Ordinance the income was to be computed and assessment framed adhering to that section alone; assessments framed on 30-6-2002 for all the four years be substituted by an amended assessment by resort to S. 12 of the Income Tax Ordinance, 2001 to "ensure that the taxpayer is liable to the correct amount of tax for the tax year", in accordance with law and all tax functionaries who contributed to the deficiencies, as pointed out be apprised of the correct legal position and special Officer has to be careful in future.

Tazeem Aghmaz Al Haq for the Complainant

Yasir Pirzada, D-CIT for Respondent.

2003 P T D 2260

[Federal Tax Ombudsman]

Before Justice (Retd:) Saleem Akhtar Federal Tax Ombudsman

PARVEZ AKHTAR (CONTRACTOR) and 2 others

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaints Nos. 1194, 1195 and 1196 of 2002, decided on 29th March, 2003.

(a) Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000)---------

----S. 9---Jurisdiction, functions and powers of the Federal Tax Ombudsman---Federal Tax Ombudsman was charged with the responsibility "to diagnose, investigate, redress and rectify any injustice done to a person through 'maladministration' by functionaries administering tax laws" ---Federal Tax Ombudsman had no jurisdiction to examine the validity of any order/direction by the President of the Central Board of Revenue or its functionaries.

(b) Income Tax Ordinance (XXXI of 1979)-----

----Ss. 66-A, 80C, 143B & 50(7)---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000) S.2(3)---Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order---Non-compliance of President's direction within specific period--­Validity---Although proceedings initiated under S.66-A of the Income Tax Ordinance, 1979 did not suffer from maladministration, it admittedly existed in non-compliance of the direction of the President of Pakistan within the time specified therein---Was the duty of Central Board of Revenue and senior supervisory officer to ensure compliance with such order and direction and should not be left to the concerned officer alone---Had supervision been carried out this lapse would not have occurred---Federal Tax Ombudsman recommended that Central Board of Revenue devise a scheme or issue order regulating the compliance of orders and directions in time with strict supervisory control by senior officers who should also be answerable for non­compliance of the order.

1999 SCMR 2189 ref

Saqib Bashir, ITP for the Complainant.

Pervaiz Alain, IAC and Shahid Jamil, Legal Adviser for Respondent.

2003 P T D 2270

[Federal Tax Ombudsman]

Before Justice (Retd.) Saleem Akhtar, Federal Tax Ombudsman

ASHOK KUMAR

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 1387-K of 2002, decided 'on 30th December, 2002.

Income Tax Ordinance (XXXI of 1979)---

----Ss. 63, 54; 50 (7E) & 62---Income Tax Ordinance (XLIX of 2001), S.122---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000)---Best judgment assessment---Assessment contrary to history and without cogent reason---Validity---Assessment was contrary to the previous history of the assessee and was not based or, any cogent reason---Determination of income was unjust, unreasonable and perverse---Assessing Officer had not brought on record any material evidence to justify the computation of income---Federal Tax Ombudsman recommended that the order passed for the year 2001-2002 be amended under S.122 of the Income Tax Ordinance, 2001, and income be worked out in accordance with law and facts after providing adequate opportunity to the assessee.

Ashok Kumar for the Complainant.

Dr. Kazi Afzal, D.C.I.T. for Respondent.

2003 P T D 2274

[Federal Tax Ombudsman]

Before Justice (Retd.) Saleem Akhtar, Federal Tax Ombudsman

MUHAMMAD AKRAM

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 1388-K of 2002, decided on 30th December, 2002.

Income Tax Ordinance (XXXI of 1979)---

----S.63---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.11---Best Judgment assessment---Assessment was finalized incomplete disregard of past history of the case against all previous records---No inquiries were made and there was no material on records to support the assessment ---Validity---Mal administration was evident on its very face---Commissioner of Income Tax was directed by the Ombudsman to examine the assessment records and give genuine relief to the assessee in accordance with law-.--Assessment framed was arbitrary, unjust, unfair and was in complete disregard of the past history of the case---Regional Commissioner of Income Tax had already issued instructions to provide genuine relief to the complainant, the cause of grievance would be taken care of---Federal Tax Ombudsman recommended that' the assessment order may be suitably amended in accordance with law and facts under S.122 of the Income Tax Ordinance, 2001.

Muhammad Iqbal Alvi, A.R. for the Complainant.

Dr. Afzal Kazi, D.C.I.T. for Respondent.

2003 P T D 2284

[Federal Tax Ombudsman]

Before Justice (Retd.) Saleem Akhtar, Federal Tax Ombudsman

Messrs FAROOQ AZAM

Versus

SECRETARY, REVENUE DIVISION; ISLAMABAD

Complaint No. 1107 of 2002, decided on 28th January, 2002.

(a) Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000)-----

----S. 2 (3)---Maladministration---Arbitrariness or highhandedness--­Although the determination/assessment of income was nest within the jurisdiction of the Federal Tax Ombudsman, yet the arbitrariness or highhandedness, constituting "maladministration", was within the scope of subsection (3) of S.2 of the Establishment of Office of Federal Tax Ombudsman Ordinance, 2000.

(b) Income Tax Ordinance (XXXI of 1979)-----

----Ss. 62, 61 & 56---Income Tax Ordinance (XLIX of 2001), S.122--­Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Assessment without bringing on record any evidence about the extent and volume of business by conducting spot enquiry--­Demand of illegal gratification---Assessment with remarks as "business was flourishing one", "assessee had good business experience" etc. without any basis available on record---Validity---With a capital of Rs.75,000 it was hardly possible to earn an annual income of over Rs.2,00,000---Arbitrariness with which assessments had, been completed smacked of mala fides lending credibility to the allegation that the unreasonable dispensation was at the behest -of official who failed to secure financial benefit from the taxpayer--Federal Tax Ombudsman recommended that both the assessments may be amended under S.122 of the Income Tax Ordinance,. 2001 so as to subject the taxpayer to "the correct amount of tax" as envisaged by law.

Kanwar Jamal Akhtar for the Complainant

Muhammad Naeem, D-CIT for Respondent

2003 P T D 2292

[Federal Tax Ombudsman]

Before Justice (Retd.) Saleem Akhtar, Federal Tax Ombudsman

Syed NAJAM-UL-HASSAN PROPRIETOR HUR INTERNATIONAL, LAHORE

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 1020-L of 2002, decided on 28th February, 2003.

(a) Income Tax Ordinance (XXXI of 1979)---

----Ss. 100, 163, 156 & 66-A---Income Tax Ordinance (XLIX of 2001), S.170---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Refund on assessment and appeal, etc.--­Credit of tax was only given to the extent of tax due---Refund was created on rectification application---Non-issuance of refund--­Proceedings initiated under S.66-A of the Income Tax Ordinance, 1979 were annulled by the Appellate Tribunal---Once again refund was withheld on the pretext of verification of challans---Validity--­Withholding payment of refund, even after verification of challans, was indicative of mala fides falling under the domain of 'maladministration' as per S.2(3) of the Establishment of Office of Federal Tax Ombudsman' Ordinance, 2000---Federal Tax Ombudsman recommended that refund having accrued from the date of the assessment on 23-8-1999 be issued forthwith under S.170 of the Income Tax Ordinance, 2001 and additional payment for delayed refund be worked out under S.171 w.e.f. 7-9-1999 when the refund was created through rectification under S.156 of the repealed Income Tax Ordinance, 1979.

(b) Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000)------

-----S. 2(3)---Maladministration---Support of illegal actions of the subordinate officer by the senior officers---Remarks of Federal Tax Ombudsman.

Latif Qureshi for the Complainant

Yasir Prizada, D-CIT for Respondent.

2003 P T D 2302

[Federal Tax Ombudsman]

Before Justice (Retd.) Saleem Akhtar, Federal Tax Ombudsman

Dr. MUHAMMAD SHARIF ANSARI

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 1069-L of 2002, decided on 25th February, 2003.

(a) Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000)---

----S. 2(3)---Income Tax Ordinance (XXXI of 1979), S.13---Mal­administration---Addition---Construction of house ---Assessment--­Discrepancies falling under the definition of "maladministration".

(b) Income Tax Ordinance (XXXI of 1979)---

----S. 13---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Deemed income ---Addition--­Removal of document i.e. reply of assessee and Inspector's report, from file by the Assessing Officer---Harassment at the behest' of `informer'---Heavy addition in income for construction of house--­Validity ---Assessee had' managed to construct a modest property after obtaining loan from House Building Finance Corporation for which departmental permission was duly obtained after explaining the, financial resources---In utter disregard of this plausible and acceptable explanation, a heavy assessment was framed creating a demand which obviously was much beyond the capacity of the complainant/assessee to pay---Involvement of the two officials, the Special Officer and the Inspector, calls for a serious note because if the Departmental functionaries become a party to private disputes and offer a helping hand to either party not only bogus irrecoverable demand would be created but the Department's reputation', would badly suffer---Federal Tax Ombudsman recommended that the Commissioner of Income Tax amend the assessment exercising powers under S.122 of the Income Tax Ordinance, 2001 Special Officer as to "levy the correct amount of Tax"; inquiries be conducted to determine responsibility for not placing on the file documents such as (a) explanation on 24-9-2002 which admittedly was received by the concerned official and passed on to the record keeper, and (b) the Inspector's report and appropriate action against the concerned official be taken under disciplinary rules---When conducting the disciplinary action the Inspector be specifically asked to explain the reason for his retracting the statement made at the time of hearing of the complainant/assessee.

Sh. Zafar-ul-Islam for the Complainant.

Muhammad Naeem, D-CIT for Respondent.

2003 P T D 2312

[Federal Tax Ombudsman]

Before, Justice (Retd.) Saleem Akhtar, Federal Tax Ombudsman

Messrs PUNJNAD COTTON INDUSTRIES LTD., through Rao & Co.

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 1157 of 2002, decided on 25 February, 2003.

Income Tax Ordinance (XXXI of 1979)---

----Ss. 52 & 86---Second Sched: Cl. 118C---Income Tax Ordinance (XLIX of 2001), S.161 & 239(7)---Establishment of the Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Initiation of proceedings under S.52 & 86 of the Income Tax Ordinance 1979 as on 19-7-2002 (after the repeal of the Income Tax Ordinance, 1979)--­Validity---S. 161 of the Income Tax Ordinance, 2001 was almost identical to S.52 of the Income Tax Ordinance, 1979 with certain limitation ---S.39(7) of the Income Tax Ordinance, 2001 provided that any income-tax, super tax, surcharge, penalty, additional tax, or other amount payable under the Income Tax Ordinance, 1979 may be recovered under the Income Tax Ordinance, 2001 but without prejudice to any action already taken for the -recovery of the amount under the Income Tax Ordinance, 1979---Notice under Ss. 52 & 86 of the Income Tax Ordinance, 1979 was issued on 19-7-2002 under the Income Tax Ordinance, 1979 was illegal and void as these provisions did not exist at that time---If it is established that tax under S.50 and additional tax under S.86 of the Income Tax Ordinance, 1979 was payable, proceeding under S.239(7) of the Income Tax Ordinance, 2001 could be initiated for their recovery---Federal Tax Ombudsman recommended that the proceedings initiated by issuing notice, dated 19-7-2002 under 5.52/86 of the Income Tax Ordinance, 1979 be dropped and appropriate action may be taken under the Income Tax Ordinance, 2001 and the case be decided after considering the plea raised by the complainant/assessee and providing proper- opportunity of being heard.

Liaqat Ali ITP for the Complainant.

Muhammad Ramzan Awan (A-CIT) for Respondent.

2003 P T D 2317

[Federal Tax Ombudsman]

Before Justice (Recd.) Saleem Akhtar, Federal Tax Ombudsman

Messrs OLMPIA MOTORS, LAHORE

Versus

CENTRAL BOARD OF REVENUE, ISLAMABAD

Complaint No. 1266-L of 2001, decided on 8th November, 2001.

(a) Income Tax Ordinance (XXXI of 1979)---

----S. 96---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000)---Refund---Excess payment/deductions--­Non-creation/payment of refund---Lame excuses---Remarks of Federal Tax Ombudsman.

(b) Income Tax Ordinance (XXXI of 1979)---

-----S. 96---Establishment of office of. Federal Tax Ombudsman Ordinance (XXXV of 2000)---Refund---Withholding the refund of Association of Persons with a view to adjust the same against the yet to be created demand of tax against a member of Association of Persons--­Validity---Refund payable to Association of Persons had been adjusted against demand outstanding against one of its members---Disregard for law was manifest by the Assessing Officer's act of withholding of refund of Association of Persons with a view to adjust the same against the yet to be created demand of tax against a member of Association of Persons---Such action fell within the definition of maladministration as defined-in S.3 of the Establishment of Office of Federal Tax Ombudsman Ordinance, 2000---Federal Tax Ombudsman recommended that, refund of Rs.194,643 should be issued to the Complainant/assessee--­Association of Persons without delay for which rectification under S.156 of the Income Tax Ordinance, 1979 may be necessary, all Assessing Officers should be directed to examine whatever documentary evidence they desire in respect of payment/deduction of tax during the process of the assessments so as to give full and final credit on the IT-30, all credits for tax paid/deducted should be accounted for in the calculation on IT-30 and no further verification be called once the IT-30 is signed and result recorded in (Demand and Collection Register).

Javed Iqbal for the Complainant.

Ghulam Rasool, DCIT for Respondent.

2003 P T D 2340

[Federal Tax Ombudsman]

Before Justice (Retd.) Saleem Akhtar, Federal Tax Ombudsman

Mian ABDUL KARIM

Versus

SECRETARY REVENUE DIVISION ISLAMABAD

Complaint No. 1501 of 2002, decided on 20th May, 2003.

Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000)----

----S. 2(3)---Income Tax Ordinance, (XXXI of 1979), 3rd Sched: R.7--­Maladministration---Non-issuance of decision of appeal by the First Appellate Authority even after 2/3 time hearings---Validity---Appeal was heard twice but no decision was made---No grounds had been shown or repeated hearings and not deciding the appeal till it was transferred which proves inefficiency, negligence and inaptitude in discharging of official duties---Matters even after change of jurisdiction should not be transferred because the hearing had been completed and decision was to be pronounced---Where any party pleaded good faith he must state the facts and reasons to justify the same---Any negligence committed in discharge of duty without reasonable cause could not be said to be in good faith---No reasonable cause to justify the delay in not pronouncing the decision even after repeated hearings had been given--­Maladministration on the part of both the Commissioner of Income tax (Appeals) was established---Federal Tax Ombudsman recommended that Central Board of Revenue directs the concerned Commissioner of Income Tax (Appeals) to dispose of the appeal filed by the complainant/assessee within 30 days; Central Board of Revenue to issue letter of warning to Commissioner of Income Tax (Appeals) Bahawalpur to be vigilant in performance of the duties; explanation of Commissioner of Income Tax (Appeals) Multan who twice heard the appeals and did not pass order be called and necessary action be taken and Central Board of Revenue to consider to issue instructions that when jurisdiction in appeals is transferred, the appeals in which arguments have been completed by the parties and were reserved for judgment should not be transferred to the hew jurisdiction.

Ch. Mohammad Asghar Saroha for Complainant.

S. Shahid Hussain (A-CIT) Bahawalpur for Respondent.

2003 P T D 2355

[Federal Tax Ombudsman]

Before Justice (Retd.) Saleem Akhtar, Federal Tax Ombudsman

Messrs AERO ASIA INTERNATIONAL (PVT.) LTD.

Versus

SECRETARY, REVENUE DIVISION

Complaint No.222-K of 2003, decided on 21st April, 2003.

(a) Central Excises Act (I of 1944)---

----S. 26---Establishment of office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Powers of stoppage, search and arrest---Audit---Repetition of objections---Validity---Auditors and the relevant authorities should take care not to repeat the objections ---No timeframe should be fixed within which audit should be completed but it should not be prolonged unnecessarily causing constant threat and harassment to the taxpayers.

(b) Central Excises Act (I of 1944)---

----S. 26---S.R.O. 617(I)/2000, dated 2-9-2000---Establishment of office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)--­Powers of stoppage, search and arrest---Issuance of notices by repeating objections---Unnecessary prolongation of case ---Complaint--­Adjudicating Officer stated that he would decide the case with free mind without any prejudice and on merits---No reason existed to doubt the statement---Attitude of Adjudicating Officer should be such which may inspire confidence and trust of the parties in his decision---All actions, be they verbal or in writing should be in a manner which may create a fair atmosphere so that the parties may look forward for justice without any bias or prejudice---Adjudicating Officer promised to decide the case within 5 days on merits and fairly and the same was recommended by the Federal Tax Ombudsman.

Muhammad Afzal Awan for Petitioner.

Abdul Hameed Memon, D.C. LTU

Saeed Jadoon, Deputy Collector Adj. (iii)

2003 P T D 2361

[Federal Tax Ombudsman]

Before, Justice (Retd.) Saleem Akhtar, Federal Tax Ombudsman

Mst. SAIERA ANWAR, Versus

SECRETARY, REVEVNUE DIVISION, ISLAMABAD

Complaint No. 1295 of 2002, decided on 21st November, 2002.

Income Tax Ordinance (XXXI of 1979)---

----S. 59(1)-Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---C.B.R. Circular No.4 of 2001, dated 18-6-2001 para. 9(a)(ii)-[Self-Assessment Scheme]---Assessment year 2001-2002, setting apart of assessment---Estimation of receipts from 8 power looms for a period of 48 days at Rs.7,00,000 against declared receipt of Rs.3,45,500 and assessment of net income at Rs.1,10,000 against declared business income Rs.33,900---Validity---Arbitrariness of Assessing Officer was evident from his decision, which was biased and discriminatory as well ---Maladministration thus was proved-- -Federal Tax Ombudsman recommended that Central Board of Revenue to direct exclusion of return from the list of cases selected under Para 9(a)(ii) for audit and for its acceptance under Self-Assessment Scheme.

2002 PTD 1828 ref.

Zafar Iqbal for Complainant.

Chaudhry Mohammad Saleem DCIT for Respondent.

2003 P T D 2366

[Federal Tax Ombudsman]

Before Justice (Retd.) Saleem Akhtar, Federal Tax Ombudsman

DOST MUHAMMAD

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 1381 of 2002, decided on 8th May, 2003

Income Tax Ordinance (XXXI of 1979)---

----S. 66-A & 63—Establishment of office of Federal Tax Ombudsman Ordinance (XXXV of 2000) S.2(3)---powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order---Best judgment assessment---Ice factory---Assessment of. income without applying a formula based upon the consumption of electricity units, capacity of the plant and number of working days---Rejection' of payment of interest on loan without verification---Ignoring of lease period- of the factory--­Validity ---Re-assessments had not been made in a proper way and according to law and earlier figures of assessed income had simply been repeated---Assessment had also been made ex parte without .obtaining information from WAPDA regarding electricity consumption and without verifying the position of bank loan and interest---Re-assessment and assessment orders had been made in haphazard and slipshod manner--­All such action amounted to maladministration--Federal Tax Ombudsman recommended that the Commissioner should amend the assessment orders for the assessment year 1989-90 to 1998-99 making such alterations to ensure that the-petitioner was liable to correct amount of tax and the assessment order be amended, after giving a reasonable opportunity of hearing to the petitioner and examining the documents evidence furnished by him.

Aslam Khan Marwat for Complainant.

M. Usman Khan, ACIT for Respondent.

2003 P T D 2372

[Federal Tax Ombudsman]

Before Justice (Retd.) Saleem Akhtar, Federal Tax Ombudsman

SHAHADAT KHAN

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 1271 of 2002, decided on 28th November, 2002.

Income Tax Ordinance (XXXI of 1979)---

----S.63---Income Tax Ordinance (XLIX of 2001), S.116--Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Best judgment assessment---Assessment in the name of successors of business for the subsequent period---Validity---Assessment order gave no basis whatsoever for the income determined and was definitely the result of maladministration ---Action would be fair if a fresh inquiry was made and the facts clearly determined---Federal Tax Ombudsman recommended that a fresh enquiry be made regarding the ownership of the business during the assessment years 1999-2000 to 2001-2002 and if the contention of the complainant/assessee was found to be correct the assessment for the relevant years be amended under S.122 of the Income Tax Ordinance, 2001 to frame these at `Nil" income.

Nemo for the Complainant

Dr. Bashirullah Khan, DICT and Hussain Shahzad Raja, Income Tax Officer, for Respondent.

2003 P T D 2375

[Federal Tax Ombudsman]

Before Justice (Retd.) Saleem Akhtar Federal Tax Ombudsman

Syed ASHAQ ALI AZAD

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 1130 of 2002, decided on 31st December, 2002.

Income Tax Ordinance (XXXI of 1979)---

----Second Sched: Part-I, cl. (78E)---Establishment of Office of Federal Ombudsman Ordinance (XXXV of 2000), S. 2(3)---C.B.R. U.O.No.4(32)TP-1/90-Pt. 1, dated 16-9-1999---Exemption---Regular Income Certificate ---Chargeability of profit received by the person whose name jointly appeared with the name of the person who converted his foreign currency account into such Regular Income Certificate---Validity---Once it was ascertained that certificates were being purchased or created by conversion of foreign. currency account then profits accruing on it will be exempt from tax irrespective of the fact whether it accrues to the account holder himself or to him jointly with his mother or any other person---Clarification issued by the Central Board of Revenue was arbitrary, contrary to law and based on irrelevant ground falling under the term "maladministration"---Federal Tax Ombudsman recommended that the Revenue Division should withdraw the clarification issued to the Central Directorate of National Savings vide U.O. No.4(32)TP-1/90Pt. 1, dated 16-9-1999.

Ijaz Ahmad Azad for Complainant.

Saeedullah Khan, Secretary C.B.R. for Respondent

2003 P T D 2381

[Federal Tax Ombudsman]

Before Justice (Recd.) Saleem Akhtar, Federal Tax Ombudsman

Messrs BAJAUR TIMBER SUPPLY CO., DARGAI, MALAKAND AGENCY

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 303 of 2002, decided on 31st December, 2002.

Customs Act (IV of 1969)---

----Ss. 9(b)(c), 10 & 11---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Declaration of customs-ports, customs-airports, etc: ---Import of timber---Clearance of goods from a place and charging duties and taxes treating the said place as Customs House Station without notifying as required by S.9 of the Customs Act, 1969---Refund was claimed being illegal collection of such duties and taxes at such place---Validity---Levy and recovery of duties and taxes on timber were not challenged and same was paid without any objection hence refund could not be allowed---Question of mark-up also did not arise---Particulars for compensation of loss suffered had also not been given---Duty and tax leviable being legal and proper it could not be claimed that by paying the same the claimant had suffered any loss­ Department having acted contrary to Ss.9, 10 & 11 of the Customs Act, 1969 maladministration was established---Federal Tax Ombudsman recommended that if the Central Board of Revenue deemed it proper and appropriate it might notify the place in question as a Customs Station under S.9 of the Customs Act, 1969 within a period of 45 days and if said place was not declared as Station House within the specified period and routes were not notified clearance of goods and levy of duties and taxes from said Check Post be not allowed.

Riaz Hussain Naqvi for the Complainant.

Sadiqualla Khan, Deputy Collector Customs, Dryport Peshawar for Respondent.

2003 P T D 2388

[Federal Tax Ombudsman]

Before Justice (Retd.) Saleem Akhtar, Federal Tax Ombudsman

Messrs AL-HADDID ENGINEERING WORKS, FAISALABAD

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 39 of 2003, decided on 5th April, 2003.

(a) Sales Tax Act (VII of 1990)---

----S. 36---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Show-cause notice---Contention that show-cause notice under S.36 of the Sales Tax Act, 1990 should be for each separate month i.e. each tax period, was not supported by the language of S.36 of the Sales Tax Act, 1990.

(b) Sales Tax Act (VII of 1990)---

----S. 36 & Sixth Sched., S. No. 44---S.R.O. 987 (I) (99), dated 30-8-1999---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S. 2(3)---Recovery of tax not levied or short-levied or erroneously refunded---Show-cause notice for recovery of tax without indication of amount of alleged supplies, rate of sales tax charged or any other kind of detail showing as to how the figure of tax had been arrived at---Validity---Show-cause notice was mainly a reproduction of a report of the Audit Officer of the Directorate of Revenue Receipts Audit merely .showing the figure of sales tax as recoverable from the complainant/assessee---No indication was found in the show-cause notice as to how this figure had been arrived at and even the amount of supplies on which the sales tax had been worked out was not shown---Without disclosing the basis for the sales tax figure, the show-cause notice remained vague, invalid and attracted the jurisdiction of Federal Tax Ombudsman---Section 36 of the Sales Tax Act, 1990 regulates the proceedings initiated and taken for violation of Sales Tax Act, 1990 which may result in recovery and penalty, therefore, it was necessary that it should be followed strictly---Federal Tax Ombudsman recommended that the show-cause notice, dated 23-10-2002 be withdrawn, if a show-cause notice was to be issued again it should inter alia indicate the ingredients of subsection of section 36 under which it is issued and it should also give the basis for any amount of sales tax which is considered to be recoverable from the complainant/assessee.

Complaint No. 1250 of 2001; Complaint No. 1702 of 2002 and Complaint No. 1435 of 2002 ref.

Assistant Collector of Customs v. Khyber Electric Lamps 2001 SCMR 838 rel.

(c) Interpretation of statutes---

---Where any action is initiated under any provision of law it should be done in the same manner as prescribed by law.

(d) Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000)---

----S. 2(3)---Maladministration---Notice contrary to law-.-Once it was determined that the notice was contrary to law it was hit by maladministration and further proceedings on the basis of such defective notice will be an exercise in futility causing harassment to the taxpayer.

Ashraf Hashmi, A.R. for the Complainant.

Sarmad Qureshi, Deputy Collector Sales Tax (Adjudication), Faisalabad for Respondent.

2003 P T D 2395

[Federal Tax Ombudsman]

Before Justice (Retd.) Saleem Akhtar, Federal Tax Ombudsman

Messrs I.A. QAZI AND SONS, KARACHI

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.C-1351 of 2002, decided on 4th April, 2003.

(a) Sales Tax Act (VII of 1990)---

----S. 13 & Sixth Sched., S. No.4, Item No.4---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000)---Exemption-­Coconut seeds, import of---No restriction/condition for sale---Recovery of sales tax---Validity---Seeds,. fruits and spores for sowing, under Hdg. 2.09, were exempt from sales tax---Customs Authorities had released the imported consignments lawfully allowing sales tax` exemption after completing the formalities---Department had not produced any orders, instructions, rules and regulations with regard tit the restrictions/conditions about the sale of coconut seeds---Government had not prescribed any regulatory mechanism in this regard---Collector and his subordinate officials acted beyond jurisdiction and without authority.

(b) Sales Tax Act (VII of 1990) ---

----Sixth Sched. S.No.4. Item No.4---Establishment of Office of Federal Tax Ombudsman (XXXV of 2000), S. 2(3)--- Maladministration ---Raid on assesses office premises, its search, seizure of the documents, and institution of case for tax evasion and contravention of various provisions of Sales Tax Act, 1990 were undertaken without lawful basis---Recovery of sales tax, additional tax and penalty on the basis of allegations that the importers were selling coconut seeds imported for sowing purposes---Non-serious adjudication ---Pendency of the case for over two years---Refusal to receive the appeal---Validity---All these acts established that action taken by the Department i.e. the Collector and his subordinate officials, the adjudication order passed by the Deputy Collector, and the refusal of the Collectors. (Appeals) not to allow the complainants to even file an appeal, were contrary to law, perverse, arbitrary and unreasonable, unjust, oppressive, and a regrettable example of administrative and judicial excess in misuse of powers, which constituted maladministration under S.2(3) of the Establishment of the Office of the Federal Tax Ombudsman Ordinance, 2000.

(c) Sales tax------

----Seizure---Obligation of officials---Was necessary to make inventory of all files, documents and articles and provide a receipt to the complainant duly signed by the authorized officer immediately at the time of seizure and removal form the premises.

(d) Sales Tax Act (VII of 1990)---

----S. 13 & Sixth Sched., S. No.4, Item No.4---Exemption---Import of coconut seeds---Demand of sales tax, additional tax and penalty on sale of such seed to private parties---Raid---Search and seizure---Rude behaviour---Removal of record without making inventories ---Validity--­Considering all facts and circumstances of the case Federal Tax Ombudsman recommended that Central Board of Revenue to set aside the order passed by the Deputy Collector and quash the entire proceedings against the complainants within thirty days; an enquiry be instituted and disciplinary action be taken against the concerned functionary and report be submitted within sixty days letter be issued to the other official not to behave rudely with taxpayers and instructions be issued that while seizing the records/documents/articles of any unit complete inventory should be prepared on the spot and delivered to the unit duly signed by the authorized officer before the removal from the premises.

Muhammad Ishaque for the Complainants:

Dr. Mubashir Baig, Deputy Collector of Sales Tax (West).

Najeebullah Jafferi, Deputy Superintendent.

Tehseen Saleem, Deputy Superintendent.

2003 P T D 2413

[Federal Tax Ombudsman]

Before Justice (Retd.) Saleem Akhtar, Federal Tax Ombudsman

Shaikh ABDUL SATTAR

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.307 of 2002, decided on 24th April. 2003.

Income Tax Ordinance (XXXI of 1979)---

----Ss.62, 80-C, 50(5) & Second Sched., Part IV, Cl.(9)---C.B.R. Circular No.26 of 1991, dated 24-8-1991---Establishment of. Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)--­Complaint by informer in respect of two assessees on the basis of special inspection report of Director Inspection that assessees were engaged only in the trading of imported raw material while they were being assessed as manufacturers---Consequently, instead of treating the tax collected under S.50(5) of the Income Tax Ordinance, 1979 as full and final discharge of tax liability on gross value of imports, deemed to be income under S.80-C of the Income Tax Ordinance, 1979, assessments were being made under S.62 of the Income Tax Ordinance, 1979 resulting in huge refunds and such assessments were made against illegal gratification---Inspecting Additional Commissioner deliberately overlooked the reports of Director Inspection---Validity---Remarks of the Inspecting Additional Commissioner that the observations of the Director Inspection were derogatory, to say the least, were insolent---Defiant attitude of .the field officers genuinely led the Director Inspection to believe that there was chain of collusion among the field officers; hence no prematurity in the adverse remarks of Director Inspection--Report of Inspecting Additional Commissioner that proposal for reopening of assessment was considered but was not approved further supported the observations of the Director Inspection about the role of concerned officers in the matter---Alleged maladministration thus was established--­Federal Tax Ombudsman recommended that jurisdiction over both the cases be assigned to the specified Taxation Officer who would conduct, personally with the assistance of his subordinates, the verification of all the evidence already placed on record from year to year since assessment year 1995-96 inter alia: (a) the existence of customers shown as per details of sales filed, .if any, with their NTN and the business they were engaged in, if any, in the relevant. year; (b) authenticity of copies of electricity and other bills submitted by assessees; (c) authenticity of copies of certificates submitted by the two assessees from various departments; (d) verification of registration under Sales Tax Act as well as the declared sales from records of Sales Tax Department.

S. M. Sibtain, Secretary, Dealing Officer

Complainant in person.

Moazzam Basheer, Taxation Officer for Respondent

2003 P T D 2484

[Federal Tax Ombudsman]

Before Justice (Retd.) Saleem Akhtar, Federal Tax Ombudsman

MUHAMMAD BASHIR

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD.

Complaint No. 1312/L of 2002, decided on 19th March, 2003.

Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑S.62‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)‑‑‑Income Tax Ordinance (XLIX of 2001), S.122‑‑‑Assessment on production of accounts, evidence etc.‑‑­Arbitrary and harsh assessment under the influence of Survey Team and without application of mind‑‑‑Validity‑‑‑20 times jump in the estimate of receipts, in the absence of any positive evidence about the increase in the nature and size of the business or the injection of fresh investment, appeared rather unjust dispensation‑‑‑No protest was made against the estimate proposed in the Report of Survey Team, yet it would be shutting eyes to the reality that an establishment undertaking dyeing of assorted ladies‑wear, on retail basis, would have receipt of approximately Rs.5,000 per day to aggregate at Rs.1.5(M) in the year‑‑‑It was also undeniable that the complainant/assessee was an illiterate person and his sons too have rudimentary education‑‑‑Such surrounding circumstances cast a shadow of unreasonableness on the accuracy of the Report by the Survey Team, which primarily was the reason for arbitrariness creeping in the assessment‑‑‑Federal Tax Ombudsman recommended that fresh enquiry be initiated to determine the extent and volume of business whereafter assessment may be amended so as "to levy the correct amount of tax" as envisaged by S.122 of the Income Tax Ordinance, 2001.

2002 PTD 1828; 2002 PTD 2562, 2002 PTD 1466 and 2002 PTD 1823 ref.

A.H. Qamar, ITP and AR for the Complainant.

Muhammad Ali Shah, D‑CIT for Respondent.

2003 P T D 2488

[Federal Tax Ombudsman]

Before Justice (Retd.) Saleem Akhtar, Federal Tax Ombudsman

MUHAMMAD DURRA

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.C‑1216 of 2002, decided on 11th December, 2002.

(a) Customs Act (IV of 1969)‑‑‑--

‑‑‑‑S.2(s), 32(2) & 139‑‑‑Import Policy Order, 1998‑99, Chap.2‑‑­Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)‑‑‑Import of freely importable goods‑‑‑Charge of smuggling‑‑‑Appellate Tribunal, having found that there was nothing on record to demonstrate that an attempt to remove the goods as old and used items without payment of duty and taxes was made, set aside the order of the Collector and directed to allow relevant provisions of law to be followed‑‑‑Despite clear directions to allow the relevant provisions of law to be followed, case was sent to the Collector (Adjudication) for initiating proceedings based on the same show‑cause notice which had been set aside‑‑‑Instead of allowing the complainant to file bill of entry for clearance of the imported consignment on payment of leviable taxes, various hearing memos. were issued‑‑‑Goods were seized and auctioned without informing the complainant in violation of the Tribunal's order‑‑­Validity‑‑‑Collector should have allowed the complainant to file documents for clearance of goods imported by him, which was not done‑‑‑All the actions taken by ‑the Customs Authorities, right from the beginning, were arbitrary, contrary to relevant law, against established procedure and without valid reasons‑‑‑Framing the charge of misdeclaration and smuggling against the complainant on the basis of the Import General Manifest and the bill of lading was without legal authority‑‑‑Seizure of goods, shifting from the sea port to the city, and the auction without notice to the importer were also illegal and without jurisdiction‑‑‑Fresh proceedings and issue of notices of hearing were actions in defiance of the Tribunal's order‑‑‑Customs Authorities had defied the provisions of the Customs Act, 1969 and the charge of serious maladministration was established‑‑‑Federal Tax Ombudsman recommended that Central Board of Revenue to institute an inquiry to identify the officials responsible for the illegal acts committed in the seizure, confiscation and disposal of goods, and take suitable disciplinary action against them and to direct the Collector of Customs to pay the sale proceeds to the owner of goods in accordance with the provisions of Customs Act, 1969.

(b) Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000)‑‑‑--

‑‑‑‑S.9‑‑‑Jurisdiction, functions and powers of the Federal Tax Ombudsman‑‑‑Non‑compliance of Appellate Tribunal's directions‑‑­Complaint against‑‑‑Department pleaded that case was sub judice before the Collector of Customs; and the Federal Tax Ombudsman had no jurisdiction‑‑‑Validity‑‑‑Appellate Tribunal had given direction which was to be followed by the Department but instead of following it they had adopted a completely arbitrary procedure which was contrary to law‑‑‑Federal Tax Ombudsman had jurisdiction in cases where maladministration was alleged in respect of process, proceeding or order that may be taken or passed by any tax employee‑‑‑Process adopted and action taken by the Collector were contrary to law and therefore, the Federal Tax Ombudsman had jurisdiction to investigate into the allegation of maladministration.

(c) Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000)‑‑‑

‑‑‑‑S.2(3)(v)‑‑‑Maladministration‑‑‑Mere quoting wrong provision of law was no ground for rejecting the complaint‑‑‑Facts relating to maladministration attracted the provisions of the Establishment of Office of Federal Tax Ombudsman Ordinance, 2000.

Rana Zahid Hussain Khan, Consultant.

Dr. Iftikhar Ahmad, Deputy Collector of Customs, Hub, Quetta Collectorate.

2003 P T D 2496

[Federal Tax Ombudsman]

Before Justice (Recd.) Saleem Akhtar, Federal Tax Ombudsman

MUHAMMAD ARSHAD

Versus

SECRETARY, REVENUE DIVISION, CENTRAL BOARD OF REVENUE, ISLAMABAD

Complaint No.331‑K of 2003, decided on 12th May, 2003.

Wealth Tax Act (XV of 1963)‑‑‑

‑‑‑‑Ss.16(5), 10(1)(c) & 35‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)‑‑‑Assessment‑‑­Refund‑‑‑While finalising assessment full credit for the amount of tax deposited under S. 14‑A of the Wealth Tax Act, 1963 was not given with ulterior motive just to avoid/delay early refund‑‑‑Refund was created on rectification application‑‑‑Transfer of jurisdiction‑‑‑Unnecessarily prolonged proceedings for non‑issuance of refund ‑‑‑Validity‑‑­Department informed that the refund had been issued to the complainant/assessee‑‑‑ Complainant/ assessee had, however, withdrawn the claim of additional tax‑‑‑Federal Tax Ombudsman recommended that the assessment proceedings for the year 2000‑2001 be completed after providing reasonable opportunity to the complainant/assessee to present his case and Central Board of Revenue to issue a directive that (a) within 14 days of the order for change of jurisdiction the assessees, whose cases are transferred, be notified in writing through Registered AID; (b) a list of all those assessees/cases whose files are transferred should be pasted on the notice board of the original office and the ransferee office within one week of the transfer of cases/files.

Complainant alongwith Mr. Dawood, Manager (present).

Nazir Shooro, I.A.C. Range‑III, Zone B, Karachi, D.R. and Abdul Hameed Anjum, ACIT, Karachi.

2003 P T D 2515

[Federal Tax Ombudsman]

Before Justice (Retd.) Saleem Akhtar, Federal Tax Ombudsman

NAZIM HUSSAIN, PROPRIETOR

Versus

SECRETARY, REVENUE DIVISION, CENTRAL BOARD OF REVENUE, ISLAMABAD

Complaint No.308‑K of 2003, decided on 8th May, 2003.

Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑S. 59(1)‑‑‑C.B.R. Circular No. 7 of 2002 dated 15‑6‑2002, para. 9(a)(ii) [Self Assessment Scheme]‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000); S.2(3)‑‑‑Self ­assessment‑‑‑Setting apart of assessment‑‑‑Assessment year 2002‑2003‑‑­Difference in balance‑sheet total ‑‑‑Assessee explained that there was no difference in total of balance‑sheet, but there was a typographical mistake in the amount of capital account which was verifiable from the copy of capital account, wealth statement and its reconciliation‑‑‑Setting apart for total audit‑‑‑Validity‑‑‑Regional Commissioner of Income Tax did not make a judicious exercise of power in selecting the case for total audit and proceeded on whim and conjectures rather than on solid evidence or cogent reasons for such selection‑‑‑No material evidence or information was available to show that true particulars of income had been suppressed‑‑‑Income declared showed an increase as compared to income declared in the immediately preceding year‑‑‑Notice did not specify any cogent reason except that the total of balance‑sheet showed a discrepancy ‑‑‑Complainant/assessee filed his wealth statements alongwith reconciliation from year to year and these figures were available on records‑‑‑Typographical mistake should not be allowed to defeat the spirit of the Self‑Assessment Scheme which otherwise fulfils all other conditions laid down in this behalf‑‑‑Nothing was there to justify the selection of the case for total audit and for excluding the return of income for assessment year 2002‑2003 from the purview of Self­ Assessment Scheme‑‑‑Such course did not meet the parameters fixed by the Central Board of Revenue ‑‑‑Maladministration thus was established‑­Federal Tax Ombudsman recommended that the order of the Regional Commissioner of Income Tax selecting the case for total audit be withdrawn and the return filed for the assessment year 2002‑2003 by the complainant/assessee be processed under Self‑Assessment Scheme.

A. R. Lakhani, F.C.A. for the Complainant.

Abdus Salem, I.A.C. Range‑II, Zone‑E, Karachi for Respondent.

2003 P T D 2521

[Federal Tax Ombudsman]

Before Justice (Retd.) Saleem Akhtar, Federal Tax Ombudsman

Messrs TOP WEAVE INDUSTRIES, KARACHI

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.C‑123‑K of 2003, decided on 8th May, 2002.

Sales Tax Act (VII of 1990)‑‑‑

‑‑‑‑Ss. 10(2) & 67‑‑‑Sales Tax Refund Rules, 2000, Rr.6 & 7(2)‑‑‑C.B.R. Letter C,,No.2(7) STP/99‑PT dated 1-1‑2003‑‑‑S.R.O. 417(I)/2000‑‑­Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)‑‑‑Refund of excess amount of input tax‑‑‑Withholding of total amount of refund due to few fake invoices or issued by the suspected units‑‑‑Validity‑‑‑Central Board of Revenue in its Letter C.No.2(7)STP/99‑PT dated 1‑1‑2003 observed that it would not be justified to reject a claim just because a few invoices were found to be fake or were issued by the suspected units; that the appropriate course in such case would be to disallow the refund claim to the extent of fake invoices and sanction the remaining amount, and if a refund claim was supported by tax invoices of suspected units; a show‑cause notice be issued before deciding the admissibility of the claim under the law‑‑‑Said Instructions were ignored by the Sales Tax Authorities ‑‑‑Federal Tax Ombudsman recommended that Central Board of Revenue to direct the Collector Sales Tax (West)., Karachi to get the invoices re‑verified from the Collectorate within thirty days and in case the genuineness of the invoices is not established issue, show‑cause notice to the complainant and decide the refund claim within two months.

M. Mubeen Ahsan, Advisor, Dealing Officer.

M. Shamshad Younus, Consultant.

Dr. Mubashir Baig, Deputy Collector of Sales Tax (West) and Nadeem Ahmed Rao, Senior Auditor.

2003 P T D 2542

[Federal Tax Ombudsman]

Before Justice (Retd.) Saleem Akhtar, Federal Tax Ombudsman

Messrs AL‑FAIZ FURNITURE, JHELUM

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 120 of 2003, decided on 31st March, 2003.

Sales Tax Act (VII of 1990)‑‑‑

‑‑‑‑Ss. 13, 3(1‑A), 3‑B & Sixth Sched., Items 2, 66‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)‑‑‑Exemption‑‑‑Auction of standing trees‑‑‑Recovery of sales tax from complainant/purchaser‑‑‑Complainant was non‑registered person.‑‑­Department refused to refund such amount charged on exempted goods on the presumption that the incident will be passed on to the consumer‑‑­Validity‑‑‑Tax had been collected on behalf of the Central Board of Revenue in terms of S.3‑B(3) of the Sales Tax Act, 1990‑‑‑Bur,len of proof that the incidence of tax had been passed on to the consumer was on Central Board of Revenue‑‑‑Nothing was available on record to show that the incidence of tax had been passed to the consumer‑‑‑In absence of any record the petitioner could not be deprived of the amount, which had been recovered from him which was not chargeable from him‑‑­Recovery of sales tax in the face of legal provision was illegal, without jurisdiction and contrary to law‑‑‑Such illegal recovery made by the Government Departments was liable to be refunded‑‑‑Federal Tax Ombudsman recommended that Rs.1,07,444 be refunded to the petitioner.

Shafqat‑ur‑Rehman for the Complainant.

Asif Yousaf, D.C. (Refund) for the Department.

2003 P T D 2596

[Federal Tax Ombudsman]

Before Justice (Retd.) Saleem Akhtar, Federal Tax Ombudsman

Messrs DANYAL SHAWAL INVESTMENT CORPORATION, WAH CANTT.

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 178 of 2003, decided on 18th June, 2003.

Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑S. 59(1)‑‑‑C.B.R. Circular No.7 of 2002, dated 18‑6‑2002, para.9(a)(ii)‑‑‑Self‑Assessment Scheme, 2002‑2003‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)‑‑ Self‑assessment, setting apart of‑‑‑Assessment year 2002‑2003‑‑‑Setting apart of case for total audit because of the low profit rate declared‑­Validity‑‑‑Adequate evidence was available to show that the overall profit declared by the complainant/assessee was by no means low as compared to the net profit declared or applied in many other cases and in fact the complainant's/assessee's net profit rate was very reasonable even in the context of the Department's agreement with land developers‑­Since case selected for audit on the basis of gross profit rate of 25 % was otherwise distinguishable and resultant net profit rate worked out was also to a lower percentage than in the complainant's/assessee's case, selection of the complainant's/assessee's case for audit merely on the basis of that other case, was not valid‑‑‑Federal Tax Ombudsman recommended that the complainant's/assessee's return be excluded from the cases selected for total audit under para. (a)(ii) of the Self­ Assessment Scheme, 2002‑2003 and the‑declared income be accepted.

Aurang Zeb, ITP, A.R. for the Complainant.

Asem Iftikhar, DCIT, Circle 1 and Haq Nawaz, Taxation Officer, Rawalpindi for Respondent.

2003 P T D 2606

[Federal Tax Ombudsman]

Before Justice (Retd.) Saleem Akthar, Federal Tax Ombudsman

Messrs NEW SHAHI JEWELLERS, PESHAWAR

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 294 of 2003, decided on 18th June, 2003.

Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑‑S. 59(1)‑‑‑C.B.R. Circular No. 7 of 2002, dated 18‑6‑2002, para. 9(a)(ii)‑‑‑Self‑Assessment Scheme, 2002‑2003‑‑‑Establishment of Office of Federal Tax Ombudsman, Ordinance (XXXV of 2000), S.2(3)‑­Self‑assessment, setting apart of‑‑‑Assessment year 2002‑2003‑‑‑Setting apart of case for total audit on the basis of electricity, telephone bills and seating capacity of the shop‑‑‑Validity‑‑‑Selection was not supported by any evidence or information and was found quite invalid‑‑‑federal Tax Ombudsman recommended that the complainant/assessee's return be excluded from the cases selected for total audit under para. 9(a)(ii) of the Self‑Assessment Scheme, 2002‑2003 and the declared income be accepted.

Shafie Jan, for the Complainant.

Arbab Muhammad Tariq, ACIT for Respondent.

2003 P T D 2617

[Federal Tax Ombudsman]

Before Justice (Retd.) Saleem Akhtar, Federal Tax Ombudsman

Messrs ATTOCK FLOUR AND GENERAL MILLS, ATTOCK

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 247 of 2003, decided on 18th June, 2003.

(a) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑S. 59(1)‑‑‑C.B.R. Circular No. 7 of 2002, dated 18‑6‑2002, para. 9(a)(ii)‑‑‑Self‑Assessment Scheme, 2002‑2003‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)‑‑Self‑assessment, setting apart of‑‑‑Assessment year 2002‑2003‑‑‑Flour mill‑‑‑Net profit rate was only 0.216%‑‑‑Suppression of income‑‑­Setting apart for total audit on the basis of formula devised in agreement with the Flour Mills Association‑‑‑Validity‑‑‑Department was found to have had valid reason for its prima facie view that the complainant/ assessee's income had been suppressed‑‑‑While making the assessment of the Assessing Officer would consider the facts in the complainant/ assessee's case and would allow the complainant/assessee adequate opportunity of showing why in its case there could be a deviation from the formula agreed to by other flour mills‑‑‑Complaint was rejected by the Federal Tax Ombudsman.

(b) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑S. 59(1)‑‑‑C.B.R. Circular No. 7 of 2002, dated 18‑6‑2002, para. 9(a)(ii)‑‑‑Self‑Assessment Scheme, 2002‑2003‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)‑­Self‑assessment, setting apart of‑‑‑Adjournment‑‑‑Selection being other wise valued could not be nullified for the reason that the hearing in the matter was not adjourned by the Regional Commissioner of Income Tax.

C.A. Habib, F.C.A., A.R. for the Complainant.

Asem Iftikhar, D.C.I.T., Circle 01, Rawalpindi and Muhammad Naeem Khan, Taxation Officer, Circle 40, Rawalpindi Zone for Respondent.

2003 P T D 2633

[Federal Tax Ombudsman]

Before Justice (Retd.) Saleem Akthar, Federal Tax Ombudsman

Messrs UNITED BANK LIMITED, KARACHI

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 1290 of 2002, decided on 10th May, 2003.

Income Tax Ordinance (XLIX of 2001)‑‑‑

‑‑‑‑Ss. 15, 151 & First Sched., Division III, Part III‑‑‑Income Tax Ordinance (XXXI of 1979), S.50(2)‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)‑‑‑Exemption or lower rate certificate‑‑‑Contention was that non‑issuance of exemption certificate is a policy matter and riot as a legal right ‑‑‑Validity‑‑­Grievance of the complainant/assessee was removed by issuing him exemption certificate under S.159 of the Income Tax Ordinance, 2001‑­In order to issue such certificates it was the policy of the Government to widen the scope of S.159 of the Income Tax Ordinance, 2001 Federal Tax Ombudsman observed that Central Board of Revenue may consider amendment in S.159 of the Income Tax Ordinance, 2001 in the light of S.50(2) of the Income Tax Ordinance, 1979.

Naved Andrebi, C.A. for the Complainant.

Misri Ladhani for Respondent.

2003 P T D 2648

[Federal Tax Ombudsman]

Before Justice (Retd.) Saleem Akthar, Federal Tax Ombudsman

ASLAM MARWAT, BANNU

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 1384 of 2002, decided on 18th June, 2003.

Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000)‑‑‑

‑‑‑‑S. 2(3)‑‑‑Maladministation‑‑‑Illegal tax practice of the departmental officials‑‑‑Allegations by the assessee and rebuttal by the tax officials‑‑­Mistrust between the parties‑‑‑‑Complaint‑‑‑In the prevailing atmosphere/circumstances there could be no end to allegations and rebuttals‑‑‑Allegations levelled by the petitioner were cumulative outcome of small complaints and grudges harboured over a period of time, which heaped‑ up and took the shape of mistrust between the petitioner and the officers/officials of the Department‑‑‑Main reason for the creation of such a situation was the fact that concerned income‑tax circles were neglected by the higher Authorities‑‑‑By visiting the circle regularly such petty problems could be solved on the spot and such situation could be avoided‑‑‑In order to create an atmosphere of goodwill between the taxpayers, tax officials and the practising lawyers and for solution of the problems Federal Tax Ombudsman recommended that the Additional Commissioner concerned should pay visit to the circles at least once in a quarter; the Commissioner concerned should pay an annual visit to these circles Central Board of Revenue's policy regarding posting/transfers be followed and officials/officers with longer stay, particularly against whom complaints have been received be transferred to other stations and the Regional Commissioner of Income Tax to hold a meeting at Commissioner of Income Tax Office, between the comp­lainant and the concerned officers/officials of the Department to sort out the problems/grievances and take action for redressal.

Aslam Marwat for the Complainant.

Dr. M. Usman Khan, A.C.I.T., Peshawar.

2003 P T D 2665

[Federal Tax Ombudsman]

Before Justice (Retd.) Saleem Akthar, Federal Tax Ombudsman

Messrs MEHRAN AGENCY

Versus

SECRETARY REVENUE DIVISION, ISLAMABAD

Complaint No. C‑338‑K of 2003, decided on 2nd June, 2003.

Customs Act (IV of 1969)‑‑‑

‑‑‑‑S. 18‑B‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)‑‑‑Levy of service charge ‑‑‑Pre­-shipment inspection‑‑‑Claim of refund on the basis of Supreme Court judgment‑‑‑Demand of Chartered Accountant's certificate by the Department to the effect that incidence of such charges had not been passed on to the consumer‑‑‑.Validity‑‑‑Complainant would not be able to pay for the Chartered Accountant's certificate for the refund of a small amount of Rs.8,246‑‑‑Sindh High Court had ordered that circular of the Central Board of Revenue with regard to the service charges was violative of the order of the Supreme Court‑‑‑Demand of Certificate thus was an attempt to disobey the said order, and it would not be acted upon‑‑‑Federal Tax Ombudsman recommended that Central Board of Revenue should set aside the order passed by the Assistant Collector of Customs and direct the Collector of Customs to sanction the refund of service charges amounting to Rs.8,426 and pay the same within thirty days.

M. Mubeen Ahsan, Advisor, Dealing Officer for Petitioner.

S.M. Yunus, Attorney and Advisor.

Sajjad Haider Jhinjhin, Assistant Collector of Customs (Appraisement).

2003 P T D 2676

[Federal Tax Ombudsman]

Before Justice (Retd.) Saleem Akhtar, Federal Tax Ombudsman

MUHAMMAD MUNSHA NASIR

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 791‑L of 2002, decided on 25th November, 2002.

(a) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑S. 59(1)‑‑‑C.B.R. Circular No. 4 of 2001, dated 18‑6‑2001, para.9(a)(ii)‑‑‑Self‑Assessment Scheme ‑‑‑C.B.R. Circular Letter No.7(7) Asstt/2001, dated 26‑3‑2001‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3.)‑‑‑Self‑assessment, setting apart‑‑‑Assessment. year 2001‑2002‑‑‑Contention was that setting apart of case by the Regional Commissioner of Income Tax was the matter related to assessment‑‑‑Validity‑‑‑Neither the process employed by the Regional Commissioner of Income Tax under para. 9(a)(ii) of C.B:R. Circular No.4 of 2001 nor his decision to select the case for audit was a matter relating to assessment of income nor remedy in the shape of appeal/revision against his decision to select the case was available to the complainant/assessee.

(b) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑S. 59(1)‑‑‑C.B.R. Circular No. 4 of 2001, dated 18‑6‑2001, para.9(a)(ii)‑‑‑Self‑Assessment Scheme ‑‑‑C.B.R. Circular Letter No.7(7) Asstt/2001, dated 26‑3‑2001‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)‑‑‑Self‑assessment‑‑­Setting apart of assessment‑‑‑Assessment year 2001‑2002‑‑‑Contention was that prejudice was caused by selecting the return for total audit by the Regional Commissioner of Income Tax‑‑‑Validity‑‑‑Privilege was earned by the complainant/assessee when his return of income qualified for acceptance under Self‑Assessment Scheme‑‑‑Denial of such privilege without valid reason would be a prejudice caused to the complainant/ assessee.

(c) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑S. 59(1)‑‑‑C.B.R. Circular No. 4 of 2001, dated 18‑6‑2001, para. 9(a)(ii)‑‑‑Self‑Assessment Scheme ‑‑‑C.B.R. Circular Letter No.7(7)Asstt/2001, dated 26‑3‑2001‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)‑‑‑Self assessment‑­Setting apart of assessment‑‑‑Assessment year 2001‑2002‑‑‑Switch over business from real estate agency to sale of wheat‑‑‑Source of investment was duly explained‑‑‑Setting apart of case by the Regional Commissioner of Income Tax without recording any reasons for dissatisfaction‑‑Validity‑‑‑Complainant/assessee‑ had satisfactorily explained all the issues that it was confronted with by the Regional Commissioner of Income Tax and sufficient cause had been shown on its behalf as to why the reasons that the Regional Commissioner of Income Tax had for his belief that it was a revenue potential case were unfounded and invalid‑‑‑Regional Commissioner of Income Tax himself had not recorded any reason for his dissatisfaction with the causes shown to him on behalf of the complainant/assessee‑‑‑Selection of return for audit thus was arbitrary‑‑‑Any order passed without reasonable ground or in breach of the parameters laid down by rules, regulations or binding orders will be contrary to law, arbitrary and based on irrelevant grounds which amounted to maladministration attracting the jurisdiction of Federal Tax Ombudsman‑‑‑Alleged maladministration, therefore, stood established‑‑‑Federal Tax Ombudsman recommended that the Central Board of Revenue should direct exclusion of return from the list of cases selected under para. 9(a)(ii) for audit and for its acceptance under Self­ Assessment Scheme.

Shahbaz Butt and Tariq Rasheed for the Complainants.

Shahid Jamil Khan, Legal Adviser for Respondent.

2003 P T D 2725

[Federal Tax Ombudsman]

Before Justice (Retd.) Saleem Akhtar, Federal Tax Ombudsman

STATE PETROLEUM REFINING AND PETROCHEMICAL, CORPORATION (PVT.) LTD. MANAGERIAL AND SUPERVISORY STAFF PENSION FUND, KARACHI

Versus

SECRETARY, REVENUE DIVISION, CENTRAL BOARD OF REVENUE, ISLAMABAD

Complaint No.511‑K of 2002, decided on 26th July, 2002.

Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑Second Sched., Part I, Cl. 56(2)(ii), Ss. 96 & 102‑‑‑C.B.R. Letter C. No.44(16)IT‑V/78, dated 17‑7‑1978‑‑‑C.B.R. Letter C.No. ITB‑3(6)/85, dated 27‑3‑1985‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)‑‑‑Exemption‑‑‑Refund‑‑‑Pension fund‑‑‑Deduction of tax from exempt pension fund‑‑‑Claim of refund of the same‑‑‑Department asked the assessee to furnish application under S.99(2)(b) of the Income Tax Ordinance, 1979 on the prescribed form along with evidence of tax deduction for process and issuance of refund‑‑­Validity‑‑‑Question was that when the funds income was exempt why deduction was made‑‑‑Such an action was maladministration on the part of deducting agencies‑‑‑Deduction having been made, it was the duty of the Assessing Officer to verify from the deducting agency about the deduction in respect of which refund was claimed ‑‑‑Complainant/assessee having filed refund application on prescribed format the claim should have been decided on its own merit, by verifying the deduction from the record of the Department‑‑‑Assistance if needed shall be provided by the complainant/assessee‑‑‑Federal Tax Ombudsman recommended that the processing of the application for refund filed by the complainant/ assessee be completed and decided within 15 days.

Haider Naqi for the Complainant.

Umer Farooq, I.A.C. Range‑II, Co. V, Karachi for the Department.

Ch. Muhammad Tarique, DCIT, Circle‑I, Co. V, Karachi.

2003 P T D 2752

[Federal Tax Ombudsman]

Before Justice (Retd.) Saleem Akhtar, Federal Tax Ombudsman

Messrs PAKISTAN MINERAL DEVELOPMENT CORPORATION, HYDERABAD

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. C‑146 of 2003, decided on 28th April, 2002.

Sales Tax Act (VII of 1990)‑‑‑

‑‑‑‑Ss. 10 & 34‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)‑‑‑Refund‑‑‑Additional tax‑‑­Additional tax was remitted by the Appellate Tribunal‑‑‑Non‑payment of refund of the same on the ground that short order of the Appellate Tribunal did not describe the facts and grounds on which the Appellate Tribunal remitted the mandatory recoverable additional tax‑‑‑Validity‑‑­Levy of additional sales tax were remitted by the Appellate Tribunal‑‑­Application for refund of remitted additional tax was filed and ten reminders were sent but the refund was not paid‑‑‑Tribunal's order should have been implemented, but the Department did not take any action for one and a half years and did not even reply to the letters and reminders and instead asked the complainant/assessee to obtain and produce the detailed order‑‑‑Matter was not sub judice before the Appellate Tribunal‑‑‑If Department wanted to file an appeal, they should have done so within the prescribed time limit of the issue of the Tribunal's order‑‑‑Order passed by the Appellate Tribunal having attained finality, should have been implemented‑‑‑Matter had been kept pending for more than two years without any justification, present case, thus was of maladministration on the part of Sales Tax Authorities‑‑­Federal Tax Ombudsman recommended that Central Board of Revenue should direct the Collector of Customs, Sales Tax and Central Excise to decide the refund application within 15 days.

A. Majeed Khan, Legal Assistant.

Mumtaz Ali Khoso, Deputy Collector of Sales Tax, Hyderabad.

2003 P T D 2758

[Federal Tax Ombudsman]

Before Justice (Retd.) Saleem Akthar, Federal Tax Ombudsman

STATE PETROLEUM REFINING AND PETROCHEMICAL CORPORATION (PVT). LTD., KARACHI

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.C‑510‑K of 2002, decided on 26th July, 2002.

Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑Second Sched., Part I, Cl. 56(2)(ii) & Ss.96, 102‑‑‑C.B.R. Letter C. No.44(16)IT‑V/78, dated 17‑7‑1978‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S. 2(3)‑‑‑Exemption‑‑­Refund‑‑‑Pension fund‑‑‑Deduction of tax from exemption pension fund‑‑Claim of refund of same‑‑‑Department contended that claim for refund was barred by time‑‑‑Validity‑‑‑Admitted position was that the amount in question being a pension fund, its income was exempted from tax‑‑‑Any deduction or levy of tax on the income of the Fund was arbitrary and illegal‑‑‑Recovery of tax was made illegally particularly as it was not subject to‑tax ‑‑‑Bar of limitation could not be applied‑‑‑Refund of any tax illegally recovered could not be refused on the ground of limitation‑‑‑Deportation committed maladministration in deducting the tax by not replying four letters and retaining the amount illegally deducted and refusing to refund on the plea of bar of time limitation‑‑­Amount claimed was illegally deducted which became refundable immediately on the date of deduction‑‑‑Complainant/assessee was not required to file return of income nor, S.99(2) of the Income Tax Ordinance, 1979 could be pressed in service‑‑‑Federal Tax Ombudsman recommended that the amount of Rs.40,000 together with compensation under S.102 of the Income Tax Ordinance, 1979. be paid to the complainant/assessee within 30 days.

Haider Naqvi for the Complainant

Umer Farooq, IAC Range‑II, Co. V, Karachi.

Ch. Muhammad Tarique, DCIT, Circle‑I, Co. V, Karachi for Respondent.

2003 P T D 2761

[Federal Tax Ombudsman]

Before Justice (Retd.) Saleem Akhtar, Federal Tax Ombudsman

Messrs MUHAMMAD ZAFAR, PROPRIETOR SUPERIOR BATTERY

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD and another

Complaint No.‑C‑1112‑K of 2002, decided on 13th November, 2002.

(a) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑S. 132(5) & (6)‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)‑‑‑Decision in appeal‑‑‑Service by the appellant personally‑‑‑Mandatory‑‑‑Service by the appellant personally a provided by S.132(6) of the Income Tax Ordinance, 1979 was‑mandatory otherwise a letter sent by post or through courier service specifically addressed to the Commissioner (Appeals) by name with endorsement a personal may fall within the category of, service on the Commissioner (Appeals) personally.

(b) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑S. 132(5) & (6)‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)‑‑‑Decision in appeal‑‑‑Service by the appellant personally‑‑‑Appellant should serve the notice personally on the Commissioner (Appeals) in person and not otherwise.

(c) Income Tax Ordinance (XXXI of 1979)‑‑‑-

‑‑‑‑S. 132(5) & (6)‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)‑‑‑Decision in appeal‑‑‑Service by the appellant personally‑‑‑Where the assessee is a firm, Corporation. Pardanashin lady or an invalid person, any duly authorized person may personally serve the notice on the Commissioner (Appeals) in person.

(d) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑S. 132(5) & (6)‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)‑‑‑Decision in appeal‑‑­Service by the appellant personally‑Specific mode of service o1 notice provided by the income Tax Ordinance, 1979 excludes other types of service, which may otherwise be legal and proper under the relevant statutes‑‑‑Whenever any act is to be done personally a physical contact of the person required to do is necessary.

(e) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑S. 132(5) & (6)‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000) S.2(3)‑‑‑Decision in appeal‑‑‑Service by the appellant personally ‑‑‑Notice required by S.132(5) of the Income Tax Ordinance, 1979 should have been personally served by the appellant on the Commissioner (Appeals)‑‑‑Section 132(6) of the Income Tax Ordinance, 1979 excludes notice by registered post A/D or in any other manner.

(f) Interpretation of statutes‑‑‑

‑‑‑‑ If the law requires a thing to be done in particular manner same should be performed in the same manner otherwise will be illegal.

(g) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑S. 132(5) & (6)‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)‑‑‑Decision in appeal‑‑‑Service by the appellant personally‑‑‑Notice by registered post‑‑‑No decision by the Appellate Authority within the prescribed three months‑‑Relief demanded whether to be deemed to be allowed‑‑‑Notice by registered post was served in the office of Commissioner (Appeals) which in the normal course should be presumed to be within the knowledge of commissioner (Appeals) but as the law requires notice to be served personally by the appellant on the Commissioner (Appeals) the consequences as envisaged by S.132(5) of the Income Tax Ordinance, 1979 will follow only on strict compliance of S.132(6) of the Income Tax Ordinance, 1979‑‑‑Service of notice was defective and not according to law‑‑‑Section 132(5) of the Income Tax Ordinance, 1979 shall not apply unless a notice by the appellant stating that no order under S.132(1) of the Income Tax Ordinance, 1979 was personally served by the appellant on the Appellate (Additional Commissioner) in person not less than thirty days before the expiration of the period of three months‑‑‑Service of notice being defective no interference was required however, facts revealed inaction, inaptitude and negligence in performance of duty even when it was pointed out of the Authorities by the taxpayer‑‑‑Such apathy on the part of the tax administrators was not condonable nor excusable‑‑­Such act was a maladministration, which perverts the entire system and requires immediate attention of Central Board of Revenue Responsibility of Central Board of Revenue was to manage and supervise in, such a manner that proper tax administration was carried out according to law‑‑‑Federal Tax Ombudsman recommended the Central Board of Revenue to institute an inquiry into the delay in delivering decision in the appeal and take suitable action and issue proper instructions regarding disposal of appeal and to ensure its implementation.

Black's Law Dictionary ref.

Messrs Aasmi Package (Pvt.) Ltd. v. Commissioner of Income ­tax (Appeals) 2000 PTD 39 and Ch. Irshad Ahmad v. CIT 1996 PTD 279 rel.

2003 P T D 2775

[Federal Tax Ombudsman]

Before Justice (Retd.) Saleem Akthar, Federal Tax Ombudsman

GHULAM RASOOL

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.864 of 2002, decided on 12th November, 2002.

Sales Tax Act (VII of 1990)‑‑‑

‑‑----S. 25‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)‑‑‑Access to record, documents, etc. ‑‑‑Inclusion of complainant/assessee's name in the list of suspected units Without notice‑‑‑Validity‑‑‑Department had not been able to establish that the complainant/assessee was requested to produce certain documents for audit; as no copy of the notice to such effect was produced duly served on him‑‑‑Neither intimation to the complainant/ assessee was given about the inclusion of his name in the suspected units nor any reply was given to the complainant/ assessee's letters offering record for audit‑‑‑Where any action was taken affecting the right of a party an opportunity of being heard should be afforded to him‑‑­Proceedings taken or order passed in violation of principles of natural justice was a nullity and void‑‑‑Department issued a notice under S.25 of the Sales Tax Act, 1990 after filing the complaint by the complainant/ assessee‑‑‑ Maladministration had been proved on the part of the Department as the name of complainant/assessee's unit was included in this list of suspected units without any valid basis‑‑‑In spite of complainant's cooperation and voluntary offer for audit, the Department did not response to evaluate and rectify its illegal action of including the complainant's unit in the list of suspected units‑‑‑Such actions which adversely affect the business, reputation and. credibility should be taken after due notice to the party and after making proper investigation‑‑­Federal Tax Ombudsman recommended that the name of the complainant/assessee's unit be deleted from the list of suspected units forthwith and the Member (Sales Tax), Central Board of Revenue to issue advice to all concerned officers that a show‑cause notice must be given to all the units before notifying thus as suspected before publication/circulating such list.

Muhammad Bashir Malik and Mazahar Hussain Shah for the Complainant.

Moin‑ud‑Din Ahmad, Assistant Collector (H.Q.), Collectorate of Sales Tax, Faisalabad for Respondent.

2003 P T D 2784

[Federal Tax Ombudsman]

Before Justice (Retd.) Saleem Akthar, Federal Tax Ombudsman

Messrs ASIM WEAVING FACTORY, FAISALABAD

Versus

SECRETARY, REVENUE DEVISION, ISLAMABAD.

Complaint No. 1264 of 2002, decided on 20th November, 2002.

Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑S. 59(1)‑‑‑C.B.R. Circular No.4 of 2001, dated 18‑6‑2001, para. 9(a)(i)‑‑‑Self‑Assessment Scheme‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)‑‑‑Self ­assessment‑‑‑Assessment year 2001‑2002‑‑‑Selection of case for total audit through computer random ballot by allotment of National Tax Number with prefix `Z' without intimating such National Tax Number to assessee‑‑‑Validity‑‑‑Without prejudice to the grounds, of complainant/ assessee's appeal no maladministration was found in selection of complainant/ as se ssee's return for audit‑‑‑Investigation was closed by the Federal Tax Ombudsman.

Muhammad Asif, Member AOP for the Complainant.

M. Masood Ahmed, ACIT for Respondent.

2003 P T D 2786

[Federal Tax Ombudsman]

Before Justice (Retd.) Saleem Akthar, Federal Tax Ombudsman

NAYAB COTTON GINNING (PVT.) LTD., GOJRA.

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 122 of 2002, decided on 23rd November, 2002.

Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑Ss. 108(b), 2(26)(c), 50, 143‑B, 142 & 116‑‑‑Income Tax Rules, 1982, R.61‑‑S.R.O. 943(I)/79, dated 17‑10‑1979‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000); S.2(3)‑‑‑Penalty for failure to furnish return of total income and certain statements‑‑‑No payments attracting provisions of S.50 of the Income Tax Ordinance, 1979 were made as the factory was leased out and no statement under S.143‑B was filed‑‑‑Imposition of penalty under S.108(b) of the Income Tax Ordinance, 1979 for default in submission of monthly statements was required to be submitted under S.142 of the Income Tax Ordinance, 1979‑‑‑Validity‑‑‑Order passed imposing penalty was arbitrary and capricious, contrary to facts evident from record as well as against the law and thus maladministration was proved on the Count that the process employed as well as the decisions made by the Special Officer and the concerned Inspecting Additional Commissioner both were contrary to law as well as mall fide the decision was perverse, arbitrary, unjust and oppressive; the decision was based on irrelevant ground; decision involved exercise of powers for improper motive of administrative excess to deny the complainant his due refund and alternately the decision proved incompetence and inaptitude of the Special Officer as well as the Inspecting Additional Commissioner in discharge of their duties and responsibilities‑‑‑Federal Tax Ombudsman recommended that the Commissioner may, by an order in writing, amend under S.221 of the Income tax Ordinance, 2001 the order to rectify the mistakes in the order that are apparent from record and the proceedings under Efficiency and Disciplinary Rules, 1973 are initiated against the Special Officer and the concerned Inspecting Additional Commissioner for committing the maladministration and to take action against them/warranted under the Rules.

Anwar Bhatti for the Complainant.

Amjad Khan, IAC for Respondent.

2003 P T D 2867

[Federal Tax Ombudsman]

Before Justice (Retd.) Saleem Akhtar, Federal Tax Ombudsman

Messrs PAKISTAN MINERAL WATER BOTTLING PLANT, KARACHI

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. C‑36 of 2003, decided on 12th April, 2003.

Central Excises Act (I of 1944)‑‑‑--

‑‑‑‑Ss. 3D (3) & 4(2)‑‑‑C.B.R. Letter Circular No.1 (20)‑CEB/94‑‑­C.B.R. No. 1(7)‑CEB/99, dated 12‑6‑1999‑‑‑C.B.R. Letter C. No.9 (10)‑CEJ/2000, dated 15‑3‑2002‑‑‑Constitution of, Pakistan (1973), Art. 189‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S. 2(3)‑‑-Collection of excess duty etc.‑‑‑Claim of refund of excess excise duty charged on account of inclusion of chilling charges in the retail price of aerated water in pursuance of Supreme Court's judgment‑‑‑Claim of such refund was rejected on the ground that the incidence of duty had been passed on to the consumer‑‑‑Validity‑‑­Entire order suffered from illegality and was against the judgment of the Supreme Court‑‑‑Where illegal orders were passed which were contrary to law and against the judgment of the Supreme Court, it amounted to maladministration requiring interference‑‑‑Where tax or duty was charged illegally it was refundable as such amounts which were not tax or duty if recovered could not be retained by the Government even on technical ground‑‑‑Federal Tax Ombudsman recommended that Central Board of Revenue set aside the order passed by the Additional Collector and direct the Collector of Sales Tax and Central Excise, to ask the complainants to furnish the certificate from a Chartered Accountant; examine the refund claim in the light of Chartered Accountant's certificate and after affording the complainants the opportunity to substantiate the refund claim.

Aminuddin Ansari, Advocate:

Z.A. Roomi, Director Finance:

Muhammad Saleem, Deputy Collector of Sales Tax and Central Excise, Peshawar.

2003 P T D 2872

[Federal Tax Ombudsman]

Before Justice (Retd.) Saleem Akhtar, Federal Tax Ombudsman

Messrs GHARIBWAL CEMENT LTD., LAHORE and another

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 1438‑L of 2002, decided on 4th February, 2003.

(a) Bias‑‑‑

‑‑‑‑Meaning‑‑‑Bias is a state of mind which if exhibited by words, expression or body language or such expression which leads to a belief or suspicion in the mind of a party that he will not have a fair deal‑‑­To determine whether particular alleged facts do constitute a bias does not depend on the perception, thinking, conviction or belief of the party‑‑‑Test is whether a reasonable man apprised of full facts would conclude that there is likelihood of bias or reasonable suspicion of bias.

(b) Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000)‑‑‑--

‑‑‑‑Preamble‑‑‑Object and purpose.

(c) Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000)‑‑‑--

‑‑‑‑S. 2(3)‑‑‑Maladministration‑‑‑Meaning.

(d) Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000)‑‑‑--

‑‑‑‑S. 9(1)‑‑‑Jurisdiction, functions and powers of the Federal Tax Ombudsman.

(e) Interpretation of statutes‑‑‑

‑‑‑‑ Principles of interpretation.

Nawaz Sharif's case PLD 1993 SC 493: AIR 1960 SC 137; (1994) 1 SCC 243; Discipline of Law by Lord Denning, Pinner v. Everett (1969) 3 AER 257; Maunsell v. Olins (1975) AC 373 and Argon (Cargo Ex) Gandeb v. Brown LR5 PC 134 ref.

(f) Interpretation of statutes‑‑‑-

‑‑‑‑Where primary construction defeats manifest purpose of a statute and leads to unjust results, absurdity, repugnancy, inconsistency or manifest contradiction, departure from the plain or primary meaning is not permitted.

(g) Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000)‑‑‑

‑‑‑‑Preamble‑‑‑Interpretation‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance, 2000 being a beneficial legislation, its provisions should be interpretated in the manner, which may advance the object of the enactment by promoting the remedy provided under it and suppressing the mischief it seeks to eradicate.

(h) Central Excises Act (I of 1944)‑‑‑--

‑‑‑‑S. 3‑‑‑Sales Tax Act (VII of 1990), Preamble‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)‑­Issuance of notices alleging evasion of excise duty and sales tax‑‑­Remarks by the Collector that he was going to create history by passing a landmark judgment consisting of 100 pages‑‑‑Allegations of bias, prejudice and passing of judgment before hearing‑‑‑Validity‑‑‑Federal Tax Ombudsman passed short order and observed that Federal Tax Ombudsman had jurisdiction in the matter; that no maladministration in the case was found that Department will not take or initiate any recovery proceeding against the complainant till the filing of the appeal before the Tribunal within the period of limitation.

Nawaz Sharif's case PLD 1993 SC 493; AIR 1960 SC 137; (1994) 1 SCC 243; Discipline of Law by Lord Denning; Pinner v. Everett (1969) 3 AER 257; Maunsell v. Olins (1975) AC 373; Argon (Cargo Ex) Gandeb v. Brown LR5 PC 134 and Complaint No.709 of 2001 distinguished.

Viqar A. Khan, C.A. for the Complainant.

Athar Minallah, Advocate.

Humayun Khan Sikandari, Collector (Adjudication) Customs, Central Excise, Rawalpindi.

2003 P T D 2888

[Federal Tax Ombudsman]

Before Justice (Retd.) Saleem Akhtar, Federal Tax Ombudsman

SIDDIQUE JEWELLERS, LAHORE

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 549/L of 2003, decided on 16th July, 2003.

(a) Income Tax Ordinance (XXXI of 1979)‑‑‑--

‑‑‑‑S. 59(1)‑‑‑C.B.R. Circular No. 7 of 2002, dated 18‑6‑2002, para. 9(a)(ii) (Self‑Assessment Scheme)‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.9(2)(b)‑‑­Jurisdiction, functions and powers of the Federal Tax Ombudsman‑‑‑Self assessment‑‑Assessment year 2002‑2003‑‑‑Setting apart‑‑‑Objection that Federal Tax Ombudsman has no jurisdiction as the matter related to assessment and the assessee had remedy to file appeal /revision/review‑‑­Validity‑‑‑Section 9(2)(b) of the Establishment of Office of Federal Tax Ombudsman Ordinance, 2000 places bar on matters relating to assessment of income where legal remedies of appeal/review/revision are provided under the law to contest the set‑apart of a return for the Total Audit by resort to para. 9(a) of the Self‑Assessment Scheme‑‑‑Matter clearly fell within the jurisdiction of Federal Tax Ombudsman as allegation about "maladministration" in the process of selection was to be investigated‑‑‑Objection was overruled by the Federal Tax Ombudsman.

(b) Income Tax Ordinance (XXXI of 1979)‑‑‑--

‑‑‑‑S. 59(1)‑‑‑C.B.R. Circular No.7 of 2002, dated 18‑6‑2002, para.9(a)(ii) (Self‑Assessment Scheme)‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)‑‑‑Self ­assessment‑‑‑Setting apart‑‑‑Assessment year 2002‑2003‑‑‑No account case‑‑‑Capital‑‑‑Cash in hand/prize bonds‑‑‑Reasons to believe‑‑‑Setting apart of case for Total Audit on the ground that cash and capital was available for conducting business and by rotating such capital 6 times the sales should have been higher than the declared‑‑‑Reason existed to believe that sales were suppressed‑‑‑Validity‑‑‑Nature of business was the manufacturer cum‑sale‑‑‑Non‑maintenance of books of accounts and admitted availability of foreign remittances were declared as cash in hand, were sufficient indicators promoting a "reason to believe" that true particulars of income may have been suppressed‑‑‑Complaint was considered to be without merit and the same was closed by the Federal Tax Ombudsman.

Muhammad Siddique Ch. for the Complainant.

Anwar‑ul‑Haq Jillani, D‑CIT for Respondent.

2003 P T D 2891

[Federal Tax Ombudsman]

Before Justice (Recd.) Saleem Akhtar, Federal Tax Ombudsman

Messrs PAK EXPO (PVT.) LIMITED, KARACHI

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. C‑688‑K of 2003, decided on 17th July, 2003.

Sales Tax Act (VII of 1990)‑‑‑

‑‑‑‑Ss. 21 & 37‑‑‑S.R.O. 230(I)/1997, dated 29‑3‑1997‑‑‑Standing Order 1 of 2000‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)‑‑‑De‑registration‑‑‑Application for de‑registration‑‑‑Audit‑‑‑No intimation about the outcome of the audit to complainants‑‑‑Unreasonable delay in disposal of application for de­registration‑‑‑Validity‑‑‑Audit had dragged on for a long time and the complainants had been kept in dark about the outcome of audit or the result of explanation given by them‑‑‑Demand seemed to have been calculated by the auditor and complainants had given explanations in this regard but had not been informed of the outcome of this exercise‑‑‑Such was a clear case of harassment on the part of the Sales Tax Authorities‑‑­Senior officers had left the entire initiative with the auditors who conduct the process of audit at their own convenience ‑‑‑Maladministration thus was established‑‑‑Central Board of Revenue should take serious view of such kind of ‑ maladministration which renders the taxpayers hostage to the whims of the Sales Tax Officials and leave them at their mercy‑‑­Federal Tax Ombudsman recommended that Central Board of Revenue to devise clear parameters for the auditors to comply with and senior officers should be made responsible to ensure that the prescribed time frame is strictly followed when the taxpayers offer explanation or reply to the audit observation, the Sales Tax Authorities should give their clear response within specified period; where a contravention case is instituted against a taxpayer, the Sales Tax Authorities should intimate him of the nature of contravention and the action proposed to be taken; Central Board of Revenue to consider to specify a time frame for issue of a show‑cause notice and completion of adjudication proceedings; initiate an inquiry to identify the, reasons for the inordinate delay at various stages of the audit, consequent on the de‑registration application, spanning a period of about three and half years and take suitable action against the officials responsible for the delay and for repeatedly demanding copies of the documents from the complainants; direct the Collector (Adjudication) to ensure that show‑cause notice be issued to the complainants within thirty days; adjudication proceedings be finalized within a reasonable period of time and decision regarding the application for de‑registration be given within fifteen days of the issue of the adjudication order.

Khushnood Ali Khan, Consultant.

Samina Taslim, Deputy Collector of Sales Tax (East).

Jamshed Talpur, Assistant Collector of Sales Tax.

Zahidul Bari, Senior Auditor.

2003 P T D (Trib.) 26

[Income‑tax Appellate Tribunal Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member and S. M. Sibtain, Accountant Member

I.T.A. No. 367/KB of 1998‑99, decided on 8th June, 1999.

Income Tax Appellate Tribunal Rules, 1981‑‑‑

‑‑‑‑R.10‑‑‑Contents of memorandum of appeal‑‑‑Grounds of appeal were not in accordance with R.10 of the Income Tax Appellate Tribunal Rules, 1981 and were vague and unspecific ‑‑‑Departmental appeal having been filed on vague and unspecific grounds, was dismissed by the Appellate Tribunal.

Muhammad Umer Farooq, D.R. for Appellant.

Z. H. Jafferi for Respondent.

Date of hearing: 8th June, 1999.

2003 P T D (Trib.) 101

[Income‑tax Appellate Tribunal Pakistan]

Before Muhammad Jahandar, Judicial Member and Mahmood Ahmad Malik, Accountant Member

I. T. As. Nos. 611/IB and 612/IB of 1998‑99, decided on 15th June, 2002.

(a) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑S.109‑‑‑Penalty for failure to maintain prescribed accounts‑‑‑Word "payable"‑‑‑Connotation‑‑‑Word "payable" appearing in S.109 of the Ordinance connotes the amount of tax which is calculated to be leviable on the assessee.

(b) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑Ss.109 & 32‑‑‑Income Tax Rules, 1982, Rr. 28 & 29‑‑‑Penalty for failure to maintain prescribed accounts‑‑‑Income from salary and private medical practice‑‑‑Non‑maintenance of requisite book of accounts as prescribed under Rr.28 & 29 of the Income Tax Rules, 1982‑‑­Calculation of penalty‑‑‑Basis‑‑‑"Tax payable" or "Tax chargeable"‑‑­First Appellate Authority directed that penalty should be calculated on the basis of tax payable whereas the same was calculated on the basis of tax chargeable‑‑‑Validity‑‑‑If the word "payable" used in S.109 of the Income Tax Ordinance, 1979 was taken, to be a tax found to have not been paid after assessment proceedings then there might be a situation where the assessee had paid the entire amount before filing the return and during assessment proceedings no further tax was determined to be payable and nothing remained to be paid‑‑‑In such case there shall be no amount of tax which could be made the basis of imposition of penalty, thus it could be inferred in the present case that it was that amount of tax which was leviable or chargeable on a source of income, for which books of accounts as required under S.32 of the Income Tax Ordinance, 1979 read with Rr.28 & 29 of the Income Tax Rules, 1982 had not been maintained and that would constitute the basis of penalty and the word "payable" used in S.109 of the Income Tax Ordinance, 1979 shall accordingly be construed‑‑‑As regards question pertaining to the proportionate tax determined in respect of the income from private medical practice for which the books of accounts had not allegedly been maintained, being made the basis of imposition of penalty, the Department had no objection‑‑‑Was axiomatic in relation to the incidence of liability, be it under the Income Tax Ordinance, 1979, 'that a net subjecting a multitude of people had to extricate those who were not clearly amenable to culpability‑‑‑Basis of the penalty would be the tax chargeable on the source of income, namely private medical practice, for which the books of accounts had allegedly not been maintained‑‑­Assessing Officer was expected to keep in mind all the attending circumstances of a given case in the context of imposition of penalty, particularly the existence of the mens rea on the part of the assessee‑‑­Appellate Tribunal disposed of the appeal accordingly.

Naushad Ali Khan, D.R. for Appellant.

Ghulam Hussain, I.T.P. for Respondent.

Date of hearing: 4th June, 2002.

2003 P T D (Trib.) 108

[Income‑tax Appellate Tribunal Pakistan]

Before Ehsan‑ur‑Rehman, Judicial Member and Muhammad Sharif Chaudhary, Accountant Member

W.T.As. Nos. 265/LB, 264/LB, 155/LB and 156/LB of 2002, decided on 21st August, 2002.

Wealth Tax Act (XV of 1963)‑‑‑

---Second Sched., Cl. 12(2)‑‑‑Exemption‑‑‑Shop‑‑‑Association of Persons‑‑Exemption of shop was rejected by the Assessing Officer as the business was being conducted by the Association of Persons consisting of the assessee as member/partner and not solely by the assessee who was the sole owner of the shop‑‑‑First Appellate Authority directed that the claim for exemption of shop under Cl.12(2) of the Wealth Tax Act, 1963 be accepted to the extent of 50% and the rest of 50% value be added in the taxable wealth‑‑‑Validity‑‑‑Order of the First Appellate Authority for allowing the exemption to the extent of 50% of the assessed value was upheld by the Appellate Tribunal as the said premises had been used by the appellant/assessee, also for the reason that it comfortably fell within the scope of Cl. 12(2) of the Wealth Tax Act, 1963 but as far as the method evolved for valuation of shop in the order was concerned it was not at all in conformity with the R.8(3) of the Wealth Tax Rule, 1963 so it was vacated and the Assessing Officer was directed to determine the Gross Annual Letting Value of the shop for its valuation:

Muhammad Zulfiqar Ali D.R. for Appellant (in W.T.As. Nos.265/LB and 264/LB of 2002).

Muhammad Ramzan for Respondent (in W.T.As. Nos. 265/LB and 264/LB of 2002).

Muhammad Ramzan for Appellant (in W.T.As. Nos. 155/LB and 156/LB of 2002).

Muhammad Zulifqar Ali, D.R. for Respondent (in W.T.As. Nos. 155/LB and 156/LB of 2002).

Date of hearing: 21st August, 2002.

2003 P T D (Trib.) 116

[Income‑tax Appellate Tribunal Pakistan]

Before S. Hasan Imam, Judicial Member and Abdul Ghafoor Junejo, Accountant

Member

I. T. A. No. 1578/KB of 1999‑2000, decided on 20th August, 2002.

(a) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑S.65‑‑‑Additional assessment‑-‑Transfer of jurisdiction from Assessing Officer of Tando Adam to Assessing Officer, Latifabad‑‑­Proceedings initiated under S.65 of the Income Tax Ordinance, 1979 by the Assessing Officer of Tando Adam were again initiated by the Assessing Officer of Latifabad‑‑‑Validity‑‑‑Original proceedings were dropped in pursuance of the Assessing Officer, Tando Adam vide order sheet entry dated 17‑6‑1994 at Tando Adam and the earlier First Appellate Authority, Hyderabad had annulled the order and thus reopening of case under S.65 of the Income. Tax Ordinance, 1979 was justified in the sense that the income for the year under appeal from the business of the assessee was not assessed to tax either in Tando Adam or at Latifabad Circle, Hyderabad.

(b) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑S.65‑‑‑Additional Assessment‑‑‑Notice‑‑‑Non‑ticking of relevant clause‑‑‑Validity ‑‑Contention of the assessee was to the effect that non­-ticking of relevant clause in the notice under S.65 of the Income Tax Ordinance, 1979 due to the reasons that earlier assessment was completed also by Assessing Officer of same circle under S.63 of the Income Tax Ordinance, 1979 and was also motivated by Departments efforts to assess the income of assessee from his business and it was annulled also by the then First Appellate Authority for want of notice under S.65 of the Income Tax Ordinance, 1979 was repelled‑ ‑‑Assessee was in complete knowledge of basis/reason of action under S.65 of the Income Tax Ordinance, 1979 before the formal issuance of notice under S.65 of the Income Tax Ordinance, 1979.

(c) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑S. 65‑‑‑Additional assessment ‑‑‑Notice‑‑‑Assessment‑‑‑Non‑mention­ing of figure of total income in the assessment order‑‑‑Validity Assessing Officer had confronted the figure of total income and he had also issued IT‑30 and notice which was part and parcel of the assessment order‑‑‑Proceeding taken in pursuance of S.65 were not thwarted by suet small technical lapses.

1979 PTD 47; 2001 PTD 1633; 1998 PTD (Trib.) 973 and 2000 PTD (Trib.) 2531 distinguished.

(d) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑Ss.13(1)(d) & 65‑‑‑Addition‑‑‑Inappropriate addition have to be deleted‑‑‑Where the addition under S.13(1)(d) of the Income Tax Ordinance, 1979 was found to be not sustainable in law, the same should have been deleted instead of setting aside the same.

1993 PTD (Trib.) 1172 and 1988 PTD (Trib.) 992 rel.

(e) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑S.13(1)(d)‑‑‑Addition‑‑‑Non/vague approval of‑‑‑Validity‑‑‑Record showed that no approval letter was sent to the Inspecting Additional Commissioner and according to him the reply about approval letter of the Inspecting Additional Commissioner was also vague and did not throw any light on the nature and details of the addition‑‑‑Addition under S.13(1)(d) of the Income Tax Ordinance, 1979 was illegal, ultra vires and not sustainable in law‑‑‑No double approval was obtained by the Assessing Officer as even the assessment order of the Assessing Officer also did not claim and mention that any double approval for this addition under S.13 of the Income Tax Ordinance, 1979 was ever obtained by Assessing Officer from the Inspecting Additional Commissioner‑‑‑Addition should not have been remanded back but was to be deleted.

1990 PTD, 889; 1988 PTD 1014; 1962 PTD 235; I.T.A. No.383/KB of 1997‑98; 1999 PTD 3637 and 1993 PTD (Trib.) 1093 ref.

1993 PTD (Trib.) 1172 and 1988 PTD (Trib.) 992 rel.

A. S. Jafri for Appellant.

Amjad Malik, D.R. for Respondent.

Date of hearing: 20th July, 2002.

2003 P T D (Trib.) 128

[Income‑tax Appellate Tribunal Pakistan]

Before Rasheed Ahmed Sheikh, Judicial Member

I.T.As. Nos. 6625/LB, 6625‑A/LB and 6625‑B/LB of 1996, decided on 3rd May, 2002.

(a) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑S.59(1)(3)‑‑‑Self‑Assessment‑‑‑Assessment order in writing‑‑‑IT‑30 Form‑‑‑Return of income had been filed under the Scheme of Self­-Assessment which qualified to be processed under the said Scheme without requiring any adjustment under S.59(3) of the Income Tax Ordinance, 1979 or otherwise, the returned income was accepted in toto as the assessed income, the requirement of an assessment order in writing were sufficiently fulfilled by preparation of a tax computation sheet in the manner described in the prescribed IT‑30 Form duly signed by the Assessing Officer‑‑‑Such an order under S.59(1) of the Income Tax Ordinance, 1979 was properly made by the Assessing Officer for the relevant year.

1998 PTD (Trib.) 3718 rel.

(b) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑Ss. 62, 63 & 59(1)‑Assessment on production of accounts evidence etc.‑‑‑Order in writing‑‑‑IT‑30 Form‑‑‑Provisions of S.59(1) of the Income Tax Ordinance, 1979 were not at par with the provisions of normal assessment to be made under Ss.62 or 63 of the Income Tax Ordinance, 1979 or in any other provision of the Income Tax Ordinance, 1979 were passing of an order in writing otherwise than in S.59(1) of the Income Tax Ordinance, 1979, had been mentioned‑‑‑In all these provisions passing' of an "order in writing" was a statutory obligation which was to, be complied with and in absence thereof IT‑30 Form coupled with it notice of demand to be issued under S.85 of the Income Tax Ordinance, 1979 could not take place of an "order in writing"‑‑‑In no way IT‑30 Form implies application of mind but was rather a mechanical sheet wherein "fill in the blanks" were to be made‑‑‑Appellate Tribunal held that mere making "fill in the blanks" or incorporating a few data in the IT‑30 Form was not sufficient to satisfy statutory requirements of an order in writing to be made under S. 62 or 63 of the Income Tax Ordinance, 1979 and in absence of a formal order of assessment, the amount of tax sought to be realized was illegal‑‑‑IT‑30 Form and the demand notice could not be equated with the passing of an assessment order in writing as was envisage under S. 62 or 63 of the Income Tax Ordinance, 1979 and as su0a no order could be solicited to exist for the relevant assessment year.

1992 PTD 347; 19817 PTD 249 rel.

(c) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑S.63‑‑‑Best judgment assessment ‑‑‑C.B.R. Letter No.C.7(22) DTO-­I/94, dated 19‑10‑1990‑‑‑Absence of assessment order‑‑‑Declared income was accepted by the First Appellate Authority on the ground that in absence of passing of any assessment order; there appeared to be no objective basis to the assessment as framed in the year under appeal‑‑­Validity‑‑‑Since no formal assessment order in terms of S.63 of the Income Tax Ordinance, 1979 had been passed‑by the Assessing Officer, there was no tax liability of assessee to be complied with‑‑‑Appeal Commissioner had rightly ordered acceptance of the declared income for all the years under appeal‑‑‑Departmental appeals failed and were dismissed being bereft of any merit by the Appellate Tribunal.

1992 PTD 347; 1987 PTD 249 rel.

Memo for Appellant.

Muhammad Asif for Respondent.

Date of hearing: 26th April, 2002.

2003 P T D (Trib.) 137

[Income‑tax Appellate Tribunal Pakistan]

Before Rasheed Ahmed Sheikh, Judicial Member and Amjad Ali Ranjha, Accountant Member

I.T.A. No.3906/LB of 2000, decided on 31st August, 2002.

Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑S.66A‑‑‑Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order‑‑‑Agreed assessment‑‑‑Inspecting Additional Commissioner cancelled the assessment on the ground that the Assessing Officer while framing the assessment had allowed capital loss on sale of investment which was not allowable against the income of the Company and could only be set off against capital‑gains hence, Assessing Officer while setting off loss against Revenue income acted in oral conversation of the law and framed an assessment which was not only erroneous but was also prejudicial to the interest of Revenue ‑‑‑Validity‑‑­Appellate Tribunal held that since an agreement had been signed between the department and the assessee and Inspecting Additional Commissioner was a part of that agreement hence, invoking of provisions of S.66A of the Income Tax Ordinance, 1979 was illegal ‑‑‑Assessee's appeal was accepted.

1993 PTD (Trib.) 125; 20(11 PTD 1206 and Scorer (Inspector of taxes) v. Olin Energy Systems. Ltd. (House of Lord) rel.

1989 PTD (Trib.) 907; (1996.) 73 Tax (sic) and (1999) PTCLR 491 ref.

Sajid Ijaz Hottiana; Muhammad Maqbool, A.C.A. for Appellant.

Mian Javed ur Rehman, D. R. for Respondent.

2003 P T D (Trib.) 163

[Income‑tax Appellate Tribunal Pakistan]

Before Ehsan‑ur-Rehman Judicial Member and Muhammad Sharif Chaudhary, Accountant Member

W.T.A. No.997/LB of 2001, decided on 24th August, 2002.

Wealth Tax Act (XV of 1963)‑‑‑

‑‑‑‑Ss.17(1)(a), 16(3) & 35‑‑‑Wealth Tax Rules, 1963, R.8(2)(ii)‑‑­Wealth escaping assessment‑‑‑Assessment‑‑‑Rectification of mistake‑‑­Valuation of shares‑‑Break up value‑‑‑Assessing Officer accepted the face value of shares while passing order under S.16(3) of the Wealth Tax Act, 1963‑‑‑Order passed under S.16(3) of the Wealth Tax Act, 1963 was rectified under S.35 of the Wealth Tax Act, 1963 which adopted the break up value of such shares which was worked out by including the surplus on revaluation of assets instead of earlier acceptance of the declared face value and the same was hit by limitation in First Appeal‑‑­Assessing Officer, at such juncture resorted to action under S.17(1)(a) of the Wealth Tax Act, 1963 and adopted the same break up value after confrontation‑‑‑Validity‑‑‑Order of the Appellate Authority was vacated by the Appellate Tribunal which annulled the proceedings initiated by issuance of notice under S.17(1)(a) of the Wealth Tax Act, 1963 and also annulled the assessment framed under Ss.16(3)/17(1)(a) of the Wealth Tax Act, 1963 which was blatantly in violation of law and as a result the existing order under S.16(3) of the Wealth Tax Act, 1963 was restored due to the reasons that there was neither any failure, or omission on the part of the assessee to make return of his net wealth nor he failed to disclose fully and truly the material facts necessary for his assessment, also there was nothing which could mean escaped assessment for charging the Wealth Tax, whereby there could be under assessment or assessment at too low a rate, that no new information had come on surface impelling the Assessing Officer to initiate proceedings under S.17(1)(a) of the Income Tax Ordinance, 1979 so as to reopen the finalized assessment under S.16(3) passed after conscious application of mind on the available facts on record; that the provisions like S.17(1)(a) of the Income Tax Ordinance, 1979 were not available to cover the negligence of the Department for not properly following the law while framing the assessment; that the Assessing Officer unlawfully extended his authority by assuming jurisdiction under S.17(1)(a) of the Income Tax Ordinance, 1979 when the time prescribed under S.35 had expired; that Assessing Officer resorted to undesirable practice by keeping the assessment proceedings pending for a period of two years and six days without any justification as was evident from the order passed and that provisions of law were not meant for applying them arbitrarily by the Assessing Officer‑‑‑No new facts had been brought on record in the present case, necessitating any action under S.17 by the Assessing Officer ‑‑‑Appellant/assessee had discharged wilfully the statutory responsibility vested in him in respect of proper submission of return and no instance had been noticed or pointed out regarding the violation which could cause an action by invoking the provisions of S. 17(1)(a) of the Wealth Tax Act, 1963.

Hamid Masood, F.C.A. for Appellant.

Muhammad Zulfiqar Ali, D.R. for Respondent.

Date of hearing: 24th August, 2002.

2003 PT D (Trib.) 192

[Income‑tax Appellate Tribunal Pakistan]

Before S. Hasan Imam, Judicial Member and Muhammad Akhtar Nazar Mian, Accountant Member

I.T.A. No.479/KB of 1996‑97, decided on 23rd August, 2002.

Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑Ss. 66‑A, 59‑A, 80‑C(4)‑‑‑C.B.R. Circular No.12 of 1991, dated 30‑6‑1991‑‑‑Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order‑‑‑Income from sale of opening stock‑‑Taxability‑‑‑Order passed under' S.59‑A of the Income Tax Ordinance, 1979 was considered as erroneous and prejudicial to the interest of Revenue by the Inspecting Additional Commissioner on the ground that income in respect of sale of opening stock was not subjected to tax after prorating expenses in terms of C.B.R. Circular No.12 of 1991, dated 30‑6‑1991 and directed the Assessing Officer to determine the taxability of income out of sale of opening stock‑‑‑Validity‑‑‑Inspecting Additional Commissioner himself, clearly showed in his order that the provisions of S.80C of the Income Tax Ordinance, 1979 had duly been complied with and the order relevant to said provision of law made by the assessing Officer under S.59‑A of the Income Tax Ordinance, 1979 was in no way erroneous or prejudicial to the interest of Revenue—Income from sale of opening stock with due regard to allowing of expenses prorata under the instructions of Central Board of Revenue was not a matter which could form a part of the order under S. 59-A of the Income Tax Ordinance, 1979---Proper course for the department was to call for the return under S. 56 of the Income Tax Ordinance, 1979 and then proceed to determine income from said source and that also under normal provisions of Law—Proceedings calling for return of income had not been initiated---Order passed under S.59-A read with S.80-C of the Income Tax Ordinance 1979, was in no way erroneous and prejudicial to the interest of Revenue on the basis of facts determined by the Inspecting Additional Commissioner after hearing the assessee but it was not in his legal jurisdiction to direct the Assessing Officer through order under S.66-A of the Income Tax Ordinance, 1979 to determine the taxability of income out of sales of the opining stock—If the legal proceedings for assessing this part of income had not been taken then obviously no order at all was in the field pertaining to this issue which could be adjudged by the interest of Revenue—Order passed by the Inspecting Additional Commissioner under S.66-A of the income Tax Ordinance, 1979 was cancelled by the Appellate Tribunal.

Muhammad Anwar, I.T.P. for Appellate.

Javed Iqbal Rana, D. R. for Respondent.

Date of hearing: 23rd August, 2002.

2003 P T D (Trib.) 199

[Income‑tax Appellate Tribunal Pakistan]

Before Sajid Hussain Member (Judicial) and Zafar Iqbal, Member (Technical)

Appeal No. 1 of 2001, decided on 18th April, 2001.

(a) Customs Act (IV of 1969)‑‑‑

‑‑‑‑Ss. 15, 16 & 194‑A‑‑‑Antiquities Act (VII of 1975), S.2(c), 24 & 26‑‑‑Illegal export of sculpture in stucco and stone alleged to be counterfeit of Ghandhara sculpture‑‑‑Respondent confiscated such goods for contravention of Ss. 15 & 16 of Customs Act, 1969 and Ss. 24 & 26 of Antiquities Act, 1975‑‑‑Validity‑‑‑Product should be an antiquity for prohibition of an export under S.2(c) of Antiquities Act, 1975‑‑‑Term "antiquity" connotes "ancientness"‑‑‑Word "ancient" means "of time long past" or `at least 75 years old"‑‑‑Goods in dispute were admittedly of recent and modern vintage and had been declared so‑‑‑Goods in dispute were not an antique as same had been termed as "counterfeit" goods by Archaeology Department‑‑‑Provisions of S.26(2) of Antiquities Act, 1975 were not applicable to the present case as goods in dispute were not prohibited under S.26(1) of Antiquities Act 1972, which specifically prohibited export of an antique and not 'otherwise‑‑‑Customs Authorities could take action, where goods were prohibited for export due to conditions laid down in S.26(1) of Antiquities Act, 1975, whereas facts of the present case did not correspond to a situation described therein‑‑‑Except report of Archaeology Department, there was no other evidence to corroborate the fact that there was deception through resemblance; and there was an intention to deceive‑‑‑Appellant had never made an attempt to export an antique, thus, there was no offence under S.26 of Antiquities Act, 1975‑‑‑No action of deception had been attributed to appellant nor any intention to defraud someone had been shown by respondent‑‑‑Provisions of S.24 of Antiquities Act, 1975, thus, were not applicable‑‑‑Tribunal declared impugned order as illegal and without jurisdiction; and directed respondent to decide appellant's application for export afresh, whereas Competent Authority under Antiquities Act, 1975 would be at liberty to pursue their independent right within framework of S.24 of Antiquities Act, 1975 before an appropriate Court of law.

(b) Penal, Code (XLV of 1860)‑‑‑

‑‑‑‑S. 28‑‑‑Counterfeit, offence of‑‑‑Prerequisite conditions for such offence stated.

An offence within the meaning of section 28 of Penal Code, 1860, takes place when two pre‑requisite conditions concur, namely, (1) that accused had caused one thing to resemble another thing, both could be either same or of similar description, and (2) that accused had intended by that resemblance to practice deception or was saddled with knowledge that there was likelihood that deception would occur.

PLD 1969 Kar. 245 ref.

Siraj‑ul‑Haq for Appellant.

Aijaz for Respondent.

2003 P T D (Trib.) 210

[Income‑tax Appellate Tribunal Pakistan]

Before Fazlur Rehman Khan, Judicial Member and Mrs. Abida‑Ali, Accountant

Member

W.T.As. Nos. 189 and 190(PB) of 1998‑99, decided on 29th June, 2002.

Wealth Tax Act (XV of 1963)‑‑‑

‑‑‑‑S. 16‑‑‑Assessment‑‑‑Gift‑‑‑Assessing Officer rejecting the contention of the assessee that he had gifted a portion of the property included the same in net wealth‑‑‑First Appellate Authority excluded the value of gifted portion from the assessment of the assessee‑‑‑Validity‑‑‑Alleged gift deed was executed on 13‑7‑1988 but from the very start the assessee was declaring such property as his own‑‑‑If gift was a genuine document, then why it was not produced before the Assessing Officer at the earliest possible opportunity‑‑‑In the gift deed the assessee had stated that possession of the gifted property had been delivered to the donee i.e. his mother but his statement dated 26‑2‑1997 was available on the departmental record wherein he had stated that he was living in the upper portion of the said property and according to the statement of assessee, this was the same portion which had been gifted to the mother‑‑­Apparently both the donor and the donee were living in the same portion‑‑‑If the donee was not living in the alleged gifted portion of the said property, then she was not in possession of the same and no question of gift arose‑‑‑If the donee was jointly living with her son the donor, then gift deed had not been incorporated in the Municipal record‑­‑Gift was not valid and the Assessing Officer had rightly rejected the same and order of the First Appellate Authority was not maintainable‑‑­Order of the First Appellate Authority was set aside and the assessment order was restored by the Appellate Tribunal.

1975 PTD 12 distinguished.

Mahomedan Law by D.F. Mulla 1985 Edn. and 1973 PTD 329 ref.

Qaisar Ali Khan, D.R. for Appellant.

Humayun Khan Rohaila ITP for Respondent.

Date of hearing: 29th June, 2002.

2003 P T D (Trib.) 220

[Income‑tax Appellate Tribunal Pakistan]

Before Justice (Retd.) Abdul Majeed Tiwana, Chairman/Member (Judicial), Mian Abdul Qayyum, Member (Judicial) and Zafar‑ul‑Majeed, Member (Technical)

Appeal No.453/LB of 1999, decided on 4th June, 2001.

Customs Act (IV of 1969)‑‑‑

‑‑‑‑Ss. 19, 33 & 194‑A‑‑‑S.R.O. 555(I)/98, dated 12‑6‑1998‑‑­S.R.O.24(I)/99, dated 13‑1‑1999‑‑‑Refund of duty, claim for‑‑‑Computer parts imported and charged with duty under S.R.O. 555(I)/98 were subsequently exempted from , duty through S.R.O. 24(I)/99, dated 13‑1‑1999 amending earlier S.R.O. No.555(I)/98‑‑‑Appellants claim for refund of duty was rejected by authority on the ground that amending S.R.O.24(I)/99 extending benefit of exemption had no retrospective effect‑‑‑Validity‑‑‑Amending S.R.O.24(I)/99 was a continuation and amplification of an entry of Finance Act, 1998‑‑‑Such S. R.O. being a subsidiary legislative measure, if was ignored, even then appellants could claim refund under PCT Heading 8473.3020 relating to "parts and accessories of personal computers" incorporated in Finance Act, 1998, the main legislation, which override notification in forms of S.R.Os.‑‑­Omission of parts and accessories of personal computers in S.R.O. 555(I)/98, dated 12‑6‑1998 had not adversely affected refund claim of appellants‑‑‑Tribunal accepted appeal, set aside impugned order and found appellants entitled to claim and to be awarded refund of customs duty and taxes paid by them on import of such parts.

Messrs Techmen Office Automation v. Collector of Customs (sic) fol.

Abid Hussain Qureshi for Appellant.

Saqib Nazir Appraiser for Respondent.

2003 P T D (Trib.) 228

[Income‑tax Appellate Tribunal Pakistan]

Before Syed Kabirul Hasan, Jawaid Masood Tahir Bhatti, Judicial Members and

Shahid Jamal, Accountant Member

I.T.A. No. 3831/KB of 1993‑94, decided on 5th May, 2001.

(a) Income‑tax‑‑‑‑

‑‑‑‑Self‑Assessment Scheme ‑‑‑I.T. 30 Form‑‑‑Assessment order‑‑‑Order issued in I.T. 30 Form or assessment completed on computerized I.T. 30 Form was also an assessment order and there was no need for formal assessment order.

(1991) 191 ITR 634; (1971) 81 ITR, 759 and 1998 PTD (Trib.) 3718 rel.

(b) Income Tax Ordinance (XXXI of 1979)‑‑‑‑

‑‑‑‑Ss. 65(1)(c), 59(B) & 156‑‑‑C.B.R. Circular No. 14 of 1992 dated 1‑7‑1992‑‑‑Additional assessment‑‑‑Order passed under S. 59(B) of the Income' Tax Ordinance, 1979 and later rectified under S. 156 of the Income Tax Ordinance, 1979 was re‑opened under S. 65 of the Income Tax Ordinance, 1979‑‑‑Validity‑‑‑Once an order was passed under S. 59(B) or 59(1) then any credit of tax which was not allowed previously could be allowed by invoking S.156 of the Income Tax Ordinance, 1979, which was rightly done by the Assessing Officer‑‑­Explicit position was that the order once passed by the Assessing Officer by using I.T. 30 as assessment order, then any subsequent changes would be made by invoking provisions of section 156 of the Income Tax Ordinance, 1979, therefore, such a case could not be opened under S.65 of the Income Tax Ordinance, 1979‑‑‑Order passed under S. 65(1)(c) of the Income Tax Ordinance; 1979 was cancelled and the order passed under S.59(B) of the Income Tax Ordinance, 1979 was restored.

1992 PTD 513 rel.

(1982) 135 ITR 368 and 1988 PTD (Trib.) 987 ref.

Haji Yousuf for Appellant.

Mr. Umer Farooq, D.R. for Respondent.

2003 P T D (Trib.) 242

[Income‑tax Appellate Tribunal Pakistan]

Before Syed Nadeem Saqlain, Judicial Member and Imtiaz Anjum, Accountant

Member

I.T.As. Nos. 3249/LB to 3254/LB of 2002, decided on 18th May, 2002.

Income Tax Ordinance (XXXI of 1979)‑‑‑

--‑‑Ss.154, 59(A)/59(1), 61 & 66‑A‑‑‑Service of notice‑‑‑First Appellate Authority admitted that notice under S.61 of the Income Tax Ordinance, 1979 was not properly served and no reasonable opportunity of hearing was provided to assessee as no receipt of post was available on record to prove that notices had actually been sent through registered post despite the fact that on the office copies of the notices the words "registered post" was written and set aside the assessments‑‑‑Contention of the assessee was that non‑service of statutory notice in a proper manner would entail cancellation of assessment orders rather than setting aside the same by the First Appellate Authority‑‑‑Validity‑‑‑First Appellate Authority was not justified to proceed to set aside the case after observing such flagrant violation of legal provision and holding same to be against the law and he was required to annul the assessment proceedings conducted by the Assessing Officer‑‑‑Since the case had been decided on the legal ground of absence of proper service of notice, Appellate Tribunal did not dilate upon the merits of the case‑‑‑Order passed by the First Appellate Authority was vacated and that of the Assessing Officer were annulled by the Appellate Tribunal‑‑‑Assessing Officer was directed to accept the declared version of the assessee.

1979 PTD (Trib.) 19; NTR 1990 (Trib) 105; 1985 PTD (Trib.) 178 and PLD 1964 SC 410 rel.

Abdul Rasheed Gill for Appellant.

Mrs. Talat Altaf Khan, D.R. for Respondent.

Date of hearing: 8th May, 2002.

2003 P T D (Trib.) 260

[Income‑tax Appellate Tribunal Pakistan]

Before Muhammad Jahandar, Judicial Member and Mahmood Ahmad Malik

Accountant Member

M. As. (R) Nos.124 to 126(IB) of 2002 and W.T.As. Nos. 1193 to 1195(IB) of 1999‑00, decided on 7th August, 2002.

Wealth Tax Act (XV of 1963)‑‑‑

‑‑‑‑S. 35‑‑‑Wealth Tax Rules,, 1963, R.8(2)(c)(i) ‑‑‑ Rectification of mistake‑‑‑Valuation of share‑‑‑Appellate Tribunal directed the Assessing Officer to follow the judgment of High Court for valuation of shares but the judgment was overruled by the Supreme Court of Pakistan‑‑­Rectification application was filed by the department on the ground that the said judgment of the High Court relied upon by the Tribunal had been overruled by the Supreme Court of Pakistan and therefore, the order of Tribunal be rectified accordingly‑‑‑Validity‑‑‑Being unaware that the Supreme Court had delivered a judgment, whereby the High Court's order had been set aide, Appellate Tribunal passed an order which was contrary to the decision of the Supreme Court‑‑‑Scope of rectification under S.35 of the Wealth Tax Act, 1963 extended to mistakes of law‑‑‑Section 35 of the Wealth Tax Act, 1963 allowed mistakes to be corrected in the light of the law as it existed when the order sought to be rectified was passed‑‑‑Appellate Tribunal passed its order when the Supreme Court had already given its decision and no order, therefore, could be passed contrary to that decision‑‑‑Matter was neither past nor closed at the time of passing of the order by the Tribunal‑‑‑Rectification was a part of assessment process and unless limitation laid down in S.35 of the Wealth Tax Act, 1963 expired, the matter remained open and live‑‑‑Appellate Tribunal rectified its order accordingly‑‑‑[(1998) 78 Tax 217 overruled.

(1998) 78 Tax 217 overruled.

C.I.T. v. Shahnazwaz Ltd. and others 1993 SCMR 73 Irrelevant.

Federation of Pakistan and others v. Mrs. Samra Shakil and others 2001 PTD 3919; Himachal Pardesh Financial Corporation v. Commissioner of Income‑tax 233 ITR 450 = 2000 PTD 1072; Khalid Adamjee v. C.I.T. (West) Karachi 1983 PTD 246; Muhammad Yousaf v. Chief Settlement Commissioner PLD 1968 . SC 101 and Shad Muhammad and another v. C.D.A. Islamabad PLD 1991 SC 777 rel.

Naushad Ali Khan, D.R. for Appellant.

Zahid Hussain, A.C.M.A. for Respondent.

Date of hearing: 7th August, 2002.

2003 P T D (Trib.) 268

[Income‑tax Appellate Tribunal Pakistan]

Before S. Hasan Imam, Judicial Member Muhammad Akhtar Nazar Mian, Accountant Member

I.T.As. Nos.2044/KB and 2045/KB of 19‑95‑96, decided on 28th August, 2002.

Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑S. 111‑‑‑Penalty of concealment of income‑‑‑Agreed assessment‑‑­First Appellate Authority confirmed the penalty on the ground that agreement for imposition of penalty was duly signed by the authorized representative of the assessee while the assessee vehemently contended that he had never agreed for imposition of penalty and words of penalty were written by the Assessing Officer behind his back and without his consent‑‑‑Validity‑‑‑No penalty under S.111 of the Income Tax Ordinance, 1979 could be imposed without service of notice under S.116 of the Income Tax Ordinance, 1979 which should clearly mention the charge on which the penalty was proposed to be imposed‑‑‑Was clear from the provision of S.111 of the Income Tax Ordinance, 1979 that the Deputy Commissioner had to be satisfied that in the said proceedings or in earlier proceedings relating to an assessment in respect of the same income year, concealment of income had taken place and such satisfaction about the concealment should clearly ‑be indicated in the assessment proceedings which in effect culminate when assessment order is passed‑‑‑Intention to impose penalty for concealment had to be given in the assessment order itself‑‑‑On examination of the assessment orders passed under S.62 of the Income Tax Ordinance, 1979 it was found that nothing had been said in these orders regarding intention of the Assessing Officer for initiating penalty proceedings under S.116 of the Income Tax Ordinance, 1979‑‑‑Condition precedent for penalty proceedings not been fulfilled penalties imposed were set aside.

1994 PTD (Trib.) 688 rel.

M. Mukhtar for Appellant.

Saheen Aziz Niazi, D.R. for Respondent.

Date of hearing: 28th August, 2002.

2003 P T D (Trib.) 279

[Income‑tax Appellate Tribunal Pakistan]

Before Munsif Khan Minhas, Judicial Member Muhammad Munir Qureshi, Accountant Member

I.T.A. No.2956/LB of 2001, decided on 27th August, 2002.

(a) Income Tax‑‑‑

----Association of persons ‑‑‑Individual‑‑‑Resources of‑‑‑Resources available to the individual members do not automatically become available to the Association of persons as the individual member are different entities in law.

(b) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑Ss. 66‑A & 13(1)‑‑‑Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order ‑‑‑Revisional jurisdiction, exercise of‑‑‑Association of Persons‑‑‑Individual‑‑‑Difference between the opening capital account of the members of Association of Persons and opening cash balance of the members individual accounts ‑‑‑Addition‑‑Inspecting Additional Commissioner exercised his Revisional jurisdiction on the ground that Association of Persons had short declared an amount of Rs.72,33,855 being tae differential amount between the opening capital account of the member of Association of Persons and opening cash balance of the members' individual account as the same constituted money available with the individual members of the Association of Persons for use by the Association of Persons but not so declared in the capital accounts of the members of the Association of Persons and the said unexplained investment was actionable under S.13(1) of the Income Tax Ordinance, 1979 and the Assessing Officer having failed to take proper cognizance of the same, loss of revenue was patent and the assessment made rendered .erroneous‑‑‑Validity‑‑‑If the individual members were to increase their investment in the Association of Persons over and above what .was declared in their capital accounts in tae Association of Persons then they would be required to either augment heir capital contributions in the Association of Persons/or make an advance to Association of Persons by way of loan‑‑‑No augmentation had been made in the capital balances of the respective members in the Association of Persons and no advance had been trade by any of the members to the Association of Persons by way of loan‑‑Individual members of the Association of Persons had done nothing that could reasonably be interpreted as an unexplained investment made by them in the Association of Persons‑‑‑Analysis as made by the Inspecting Additional Commissioner in this regard was found to be faulty and the same could provide no justification for exercise of revisional jurisdiction under S.66‑A of the Income Tax Ordinance, 1979.

(2000) 82 Tax 20 (Trib.); 1987 PTD (Trib) 563; 1998 PTD 3319 and 1993 PTD 766 ref.

(c) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑S. 66‑A‑‑‑Power of Inspecting Additional Commissioner to revise Deputy Commissioner's order‑‑‑Exercise of revisional jurisdiction under S.66‑A of the Income Tax Ordinance, 1979 on the direction of Zonal Commissioner of Income Tax‑‑‑Validity‑‑‑Exercise of revisional jurisdiction under S.66‑A of the Income Tax Ordinance, 1979 by the Inspecting Additional Commissioner was a very special statutory authority that must be exercised independently by the Inspecting Additional Commissioner without any advice or direction from any other authority, including the Zonal Commissioner of Income Tax‑‑‑Was patent that the Inspecting Additional Commissioner had reacted to the observations recorded by the Zonal Commissioner of Income Tax‑‑­Exercise of jurisdiction by the Inspecting Additional Commissioner under S.66‑A of the Income Tax Ordinance, 1979, was thus not shown beyond reasonable doubt to have indeed been exercised independently by the Inspecting Additional Commissioner as the law required that it must be exercised‑‑‑Order passed under S.66‑A of the Income Tax Ordinance, 1979 was not tenable in law and in the same was annulled by the Appellate Tribunal.

M. Sarwar Khawaja for Appellant.

Agha Hadayat Ullah Khan, D.R. for Respondent.

Date of hearing: 20th July, 2002.

2003 P T D (Trib.) 299

[Income‑tax Appellate Tribunal Pakistan]

Before Karamat Hussain Niazi, Judicial Member Saeed Ahmed Zaidi, Accountant

Member

W. T. A. No. 88(IB) of 2000‑01, decided on 11th April, 2002.

Wealth Tax Act (XV of 1963)‑‑‑

‑‑‑‑Second Sched., Part I, Cl. (I)‑‑‑Zakat and Ushr Ordinance (XVIII of 1980), Ss.2(xxvi) & 3‑‑‑Exemption‑‑‑Shares of Private Limited Company were claimed as exempt on the basis of deduction of Zakat on the face value of the shares‑‑‑Assessing Officer determined the break up value and added the so determined value to the net wealth of the assessee as Zakat was deducted on the face value and no Zakat was deducted on the remaining value of the shares‑‑‑First Appellate Authority directed the Assessing officer to exclude the shares from the computation of net wealth on the ground that .those shares were subject to Zakat which had already been deducted and the same were exempt from the wealth tax under the law‑‑‑Validity‑‑‑Shares in a private limited company were an asset and was subject to compulsory levy of Zakat through deduction at source @ 2.5 % of the paid up value on the valuation date in each Zakat year‑‑‑Paid‑up value of each share was Rs.10‑‑‑Break‑up value of shares was not its paid‑up value and the break‑up value had no relevancy for computation and deduction of Zakat, under the Zakat and Ushr Ordinance (XVIII of 1980)‑‑‑Company deducted Zakat at source in accordance with law‑‑‑Shares held by the assessee were subjected to Zakat and were exempt from the levy of wealth tax under cl. (1) of Part I of Second Sched. to the Wealth Tax Act, 1963‑‑‑Order of First Appellate Authority was maintained and appeal of the Department was rejected by the Appellate Tribunal.

Shahid Zaman, D.R. for Appellant.

Khalid Majid, F.C.A. for Respondent.

Date of hearing: 9th April, 2002.

2003 P T D (Trib.) 307

[Income‑tax Appellate Tribunal Pakistan]

Before Syed Kabirul Hasan, Judicial Member and Agha Kafeel Barik, Accountant Member

I.T.As. Nos. 1734/KB and 1735/KB of 2001, decided on 28th August, 2002.

Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑S. 131(4)‑‑‑procedure in appeal‑‑‑Admission of documentary evidence‑‑‑First Appellate Authorities admitted evidence which was not produced before tile Assessing officer and which was barred to be admitted under the provisions of S.131(4) of the Income Tax Ordinance. 1979‑‑‑Validity‑‑.provisions of S.131(4) of the Income Tax Ordinance, 1979 were mandatory inasmuch as these bar the First Appellate Authority from admitting an evidence, except in special circumstances which did not exist in the present case‑‑‑Neither the appellant/assessee was prevented by sufficient cause from producing any evidence, nor the First Appellate Authority had mentioned any such eventuality in his order‑‑‑During the hearing of the appeal of the assessee the First Appellate Authority totally ignored the written reply/comments of the Assessing Officer and even did not allow her attendance to represent the Department case during hearing of the appeal‑‑‑Maxim "audi alteram partem" applied to all proceedings of judicial or quasi‑judicial nature and it squarely applies even when an appeal of the assessee against the Department was heard by the AAC or Commissioner of Income‑tax (Appeals), as the Department was a party to the case‑‑Appellate Tribunal set aside order of the First Appellate Authority with the direction to . examine the written reply/comments of the Assessing Officer, the author ‑of the assessment order, and also give the Assessing Officer a fair opportunity of being heard and represent the case of the Department and should, after hearing both the sides, pass such a judicious order as required under the law.

1993 PTD (Trib.) (sic) distinguished.

Sajjad Ahmed, D.R. for the Complainant.

Abdul Tahir, I.T.P. for Respondent.

Date of hearing: 28th August, 2002.

2003 P T D (Trib.) 319

[Income‑tax Appellate Tribunal Pakistan]

Before Syed Nadeem Saqlain, Judicial Member and Amjad Ali Ranjha, Accountant Member

I.T.A. No. 2046/LB of 2000, decided on 30th April, 2002.

Wealth Tax Act (XV of 1963)‑‑‑-

‑‑‑‑S. 14‑C‑‑‑Tax on ownership of certain immovable assets ‑‑‑Assessee filed wealth tax return. and claimed exemption on self‑occupied house‑‑­Tax was paid on the basis of such return‑‑‑Assessing Officer changed minimum tax under S. 14‑C of the Wealth Tax Act, 1963 over and above the tax paid on the basis of wealth tax return and the same was confirmed by the First Appellate Authority‑‑‑Validity‑‑‑Record showed that the assessee had paid total tax alongwith the return but Assessing Officer proceeded to levy tax under S. 14‑C of the Wealth Tax Act, 1963 over and above the tax liability imposed upon the assessee‑‑‑Such action amounted to double taxation which was not permissible under the law‑‑­Assessee claimed exemption being .in self‑occupation of the property which was allowed by the Department‑‑‑If assessee still had to pay tax under S. 14‑C of the Wealth Tax Act, 1963 then this would be a sort of the liverage given to the Department to circumvent the legal provision under which the assessee had been provided exemption‑‑‑Appellate Tribunal vacated the assessment order as well as the first appellate order and tax levied under S. 14‑C of the Wealth Tax Act, 1963 was directed to be deleted.

2000 PTD (Trib.) 2433 ref.

M. Sarfraz, F.C.A. for Appellant.

Mehboob Alam, D.R., for Respondent.

Date of hearing: 6th February, 2002.

2003 P T D (Trib.) 322

[Income‑tax Appellate Tribunal Pakistan]

Before Fazlur Rehman Khan, Judicial Member and Mrs. Abida Ali, Accountant Member

I.T.As. Nos. 492 to 494(PB) of 1999‑2000, decided on 29th September, 2001.

(a) Income‑tax‑‑‑-

--Portfolio management ‑‑‑Fund/cash management‑‑‑Connotation and meanings‑‑‑Portfolio management was nothing else than the methods evolved or to be evolved for realizing income from portfolio which included income from interest or income from other known methods of investments‑‑‑Phrase "fund/cash management" carried the same meaning as carried by the phrase "portfolio management".

Black's Law Dictionary, 6th Edn. ref.

(b) Income Tax Ordinance (XXXI of 1979)‑‑‑-

‑‑‑Ss. 30 & 23(1)(vii)‑‑‑Income from other sources‑‑‑Interest income‑‑­"Unallocated" capital expenditure‑‑‑ Set off‑‑‑Set off of the interest income against unallocated capital expenditure on the ground that investment of, the surplus money or withdrawing/realizing investment from one financial institution and re‑investing the same in more profitable investment was part of the income from business of the company which has been authorized by the resolution of the Board of Directors passed under Memorandum of Association of the company and the respondent was entitled to set‑off the same against the unallocated capital expenditure and the balance, if any, to capitalize in order to reduce the capital cost of the project‑" Interest income" received by assessee on the investment of its surplus money was treated as income from "other sources" falling under S.30 of the Income Tax Ordinance. 1979 and taxed accordingly by the Assessing Officer‑‑‑First Appellate, Authority directed the Assessing Officer to set‑off interest income against the "unallocated" capital expenditure, inclusive of financial charges and to capitalize the balance interest income, remaining unabsorbed in order to reduce the capital cost of the project ‑‑‑Validity ­Main business of the assessee was to earn income from manufacture an. ‑sale of cement and though Articles of Association allowed the company to invest surplus money but it could not be included in the normal business of the assessee‑‑‑Order of the First Appellate Authority, held, was not maintainable‑‑‑Appeal of the Department was accepted‑‑‑Order of the First Appellate Authority was set aside and that of the Assessing Officer was restored by the Appellate Tribunal‑‑‑[(1988) 58 Tax 15 (Trib.) overruled.

(1988) 58 Tax 15 (Trib.) overruled.

I.T.A. No.920/LB of 1986‑87; (1921) 3 KBD 258; (1995) 211. ITR 55; (1988) 171 ITR 663; (1981) 132 ITR 70 and 1996 PTD (Trib.) 11 ref.

PLD 1962 SC (Pak.) 128 and 1999 PTD (Trib.) 708 rel.

Dr. Ikram Ghani, D.R. for Appellant.

Iqbal Naeem Pasha for Respondent.

Date of hearing: 31st May, 2001.

2003 P T D (Trib.) 332

[Income‑tax Appellate Tribunal Pakistan]

Before Ehsan‑ur‑Rehman, Judicial Member and Muhammad Sharif Chaudhry, Accountant Member

W.T.As. Nos. 1955/LB and 1954/LB of 2000, decided on 6th August, 2002.

Finance Act (XII of 1991)‑‑‑-

‑‑‑‑Ss. 12(6)(7) & (8)‑‑‑Corporate Assets Tax‑‑‑Assessment‑‑‑Additional tax‑‑‑Penalty‑‑‑Return was filed in response to notice of Assessing Officer declaring the value of fixed assets at below the. minimum threshold by excluding the value of the work‑in‑progress while arriving at the value of fixed assets for Corporate Assets Tax and submitted a detailed explanation alongwith the Corporate Assets Tax Return‑‑‑Tax was levied alongwith additional tax under S.12(8) and penalty under S.12(7) of the Finance Act, 1991, for delay in filing of Corporate Asset Tax Return‑‑‑First Appellate Authority reduced the value of fixed assets‑‑‑Imposition of additional tax was maintained and the imposition of penalty under S.12(7) of the Corporate Assets Tax was upheld by holding the appellant/assessee defaulter for non‑filing of Corporate Assets Tax Return‑‑‑Validity‑‑‑Law did not help the dormant party in a dispute‑‑‑Although there was no time limit for initiating the proceedings and also for levying of penalty for non‑filing of Corporate Assets Tax Return but the Department had failed to start the proceedings for assessment as well as of imposing the penalty within legal or morally justifiable span of time‑‑‑Assessment order under S.12(6) of the Finance Act, 1991 was pointless, regarding the delay in filing the returns vis‑a­vis findings for initiating the penalty proceedings particularly in the presence of explanatory letter from appellant/assessee on record‑‑­Assessing Officer failed to record the findings on the point of belated Corporate Assets Tax Return and also there was complete absence of the express intention to initiate the penalty proceedings under S.12(7) of Corporate Assets Tax read with S.12 of the Finance Act, 1991‑‑‑Such incurable defect went to the roots of the penalty proceedings‑‑‑Ambiguity in respect of imposition of Corporate Assets Tax was created by the Revenue itself and no attempt was made to clarify the ambiguous circular after the imposition of the Corporate Assets Tax vide Finance Act, 1991‑‑‑No reason existed for maintaining the imposition of penalty under S.12(7) of the Finance Act, 1991‑‑‑Appellate Tribunal held that the penalty be deleted being devoid of any legal sanction in the circumstances whereas the Corporate Assets Tax imposed under S.12(6) of the Finance Act, 1991, was maintained but on the point of imposition if additional tax the First Appellate Authority omitted to decide the issue and it could not be adjudicated upon by the Tribunal and the same was remanded to the First Appellate Authority for passing appropriate order‑‑‑Order of the First Appellate Authority was maintained only to the extent of determining the value of capital assets and levying the Corporate Assets Tax on such determined value.

2000 PTD (Trib.) 532; 2000 PTD (Trib.) 2853 and 2001 PTD (Trib.) 2964 rel.

Shahbaz Butt for Appellant.

Vishno Raja Qavi, D.R. for Respondent.

Date of hearing: 6th August, 2002.

2003 P T D (Trib.) 341

[Income‑tax Appellate Tribunal Pakistan]

Before Muhammad Tauqir Afzal Malik, Judicial Member and Javed Tahir Butt, Accountant Member

W.T.As. Nos. 654/LB to 656/LB of .2002, decided on 16th August, 2002.

Wealth Tax Act (XV of 1963)‑‑‑

‑‑‑‑S. 16(5)‑‑‑Assessment‑‑‑Finalization of assessment before the date fixed for hearing‑ ‑‑Assessment was finalized seven days before the date fixed for hearing‑‑‑First Appellate Authority after perusal of the record and considering the arguments of the assessee found the assessment order as illegal and annulled the assessments and the same was upheld by the Appellate Tribunal.

I.T.As. Nos. 4662 and 4663/LB of 1991‑92 ref.

Naseer Amed, D.R. for Appellant.

Muhammad Shahid Abbas for Respondent.

Date of hearing: 16th August, 2002.

2003 P T D (Trib.) 346

[Income‑tax Appellate Tribunal Pakistan]

Before Inam Ellahi Sheikh, Chairman and Javid Iqbal, Judicial Member

I.T.As. Nos. 417/KB to 420/KB of 2000‑2001, decided on 27th July, 2002.

(a) Income Tax Ordinance (XXXI of 1979)‑‑‑--

‑‑‑‑Ss. 108(b), 142, 50 & 86‑‑‑Income Tax Ordinance (XLJX of 2001), 5.182‑‑‑Penalty for failure to furnish return of total income and certain statements ‑‑‑Default in filing of statements‑‑‑Levy of initial penalty of Rs.2,001 before proceeding to levy the penalty for continuing default of each day separately‑‑‑Validity‑‑‑Law required that in case of default in filing of the statements the Deputy Commissioner shall impose a penalty on an "Amount equal to two thousand rupees and a further sum equal to two hundred rupees for every day during which the default continues"‑‑­In law. penalties are not meant to be source of Revenue but only a deterrent for default or concealments ‑‑‑Under the provisions of S.50 of the Income Tax Ordinance, 1979 a person was duty bound to collect tax from persons to whom he was making payments whereas tax collection was fundamentally the function of the Revenue Authorities‑‑‑Not only that S.142 of the Income Tax Ordinance, 1979 imposed duty upon such person who was making the payment to file certain statements giving the details of the payees which the payee might not be willing to provide to He Department‑‑‑Considering the prevalent tax culture and the lack of documentation; it was not surprising that many people should refuse to do business with a person who earnestly seeks to implement the law‑‑‑On top of all these obligations, the assessee was faced with the threat of penalties for non‑filing of such statements in addition to the action under S.52 of the Income Tax Ordinance, 1979 as well as S.86 of the Income Tax Ordinance, 1979‑‑‑In return for performing these services for the Revenue and under the threat of being held an assessee‑in‑default for any non‑deduction or short‑deduction of tax, the assessee was not entitled to any remuneration or relief for performing such functions on behalf of the Revenue‑‑‑No doubt one of the major considerations for making such laws and rules for deduction of tax at source was to discourage tax evasion, again it was strictly the function of the Tax Authorities to catch the tax evaders ‑‑‑Appellate Tribunal did not find any justification for the Assessing Officer to levy the initial penalty as well as the penalty for continuing default in one go without providing the assessee a further opportunity to correct the situation‑‑‑Revenue Authorities could not proceed to levy initial penalty as well as the continuing penalty in the same order and they must provide opportunity to the assessee before the levy of penalty for the continuing default‑‑‑Same also appears to be the intention of the law as laid down in S.182 of the new Income Tax Ordinance, 2001.

(b) Income Tax Ordinance (XXXI of 1979)‑‑‑--

‑‑‑Ss. 108(b) & 142‑‑‑Income Tax Rules, 1982, R.61‑C.B.R. Circular No. 10 of 1997, dated 22‑8‑1999‑‑‑Penalty for failure to furnish return of total income and certain statements‑‑‑Assessee was, a non‑resident company‑‑‑Default in filing of statements‑‑‑Default was not wilful or without reasonable cause‑‑‑Explanations offered were not accepted‑‑­Penalty‑‑‑Validity‑‑‑Penalty could only be levied if the default was found to be deliberate or wilful‑‑‑Assessing Officer had rejected all the explanations of the assessee and found the assessee to be a wilful defaulter‑‑‑Main reason given by the Assessing Officer was that the assessee had hired the services of the very efficient, chartered accountant who should have guided the assessee properly‑‑‑Other reasons such as the conditions of work and influence of the law had also been rejected‑‑­Was also argued that assessee was unable to find such persons to do business with, who were willing to suffer a deduction of tax‑‑‑When the assessee was a non‑resident corporation and working under difficult circumstances, this could be held to be a reasonable cause ‑‑‑Assessee had been charged to tax as an assessee‑in‑default and the tax had been recovered from it‑‑‑Business entity had to work to earn profits keeping in view the conditions prevalent in a society‑‑‑Might not always be possible plan the running of a business keeping in view the requirements of the law‑‑‑Basic objective of any business was to earn profit from which the Government recovers the tax due to it ‑‑‑Assessee coming from a foreign land may not be able to cultivate tax culture as appears to be the intention of the law under consideration‑‑‑There being no deliberate or wilful default, Appellate Tribunal upheld the order of the First Appellate Authority and dismissed the appeals of the Department.

1999 PTD (Trib.) 1661 ref.

1986 PTD (Trib.) 588 distinguished.

Bakht Zaman, D.R. for Appellant.

Yaqub Ali, F.C.A. and A.R. Nizami for Respondent.

Date of hearing: 27th July, 2002.

2003 P T D (Trib.) 368

[Income‑tax Appellate Tribunal Pakistan]

Before Syed Masood ul Hassan Shah, Judicial Member and Syed Aqeel Zafar ul Hasan, Accountant Member

I.T.As. Nos. 1158/IB, 1159/IB of 1986‑87, 223/IB, 224/IB of 1989‑90, 230/IB; 64/IB of 1990‑91, 366/IB and 367/IB of 1996‑97, 11/IB, 12/IB of 1987‑88, 253/IB of 1989‑90, 328/IB, 206/IB of 1990‑91 and 499/IB of 1992‑93, decided on 30th July, 2002.

(a) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑S. 2(12) & Third Sched. R.8(8)(c)‑‑‑Capital assets ‑‑Exchange loss on foreign currency‑‑‑Capital expenditure or revenue loss ‑‑‑Determination‑‑‑­Assessee claimed exchange loss of different amounts on foreign currency loan secured from the Government of Italy which was utilized for obtaining technical services for establishment of a plant‑‑‑Assessing Officer disallowed the same while treating the said loan as a capital. expenditure utilized for establishing the factory ‑‑‑Assessee contented than loan was obtained for purpose of payment of fee for technical services and not for the purchase of plant and machinery which was approved by the State Bank of Pakistan for specific purpose of payment of fee for technical services and the same did not fall within the ambit of R.8(8)(c) of the Third Sched. of the Income Tax Ordinance, 1979‑‑‑First Appellate Authority maintained the action of the Assessing Officer on the ground that the exchange loss was incurred on the payment of instalments of loan and on account of re‑valuation of foreign currency loan in the books of accounts of the assessee and no exchange loss was incurred in connection with the payment of interest on loan and therefore the original loan as well as loan instalment and revaluation of loan all were of capital asset or fixed capital of capital nature‑‑ ‑Validity‑‑Loan was admittedly taken for the purpose of expenditure of capital nature and the exchange loss was incurred on the payment of instalment of loan on account of re‑valuation of foreign currency loan in the books of accounts of the assessee and no exchange loss was incurred in connection with payment of interest of the loan and that the original loan as well as loan instalment and revaluation of loan, all were of capital nature‑‑‑Exchange loss suffered in connection with capital assets or fixed capital was of capital nature‑‑‑Appellate Tribunal did not take any exception to the treatment given to the assessee by the Department and affirmed tht: action of the First Appellate Authority‑‑‑Appeal of the assessee was rejected by the Appellate Tribunal.

House Building Finance Corporation v. CIT, Dacca 1985 PTI 820; Reform Flour Mills Ltd. v. CIT, West Bangal (1981) 132 ITR 184; B.D.G.A. (Punjab) Ltd. v. CIT, Punjab, Lahore (1937) 5 ITR 279; (1962) 46 ITR 590; Income Tax Made Easy by Mr. Sajjad, pp. 14, 73; Income Tax Law by Kanga & Palki Wala, S.33, p.477; 2000 PTD 2446; 2000 PTD 720 and 2000 PTD 2119 ref.

(b) Income Tax Rules, 1982‑‑‑

‑.‑‑‑Rr. 216(1)(b) & 216(3)(b)(ii), (iii)‑‑‑Computation of export profits and tax attributable to export sales‑‑‑Calculation of export rebate‑‑­Assessing Officer took the gross total sales by including the sales of the purchased fertilizers while calculating the export rebate‑‑‑Validity‑‑‑Main point involved in the proposition was regarding definition of "total' as given in the said rule‑‑‑Plea of the assessee was that Para. (ii) of Cl. (b) of sub‑rule (3) of 8.216 will apply to the case of the assessee‑company whereas the stance of the Department was that Para. (iii) of Cl. (b) of sub‑rule (3) of 8.216 was applicable ‑‑‑Assessee only exported the fertilizer which was locally manufactured and it never re‑exported any fertilizer which was imported‑‑‑Case of the assessee would fall in context of definition of "total" as given in Para. (ii) of Cl. (b) of sub‑rule (3) of 8.216 of Income Tax Rules, 1982‑‑‑Plea of the assessee was accepted and the Department was directed to make fresh computation of export profit and tax attributed to export sales and to determine export rebate after providing another opportunity to the assessee.

(c) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑S. 25(c)‑‑‑Amounts subsequently recovered in respect of deduction, etc.‑‑‑Loan remained unpaid in excess of three years‑‑‑Assessing Officer while resorting to provisions of S.25(c) of the Income Tax Ordinance, 1979 added back the amount in the income of the assessee and the same was confirmed by the First Appellate Authority‑‑‑Validity‑‑‑With regard to such addition Appellate Tribunal did not interfere because the factual position had been determined by the Assessing Officer specifically with regard to non‑payment of such amount within three years when the same was charged to account‑‑‑First Appellate Authority came to the conclusion that the liability was to be created by 30th June which had admittedly not been done and provisions of S.25(c) of the Income Tax Ordinance, 1979 were attracted‑‑‑Two fact‑findings forums firstly at the assessment stage and secondly at the First Appellate stage had concurrently taken the position in respect of non‑payment of such amount within three years when such amount was charged to account‑‑‑Appellate Tribunal maintained the action of two forums below.

(d) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑Third Sched., R.3(2) & (3)‑‑‑Extra depreciation allowance for multiple shift working‑‑‑Other plant and machinery‑‑‑No exit depreciation could be allowed on "other plant and machinery" for the items installed/located in the admin. block of factory, regional office, marketing division and head office as these were not normally used for extra shift and only have normal working office hours but at the same time it was to be looked into again for determining the aspect of use of these items under the head "other plant and machinery" as to have been actually and factually made by the assessee or not‑‑‑Matter in issue was required to be set aside with the directions to Assessing Officer to make a re‑probe into the matter and pass an order in accordance with the relevant rule and law and the same was set aside by the Appellate Tribunal.

(e) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑Ss. 24(b) & 50(3)‑‑‑Deductions not admissible‑‑‑Deduction of tax at source‑‑‑Interest expenditure‑‑ ‑Loan advanced and interest received by the foreign sovereign Government‑‑‑Disallowance of interest expenditure on the ground that tax was not deducted on payment of such interest and added to the income of the assessee under S.24(b) of the Income Tax Ordinance, 1979‑‑‑First Appellate Authority deleted the addition on the ground that the loan was advanced and interest was received by the foreign sovereign Government and no tax under S.50(3) of the Income Tax Ordinance, 1979 was deductible as the recipient of interest was not a taxable entity‑‑‑Since no deduction of tax was required to be made, provisions of S.24(b) of the Income Tax Ordinance, 1979 were not attracted‑‑‑Validity‑‑‑Position depicted from the order clearly established that the loan was made available to the assessee with the approval of the Government of Pakistan as well as that of Italy and that the re‑payment was also guaranteed by the Ministry of Finance, Government of Pakistan and Banco Di Roma (Italian Bank) acted simply as a collecting agent of the Government of Italy" which was the actual beneficiary of the interest‑‑Assessing Officer repeatedly referred to the loan as "Government of Italy" loan which meant that they also did not dispute this fact‑‑‑No tax under S.50(3) of the Income Tax Ordinance, 1979 was deductible as the recipient of interest was not taxable entity‑‑‑Provision of S.24(b) of the Income Tax Ordinance, 1979 were not applicable to the case of the assessee‑‑‑Deletion of disallowance of interest being justified was not interfered by the Appellate Tribunal.

(f) Income Tax Ordinance (XXXI of 1979)‑‑‑-

‑‑‑‑Ss. 88 & 54‑‑‑Income Tax Rules, 1982, R.216‑‑‑Additional tax‑‑­Export rebate‑‑‑Additional tax was levied on the basis of new working of the export rebate as made, by the Assessing Officer at the time of assessment‑‑‑First Appellate Authority found levy of additional tax under S.88 of the Income Tax Ordinance, 1979 on the basis of new working was not correct because there was no intentional default‑‑‑Validity Additional tax under S.88 of the Income Tax Ordinance, 1979 was levied if the assessee failed to pay tax under S.54 of the Income Tax Ordinance, 1979, as payable on the basis of return or the tax so paid was less than the tax payable‑‑‑If tax liability was enhanced on the basis ,of an assessment in the event of interpretation placed to a provision of law or rule for calculating total income/taxable income, then of course, there would be a marked distinction between the tax payable under S.54 on the basis of return filed by the assessee and the tax payable on the basis of assessment made by the Assessing Officer‑‑‑Tax payable on the basis of return was considered an admitted tax liability and the tax determined on the basis of assessment order was taken to be assessed tax liability‑‑­Action of the First Appellate Authority was affirmed by the Appellate Tribunal.

(1988) 58 Tax 153 (Trib.) ref.

2002 PTD 388 rel.

(g) Income‑tax‑‑‑

‑‑‑‑Method of accounting‑‑‑Change of‑‑‑Change in the method of accounting could be made but it must be bona fide and not for escapement of treatment of an income for taxation purposes.

(h) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑Ss. 32, 11 & 55‑‑‑Method of accounting‑‑‑Total "income ‑‑‑Scope‑‑­Marketing and Pricing Principle Agreement‑‑‑Urea Price Adjustment‑‑­Change of accounting method ,from accrual basis to receipts basis‑‑­Claim of Urea Price Adjustment was not offered for taxation by the assessee due to change of method of accounting from accrual basis to receipts basis‑‑‑Admittedly claims were recognized on accrual basis‑‑­Assessing Officer added to same in total income as the assessee consistently accounted as income on an "accrual basis" and the claim so worked out under the agreement was always included in the income of the assessee and treated as such for arriving at taxable income‑‑‑First Appellate Authority did not constitute assessee's income on accrual basis on the ground that it neither represents a definitely ascertained amount nor the assessee had acquired the right to receive it‑‑‑Claim will be included in assessee's‑ income only to the extent of its actual approval by the Government in the year of its approval, only then the claim will be considered as having accrued‑‑‑Price adjustment claim was directed to be deleted‑‑‑Validity‑‑‑No deviation could be made to the employment of method of accounting in a half way if the same had been regularly employed in the past by the assessee‑‑‑Change could only be permitted if die method was totally changed from an accrual basis to receipt basis and it was bona fide change‑‑‑Contention of assessee that First Appellate Authority had in fact interpreted/explained the method of accounting on accrual basis and there was no change from accrual basis to receipts basis, had no rational basis to accept the view point of First Appellate Authority because it would amount to bring method of accounting of accrual basis intermingled with method of accounting on receipts basis‑‑‑Such interpretation of method of accounting of that of accrual basis would definitely amount to the negation of the system of accounting and would be defeating the provisions of Ss.11 & 32 of the Income Tax Ordinance, 1979‑‑‑Treatment given by the Assessing Officer seemed to be proper and just in circumstances‑‑‑Action of First Appellate Authority was not sustained and order to that extent was cancelled and that of the Assessing Officer was restored by the Appellate Tribunal.

1985 PTD 820; (1981) 132 ITR 184: (1937) 5 ITR 279; PLD 1966 Lah. 246; 56 ITR 42; 48 ITR 1; (1971) 80 ITR 650; 4 ITR 420 and 44 ITR 22 ref.

(i) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑Ss. 49 & 2(3)‑‑‑Allowance to be treated as deductions from income‑‑­Rebate on donation on super‑tax‑‑‑Disallowance‑‑‑Validity‑‑‑Word "tax" had been used in S.49 of the Income Tax Ordinance, 1979 and tax had been defined in S.2(3) of the Income Tax Ordinance, 1979 as to include income‑tax, super‑tax, surcharge etc. and accordingly the rebate on donations should have been allowed on income‑tax as well as on super­ tax‑‑‑Assessee was entitled to claim rebate on donations on income‑tax as well as on super‑tax and accordingly the Department was directed to allow the same by the Appellate Tribunal.

Shahid Sadiq, F.C.A. and Nadeem Ayaz, A.C.A. for Appellant (in I.T.As. Nos. 1158/IB, 1159/IB of 1986‑87, 223/IB, 224/IB of 1989‑90, 230/IB, 64/IB of 1990‑91, 366/IB and 367/IB of 1996‑97).

Malik Muhammad Nawaz, L.A., Abdul Jaleel, D.R. and Khalid Javed, D.C.I.T. for Respondent (in I.T.As. Nos. 1158/IB, 1159/IB of 1986‑87, 223/IB, 224/IB of 1989‑90, 230/IB; 64/IB of 1990‑91, 366/IB and 367/IB of 1996‑97).

Malik Muhammad Nawaz, L.A., Abdul Jaleel, D.R. and Khalid laved, D.C.I.T. for Appellant (in I.T.As. Nos. 11/IB, 12/113 of 1987‑88, 253/IB of 1989‑90, 328/IB, 206/IB of 1990‑91 and 499/IB of 1992‑93).

Shahid Sadiq, F.C.A. and Nadeem Ayaz, A.C.A. for Respondents (in I.T.As. Nos. 11/IB, 12/IB of 1987‑88, 253/IB of 989‑90, 328/IB, 206/IB of 1990‑91 and 499/IB of 1992‑93).

Date of hearing: 4th June, 2002.

2003 P T D (Trib.) 403

[Income Tax Appellate Tribunal Pakistan]

Before Muhammad Akhtar Nazar Mian, Accountant Member and S. Hasan Imam, Judicial Member

M.A. (Rect.) No.418/KB of 2002 in I.T.A. No. 415/KB of 2001, decided on 20th September, 2002.

Income Tax Ordinance (XXXI of 1979)‑‑‑-

‑‑‑Ss.156 & ‑80‑B‑‑‑Rectification of mistakes‑‑‑Minimum tax on income of certain persons‑‑‑Society‑‑‑"Company"‑‑‑Appellate Tribunal had held that society was not included in the definition of "company" and Assessing Officer was not justified in charging minimum tax under S.80‑D of the Income Tax Ordinance, 1979‑‑‑Application for rectification by the Department on the ground that through an amendment by Finance Act, 1999 all persons were made liable to minimum tax under S. 80‑D of the Income Tax Ordinance, 1979 and Appellate Tribunal had made a mistake apparent from record in deciding that minimum tax was not applicable to the Society even if it was not to be treated as a company‑‑‑Validity‑‑‑Application moved by the Department was misconceived‑‑‑Section 80‑D of the Income Tax Ordinance, 1979 was inserted by Finance Act, 1991 and the minimum tax was made chargeable in the cases of companies only, then through an insertion by Finance Act, 1992 registered firms were also included as assessees from whom minimum tax was liable to be charged and by the Finance Act, . 1999, "an individual, an Association of Persons, an unregistered firm, or a Hindu undivided family" were also made liable to pay minimum tax under S.80‑D of the Income Tax Ordinance, 1979‑‑‑Appellate Tribunal having held that Society was an artificial juridical person and artificial juridical person had not been made liable to minimum tax under S.80‑D of the Income Tax Ordinance, 1979 through insertion by the Finance Act, 1999, application was rejected.

Shoaib Ahmed Sethi, D.R. for Appellant.

Mazharul Hasan for Respondent.

Date of hearing: 20th September, 2002.

2003 P T D (Trib.) 405

[Income‑tax Appellate Tribunal Pakistan]

Before Ehsan‑ur‑Rehman, Judicial Member and Muhammad Sharif Chaudhary, Accountant Member

I.T.As. Nos. 1297/LB and 1298/LB of 2002, decided on 21st September, 2002.

Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑Ss. 52, 86 & 62‑‑‑Liability of persons failing to deduct or pay tax‑‑­Charge of additional tax for failure to deduct and pay tax ‑‑‑Assessee in default‑‑‑Assessing Officer treated the assessee as "assessee in default" for non‑deduction of tax on various heads of accounts without specifying any particular amount and person and created demand under S.52 of the Income Tax Ordinance, 1979 alongwith additional tax under S.86 of the Income Tax Ordinance, 1979‑‑‑Order was also passed after about 5 years from the date of issuance of show‑cause notice‑‑‑Validity‑‑‑Assessing Officer without particularly pinpointing the payments liable to tax deduction had made liable the whole of the payments made under the various heads of accounts as mentioned in the order and thus failed to qualify and also to quantify the exact amount of tax deduction against the particular payment made, vis‑a‑vis against particular person because the tax was charged in respect of a particular payment and also in respect of a particular person without determining the payment and person the imposition of .tax could not get a legal. shape‑‑‑Importantly the Department had slept over the case after the issuance of the notice, dated 26‑12‑1996 till June, 2001, when hurriedly entire proceedings were concluded, ,so there was no justification of such inordinate delay in finalization of order under Ss 52/86 of the Income Tax Ordinance, 1979 after issuance of notice, dated 26‑12‑1996 as all this did not give the impression that the judicious view was adopted‑‑‑Such condition was depictive of the callousness on the part of the functionaries of the Department towards national interest‑‑‑Initiating of the proceedings for action under S.52 of the Income Tax Ordinance, 1979, thereafter passing of the order by framing the assessment for creating the demand and thirdly the imposition of Additional Tax under S.86 of the Income Tax Ordinance, 1979 on the so worked out tax demand under S.52 of the Income Tax Ordinance, 1979 by treating the assessee as "Assessee in default", were null and void in the eye of the law which were annulled and entire tax demand was knocked off by the Appellate Tribunal.

(2000) 82 Tax 17 (Trib.); (1999) Tax 67 (Trib.); Writ Petition No. 1335 of 1998; I.T.A.T. No. 4136/LB of 2000 (1980) Tax 262 (L. H. Court) and 2001 PTD 1094 ref.

Muhammad Saeed Chaudhry for Appellant.

Muhammad Zulfiqar Ali, D.R. for Respondent.

Date of hearing: 18th September, 2002.

2003 P T D (Trib.) 436

[Income‑tax Appellate Tribunal Pakistan]

Before S. Nasan Imam, Judicial Member and Muhammad Akhtar Nazar Mian, Accountant Member

I.T.A. No. 744/KB of 1997‑98, decided on 26th October, 2002.

(a) Income Tax Ordinance (XXXI of 1979)‑‑‑-

‑‑‑First Sched., Parts V, & IV, Para. B(2), Ss.2(16)(31) & 47‑‑‑Finance Ordinance (XIV of 1983), C.B.R. Circular No. 7 of 1983, dated 12‑6‑1983‑‑‑Rate of tax for companies‑‑‑Trust‑‑‑Rate of tax i.e. 46% was charged on the income of .trust applicable to companies other than banking companies and public companies‑‑‑Validity‑‑‑As her §.2(16) of the Income Tax Ordinance, 1979, a "company" means a Trust formed by under any law for the time being in force‑‑‑Central Board of Revenue ‑pile explaining Cl. (bb) of S.2(16) of the Income Tax Ordinance, 1979 reiterated in Circular No.7 of 1983 dated 12‑6‑1983 that the rate of tax applicable to such Trusts would be the same as in the case of public company‑‑‑In order to give effect to these Instructions of Central Board of Revenue an amendment was made in S.2(31) of the Income Tax Ordinance, 1979 thereby including such a Trust into a public company and a further amendment was made by substituting sub‑para. (2) of para. B, in Part IV of the First Sched. of the Income Tax Ordinance, 1979 whereunder Trust was included in the definition of "public company", and all Trusts formed by or under any law whether recognized or not for the purposes of S.47 of the Income Tax Ordinance, 1979 were to be treated as public company and the tax rate applicable to public companies was to be applied to the Trust‑‑‑Appellate Tribunal directed that tax in the present case may be computed at the rates applicable to public companies.

(b) Income‑tax—

‑‑‑‑Revenue expenditure‑‑‑Principle‑‑‑Whatever are substitutes or surrogates in revenue expenditure is also revenue expenditure‑‑­Surrogate expenditure may be a lump sum payment, it may be laid out at any stage but it saves the tax payer from incurring in the very year or in other years, other revenue payments either in whole or in part, then the expenditure has to qualify as revenue expenditure.

(c) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑S.23(1)(iii)‑‑‑Deductions‑‑‑Current repairs‑‑‑Rented out building‑‑­Amount was spent for construction of rented out premises by dismantling the old and claimed as revenue expenditure on the ground that the building in which business was carried on did not belong to assessee and no asset of the assessee had been created by dismantling the old building‑‑‑Assessing Officer treated the same as capital expenditure and disallowed the same in toto‑‑‑Validity‑‑‑Building was already in the possession of the assessee and the investment made in amendment the building was for the purpose of obtaining a new advantage and as such the expenditure could not be treated as expenditure of a revenue nature and was not admissible as expenditure incurred on current repairs‑‑­Appellate Tribunal unheld the findings of the Authorities below that the expenditure was capital expenditure and was not admissible as "current repair"‑‑‑Disallowance of 25 % for unverifiable expenses being reason­able was also upheld by the Appellate Tribunal.

(1986) 54 Tax 128 distinguished.

New Shorrock Spinning & Manufacturing Company Ltd. v. Commissioner of Income‑tax, Bombay North (1956) 30 ITR 336 rel.

Anthony Santamaria, I.T.P. for Appellant.

Abdul Salam, D.R. for Respondent.

Date of hearing: 23rd October, 2002.

2003 P T D (Trib.) 447

[Income‑tax Appellate Tribunal Pakistan]

Before Ehsan‑ur‑Rehman, Judicial Member and Muhammad Sharif Chaudhary, Accountant Member

I.T.A. No. 4337/LB of 1996, decided on 22nd October, 2002.

Income Tax Ordinance (XXXI of 1979)‑‑‑--

‑‑‑‑S.59‑‑‑C.B.R. Circular No.16 of 1992, dated 1‑7‑1992‑‑‑Self ­Assessment Scheme for assessment year 1992‑93‑‑‑C.B.R. Circular No.9 of 1994, Para. 5‑A‑‑‑Self‑Assessment Scheme for assessment year 1994‑95‑‑‑Self‑assessment‑‑‑Assessment year 1994‑95‑‑‑Selection of case for total audit ‑‑‑Assessee contended that selection for Total Audit could not be earmarked for random balloting draw as it had been exempted to be earmarked by virtue of Self‑Assessment Scheme for the assessment year 1992‑93 being case selected for Total Audit for assessment year 1992‑93 shall not be earmarked for random balloting draw in the subsequent two assessment years‑‑‑Assessing Officer finalized the assessment under S.62 of the Income Tax Ordinance, 1979 on the ground that para. 5‑A of the Self‑Assessment Scheme, 1994‑95 had not been complied with and case had been subjected to Total Audit in one of the three preceding years so for availing the immunity from selection from Total Audit, the tax paid for assessment year 1994‑95 was to be enhanced by at least 20 % as compared to maximum tax payable in any of the three preceding years‑‑‑First Appellate Authority admitted that instructions contained in Self‑Assessment Scheme for assessment year 1994‑95 were contradictory to the earlier policy announced for assess­ment year 1992‑93 and accepted the claim of the assessee for acceptance of the return under Self‑Assessment Scheme being not eligible to be earmarked for Random Balloting Draw List‑‑‑Validity‑‑‑Assessing Officer failed to acknowledge the fact that there was nothing in Self ­Assessment Scheme for assessment year 1994‑95 which could be termed as supersession of what it had given in Self‑Assessment Scheme for assessment year 1992‑93 by specifically exempting from earmarking from random total balloting draw‑‑‑Consequential provisions of allowing relief in respect of the cases for assessment year 1994‑95 could not be forfeited simply by presumptions‑‑‑After processing under Total Audit the income‑tax return for assessment year 1992‑93 filed under Self ­Assessment Scheme, then the case could not be brought in the scope of para. 5‑A of the Self‑Assessment Scheme for assessment year 1994‑95 which was entirely dealing with a different situation‑‑‑As the case had been subjected to Total Audit for the preceding two years i.e. in assessment year 1992‑93 it was not a case falling under the category once in the preceding three years‑‑‑Taxing statutes were to be strictly construed so bringing such case within the scope of para. 5‑A of the Self‑Assessment Scheme for assessment year 1994‑95 was against all the norms of interpretation of taxing provisions‑‑‑Provisions of the Self­‑assessment Scheme for assessment year 1992‑93, effecting the Income tax returns filed under Self‑Assessment Scheme for assessment year 1994‑95 were validly operative as these had not been taken away by the Self‑Assessment Scheme for assessment year 1994‑95‑‑‑Assessing Officer despite processing the case under Total Audit, had totally failed to justify his action even on passing order under S.62 of the Income Tax Ordinance, 1979. by using the maximum authority vested in him‑‑­Appellate Tribunal upheld the acceptance of the income‑tax return under the self‑assessment.

Muhammad Zulfiqar Ali, D.R. for Appellant.

Ahmed Shujah Khan for Respondent.

Date of hearing: 22nd October, 2002.

2003 P T D (Trib.) 463

[Income‑tax Appellate Tribunal Pakistan]

Before Muhammad Jahandar, Judicial Member and Mahmood Ahmad Malik, Accountant Member

I.T.As. Nos. 34(IB)/2000‑01 and 946(IB)/2000‑01, decided 8th June, 2002.

(a) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑Ss.62, 66A & Second Sched., Cls. (7) & (8)‑‑‑Income‑tax Act (XI of 1922), S.4(3)(xii)(xiii)‑‑‑S.R.O. 1136(I)/91, dated 7‑11‑1991‑‑­Regulations of Mines and Oilfields and Mineral Development (Government Control) Act (XXIV of 1948), S.3‑B & Sched., Cl. (13)‑--­Concession to petroleum exploration companies ‑‑‑Exemption‑‑‑Exemption to salaries of employers of licensed petroleum companies from levy of tax was refused on the ground that S.3‑B of the Regulation of Mines and Oilfields and Mineral Development (Government Control) Act, 1948 dealt with those companies only which had been granted license by the Government and it had nothing to do with the foreign nationals, who were employed by said companies licensees‑‑‑Schedule attached to the Regulation though provided in Cl. (13) a concession to foreign nationals yet it was an independent provision, which had no nexus with the regulation and was subject to the provisions of the Income tax Ordinance, 1979‑‑‑Section 3‑B of the Regulations started with a non obstante clause and it had an overriding effect over the Ordinance but S.3‑B was confined only to the cases of the companies licensees but Cl. (13) of the Schedule did not start with a non obsante clause‑‑­Department, while referring to Cl. (13) further maintained that Cls. (7) & (8) the Second Sched. to the Income Tax Ordinance, 1979 which formed part of Cl. (13) of Sched. to the regulations stood omitted from 1991, therefore, Cl. (13) of the Sched. to the Regulations had become redundant and non‑operative, and no more invocable by any foreign national, employed by licensee‑‑‑Validity‑‑‑Distinction sought to be created by the department in relation to the case of the employees of a licensee having not been covered by S.3‑B of the Regulations was not acceptable‑‑‑Employees of a licensee were part and parcel of the company as any benefit made available to them was in its ultimate result and analysis, a concession to the company for which different incentives were intended to be given‑‑‑Contention of the Department was that Cl. (13) of the Sched. to the Regulations of Mines and Oilfields and mineral Development (Government Control) Act, 1948 had become redundant and that even if that was taken as operative should be given a status having no nexus with S.3‑B of the Act, 1948‑‑Validity‑‑‑No provision should be taken to have become redundant and redundancy must not be attributed to the Legislature‑‑‑Each word used in statute was to be read as integral part thereof carrying the meaning‑‑‑Interpretation shall have to be made that makes every part effective‑‑‑If a Court comes across a case of redundancy, which was an exceptional eventuality, the Court shall have to interpret in a manner that gives consistency and fulfils the object and intention of the Legislature‑‑‑Schedule to an Act was always part and parcel of the enactment‑‑‑Such part of the statute was significant in terms of providing details of the principles laid down in the form of sections in the enacting part‑‑‑Situation may exist where a Sched. was violative of the enacting part but that was a rarity and in that case undoubtedly the section part prevails upon the Sched.‑‑‑No such conflict. existed in the present case and the Sched. appeared to be in line with S.3‑B of the Act, 1948 and provided details of the concessions laid down in the section‑‑‑Examination of paras. (9) to (13) and in particular para. (13) of the Sched. to S.3‑B of the Regulations of Mines and Oilfields and Mineral Development (Government Control) Act, 1948 (as amended) would show that reference to Cls. (xii) and (xiii) of S.4(3) of the Income‑tax Act, 1922 were incorporated through the process of legislation by reference which was replaced by Cl. (7) of Part I of the Second Sched. to the Income Tax Ordinance, 1979 which was deleted w.e.f. July 1, 1991 by Notification S.R.O. 1136/91, dated November 7, 991 which revealed that the exemption of taxation would be available to he foreign nationals employed by a company under S.3‑B of the Regulations, of Mines and Oilfields and Mineral Development Government Control) Act, 1948 (as amended by Act LXXXIII of 1976) irrespective of deletion of Cl. (7) of the Second Sched. to the Income Tax Ordinance, 1979‑‑Said clause of the Ordinance only explained the procedure for claiming exemption ‑‑‑Assessees being foreign nationals having been employed by Pakistan licensee, were entitled to the exemption in relation to their salary being given by the licensee for the period claimed by them‑‑‑Departmental appeals for the assessment year 1995‑96 failed while assesses appeals for the assessment year 1996‑97 succeeded‑‑‑.Orders under S.66‑A of the' Income Tax Ordinance, 1979 of the assessment year 1996‑97 were cancelled and those of the Assessing Officer were restored by the Appellate Tribunal.

Flopetrol International v. Central Board of Revenue etc. 1994 CLC 1721 = 1994 PTD 1370 fol.

(b) Interpretation of statutes‑‑‑

‑‑‑‑ Schedule to an Act/Ordinance‑‑‑Significance‑‑‑Principles‑‑‑No provision should be taken to have become redundant and redundancy must not be attributed to the Legislature‑‑‑Each word used in statute was to be read as integral part thereof carrying the meaning‑‑‑Interpretation shall have to be made that makes every part effective‑‑‑If a Court comes across a case of redundancy, which was an exceptional eventuality, the Court shall have to interpret in a manner that gives consistency and fulfils the object and intention of the Legislature‑‑‑Schedule to an Act was always part and parcel of the enactment‑‑‑Such part of the statute was significant in terms of providing details of the principles laid down in the form of sections in the enacting part‑‑‑Situation may exist where a Sched. was violative of the enacting part but that was a rarity and in that case undoubtedly the section part prevails upon the Sched.

Rashid Ibrahim F.C.A. and Khalid Mehmood, A.C.A. for Appellant (in I.T.A. No. 34(IB) of 2000‑01).

Naushad Ali Khan, D.R. and Malik Muhammad Nawaz, L.A. for Respondent (in I.T.A. No. 34(IB) of 2000‑01).

Naushad Ali Khan, D.R. and Malik Muhammad Nawaz, L.A. for Appellant (in I.T.A. No. 946(IB) of 2000‑01).

Rashid Ibrahim, F.A.C. and Khalid Mehmood, A.C.A. for Respondent (in I.T.A. No. 946(IB) of 2000‑01).

Date of hearing: 8th June, 2002.

2003 P T D (Trib.) 473

[Income‑tax Appellate Tribunal Pakistan]

Before Inam Ellahi Sheikh, Chairman and Muhammad Ashfaque Baloch, Judicial Member

I.T.As. Nos. 529/KB to 531/KB and 408/KB to 411/KB of 1997‑98, decided on 16th October, 2002.

(a) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑Ss. 156(4) & 66‑A(2)‑‑‑Limitation‑‑‑Order passed under Ss. 156 & 66‑A of the Income Tax Ordinance, 1979 was cancelled by the Appellate Tribunal being barred by limitation as limitation runs from the date of order and not from the date of service.

(b) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑S.2(20)‑‑‑Agreement for Avoidance of Double Taxation between the Government of Pakistan and the Swiss Federal Council ‑‑‑Dividend‑‑­Non‑resident company‑‑‑Dividend income from Pakistani company‑‑­Dividend income was bifurcated into two categories by the Department, one out of the income from business and the other out of the other, income and levied tax at 10% to the amount of part of the dividend allocable to business income and 20% to the part of the income allocated to the other income ‑‑‑Assessee contended that Inspecting Additional Commissioner was nut justified to apply a rate of 20% to the portion allocated by him to other income as the payer company of dividend was undisputedly an industrial undertaking‑‑‑Validity‑‑‑Appellate Tribunal had already decided this issue in favour of the assessee in a reported judgment 1998 PTD (Trib.) 1971 and following such order, the Appellate Tribunal accepted the assessee's appeal and cancelled the orders of the Inspecting Additional Commissioner.

1998 PTD (Trib.) 1971 and I.T.A. No. 536/KB of 1998‑99 rel.

Raeesul Hassan for Appellant.

Mrs. Rukhsana Saeed, D.R. for Respondent.

Date of hearing: 16th October, 2002.

2003 P T D (Trib.) 484

[Income‑tax Appellate Tribunal Pakistan]

Before Ehsan‑ur‑Rehman Sheikh, Judicial Member and Muhammad Sharif Chaudhry, Accountant Member

I.T.As. Nos.836/LB to 838/LB of 2002,'decided on 3rd August, 2002.

(a) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑Ss. 86, 52, 52A & 50‑‑‑Charge of additional tax for failure to deduct and pay tax‑‑‑Additional tax was imposed under S.86 of the Income Tax Ordinance, 1979 in addition to creation of demand under S.52A of the Income Tax Ordinance, 1979‑‑‑Assessee contended that additional tax under S.86 of the Income Tax Ordinance, 1979 could be recovered only from the payer/deducting agent and not from the recipient/deductee as there was no nexus between Ss. 86 & 52A of the Income Tax Ordinance, 1979‑‑‑Validity‑‑‑Section 52A of the Income Tax Ordinance, 1979 empowered the Department to make recovery of the amount of tax from the deductee/payee if the deducting agent/payer failed to make deduction of tax or failed to make deduction of full amount of due tax under S.50 of the Income Tax Ordinance, 1979‑‑‑Section 52A of the Income Tax Ordinance, 1979 did not empower the Department to impose additional tax under S.86 of Income Tax Ordinance, 1979 in the case of the deductee/payee, neither S.86 of the Income Tax Ordinance, 1979 empowered the Department to do so‑‑‑Section 52A of the Income Tax Ordinance, 1979 no doubt ended with the words, "and all provisions of this Ordinance relating to recovery of tax shall apply" but additional tax under S.86 of the Income Tax Ordinance, 1979 was not a provision of Income Tax Ordinance, 1979 relating to recovery of tax despite the fact that S.86 of the Income Tax Ordinance, 1979 had been incorporated in Income Tax Ordinance, 1979 under its Chap. IX which dealt with recovery of tax‑‑Sections relating to recovery of tax in the said chapter of Income Tax Ordinance, 1979, were in fact those sections which deal with levy of penalty like S.91 of the Income Tax Ordinance, 1979 and recovery of tax like Ss.92, 93, 93A & 94 of the Income Tax Ordinance, 1979‑‑‑If S.86 of the Income Tax Ordinance, 1979 was taken to be a provision relating to recovery of tax even then it would not be applicable to a deductee or payee‑‑‑Section 86 of the Income Tax Ordinance, 1979, actually related to recovery of additional tax from the withholding agent who failed to comply with the provisions of S.50 of the Income Tax Ordinance, 1979 regarding deduction of tax at source and the payment thereof‑‑‑Provisions of Ss.52 & 52A of the Income Tax Ordinance, 1979 were the same and S.86 of the Income Tax Ordinance, 1979 could be invoked against the deductee in‑case of recovery of tax from him under S.52A of the Income Tax Ordinance, 1979 as it was invoked against the deducting agent when recovery of tax from him was made under S.52 of the Income Tax Ordinance, 1979‑‑‑Section 86 of the Income Tax Ordinance, 1979 had no nexus with S.52A of the Income Tax Ordinance, 1979 so demand of additional tax created by Revenue under S.86 of the Income Tax Ordinance, 1979 were not justified‑‑‑Appellate Tribunal held that provisions of S.86 of the Income Tax Ordinance, 1979 not applicable to the assessee in circumstances and additional tax under S.86 of the Income Tax Ordinance, 1979 had illegally been levied‑‑­Additional tax levied in the case of the assessee in all the years under consideration was deleted by the Appellate Tribunal to meet the ends of justice.

(b) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑Ss.52 & 52A‑‑‑Distinction‑‑‑Difference between Ss.52 & 52A of the Income Tax Ordinance, 1979 was that S.52 of the Income Tax Ordinance, 1979 empowers the Assessing Officer to treat the deducting authority in case of its default as assessee in default while S.52A of the Income Tax Ordinance, 1979 did not give his power to the Assessing Officer and so the Assessing Officer could recover only the undeducted, tax or shortfall in deductible tax from the deductee but he could not treat the deductee as assessee in default‑‑‑No nexus existed between Ss.52 & 52A of the Income Tax Ordinance, 1979.

Imtiaz Amad, A.C.M.A. for Appellant.

Muhammad Zulfiqar Ali, D.R. for Respondent.

Date of hearing: 2nd August, 2002.

2003 P T D (Trib.) 494

[Income Tax Appellate Tribunal Pakistan]

Before S. Hasan Imam, Judicial Member and Muhammad Akhtar Nazar Mian, Accountant Member

I.T.A. No. 293/KB of 1995‑96, decided on 16th September, 2002.

Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑Ss.15 & 2(12)‑‑‑Banking Companies Ordinance (LVII of 1962), Ss.7(1)(a), 13(1)(2), (4) & 29‑‑‑Head of income‑‑‑Capital assets‑‑­Banking companies‑‑‑Income from sale of Government securities‑-­Income from capital gain and income from business‑‑‑Determination of‑­Principle‑‑‑If the investment in securities was made to meet the statutory requirements of the State . Bank of Pakistan, the gain or loss on sale of these securities would be computable under the head "capital gain" and if the securities are dealt with as stock‑in‑trade, a function which a Banking Company was allowed to perform under S.7 of the Banking Companies Ordinance, 1962, the gain or loss would be computable under the head "business income"‑‑‑Banking Company may purchase the securities for the purpose of dealing in securities or for the purpose of investment‑‑‑Intention in this regard could be determined by examining the circumstances in which a security was purchased‑‑‑When security was purchased in order to meet with the statutory requirements of S.13 of the Banking Companies Ordinance, 1962 then it was purchased as an investment, whenever such securities were disposed of the resultant gain or loss therefrom will be computable as "capital gain or loss" because these securities not being stock‑in‑trade but being an asset of the company satisfy the definition of capital asset as given in S.2(12) of the Income Tax Ordinance, 1979‑‑‑If, on the other hand, the securities were purchased for the purpose of dealing in them, then, if matured, the income received therefrom was to be computed as interest from Government securities and the loss or gain on sale was Revenue loss or gain because these securities were purchased as stock‑in‑trade‑‑­Appellate Tribunal set aside the assessment on this issue and sent the case back to the Assessing Officer with the direction that it may be examined as to which of the securities were purchased as investment and which of them were purchased as stock‑in‑trade‑‑‑Where the securities were purchased as investment, then, the gain or loss on disposal of these securities may be computed as capital gain/loss and where the securities were purchased as stock‑in‑trade, the loss or gain on disposal of these securities may be treated as Revenue loss or gain.

Grindlay's Bank v. C.I.T. Central 1985 PTD 329 and 1995 PTD Trib.) 807 rel.

City Bank, N.A.'s case I.T.As. Nos. 277 to 284/KB of 1982‑83; Agricultural Development Bank's case I.T.A. No. 1178/KB of 1980‑81; I.T.A. No. 2247/KB of 1984‑85; Citi Bank N.A.'s case 1994 P TD 271; 1995 PTD (Trib.) 435; American Express Bank's case I.T.A. No.1361/KB of 1985‑86 and American Express Bank's case I.T.A. No.753/KB of 1997‑98 ref.

Ali Hasnain, D.R. for Appellant.

E.U. Khawaja for Respondent.

Date of hearing: 10th September, 2002.

2003 P T D (Trib.) 535

[Income‑tax Appellate Tribunal Pakistan]

Before Khawaja Farooq Saeed, Judicial Member and Imtiaz Anjum, Accountant

Member

W.T.As. Nos. 1103/LB to 1107/LB of 2001, decided on 27th April, 2002.

(a) Wealth Tax Act (XV of 1963)‑‑‑

‑‑‑‑Ss.2(m)(iii), 2(d) (2)(16) & 2(4)‑‑‑Qanun‑e‑Shahadat (10 of 1984), Art. 85(5)‑‑‑Registration Act (XVI of 1908), Ss.17(1)(b) & 17(2)(v)‑‑­C.B.R. Letter C. No. 1568‑5 (W.T.)/80, dated 22‑9‑1980‑‑‑Net wealth­-Status, determination of‑‑‑Arbitration award made rule of the Court‑‑­Joint properties‑‑‑Bifurcation through agreement in ascertainable shares‑‑‑Some of the properties were rented out jointly ‑‑‑Assessees filed their returns in individual status‑‑‑Department assessed such property by assigning status of Association of Persons‑‑‑Validity‑‑‑Arbitration award had been accepted by all the parties and the same was not objected to even by the Department and after it was made rule of the Court, the separate ownership was established‑‑‑Department itself having assessed it in the names of such owners in income-tax as well as in wealth tax, was estopped from challenging its title ‑‑Award, however, did not determine or ascertain the specific properties hence a further agreement in consequence thereof was made which had determined as to who was owner of what‑‑‑Separate 'independent units had been registered accordingly in the Excise and Property Tax Department and were statedly being charged to property tax respectively‑‑‑Agreement had only ascertained file shares of which the individuals were already owners by way of Arbitration and rule of the Court and did not require any further registration or another decree from the Court ‑‑‑Assessee had still continued with some joint agreements in respect of certain assets in which agreements earlier jointly signed still existed in some of the relevant assessment years‑‑‑Though in the agreement such properties had been specifically assigned to individuals still assessee's action of not having a new agreement proved that they wished to retain its status as Association of Persons‑‑‑Having become a separate owner a new notice as per law by the incumbents and subsequent renewal of agreement in individual status could have settled the issue‑‑‑Continuation of agreement with the tenants gave a genuine impression that such part of the property even after partition was not separately identifiable or ascertainable‑‑­Such properties shall remain assessable in the status of Association of Persons till a new agreement by the individual owner with tenant was framed‑‑‑Appellate Tribunal set aside the case with the directions that after the agreement and registration with Excise Department wherever the petitioners had made separate individual agreements, the status of Association of Persons shall not be assigned‑‑‑Assessment shall be finalized in their individual hands under R.8(3) of the Wealth Tax Rules, 1963‑‑‑Properties, which had still been rented out jointly even after agreement shall be assessed as an Association of persons till the respective owners agreed in an agreement mentioning their specific portion with the tenant‑‑‑Except for assessment yea: 1997‑98 for which the concept of Association of Persons was non‑existent in the Wealth Tax Act, 1963 and for which Appellate Tribunal had directed for cancellation of the order, in all other years, the assessments were set aside with above specific directions.

1989 PTD (Trib.) 364; 1998 PTD 2054; 1987 PTD (Trib) 720; 1989 PTCL CL 315; 1998 PTD (Trib.) 2054; 1988 PTD (Trib.) 1027; 1989 PTD (Trib.) 364 and 1991 SCC 773 rel.

160 ITR 920; PLD 1983 SC 251; (1960) 2 Tax (III‑437); PLD 1977 Kar. 88; AIR 1963 Pat. 62; PLD 1965 SC 274; 1987 MLD 2835; 1994 MLD 2458; 1994 CLC 1811 and 1986 SCMR 1121 ref.

(b) Wealth Tax Act (XV of 1963)‑‑‑

--‑Ss.2(5)(ii) (2)(e)(ii) & 3‑‑‑C.B.R. Circular No. 8 of 1997, dated 24‑7‑1997‑‑‑Assets‑‑‑Status‑‑‑Assessment years 1997‑98‑‑‑Charge of wealth tax to Association of Persons‑‑‑Validity‑‑‑No charge was provided for an Association of Persons or body of individuals for assessment year 1997‑98‑‑‑Legislature having intentionally deleted same, no assessment in the status of Association of Persons could be made for assessment year 1997‑‑98‑‑‑Appellate Tribunal cancelled the assessment framed for assessment year 1997‑98 in the status of Association of Persons.

1984 PTD (Trib.) 65 ref.

(c) Wealth Tax Act (XV of 1963)‑‑‑‑

‑‑‑Ss.3, 2(16) & 2(5)(ii)‑‑‑Charge of wealth tax‑‑‑Association of Persons‑‑‑Assessment year 1999‑2000‑‑‑Assessee contended that S.2(6) of the Wealth Tax Act, 1963 did not define Association of Persons till 3‑6‑1998 hence the charge of the same started from assessment year 1999‑2000‑‑‑Validity‑‑‑If the definition of "Association of Persons" was not available in the Wealth Tax Act, 1963 help could be sought from the Income Tax Ordinance, 1979 and if it also did not help the ordinary dictionary meanings the judgments on the subject could come to rescue‑‑­Its absence in the definition S.2(16) of the Wealth Tax Act, 1963 did not exonerate it from S.3 of the Wealth Tax Act, 1963‑‑‑In S.2(5)(ii) of the Wealth Tax Act, 1963, while defining "assets" had included Association of Persons‑‑‑Contention of the assessee was repelled by the Appellate Tribunal.

(d) Wealth Tax Act (XV of 1963)‑‑‑

‑‑‑‑Ss.2(4) & 3‑‑‑Income Tax Ordinance (XXXV of 1979), S.2(8) ‑‑Assessment year‑‑‑Definition and application of‑‑‑Assessment year basically was the year that starts after the end of the financial year and had been so defined in the Income Tax Ordinance, 1979 vide S.2(8)‑‑­Definitions given in the Income Tax Ordinance, 1979 could be applied mutatis mutandis in the proceedings under S.2(4) of the Wealth Tax Act, 1963‑‑‑Language of S.3 of the Wealth Tax Act, 1963 had not happily been worded; however, it did not give any impression that the financial year in wealth tax shall also be its assessment year.

Dr. Ilyas Zafar and Javed Iqbal Qazi for Appellant.

Muhammad Asif, D.R. for Respondent.

Date of hearing: 1st September, 2001.

2003 P T D (Trib.) 605

[Income‑tax Appellate Tribunal Pakistan]

Before Karamat Hussain Niazi, Judicial Member and Saeed Ahmed Zaida, Accountant Member

I.T.As Nos. 65/IB and 66/IB of 2001‑2002, decided on 3rd September, 2002.

Income Tax Ordinance (XXXI of` 1979)‑‑‑

‑‑‑‑S. 66‑A(2), 62 & 62/132‑‑‑Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order ‑‑‑Limitation‑‑­Whether limitation runs from the date of order passed under S.62 of the Income Tax Ordinance, 1979 or from the date of revised order passed under Ss.62/132 of the Income Tax Ordinance, 1979‑‑‑When the issue raised by the Inspecting Additional Commissioner in his order under S.66‑A of the Income Tax Ordinance, 1979 was not the subject‑matter of appeal, the limitation would start from the date of the assessment order made under S.62 of the Income Tax Ordinance, 1979 and not from the revised order made under Ss.62/132 of the Income Tax Ordinance, 1979.

Pak River Steamers Ltd.'s case 1971 PTD 204 distinguished.

Abdul Sattar v. Commissioner of Income‑tax 1995 PTD 882 and 1999 PTD (Trib.) 2294 rel.

Anjum A. Sheikh, F.C.A. and Imtiaz Ahmad, C.M.A. for Appellants.

Malik Muhammad Nawaz, L.A. and Shahid Zaman, D.R. for Respondent.

Date of hearing: 17th August, 2002.

2003 P T D (Trib.) 613

[Income‑tax Appellate Tribunal Pakistan]

Before Syed Masood ul Hassan Shah, Judicial Member and Syed Aqeel

Zafar‑ul‑Hasan, Accountant Member

Reference Applications Nos. 52(IB) and 53(IB) of 2002, decided on 2nd August, 2002.

(a) Interpretation of statutes‑‑‑

‑‑‑‑Special provision of law‑‑‑General provision of law‑‑‑Preference‑‑‑If case of an assessee of a specific business was totally covered in the ambit of one provision of law then there would be no question to attract another provision of law which is general in nature‑‑‑General provision cannot be preferred over a special provision in the same statute‑‑‑If a statute is having two provision out of which one is of specific character and the other is of general character then the specific provision will be applied and preferred over the general provision.

(b) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑Ss.136(1), 26(c) & 80‑C‑‑‑Reference to High Court ‑‑‑Assessee was a private limited company, engaged in the business of mining and managing and controlling different projects of mineral deposits etc.‑‑­Inspecting Additional Commissioner by passing an order under S.66‑A of the Income Tax Ordinance, 1979 directed the Assessing Officer to frame 'assessments by subjecting the entire supply/receipts to tax under S.80‑C of the Income Tax Ordinance, 1979 and the income under the head "other income" should also be determined after allowing attributable expenses on proportionate basis‑‑‑Appellate Tribunal directed the Assessing Officer to compute assessee's business income under S.26 of the Income Tax Ordinance, 1979 while making re‑assessment‑‑­Question for reference to High Court, was whether income of the assessee was assessable under normal law under S.62 of the Income Tax Ordinance, 1979 read with S.26(c) of the Income Tax Ordinance, 1979 and not under presumptive tax regime under S.80‑C of the Income Tax Ordinance, 1979‑‑‑Validity‑‑‑Case of the assessee fully an" clearly fell within the provisions of S.26(c) of the Income Tax Ordinance, 1979 and there was no room for ambiguity in the same necessitating for attracting any other provision of law‑‑‑No question of law as proposed by the Department arising out of the order of the Tribunal for being referred to the High Court for decision‑‑‑Request of the Department for making a reference to High Court was declined.

PLD 1961 SC 373; 1951 ITR 579 and 1940 ITR 41 ref.

PLD 1989 SC 384; PLD 1985 Lah. 358; PLD 1988 Lah. 171 and PLD 1956 SC (Pak.) 331 rel.

Muhammad Ishfaq Ahmad, D.R. for Applicant.

Khalid Majid, FCA/AR for Respondent.

Date of hearing: 2nd August, 2002.

2003 P T D (Trib.) 622

[Income‑tax Appellate Tribunal Pakistan]

Before Khalid Waheed Ahmad, Judicial Member and Inam Ellahi Sheikh, Accountant Member

I.T.A. No. 4050/LB of 1998, decided on 18th November, 1999.

Income Tax Ordinance (XXXI of 1979)‑‑‑

-‑‑Ss. 80‑D & 80‑C‑‑‑Minimum tax on income of certain persons‑‑‑First Appellate Authority directed the Assessing Officer to take into consideration the amount of tax paid by the assessee under S.80‑C of the income Tax Ordinance, 1979 at the time of working of tax under S.80‑D of the Income Tax Ordinance, 1979 and turnover under S.80‑C of the Income Tax Ordinance, 1979 should also be included in the total turnover for purpose of working‑‑‑Validity‑‑‑Department failed to establish that the tax paid under the provisions of S.80‑C of the Income Tax Ordinance, 1979 was excluded from the total tax payable under the provision of S.80‑D of the Income Tax Ordinance, 1979‑‑‑In the provision of Explanation to S.80‑D of the Income Tax Ordinance, 1979 it was clarified that turnover meant the gross receipts, exclusive of trade discount shown on invoices or bills, derived from sale of goods or from rendering, giving or supplying services or benefit or from execution of contracts‑‑‑Provisions of S.80‑D of the Income Tax Ordinance, 1979 did not exclude the turnover and tax paid under S.80‑C of the Income Tax Ordinance, 1979 for the purposes of working out minimum tax liability under said section‑‑‑Order of First Appellate Authority being fully justified was upheld by the Appellate Tribunal and appeal of the Revenue failed.

Javaid Iqbal Rana, D.R. for Appellant.

Shaukat Amin, F.C.A. for Respondent.

Date of hearing: 12th November, 1999.

2003 P T D (Trib.) 625

[Income‑tax Appellate Tribunal Pakistan]

Before Rasheed Ahmed Shaikh, Judicial Member and Mehmood Ahmed Malik, Accountant Member

I.T.A. No. 414/LB of 2002, decided on 27th July, 2002.

(a) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑S.62(1), proviso‑‑‑Assessment on production of accounts etc.‑‑­Conditions to be enforced where the assessee produced books of accounts and effects for non‑compliance of‑‑‑Proviso to S.62(1) of the Income Tax Ordinance, 1979 canvassed three conditionalities to be enforced where the assessee produces books of accounts as evidence in support of the return income, firstly, that the Deputy Commissioner of Income Tax shall give a notice to the assessee, of the defects noted in the books of accounts, secondly, that he shall provide opportunity to the assessee to explain his point of view about such defects in the accounts and thirdly that he shall record such explanation and the basis of computation of total income of the assessee in the assessment order‑‑‑Since proviso to S.62(1) of the Income Tax Ordinance, 1979 had been inserted by finance Act, 1993, therefore, this was the statutory obligation of the Assessing Officer to comply with such conditionalities in seriatim and if any one of these ceased to be implemented or not followed in proper order the returned version could not be disbelieved‑‑‑If the assessee was confronted prior to examination of books of accounts such notice would certainly be held to have been issued in violation of law‑‑‑Such notice could not be proclaimed to be substitution of the notice to be issued after examination of books of accounts‑‑‑Merely mentioning S.62 of the Income Tax Ordinance, 1979 on the top of the notice, without adhering to the statutory obligations, would not absolve the Assessing Officer from his responsibility to issue a notice in terms of proviso to S.62(1) of the Income Tax Ordinance, 1979‑‑‑In such eventuality there was no cavil except to accept the declared results of the assessee.

2002 PTD (Trib.) 1583; 2001 PTD (Trib.) 2938 and 1999 PTD (Trib.) 3892 rel.

(b) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑S. 62‑‑‑Assessment on production of accounts etc.‑‑‑Issuance of notice under S.62 of the Income Tax Ordinance, 1979 prior to examination of books of accounts ‑‑‑Assessee contended that since statutory requirement of law in terms of proviso to S.62(1) of the Income Tax Ordinance, 1979 prior to completion of assessment had not been met, therefore, Appellate Authority was not justified in setting aside the assessment instead of annulling the same‑‑‑Validity‑‑‑Prior to examination of books of accounts, a notice was issued by the Assessing Officer, mentioning S.62 on the top of the said notice, calling for certain documents and details from the assessee which was complied with‑‑­Books of accounts were scrutinized but no specific defects were pointed out by the Assessing Officer for his disagreement with such accounts rather those were discarded by the Assessing Officer by advancing general remarks‑‑‑Philosophy for issuance of notice under S.62 of the Income Tax Ordinance, 1979 after examination of books of accounts was to seek evidence on specific points before disagreement with such accounts‑‑‑Evidence had been sought prior to examination of books of accounts meaning thereby that no specific defects could be pointed out by the Assessing Officer from the books of accounts' maintained by the assessee‑‑‑No notice as contemplated by law was issued which was sine qua non for discarding the returned version‑‑‑Appellate Tribunal held that the notice issued prior to examination of books of accounts could not be equated with the notice to be issued in terms of proviso to S.62(1) of the Income Tax Ordinance, 1979 which the law required to be issued before disagreeing with the declared results‑‑‑Same being a mandatory provision of law, the Assessing Officer was bound to follow such statutory obligation and violation thereof naturally rendered the assessment framed to be ab initio illegal and void‑‑­Declared results were not lawfully discarded as a result of which the Assessing Officer was directed to accept returned version of the assessee‑‑‑Order passed by the Appellate Authority was vacated which resulted into acceptance of the assessee's appeal on legal plane.

1985 PTD 375 ref.

2002 PTD 1195; 2002 PTD (Trib.) 1583; 2001 PTD (Trib.) 2938 and 1999 PTD (Trib.) 3892 rel.

Ch. Abdul Ghafoor, I.T.P. for Appellant.

Javed‑ur‑Rehman, D.R. for Respondent.

Date of hearing: 27th July, 2002.

2003 P T D (Trib.) 634

[Income‑tax Appellate Tribunal Pakistan]

Before S. Hasan Imam, Judicial Member and Muhammad Akhtar Nazar Mian, accountant Member

I.T.As. Nos.1535/KB to 1537/KB of 2002, decided on 9th September, 2002.

(a) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑Ss. 52 & 50(3), (4)‑‑‑Liability of persons failing to deduct or pay tax‑‑‑Deduction of tax at source‑‑‑Non‑deduction of tax ‑‑‑Assessee contended that no order under S.52 of the Income Tax Ordinance, 1979 could legally be passed against the withholding agent for the default of non‑deduction of tax under S.50(4) of the Income Tax Ordinance, 1979 if the payments in the hands of recipients were ultimately adjudged not chargeable to tax and if it Was held that withholding agent was not authorized under the law to adjudicate upon the chargeability or otherwise of the payments in the hands of the recipients, then this would result into anomalous situation because all the importers will be required to deduct tax under S.50(4) of the Income Tax Ordinance, 1979 out of payments made by them to non‑resident from whom imports were effected‑‑‑Validity‑‑‑Provisions of S.50(4) of the Income Tax Ordinance, 1979 were applicable when the withholding agent was a person as prescribed in said section and whenever he made payments for contracts, supplies or services rendered as prescribed‑‑‑Only situation in which the withholding agent need not deduct any tax was that when the recipient produces a certificate from Commissioner to this effect‑‑‑Admittedly no such certificate was produced by the recipient‑‑‑Withholding agent was not authorized to determine the chargeability of tax on the payments and then to decide as to whether tax under S.50(4) of the Income Tax Ordinance, 1979 was to be deducted or not‑‑‑Only provision of law where chargeability of receipts had been made basis for withholding tax was S.50(3) of the Income Tax Ordinance, 1979‑‑No anomalous situation could arise because payments of all types to non‑residents were not covered by S.50(4) of the Income Tax Ordinance, 1979‑‑‑Payments to non‑residents on account of execution of turnkey contract, a contract or sub‑contract for designing, supply of plan and equipment and construction of power projects, a contract of‑construction, assembly or like project in Pakistan or any other contract for construction or for services other than that to which the provisio is of subsection (3A) and (4A) of the Income Tax Ordinance, 1979 apply were covered by S.50(4) of the Income Tax Ordinance, 1979‑‑‑Payments to non‑residents other than said payments were covered under S.50(3) of the Income Tax Ordinance, 1979 where the withholi4ing agent was to withhold tax only when such payments in the hands of non‑residents were chargeable under the provisions of Income Tax Ordinance, 1979‑‑‑Even in S.50(3) of the Income Tax Ordinance, 1979 withholding agent may not withhold tax from payments if he himself was liable to pay tax thereon as agent of the non‑resident‑‑‑Consequently, when no certificate under S.50(4) of the Income Tax Ordinance, 1979 from the Commissioner holding jurisdiction over the recipient was produced before the withholding agent, he was under the law obliged under all circumstances to withhold tax under S.50(4) of the Income Tax Ordinance, 1979, and therefore, when tax had not been deducted or lesser amount of tax from lesser amount of payments was deducted, as the case may be, the Assessing Officer having jurisdiction over the withholding agent had legal jurisdiction to proceed under S.52 of the Income Tax Ordinance, 1979.

1996 PTD (Trib.) 1128 distinguished.

(b) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑Ss. 86, 89, 52 & 50‑‑‑Additional tax‑‑‑Default in deduction of tax‑‑­Setting aside of demand under S.52 of the Income Tax Ordinance, 1979‑­Distinction between Ss.86 & 89 of the Income Tax Ordinance, 1979‑‑­Assessee contended that the additional tax under S.86 of the Income Tax Ordinance, 1979 should not have been charged for the period during which the demand under S.52 of the Income Tax Ordinance, 1979 remained as set aside‑‑‑Validity‑‑‑When an order of assessment had been set aside then there was no demand against the assessee during the period intervening the setting aside of the order and passing of fresh order‑‑‑No additional tax under S.89 of the Income Tax Ordinance, 1979 could be charged for such period‑‑‑Situation for charging additional tax under S.86 of the Income Tax Ordinance, 1979 was different‑‑‑Under S.89 of the Income Tax Ordinance, 1979, the additional tax was to be calculated from the date the demand was made payable to the date it was actually paid, the calculation of the additional tax, therefore, depended upon the date when the demand was payable‑‑‑Such date may vary every time a fresh demand was created after passing the assessment order consequent upon setting aside of the original order by the Competent Authority‑‑­Whenever an order under S.86 of the Income Tax Ordinance, 1979 will be passed for default of provisions of S.50 of the Income Tax Ordinance, 1979 the additional tax will be calculated from the date when the tax deducted or liable to be deducted was required to be paid as prescribed in S.50 of the Income Tax Ordinance, 1979 which meant that notwithstanding setting aside of order under S.52 of the Income Tax Ordinance, 1979 whenever the fresh order under S.52 would be passed the date from which the additional tax was to be calculated shall remain the same and the additional tax would need be computed till the date when the tax under S.52 of the Income Tax Ordinance, 1979 was actually paid‑‑‑Initially the additional tax had been calculated by the Assessing Officer from the date it was required to be paid under S.50 of the Income Tax Ordinance, 1979 to the date of passing the order under S.52 of the Income Tax Ordinance, 1979 by the Assessing Officer‑‑­Payments of the tax under S.52 having actually been made, the Assessing Officer was legally justified in revising his order under S.86 of the Income Tax Ordinance, 1979 so as to calculate the additional tax for the period starting from the date on which the tax was payable under S.50 of the Income Tax Ordinance, 1979 to the date on which the actual payment was made.

I.T.A. No. 4643/LB of 1997 distinguished.

Nadim Tirmizi and Khaliq‑ur‑Rehman, F.C.As. for Appellant.

Shaheen Aziz Niazi, D.R. and Saeed Ahmed, D.C.I.T. for Respondent.

Date of hearing: 7th September, 2002.

2003 P T D (Trib.) 651

[Income‑tax Appellate Tribunal Pakistan]

Before Khawaja, Farooq Saeed, Judicial Member and Imtiaz Anjum, Accountant

Member

W.T.As. Nos. 891/LB to 894/LB of 2002, heard on 18th September, 2002.

Wealth Tax Act (XV of 1963)‑‑‑

‑‑‑‑Ss.18(1)(a), 35 & 14(1)(a)‑‑‑Penalty for concealment‑‑­Rectification of mistake‑‑‑Penalties were imposed equal to wealth tax for default of S.14(1)(a) of the Wealth Tax Act, 1963 with the approval of Inspecting Additional Commissioner which was subsequently revised under S.35 of the Wealth Tax Act, 1963 in terms of time and rate prescribed under S.18(1)(a) of the Wealth Tax Act, 1963 on pointation of Audit Authorities ‑‑‑ Validity ‑‑‑ Both the Assessing Officer as well as Inspecting Additional Commissioner had referred to the relevant law and imposed penalty equal to tax‑‑‑Could be rightly presumed that they were well aware of the existing provisions regarding imposition of penalty for the relevant default while passing order under Ss.18(1)(a)/35 of the Wealth Tax Act, 1963‑‑‑Assessing Officer had recorded the reply made to the show­cause notice but had not discussed as to how the same was being rejected except that as pointed out by the Audit Authorities penalty for default of S.14(1)(a) of the Wealth Tax Act, 1963 was chargeable in terms of time and rate prescribed under S.18(1)(a) of the Wealth Tax Act, 1963‑‑‑Right of the assessee which was got secured in the light of original penalty orders had not been dislodged in any manner‑‑‑First Appellate Authority opted easy way out for rejecting grounds of appeal merely on the ground that assessee/appellant had mentioned additional tax and not the penalty‑‑‑Neither the grounds were valid nor the case of Supreme Court was relevant‑‑‑Cognizance of the facts and consequent adjudication was conspicuously missing‑‑­Assessing Officer as well as First Appellate Authority brushed aside the legal objections raised on behalf of the assessee/appellant‑‑‑Such a treatment was against the principles of natural justice and fair-play‑‑­In application of law and appreciation of fact a fair handed treatment was legally bounden duty of the judicial as well as quasi‑judicial forum‑‑‑Assumption of jurisdiction under S.35 of the Wealth Tax Act, 1963 was not sustainable on facts and law‑‑‑Penalty imposed equal to tax was reasonable for default under S.14(1)(a) of the Wealth Tax Act, 1963‑‑‑As penalty imposed equal to tax‑had already stood paid, the revised orders under Ss.18(1)(a)/35 of the Wealth Tax Act, 1963 were vacated and original .orders restored by the Appellate Tribunal.

1992 SCMR 687 = 1992 PTD 570; 2002 PTD (Trib.) 2695 and (1974) 95 ITR 532 rel.

Muhammad Ajmal Khan for Appellant.

Sabiha Mujahid, D.R. for Respondent.

Date of hearing: 12th September, 2002.

2003 P T D (Trib.) 661

[Income‑tax Appellate Tribunal Pakistan]

Before Inam Ellahi Sheikh, Chairman and Javed Iqbal, Judicial Member

I.T.A. No.1770/KB of 1996‑97, decided on 6th June, 2002.

Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑Ss. 80‑B(1), 2(20)(e) & 50(6A)‑‑‑Tax on income of certain persons from dividend and Bank profits etc.‑‑‑Dividend‑‑‑Loan‑‑­Deduction of tax at source ‑‑‑Assessee was Director as well as share­holder of a private limited company ‑‑‑Assessee obtained loan from the company‑‑‑Assessing Officer invoked the provisions of S.2(20)(e) of the Income Tax Ordinance, 1979 and treated the same as "dividend" after deducting accumulated profit from such loan, which was added to the income of the assessee‑‑‑First Appellate Authority confirmed the application of S.2(20)(e) of the Income Tax Ordinance, 1979 but directed the Assessing Officer to treat this income as a separate block under S.80B of the Income Tax Ordinance, 1979‑‑­Validity‑‑‑Reading of the provisions of S.50(6A) of the Income Tax Ordinance, 1979 together with the meaning of word "dividend" given in S.2(20)(e) of the Income Tax Ordinance, 1979, showed that payment by a private company of a sum by way of advance or loan to a shareholder would fall within the definition of dividend and would thus attract the provisions of S.50(6A) of the Income Tax Ordinance, 1979‑‑‑Any payment by way of a loan or advance by a private company to its shareholders to the extent of its accumulated profit would be treated as dividend and liable to deduction of tax‑‑‑Dividend on which tax was deductible under S.50(6A) of the Income Tax Ordinance, 1979 would be taxable under the provisions of 80B(1) of the Income Tax Ordinance, 1979‑‑‑Order of the Appellate Authority was maintained by the Appellate Tribunal and appeal of the Department was dismissed.

Bakht Zaman, D.R. for Appellant.

Muhammad Siddiqui Ragadia for Respondent.

Date of hearing: 24th May, 2002.

2003 P T D (Trib.) 664

[Income‑tax Appellate Tribunal Pakistan]

Before S. Hasan Imam, Judicial Member and Muhammad Akhtar Nazar Mian, Accountant Member

I.T.A. No. 1056/KB of 1996‑97, decided on 3rd September, 2002.

(a) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑Ss. 66‑A, 59‑A & 143‑B‑‑‑Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order‑‑‑Under S.59‑A of the Income Tax Ordinance, 1979 order was deemed to have been passed when statement under S.143‑B of the Income Tax Ordinance, 1979 was received and such order could not even be cancelled under S.66‑A, of the Income Tax Ordinance, 1979 what to speak of allowing the Assessing Officer to deviate from the declaration made under S.143‑B of the Income Tax Ordinance, 1979.

I.T.As. Nos.966 and 967/KB of 2000‑2001 rel.

(b) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑S. 56‑‑‑Notice‑‑‑Request for filing of return through a letter, not by a notice---Validity---Assessing Officer had specifically requested the assessee to submit the return income and other details‑‑‑Letter of the Assessing Officer receipt of which was not denied by the assessee satisfied the provisions of S.56 of the Income Tax Ordinance, 1979.

I.T.A. No.84/KB of 1998‑99 distinguished.

(c) Income Tax Ordinance (XXXI of 1979)‑‑‑

----S. 155---Certain mistakes not to vitiate assessment, etc.,---Notice---Want of form---Mistakes, defect or omission—Validity---No notice issued or executed or purported to be made, issued or executed under the Income Tax Ordinance, 1979, shall be void or otherwise inoperative merely for want of form or for a mistake, defect or omission therein which was not of a substantial nature prejudicially affecting an assessee.

(d) Income Tax Ordinance (XXXI of 1979)----

---Ss. 80-B, 143-B & 2(3)---Tax on income of certain contractors and importers—Interest—Income---Company—Presumptive taxation---Validity—appellate Tribunal did not subscribe to the view of the assessee that the interest income declared under S. 143-B of the Income Tax Ordinance, 1979 by the company was rightly chargeable under S. 80-B of the Income Tax Ordinance, 1979 as the assessee was an artificial juridical person duly covered in S. 80-B(1) of the Income Tax Ordinance, 1979 and S. 2(32) of the Income Tax Ordinance, 1979 prescribed independent status to a company as a person from that of other artificial juridical persons---Since the word company as a person was conspicuously mission in S. 80(1) of the Income Tax Ordinance, 1979, Appellate Tribunal held, that the provisions of presumptive taxation under S. 80-B of the Income Tax Ordinance, 1979 were not available to a company—Interest or profit received by the company or accrued to company was not covered by S. 80-B of the Income Tax Ordinance, 1979.

(e) Income Tax Ordinance (XXXI of 1979)--

---Ss. 143-B & 62---C.B.R. Circular No. 12 of 1991 dated 30-6-1991---Statements regarding certain payments---Normal assessment—Proportionate expenses against income being assessed under normal law was not allowed by the assessing Officer due to non-filing of audited accounts ---Validity---Appellate Assessee had never provided copies of the audited accounts in spite of repeated requests by the Assessing Officer—Assessing Officer had no basis to verify and allow expenses against income which was being assessed under normal law---Assessing Officer could only estimate the profit and loss expenses against the income assessed under normal law‑‑‑Appellate Authority was justified in confirming the treatment given by the Assessing Officer in this regard.

Malik Muhammad Iqbal and Hameedullah, I.T.P. for Appellant.

Shaheen Aziz Niazi, D.R. for Respondent.

Date of hearing: 3rd September, 2002.

2003 P T D (Trib.) 669

[Income‑tax Appellate Tribunal Pakistan]

Before Rasheed Ahmad Sheikh, Judicial Member and Amjad Ali Ranjha, Accountant Member

W.T.As. Nos.1069/LB, 1070/LB and 1071/LB of 2002, decided on 28th August, 2002.

(a) Wealth tax‑‑‑

‑‑‑‑Assessment‑‑‑Legal issue, which goes to the root of the assessment, can be raised even at any stage of apex Court of Pakistan.

(b) Wealth Tax Act (XV of 1963)‑‑‑

‑‑‑‑S. 5(1) (xii)‑‑‑Finance Act (XII of 1994), Preamble‑‑‑Exemption in respect of certain assets‑Agricultural land‑‑‑Inclusion of in net wealth‑‑‑Assessment year 1993‑94‑‑‑Value of land Rs.2,90,000‑‑­Assessee contended that since value of land was below the prescribed limit of Rs.10,00,000 same shall not be included in total net wealth of the assessee‑‑‑Validity‑‑‑Plea of the assessee was not sustainable in law‑‑‑Prior to substitution in cl. (xii) of S.5(1) of Wealth Tax Act. 1963 by virtue of Finance Act, 1994, ‑clue of agricultural land subject to a maximum limit of one lac of Rupees was not includable in total net wealth of the assessee‑‑‑Meaning thereby that if value of agricultural land exceeded Rs.1,00,000 then the value so assessed shall be included in total net wealth of the assessee but after it.,, substitution this amount had been raise to one million rupee (Rs.10,00,000), this substituted figure was applicable with effect from assessment year 1994‑95 onward‑‑‑Since the assessment year which was under appeal was 1993‑94 which pertained to the assessment year prior to substitution in S.5(1)(xii) of the Wealth Tax Act, 1963, the Assessing Officer ha acted within his jurisdiction in including value of agricultural land held by the assessee in his total net wealth as the value adopted was higher than the prescribed limit of Rs. 1,00,000---Orders of the two Authorities below were endorsed by the Appellate Tribunal on this score.

(c) Wealth Tax Act (XV of 1963)‑‑‑

‑‑‑‑S. 5(1) (xvi)‑‑‑Wealth Tax Rules, 1963, R.8(3) ‑‑Lahore Development Authority Buildings Regulation Act, 1984, R.51‑‑­Exemption in respect of certain assets‑‑‑House‑‑‑Clinic ‑‑Portion of residential house was being utilized for clinic by the assessee‑‑­Exemption was allowed to house to the extent which was being used for self‑residence and value of the portion used as clinic was added in the net wealth ‑‑‑Assessee contended that merely using part of the house for professional purposes would not change status of the house and according to R.51 of Lahore Development Authority Buildings Regulation, 1984, part of the house could be used as office of clinic‑‑‑Validity‑‑‑No ambiguity existed to understand Buildings Regulation Act of Lahore Development Authority for the purpose of using a portion of the house for professional ends because Lahore Development Authority Buildings Regulation was a separate law and Authority was governed by its own rules and regulations‑‑‑Wealth Tax Act was an independent enactment which had nothing to do with any other law‑‑‑Lahore Development Authority law did not have overriding effect over the Wealth Tax Act, 1963‑‑‑Wealth Tax Act. 1963 did not debar the assessee from using part of his property, otherwise than for a residential purpose so there was no legal bar on the assessee in whatever manner he desired to use his residence‑‑­Appellate Tribunal held that no other law came into play for valuation of immovable assets for the purposes of charging wealth tax thereon until and unless it had been said so‑‑‑According to S.5(1)(xvi) of the Wealth Tax Act, 1963, around which whole controversy of the issue in hand revolved provided that wealth tax shall not be payable by an assessee in respect of one residential house owned and occupied by the assessee for purposes of his own residence where he opted to exclude his house from the assets‑‑‑Paramount significance in the said clause, had been attached to the words "owned and occupied by the assessee for purpose of his own residence" ‑‑‑Option for claiming exemption of the house thus could only be exercised if, the house was owned and occupied by the assessee for purposes of his own residence‑‑‑Clause (xvi) of S.(5)(1) of the Wealth Tax Act, 1963 had inbuilt characteristic of its being apportionment of the house into two heads i.e. one utilization for self‑residence and the other for non­-utilization for residential purposes and in no way such portion of the residential house which was being used for clinic could be said to have been occupied by the assessee for the purposes of his own residence‑‑‑Appellate Tribunal held that every time, that a portion of house was used otherwise than for residential purposes, no matter whether any division of the house had taken place or not, the assessee shall not be entitled to the benefits of exemption to the extent the house was in utilization for professional purposes---Objection of the assessee was rejected by the Appellate Tribunal accordingly.

(d) Wealth Tax Act (XV of 1963)---

-----Second Sched., Cl.12(2)---exemption—Clinic---Refusal to grant exemption to clinic—Validity—Clinic having been excluded out of the definition of shop exemption to clinic had rightly been refused by the Assessing Officer.

(2000) 81 Tax 80 rel.

Latif Ahmed Qureshi for Appellant.

Javed-ur-Rehman, D.R. for Respondent.

Date of hearing: 21st August, 2002.

2003 P T D (Trib.) 692

[Income‑tax Appellate Tribunal Pakistan]

Before Syed Nadeem Saqlain, Judicial Member and Imtiaz Anjum, Accountant

Member

I.T.A. No. 3398/LB of 2000, decided on 29th July, 2002.

Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑Ss.66‑A, 59(1) & 59(A)‑‑‑Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order‑‑‑Assessment year 1998‑99‑‑‑Assessment under Self‑Assessment Scheme‑‑‑Cancellation of assessment order passed under S.59(A) of the Income Tax Ordinance, 1979 as on 30‑6‑2000 which was required to be passed before 30‑6‑1999‑‑‑Assessee contended that limitation period under the law having expired, the Assessing Officer erred in law to pass an order under S.59(1) of the Income Tax Ordinance, 1979 and that too on 30‑6‑2000 which was to circumvent the provisions of law and in order to overcome the hindrance created due to lapse of time‑‑‑Since original order passed by the Assessing Officer was an order void ab initio being time‑barred order, the Inspecting Additional Commissioner could not exercise his revisional powers under S.66‑A of the Income Tax Ordinance, 1979 and assumption of jurisdiction by the Inspecting Additional Commissioner was nullity in the eye of law ‑‑Even it the stance of the Department is accepted that order was passed under S.59(1) of the Income Tax Ordinance, 1979, still such order could not be subjected to revisional powers conferred by S.66‑A of the Income Tax Ordinance, 1979 for the reason that under the law no formal order was holding the field at the time of invocation of S.66‑A of the Income Tax Ordinance, 1979‑Validity‑‑‑Order passed under S.59(A) of the Income Tax Ordinance, 1979 being time‑barred was an order without jurisdiction and any proceedings subsequent thereto would entail the same consequences‑‑‑Orders passed under S.66‑A of the Income Tax Ordinance, 1979 as well as under S.59(A) of the Income Tax Ordinance, 1979 were annulled by the Appellate Tribunal.

2002 PTD (Trib.) 912 and 2002 PTD (Trib.) 1949 ref.

Noor Muhammad Qureshi for Appellant.

Mrs. Talat Altaf, D.R. for Respondent.

Date of hearing: 13th June, 2002.

2003 P T D (Trib.) 698

[Income‑tax Appellate Tribunal Pakistan]

Before Muhammad Akhtar Nazar Mian, Accountant Member and Syed Hassan

Imam, Judicial Member

I.T.A. No. 1713/KB of 1996‑97, decided on 28th October, 2002.

(a) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑S.25(c)‑‑‑Amounts subsequently recovered in respect of deductions etc.‑‑‑Terms "liability", "liable" "trading liability" and "trade creditor"‑‑‑Connotation‑"Liability" had not been defined anywhere in the Income Tax Ordinance; 1979 and the ordinary dictionary meaning of the word "liability" was the state of being liable‑‑‑"Liable" means "legally bound" ‑‑‑Whatever a trade owes and a person was legally bound to pay was a liability‑‑‑Rights to properties were divided into two principal heads: the rights of creditors and the rights of the owners‑‑‑Rights of the owners were called capital, share capital or owner's equity‑‑‑Rights of creditors represent debts of the business and were called "liabilities"‑‑‑Debts pertaining to goods and services were called "trading liabilities" and such creditors were known as "trade creditors"‑­Word "trading liabilities" connotes all the liabilities which the trade owes relating to the items charged to the trading account or to the profit and loss account.

(b) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑Ss.25(c) & 23‑‑‑Amounts subsequently recovered in respect of deductions etc. ‑‑‑Additions‑‑‑Principles‑‑‑Section 25 of the Income Tax Ordinance, 1979 shows that additions under various clauses of S.25 could be made only of allowance or deduction that had been made in respect of these amounts under S.23 of the Income Tax Ordinance, 1979 for any year‑‑‑Deduction or allowance may be in respect of loss, bad debts, interest credited to suspense account, expenditure or trading liability‑‑‑Where the accounts were maintained on cash basis and no trading liability as such appeared in the accounts then any benefit received in cash or otherwise against the deduction or allowance allowed under S.23 of the Income Tax Ordinance, 1979 became income under cls. (a), (aa) or (ab) of S.25 of the Income Tax Ordinance, 1979‑‑‑Where accounts were maintained on mercantile basis and the payments had already been made in respect of allowances and deductions made under S.23 of the Income Tax Ordinance, 1979, the situation was similar to that when the cash system of accounting was employed‑‑‑Where, however, some liability in respect of deductions or allowances allowed under S.23 of the Income Tax Ordinance, 1979 remained payable, then that was the trading liability and any benefit derived in respect of the trading liability was to be taken as income under cl. (b) of S.25 of the Income Tax Ordinance, 1979‑‑‑Section 25(c) of the Income Tax Ordinance, 1979 would come into play if the trading liability on the basis of mercantile system of accounting remained unpaid for a period of three years‑‑‑Amount not so, paid although allowed under S.23 of the Income Tax Ordinance, 1979 in preceding years, was deemed to be income of the year in which such finding was made by the Assessing Officer‑‑‑Cumulative effect of the provision was thus that all the liabilities incurred and allowed under S.23 of the Income Tax Ordinance, 1979, if not paid in three years, were liable to be added as income under S.25(c) of the Income Tax Ordinance, 1979.

(c) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑Ss. 25(c), 23 & 22‑‑‑Amounts subsequently recovered in respect of deductions etc. ‑‑‑Addition‑‑‑No business was done and return was filed showing loss pertaining to the financial expenses‑‑‑Assessing Officer disallowed the same which was confirmed by the First Appellate Authority as no business had admittedly been carried on‑‑‑" Liabilities not paid in previous three years" was added as income under S.25(c) of the Income Tax Ordinance, 1979 and for this purpose, the business was deemed to have been carried on ‑‑‑Assessee contended that liabilities not allowed as deduction in the preceding years were not liable to be added under S.25(c) of the Income Tax Ordinance, 1979‑‑‑First Appellate Authority directed the Assessing Officer that the amount falling in said category of liabilities not allowed previously be deleted from the deemed income and the remaining amount of liability under S.25(c) of the Income Tax Ordinance, 1979 was upheld‑‑‑Business loss of the preceding year was not allowed to be set off against the addition under S.25(c) of the Income Tax Ordinance, 1979 on the ground that since no business was carried the loss of the earlier years could not be brought forward and adjusted against the addition under S.25(c) of the Income Tax Ordinance, 1979‑‑‑Validity‑‑‑For the purpose of making such addition, it had been provided with reference to S.22 of the Income Tax Ordinance, 1979 that such business shall be deemed to have been carried on by the assessee in that year‑‑‑Held, First Appellate Authority was justified in deleting the liability incurred, but did not allow under S.23 of the Income Tax Ordinance, 1979, from the purview of the addition made under S.25(c) of the Income Tax Ordinance, 1979‑‑‑Appellate Authority was also justified in maintaining the 'balance addition relevant to the items allowed previously under S.23 of the Income Tax Ordinance, 1979 whether in the trading account or in the profit and loss account‑‑­Assessee candidly admitted that no business had been done‑‑‑Irresistible conclusion was that the assessee had discontinued the business and in these circumstances, Appellate Tribunal maintained that the administrative and financial charges were rightly not allowed by the Authorities below‑‑‑Appeal was dismissed by the Appellate Tribunal.

(d) Income Tax Ordinance, (XXXI of 1979)‑‑‑

‑‑‑S.25(c), 22 & 35‑‑‑Amounts subsequently recovered in respect of deduction etc. ‑‑‑Loss‑‑‑Set off‑‑‑Contention was that if the business was deemed to have been carried on for the purpose of S.22 of the Income Tax Ordinance, 1979, the business loss of the preceding years could be allowed to be brought forward and set off against the addition under S.25(c) of the Income Tax Ordinance, 1979‑‑‑Validity‑‑‑Provision of S.22(a) of the Income Tax Ordinance, 1979 provided that the profits and gains of any business or profession were chargeable under S.22 of the Income Tax Ordinance, 1979 if the business was carried on and similarly, the profits and gains were chargeable under S.22 of the Income Tax Ordinance, 1979 where the business was deemed to be carried on‑‑‑Income was to be computed under S.22 of the Income Tax Ordinance, 1979 in two situations i.e. where the business was (actually) carried on or where business was deemed to be carried on‑‑‑Under S.35 of the Income Tax Ordinance, 1979 a business loss could be carried forward and set off against income only, if such, business or profession continued to be carried on by the assessee which meant that where business was deemed to be carried on no adjustment of the available loss of the preceding year could be made‑‑‑Adjustment of loss, of the preceding year was permissible only when such business or profession continued to be carried on‑‑‑Business having pot actually been carried on in the year under appeal, the available loss of the preceding year was not permissible to be adjusted against the income in respect of business which was only deemed to be carried on.

(e) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑S.25(c)‑‑‑Amounts subsequently recovered in respect of deductions etc. ‑‑‑Explanation‑‑‑If the available losses of the preceding year were allowed to be adjusted against the business deemed to be carried on that would be unjustified and unreasonable‑‑‑Any trading liability added under S.25(c) of the Income Tax Ordinance, 1979, if subsequently paid, will be allowed as deduction against income‑‑‑If the adjustment of available business loss was allowed, that would mean that the deemed income will be wiped off once by adjusting the loss and the assessee will again get benefit for the second time when the liability if discharged, will have to be allowed as provided in the proviso to S.25 of the Income Tax Ordinance, 1979.

M. Shakir, F.C.A. for Appellant.

Abdul Salam, D.R. for Respondent.

Date of hearing: 24th October. 2002.

2003 P T D (Trib.) 711

[Income‑tax Appellate Tribunal Pakistan]

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

Reference Application No. 254/LB of 2002, decided on 22nd July, 2002.

Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑Ss.136, 134(2)(5) & 155‑‑‑Reference to High Court‑‑‑Appellate Tribunal had dismissed the Departmental appeal merely on technical grounds that the memo of appeal and other documents had been signed by any other person on behalf of Assessing Officer and without providing an opportunity to make up the deficiency‑‑‑Validity‑‑‑Appeal memo was signed by some one on behalf of the Assessing Officer and even the name and designation of the person who supposedly exercised the authority of filing the appeal on behalf of the Assessing Officer had not been mentioned‑‑‑Documents appended with the appeal were not duly certified as prescribed under the rules but same were also attested by the said person‑‑‑Contention that appeals were dismissed merely on technical ground did not hold good because such defect was not merely a technical objection/mistake/omission which could be cured under S.156 of the Income Tax Ordinance, 1979‑‑‑Section 134(2) read with S.134(5) of the Income Tax Ordinance, 1979 provided that appeal on behalf of the Department could be filed only by the Assessing Officer and none else‑‑­When law required something to be done in a particular manner, the same must be done in that manner or not at all‑‑‑No question of law arising and reference application being devoid of any merit same was dismissed by the Appellate Tribunal.

2001 PTD 781 rel.

Nemo for Appellant.

Bashir Ahmad Ansari for Respondent.

Date of hearing: 17th July, 2002.

2003 P T D (Trib.) 714

[Income‑tax Appellate Tribunal Pakistan]

Before Khawaja Farooq Saeed, Judicial Member

I.T.A. No. 1125/LB of 1994, decided on 4th June, 2002.

(a) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑S.65‑‑‑Additional assessment‑‑‑" Definite information" ‑‑‑Value in a parallel case, whether a definite information‑‑‑By no stretch of imagination it could be said that in a parallel case the value being different the same could be called as "definite information" for invoking jurisdiction under S.65 of the Income Tax Ordinance, 1979.

(b) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑Ss.13(1)(d) & 65‑‑‑Income Tax Rules, 1982, R.207‑A‑‑‑Addition‑‑­Valuation of property‑‑‑Adjacent property‑‑‑Parallel case‑‑‑Value declared according to the registered deed was considered to be low and on the basis of value declared regarding the adjacent property, the estimate was made and added the same in net income under S.13(1)(d) of the Income Tax Ordinance, 1979‑‑‑First Appellate Authority annulled the assessment on the ground that S.65 of the Income Tax Ordinance, 1979 was not applicable as the facts on record did not indicate any definite information with the Department with regard to under statement of the value of the property and value declared was in accordance with R.207A of the Income Tax Rules, 1982‑‑‑Validity‑‑‑No evidence was available to support Department's case that the money paid was more and registered was less‑‑‑Such evidence could be in forum of an agreement to sell, some Bank draft or other similar Bank entry, or some other source from which assessee had made excess payment but nothing had been brought on record‑‑‑Word definite information' used in S.65 of the Income Tax Ordinance, 1979 and the wordsin the opinion of in S.13(2) of the Income Tax Ordinance, 1979 would not mean `reason to suspect' how strong it may be‑‑‑Only that evidence could be used for reopening of an assessment and for subsequent addition under S.13(2) of the Income Tax Ordinance, 1979 which gave reason to believe that the assessee had paid more amount than what had been registered and in this regard all the parameters fixed by the superior Courts required attendance for finalizing of the assessment‑‑‑Section 13 of the Income Tax Ordinance, 1979 was a deeming provision and could not be applied without some objective evidence‑‑‑First Appellate Authority rightly annulled the assessment‑‑‑Order of the First Appellate Authority was maintained and appeal of the Department was rejected by the Appellate Tribunal.

Messrs Edulji Dinshaw Limited v. I.T.O. 1990 PTD 155 and Messrs Arafat Woollen Mills Ltd. v. I.T.O., Companies Circle‑1, Karachi 1990 SCMR 697; Messrs A.G. Siemen v. C.I.T. (sic) 1991 SC 773; 1999 PTD (Trib.) 8; CIT v. Shah Nawaz Limited and others 1993 SCMR 73 and NLR 1995 (Trib.) 100 rel.

Mrs. Sabiha Mujahid, D.R. for Appellant.

Tariq Javed Raja for Respondent.

Date of hearing: 4th June, 2002.

2003 P T D (Trib.) 720

[Income‑tax Appellate Tribunal Pakistan]

Before Syed Nadeem Saqlain, Judicial Member and Imtiaz Anjum, Accountant

Member

M. As. (Stay) Nos.324/LB and 325/LB of 2002, decided on 15th June, 2002.

Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑‑S.134(6)‑‑‑Appeal to Appellate Tribunal‑‑‑Stay of reassessment proceedings‑‑ Department contended that S.134(6) of the Income Tax Ordinance, 1979 empowered the Appellate Tribunal to grant stay only with regard to recovery of tax and did not give powers to Appellate Tribunal to grant stay against the reassessment proceedings and if stay was not vacated, the case of the assessee would become time‑bared‑‑­Assessee contended that grant of stay by the Appellate Tribunal was integral part and parcel of Appellate Tribunal's powers to hear appeals under S.134 of the Income Tax Ordinance, 1979 and appeal was the continuation of the assessment proceedings so the Appellate Tribunal had inherent jurisdictional powers not only to grant stay against the recovery of tax but also to stay the reassessment proceedings ‑‑‑Validity‑­Appellate Tribunal agreeing with the contention of the assessee did not interfere with earlier finding whereby it granted stay against the reassessment proceedings‑ ‑‑Application seeking vacation of stay order was rejected by the Appellate Tribunal.

Writ Petition No. 13815 of 1996; 1985 PTD 375 and Commissioner of Income‑tax, Bombay Presidency and others v. Khaim Chand Ram Das (1938) 6 ITR 414 rel.

Asif Hashmi and Mrs. Talat Altaf, D. Rs. for Appellant.

Shahbaz Butt for Respondent.

Date of hearing: 1st June, 2002.

2003 P T D (Trib.) 722

[Income‑tax Appellate Tribunal Pakistan]

Before Khawaja Farooq Saeed, Judicial Member and Mazhar Farooq Shirazi, Accountant Member

Reference Application No. 161/LB of 2002, decided on 22nd June, 2002.

Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑Ss.136 & 23(1)‑‑‑Reference to High Court ‑‑‑Deductions‑‑­Depreciation allowance ‑‑‑Assessee was under obligation to claim depreciation allowance as well as expenditure under the head maintenance of car in the Profit and Loss Account and non‑claim of such depreciation and expenses amounted to an ad hoc addition which was not permissible under the Self‑Assessment Scheme‑‑‑Validity‑‑‑Such was an allowance, which could only be allowed if claimed‑‑No concept of an allowance or depreciation existed in law without claim‑‑‑Appellate Tribunal found that the depreciation could not be allowed without claim and that the present was not fit case for cancellation of the order‑‑‑No substantial question of law arising from the order of the Appellate Tribunal, questions framed were considered as without any notable or useful purpose‑‑‑Appellate Tribunal refused to refer the same to High Court.

CIT v. Mathendra Mills and others 2001 PTD 609 rel.

Mrs. Sabiha Mujahid, D.R. for Appellant.

Jamal Sukheera for Respondent.

Date of hearing: 22nd June, 2002.

2003 P T D (Trib.) 728

[Income‑tax Appellate Tribunal Pakistan]

Before Syed Nadeem Saqlain, Judicial Member and Imtiaz Anjum, Accountant

Member

I.T.A. No.4764/LB of 2001, decided on 31st May, 2002.

Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑Ss.86, 85 & 156‑‑‑Additional tax‑‑‑Short levy of‑‑‑Enhancement‑‑‑Assessing Officer proceeded through a notice under S.85 of the Income Tax Ordinance, 1,979 to levy additional tax under S.86 of the Income Tax Ordinance, 1979, for the reason that while preparing IT‑30 for the years under consideration, additional tax levied was short of what should have been actually attracted‑‑‑First Appellate Authority set aside the same for de novo consideration for proper application of rate‑‑‑Assessee contended that once a tax had already been levied under S.86 of the Income Tax Ordinance, 1979; additional tax could not be imposed under the same section and if the Assessing Officer wanted to rectify the mistake and to enhance the additional tax then mandatory notice under S.156 of the Income Tax Ordinance, 1979 should have been issued and that Assessing Officer having committed flagrant violation of law, the order should have been annulled rather than being set aside‑Validity‑‑­Additional tax under S.86 of the Income Tax Ordinance, 1979 had already been levied and the Assessing Officer proceeded to enhance the same by invoking S.86 of the Income Tax Ordinance, 1979 for imposition of additional tax under S.86 of the Income Tax Ordinance, 1979 which could not be permitted under the law for the reason that the same provision could not be used by the Assessing Officer, for levying the tax twice‑‑‑Assessing Officer also failed on count of rectification for the reason that additional tax could not be enhanced without issuing mandatory notice required under S.156 of the Income Tax Ordinance, 1979‑‑‑Assessment.order.did not show as to under which legal provision the Assessing Officer had enhanced the additional tax because in case of rectification, the Assessing Officer was under legal obligation to comply with the provision of law i.e. to issue notice under S.156 of the Income Tax Ordinance, 1979 which he failed to do‑‑‑Appellate Tribunal vacated the order and restored the original assessment order.

2000 PTD 2407; 1993 PTD 580 and 1971 SCMR 981 rel.

Irfan Ilyas, A.C.A. for Appellant.

Nemo for Respondent.

Date of hearing: 16th May, 2002.

2003 P T D (Trib.) 731

[Income‑tax Appellate Tribunal Pakistan]

Before Khawaja Farooq Saeed, Judicial Member and Mazhar Farooq Shirazi, Accountant Member

Reference Application No. 153/LB of 2002, decided on 24th April, 2002.

Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑Ss.136 & 50(4)(b), proviso (i)‑‑‑Reference to High Court‑‑‑Deduction of tax at source‑‑‑Purchase and buy back arrangement‑‑‑Question whether Appellate Tribunal was justified to reject the plea of the Department that deduction under S.50(4) of the Income Tax Ordinance, 1979 by leasing company on buy and lease back was not the final discharge of liability of the assessee by referring a case decided by the High Court holding that such deduction was covered under S.80‑C of the Income Tax Ordinance 1979‑‑‑Validity‑‑‑Fact that the Department had not contested the said judgment in higher forum on which the Tribunal had relied and the unreported judgment of High Court having never been placed before the Tribunal for checking of its contents could not go to favour the Department‑‑‑Language of S.50(4)(b), proviso (i) speaks of non‑charging of withholding tax on certain assets specifically‑‑‑Said provision was not containing the words "or to the purchase of an asset under a lease and buy .back arrangement by a Modarba or leasing company" as the same were inserted in 1998, but this could not be ignored that said proviso was of remedial nature as the same had provided relief to the taxpayers from deduction of the tax chargeable under S.50(4) of the Income Tax Ordinance, 1979 which had provided remedy against the deduction hence was applicable on all pending proceedings including appeal at any stage‑‑‑Even if there was a different finding with regard to application of S.50(4) of the Income Tax Ordinance, 1979 on purchase and buy back arrangement, such amend­ment had come to the rescue of the same‑‑‑Department was considering such arrangement to be a supply, which impression had been reversed through the said amendment wherein exemption had been provided‑‑­Provision in its nature being curative and remedial was applicable to the present case‑‑‑Departmental application being devoid of any merit was dismissed by the Appellate Tribunal.

Sundara Finance Ltd. v. State of Kerala and another 17 STR 489 (SC); Shah Nawaz Limited's case 1993 SCMR 73; 1970 SCMR 872 and Statutory Construction by Crawford, 1940 Edn., para. 282 rel.

Sabiha Mujahid, D.R. for Appellant.

Dr. Ikramul Haq for Respondent.

Date of hearing: 24th April, 2002.

2003 P T D (Trib.) 735

[Income‑tax Appellate Tribunal Pakistan]

Before Rasheed Ahmad Sheikh, Judicial Member and Amjad Ali Ranjha, Accountant Member

I.T.As. Nos. 198/LB and 199/LB of 2002, decided on 26th September, 2002.

Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑Ss. 80‑C, 50(5) & 156‑‑‑Tax on income of certain contractors and importers‑‑‑Deduction of tax at source‑‑Sales tax and customs duty‑‑­Inclusion of in the value of imported goods for purpose of income‑tax deduction under S.50(5) of the Income Tax Ordinance, 1979‑‑‑Validity‑‑­Sales tax and customs duty shall not be added in the value of imported goods for the purpose of assessing income of the assessee under S.80‑C of the Income Tax Ordinance, 1979‑‑‑Tax liability was to be worked out after deducting sales tax and customs duty paid by the assessee‑‑‑Appeal of the assessee was accepted by the Appellate Tribunal.

Messrs Ramma Pipe and General Mills (Pvt.) Limited through its Director v. The Federation of Pakistan through Secretary, Ministry of Finance, Islamabad and 3 others 1994 PTD 848 and Writ Petition No. 18286 of 2001 rel.

Shahid Abbas and Muhammad Hamid for Appellant.

Javed‑ur‑Rehman, D.R. for Respondent.

Date of hearing: 24th September, 2002.

2003 P T D (Trib.) 743

[Income‑tax Appellate Tribunal Pakistan]

Before Syed Nadeem Saqlain, Judicial Member and Imtiaz Anjum, Accountant

Member

W.T.As. Nos.1012/LB and 1361/LB of 2001, decided on 30th May, 2002.

Wealth Tax Act (XV of 1963)‑‑‑

‑‑‑‑S. 16(3)‑‑‑Wealth Tax Rules, 1963, R.8(2)(c)(ii)‑‑‑Calculation of break‑up value‑‑‑Reserve for contractual obligation‑‑‑Free reserve‑‑­Value of shares was declared at face value‑‑‑Break‑up value however was declared on the basis of final balance sheet without adding "reserve for contractual obligation" appearing on the liability side of the balance sheet‑‑‑Assessing Officer worked out the break‑up value by adding such reserve for contractual obligation ‑‑‑Assessee contended that "reserve for contractual obligation" appearing on the balance sheet was a trade liability emanating from future obligation which had to be provided for in terms of contract and was not free reserves as envisaged under R.8(2)(c)(ii) of the Wealth Tax Rules, 1963 which was wrongly assumed to be so by the Assessing Officer‑‑First Appellate Authority observed that Assessing Officer was required in terms of the provisions of the said rules to carefully scrutinize the balance sheet in order to exclude therefrom items which really did not form part of the reserves, as well as distinction between provisions and reserves etc.‑‑‑Validity‑‑‑Undoubtedly calculation of break‑up value was made by treating the reserve for contractual obligation as a free reserve without scrutinizing the balance sheet with a view to exclude items which should really form part of the reserve as had been simply assumed that reserve for contractual obligation constituted free reserve without saying anything in terms of the detailed facts of such reserve or for that matter without having proved the surplus over the liabilities which could have formed the part of the reserves in terms of R. 8(2)(c)(ii) of the Wealth Tax Rules, 1963‑‑‑Assessing Officer intended to treat reserves for contractual obligation as free reserve deviating from the past or if put in the words of the assessee that reserve for contractual obligation as declared position had been accepted on merit in the past, it was required that proper details should have been ascertained and assessee allowed opportunity to put their point of view‑‑‑Since it was not done action of the Assessing Officer in calculating break‑up value was rightly declared by the First Appellate Authority as not sustainable in law‑‑‑Appellate Tribunal held that reserve for contractual obligation was clearly distinguishable as reserves based on provision for contractual obligation which constituted ascertainable liability‑‑‑What the Assessing Officer should have done was to ascertain the excess over the contractual obligation for meeting the provisions created‑‑‑Assessing Officer calculated break‑up value without properly ascertaining the facts of reserves as acquired by law and without scrutinizing the facts of the reserves/provisions before treating the same as free reserves‑‑‑Provisions of law and instructions of the Central Board of Revenue on the subject had been dealt in contravention of method and manner for purposes of calculation of break‑up value‑‑‑Requirement of justice and fair-play was that when deviating from history and creating liability of a very high proportion assessee should have been heard by confronting him with the objection and their point of view considered‑‑‑First Appellate Authority emphasized by the assessee although got persuaded to find that the treatment of calculation of break‑up value was not sustainable yet in the interest of justice and fair-play to both the parties (particularly the Revenue) it was deemed proper to order de novo proceedings‑‑­Objections of the assessee on the setting aside by the First Appellate Authority though were well based yet Appellate Tribunal observed that it would be appropriate to let the Assessing Officer scrutinize the facts of the reserves for contractual obligation which in all fairness was an ascertained liability‑‑‑Appellate Tribunal directed that reserve for contractual obligation be scrutinized for purposes of exclusions from free reserves‑‑‑Appeal of the Department against the setting aside was declared without merit.

1979 PTD 12; PLD 1979 Lah. 63; 1985 PTD 413; S.R.O. 116(R)/68; 1964 PTD 194; (1962) 44 ITR 551; (1963)48 ITR 562; AIR 1959 SC 1049; 1982 PTD 277 and 1983 PTD 435 ref.

1984 PTD 18 and (1969) 73 ITR 53 rel.

Ch. Yousuf Ali, I.T.P. for Appellante/Assessee.

Mrs. Talat Altaf, D.R. for Respondent/Department.

Date of hearing: 15th May, 2002.

2003 P T D (Trib.) 754

[Income‑tax Appellate Tribunal Pakistan]

Before Khawaja Farooq Saeed, Judicial Member and Mazhar Farooq Shirazi, Accountant Member

I.T.As. Nos. 632/LB and 633/LB of 2001, decided on 30th May, 2002.

Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑Ss. 66‑A & 80C‑‑‑Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order ‑‑‑Assessee used to file return/statement under S. 143‑B of the Ordinance in a circle which had jurisdiction over the contractors ‑‑‑Assessee opted out of the Self-­Assessment Scheme and filed return being manufacturers for the next years in a circle having territorial jurisdiction over the case and got refund in consequence of finalization of assessment under normal law‑‑­Inspecting Additional Commissioner considered the assessments as erroneous and prejudicial to the interest of revenue ,on the ground that assessee's jurisdiction was with the circle having jurisdiction over the contractor and assessment was finalized in a circle having territorial jurisdiction over the case in connivance with the Assessing Officer of that circle as assessee was not a manufacturer‑‑‑Validity‑‑‑Opting from Self‑Assessment Scheme being a manufacturer, was only to opt for a normal assessment which did not give right to assessee to change suo Motu his jurisdiction at his own sweet will by saying that the area of his business fell in a particular jurisdiction‑‑‑Jurisdiction of the case remained with the same circle where assessment for the earlier years were made‑‑‑Filing of return in a different circle was erroneous and also prejudicial to the interest of revenue in term of proviso to S.66‑A of the Income Tax Ordinance, 1979 which provided that an order without jurisdiction becomes prejudicial to the interest of revenue suo motu‑‑­Order had rightly been held to be an erroneous and prejudicial to the interest of revenue as the nature of the assessee's business even after opting out remains the same and its assessment under normal law was also to be made by the Assessing Officer having jurisdiction over the cases of contractors‑‑‑Cancellation of order by the Inspecting Additional Commissioner under S.66‑A of the Income Tax Ordinance, 1979 was not interfered by the Appellate Tribunal in circumstances.

Mian Muhammad Akram for Appellant.

Mrs. Sabiha Mujahid, D.R. for Respondent.

Date of hearing: 28th March, 2002.

2003 P T D (Trib.) 769

[Income‑tax Appellate Tribunal Pakistan]

Before Khawaja Farooq Saeed, Judicial Member and Mazhar Farooq Shirazi, Accountant Member

I. T. A. No. 4949/LB of 2001, decided on 11th May, 2002.

(a) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑Second Sched., Part I, Cl. (86)‑‑‑C.B.R. Circular No.2 of 1996, dated 18‑2‑1996‑‑‑Exemption‑‑‑Educational institution‑‑‑Payment of salary to teachers related to the Members of the Board of Directors was termed as not for purpose of education but for personal benefit and exemption was disallowed‑‑‑Validity‑‑‑Institution was separate from its administration‑‑‑Method of running the institution had nothing to do with the purpose of its establishment‑‑‑If the Board of Trustees had employed some staff related to them but the .staff was being paid salaries suitable to their qualification and it did not give the impression that the same were disproportionate to their abilities and the work assigned to them that could not be used as a tool to disallow the exemption.

(b) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑Second Sched., Part I, Cl. (86)‑‑‑Exemption‑‑‑Educational insti­tution.‑‑Test and points to see for grant of exemption.

(c) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑Second Sched. Part I, Cl. (86)‑‑‑Exemption‑‑‑Educational institution‑‑‑Use of surplus for educational purpose‑‑‑No profit motive‑‑­Where the sole object of an institution was education, and the surplus was used for educational purposes only, no profit motive would come in by the mere presence of the surplus as no prudent institution can work without having some idle funds at its disposal for unforeseen contingencies.

(d) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑Second Sched., Part I, Cl. (86)‑‑‑Exemption‑‑‑Educational institution‑‑‑Employees related to Board of Governors or Board of Trustees‑‑‑Surplus used for improvement of institution‑‑‑No bungling in accounts‑‑‑Disallowance of exemption‑‑‑Validity‑‑‑If the purpose was imparting education and the working of the organization had been so proved then some employees being relation of the Board of Governors or Board of Trustees could not be of any damage for the claim of exemption‑‑‑If accounts showed profit it also did not become a disqualification for the claim‑‑‑Requirement of exemption being the purpose i.e. imparting education, if was being fulfilled and thus the exemption could not be denied‑‑‑Exceptions which could be fatal for the claim were bungling in accounts for personal benefits of the sponsor and distribution of profit directly or indirectly‑‑‑If the accounts were prepared as per rules and regulations and there was no reason to believe that some manipulation had been done for transfer of profit for personal gains, exemption could not be denied‑‑‑Keeping the surplus for improvement of the institution was no reason for disallowing the exemption‑‑‑Damage to the claim was personal gains in actuality‑‑‑Salary paid was proportionate to the job and qualifications of the said persons and amount paid looked reasonable which did not give the impression that they were exceptional or excessive‑‑‑Exemption allowed by the First Appellate Authority was fully justified and appeal of the Department was rejected by the Appellate Tribunal.

Mrs. Sabiha Mujahid, D.R. for Appellant.

Noor Muhammad Qureshi for Respondent.

Date of hearing: 10th May, 2002.

2003 P T D (Trib.) 783

[Income‑tax Appellate Tribunal Pakistan]

Before Rashid Ahmed Sheikh, Muhammad Taquir Afzal Malik, Judicial Members and Muhammad Sharif Chaudhry, Accountant Member

W.T.A. No. 1230/LB of 2000, decided on 15th April, 2002.

Per Rasheed Ahmad Sheikh (Judicial Member)‑‑‑

(a) Finance Act (XII of 1991)‑‑‑

‑‑‑‑S.12(6)‑‑‑Wealth Tax Act (XV of 1963), S.17A,‑‑‑Corporate Assets Tax‑‑‑Assessment of Corporate Assets Tax‑‑‑Rectification‑‑‑Merger‑‑­Limitation‑‑ Assessee pleaded in appeal that the order passed was barred by limitation in terms of S. 17A of the Wealth Tax Act, 1963‑‑‑Validity‑­Soon after the receipt of the assessment order, assessee moved rectification application challenging the order sought to be rectified‑‑­Order originally made under S.12(6) of the Finance Act, 1991 having merged with the rectifying order, reckoning from the date of the order under S.12(6)(10) of the Finance Act, 1991 same was passed within the statutory limit of time.

(b) Income‑tax‑‑‑

‑‑‑‑Acknowledgment receipt without rubber stamp of concerned office‑‑­Evidentiary value‑‑‑In absence of rubber stamp of the concerned office affixed on acknowledgment receipt/letter head pad same could not he accepted as valid piece of evidence.

Per Muhammad Sharif Chaudhry (Accountant Member), Muhammad Tauqir Afzal Malik (Judicial Member) agreeing with different reasons‑‑‑

(c) Finance Act (XII of 1991)‑‑‑

‑‑‑‑S.12(6)(7)(8)‑‑‑Corporate Assets Tax‑‑‑Non‑filing of return voluntarily‑‑‑Confusion by Circulars of C.B.R.‑‑‑Levy of penalty and additional tax ‑‑‑Validity‑‑‑Assessee did not file its return nor paid tax alongwith the return‑‑Penalty under S.12(7) and additional tax under S.12(8) of the Finance Act, 1991 was rightly charged by the Assessing Officer and confirmed by the First Appellate Authority‑‑‑Without indicating the circulars and without pointing out and identifying the confusion in such circulars, Appellate Tribunal could not hold that the circulars issued by the Central Board of Revenue created confusion in the minds of the taxpayers ‑‑‑Assessee could not be supposed to be confused and that he was under a bona fide impression that return was not required to be filed ‑‑‑Assessee having neither taken such plea in its grounds of appeal before the Appellate Tribunal nor in grounds of appeal before the First Appellate Authority nor during his arguments its contention regarding filing of returns of Corporate Assets Tax under S.12(2) of the Finance Act, 1991 was not proved‑‑‑No ambiguity existed on the issue that the appellant being a public limited company, quoted on stock exchange and running a textile unit, having the value of its fixed assets exceeding Rs.50 million was required under S.12(2) of the Finance Act, 1991 to file its return of Corporate Assets Tax and pay the said tax alongwith the return under S.12(5) of the Finance Act, 1991‑‑­Penalty and additional tax levied by the Assessing Officer under S.12(7) & (8) of the Finance Act, 1991 was, maintained by the Appellate Tribunal as the assessee failed to file its return of its Corporate Assets Tax.

I.T.A. No. 1872/LB of 1997; 2001 PTD (Trib.) 2969 and W.T.A. No. 154/LB of 1999 distinguished.

ICC Textile Ltd. v. Federation of Pakistan and others 2001 PTD 1557 = 2001 SCMR 1208 rel.

Per Muhammad Sharif Chaudhry (Accountant Member)‑‑‑

(d) Finance Act (XII of 1991)‑‑‑

‑‑‑‑S.12(6)‑‑‑Wealth Tax Act (XV of 1963), S.17A‑‑‑Corporate Assets Tax‑‑‑Application of S. 17A of the Wealth Tax Act, 1963 to a case of Corporate Assets Tax‑‑‑Section 17A of the Wealth Tax Act, 1963 was not applicable to a case of Corporate Assets Tax‑‑‑Section 12(6) of the Finance Act, 1991 clearly mentioned that only Ss.32, 23, 24, 25 & 35 of the Wealth Tax Act, 1963 shall be applicable to Corporate Assets Tax.

Per Rasheed Ahmad Sheikh (Judicial Member) [Minority view]‑‑­

I. T. A. No. 1872/LB of 1997 ref.

2001 PTD (Trib.) 2969 and W.T.A. No. 154/LB of 1999 rel.

Dr. Sarshar Hussain for Appellant.

Nemo for Respondent.

Date of hearing: 13th March, 2002.

2003 P T D (Trib.) 822

[Income‑tax Appellate Tribunal Pakistan]

Before Syed Kabirul Hasan, S. Hasan Imam, Judicial Members and Abdul Ghafoor

Junejo, Accountant Member

I.T.As. Nos. 24/KB, 96/KB, 2052/KB and 2053/KB of 2000‑2001, decided on 30th April, 2002.

Per Syed Kabirul Hasan and S. Hasan Imam (Judicial Members) agreeing; Abdul Ghafoor Junejo (Accountant Member) Contra‑‑‑

Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑S. 27‑‑‑Capital gain‑‑‑Inherited agricultural land‑‑‑Sale of such land in the shape of plots ‑‑‑Taxability‑‑‑Assessee converted inherited agricultural land into sikny and obtained "No‑Objection Certificate "from the Development Authority‑‑‑Land was bifurcated into number of plots and sold in the open market‑‑‑Permission for sale of such plots as Housing Scheme was allowed by the concerned Development Authority‑­Profit on sale of such agricultural land was declared as capital gain being, exempt from income‑tax on the ground that one solitary transaction of land could not be treated an activity in the nature of trade or business which was not accepted by the Assessing Officer and treated as income in the nature of business‑‑‑First Appellate Authority confirmed the same‑‑‑Validity‑‑‑Agricultural land was converted into sikny land from the Government and later "No‑Objection Certificate" was obtained from concerned Development Authority for the selling of plots to general public ‑‑‑Assessee also declared himself as builder or developer‑‑‑Such facts made it clear that the assessee was a builder or developer‑‑­Conversion of land into sikny and obtaining of N.O.C. were all series of' the transaction which clearly spelled out that the intention of the assessee was to do the business of builder or developer and the scheme was duly approved scheme by the Government‑‑‑Transaction being an adventure in the nature of trade its profits were taxable in circumstances.

1994 PTD (Trib.) 103 rel.

(1968) 68 ITR 573; (1959) 35 ITR 594 and (1980) 121 ITR 580 irrelevant.

Per Abdul Ghafoor Junejo (Accountant Member) Contra. ‑‑‑[Minority view].

1989 PTD 594; 1989 PTD (Trib.) 460; 1975 PTD‑(Trib.) 6; 2001 PTD 1222; 1990 PTD 155 = PLD 1990 SC 399; CIT, Gujarat v. Premji Gopal Bhai (1978) 113 ITR 785; Deep Chandra & Co. v. CIT, Kanpoor 1989 PTD 445 and 1990 PTD (Trib.) 671 ref.

A.S. Jafri and Kh. Mazharuddin for Appellant.

Sajjad Ahmed, D.R. and Amjad Jashmed, D.R. for Respondent.

Dates of hearing: 12th March and 15 August, 2002.

2003 P T D (Trib.) 835

[Income‑tax Appellate Tribunal Pakistan]

Before Muhammad Jahandar, Syed Masoodul Hassan Shah, Judicial Members and

Syed Aqeel Zafarul Hasan, Accountant Member

I.T.A. Nos. 382/IB to 390/IB of 2000‑2001, decided on 13th November, 2001.

Per Syed Masoodul Hassan Shah (Judicial Member)‑‑‑

(a) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑S. 66‑A‑‑‑Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order‑‑‑Issue not examined or settled by the Assessing Officer‑‑‑Re‑assessment by the Inspecting Additional Commissioner‑‑‑Validity‑‑‑Section 66‑A of the Income Tax Ordinance, 1979 was not meant to make a fresh assessment on issues not examined or settled by the Assessing Officer in the assessment order.

I.T.As. Nos. 156, 157, 158 and 167/IB of 1993‑94 rel.

Per Syed Masoodul Hassan Shah (Judicial Member); Muhammad Jahandar (Judicial Member) agreeing with different reasons‑‑‑

(b) Income Tax Ordinance (XXXI of 1979)‑‑

‑‑‑‑Ss. 12(18), 66‑A, 59A & 133(7)‑‑‑Constitution of Pakistan, (1973), Arts. 189 & 201‑‑‑Deemed income‑‑‑Addition‑‑‑Advance for house building and motor car ‑‑‑Loan‑‑‑Assessees were directors of private limited company‑‑‑Assessments were finalized under S.59A of the Income Tax Ordinance, 1979‑‑‑Advance received for house building and motor car by the assessees being directors/employees of the company was treated "loan" by the Inspecting Additional Commissioner who trade the addition of the same under S.12(18) of the Income Tax Ordinance. 1979 by invoking provision of S.66‑A of the Income Tax Ordinance, 1979‑‑‑Validity‑‑‑Tribunal had already decided the issue involving the present cases in the similar facts and circumstances and in similar situation of the assessees obtaining loans/advances from the same private limited company in the status of their directors/employees‑‑‑No distinction or distinguishing feature appeared in the facts and circumstances of the present appeals and the facts and circumstances of the earlier decided case‑‑‑Tribunal thus had to follow the dictum given in their earlier reported case‑‑‑Appellate Tribunal did not go into further details of the contentions of the assessees or to discuss the grounds of appeals of every assessee which were almost identical in every appeal‑‑­Tribunal followed its earlier findings given by Division Bench which had a binding effect in the similar set of circumstances and facts and accepted the appeals of the assessee by holding that the original assessment orders made were not erroneous and prejudicial to the interest of the Revenue and that the provisions of S.12(18) of the Income Tax Ordinance, 1979 were not applicable to the cases of the assessees and the invocation of provisions of S.66‑A of the Income Tax Ordinance, 1979 by the Inspecting Additional Commissioner exercising the revisional jurisdiction was improper and illegal‑‑Orders passed by the Inspecting Additional Commissioner under S.66‑A of the Income Tax Ordinance, 1979 were cancelled and that of Assessing Officer were restored by the Appellate Tribunal.

Messrs Moin Sons (Pvt.) Limited's case 2002 PTD (Trib.) 141 rel.

I.T.As. Nos. 156, 157, 158 and 167/IB of 1993‑94; I.T.As. Nos.291 and 292/IB of 1998‑99 and 1996 PTD (Trib.) 388 ref.

Per Muhammad Jahandar (Judicial Member)‑‑‑

(c) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑Ss. 12(18), 66‑A, 59A & 133(7)‑‑‑Constitution of Pakistan, (1973) Arts. 189 & 201‑‑‑Deemed income‑‑‑Addition‑‑‑Advance for house building and motor car ‑‑‑Loan‑‑‑Assessees were directors of private limited company‑‑‑Assessments were finazlied under S. 59A of the Income Tax Ordinance, 1979‑‑‑Advance received for house building and motor car by the assessees who were Directors/employees of the company was treated "loan" by the Inspecting Additional Commissioner and made addition of the same under S.12(18) of the Income Tax Ordinance, 1979 by invoking provision of S.66‑A of the Income Tax Ordinance, 1979‑‑‑Validity‑‑‑Provision of S.12(18) of the Income Tax Ordinance, 1979 were not applicable unless two conditions were answered viz. that there was a loan received by an assessee and that it was so claimed' orshown' by him‑‑‑Certain distinguishing features were noticed to the effect that reported decision was per incuriam‑‑‑Even if for the sake of arguments it was assumed that the facts were different, then it could at best be said that the facts of the decision was distinguishable and the ratio of the same could not be followed‑‑‑By no stretch of imagination, the reported decision could be held per incuriam‑­Appeals of the assessee stood accepted.

Messrs Moin Sons (Pvt.) Limited's case 2002 PTD (Trib.) 141 rel.

I.T.As. No.156, 157, 158 and 167/IB of 1993‑94; I.T.As. Nos.291 and 292/IB of 1998‑99 and 1996 PTD (Trib.) 388; Micropak (Pvt.) Ltd., Lahore v. CIT 2001 PTD 1180; 2002 PTD (Trib.) 560; Multifine Associates v. Ardeshir Cowasjee PLD 1995 SC 423; 1997 PTD (Trib.) 879; Jowwitt's Dictionary of English Law, Second Edn.; Bourier's Law Dictionary; Bellentine's Law Dictionary, Third Edn.; Law Dictionary by Max Radin; Words and Phrases, First Edn. by D. Varagarajan; Province of the Punjab v. Dr. S. Muhammad Zafar Bukhari PLD 1997 SC 351; Muhammad Anees v. Abdul Haseeb PLD 1994 SC 539; Halsbury's Law of England, 4th Edn., Vol. 26, paras. 577, 578 and (2002) 86 Tax ref.

(d) Judgment‑‑‑

‑‑‑‑ Per incuriam‑‑‑Meanings‑‑‑Any judgment, which is against a statute or a precedent or given as a result of lack of care or through inadvertence shall be said to be per incuriam.

Black's Law Dictionary; Concise Law Dictionary by V.R. Manohar, 1997 Edn.; Jowwitt's Dictionary of English Law, Second Edn.; Bourier's Law Dictionary; Bellentine's Law Dictionary, Third Edn.; Law Dictionary by Max Radin; Words and Phrases, First Edn. by D. Varagarajan; Province of the Punjab v. Dr. S. Muhammad Zafar Bukhari PLD 1997 SC 351; Muhammad Anees v. Abdul Haseeb PLD 1994 SC 539 and Halsbury's Laws of England, 4th Edn., Vol. 26, paras. 577, 578 ref.

(e) Words and phrases‑‑‑

‑‑‑‑"Per incuriam"‑‑‑Meaning.

Per Syed Aqeel Zafar ul Hasan (Accountant Member)‑‑‑[Minority view].

Messrs Moin Sons (Pvt.) Limited's case 2002 PTD (Trib.) 141 Per incuriam.

I.T.As. Nos. 291 and 292/IB of 1998‑99; 1996 PTD (Trib.) 388 and Micropak (Pvt.) Ltd. Lahore v. CIT 2001 PTD 1180 ref.

Akhtar Hussain for Appellant.

Saleem Akhtar, D.R. for Respondent.

Date of hearing: 13th November, 2001.

2003 P T D (Trib.) 869

[Income‑tax Appellate Tribunal Pakistan]

Before Khawaja Farooq Saeed, Judicial Member and Mazhar Farooq Shirazi, Accountant Member

I.T.As. Nos. 4465/LB of 1996, 1418/LB of 1997, 3212/LB and 3213/LB of 2000, decided on 15th May, 2002.

Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑Ss. 66‑A, 80‑C, 80‑D, 50(4) & 50(4‑A)‑‑‑C.B.R. Circular No.12 of 1991, dated 30‑6‑1991‑‑‑Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order ‑‑‑Assessee was a distributor of goods‑‑‑Cancellation of assessment on the ground that deduction made on supplies was liable to be assessed under S.80‑C of the Income Tax Ordinance, 1979 and turnover tax under S.80‑D of the Income Tax Ordinance, 1979 was also applicable as company had debited purchases in the assessee's account‑‑‑Validity‑‑‑Receipts or turnover of assessee was his commission and as such he could not be put to charge under S.80‑D of the Income Tax Ordinance, 1979 on the amount paid by the buyer/assessee to his principal and amount of commission declared by the assessee stood certified by the principal‑‑‑Under S.80‑D of the Income Tax Ordinance, 1979 the requirement of law was that if the assessed tax otherwise fell less than ½% of this amount, he was liable to pay the balance, if the amount paid by the assessee fell short of his commission, he shall make good the deficiency and if otherwise tax paid by him was already in excess of ½% of his commission amount he shall not be asked to pay the balance‑‑‑Order of Inspecting Additional Commissioner passed under S.66‑A of the Income Tax Ordinance, 1979 was not justified and the same was cancelled by the Appellate Tribunal.

Muhammad Ijaz Ali Bhatti for Appellant.

Mrs. Sabiha Mujahid, D.R. for Respondent.

Date of hearing: 3rd May, 2002.

2003 P T D (Trib.) 880

[Income‑tax Appellate Tribunal Pakistan]

Before Syed Nadeem Saqlain, Judicial Member and Imtiaz Anjum, Accountant

Member

I.T.As. Nos. 322/LB to 324/LB of 2000, decided on 10th June, 2002.

Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑Ss. 66A, 62, 59A, 92, 50(4) & 156‑‑‑Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order‑--Finalization of assessment after detailed scrutiny and under the direction of Commissioner of Income‑tax‑‑‑Refund‑‑‑Withholding of refund­--Cancellation of assessment with the approval of Inspecting Additional; Commissioner under S.156 of 'the Income Tax Ordinance, 1979 rectifying the original order passed under S.59‑A of the Income Tat Ordinance, 1979 giving effect to tax deduction under Ss.50(4) & 50(4A) of the Income Tax Ordinance, 1979 and also treating the tax deducted under S.50(4) of the Income Tax Ordinance, 1979 by the Leasing Company under "Buy & Lease Back Arrangements" as full and find­--discharge of tax liability under S.80‑C of the Income Tax Ordinance:, 1979‑‑‑Validity‑‑‑Original assessments were finalized after detailed scrutiny of the facts of the returned income, provisions of relevant Scheme of Self‑Assessment and correspondence between different Assessing Authorities‑‑‑Action in delaying refunds even to the extent of not submitting report and parawise comments as directed by the High Court resulting in withholding of refunds and invoking jurisdiction under S.66‑A of the Income Tax Ordinance, 1979 pointed towards a desperate attempt of fault finding on the part of Revenue‑‑‑Assessing Authorities digressed to the extent that norms of propriety and legality of the action were violated‑‑‑Basis of action under S.50(4) of the Income Tax Ordinance, 1979 pertaining to tax deducted under S.80‑C of the Income Tax Ordinance, 1979 vis‑a‑vis refund as determined by action under S.156 of the Income Tax Ordinance, 1979, discrepancies in purchasing and stocks etc., amounted to an attempt to cure certain deficiencies which occurred during the assessment proceedings‑‑‑Action under S.66A of the Income Tax Ordinance, 1979 amounted to change of opinion‑‑­Refund created on the basis of assessments framed as per law could not be allowed to be attributed inasmuch as that prejudice to revenue had been caused‑‑‑Order passed under S.66A of the Income Tax Ordinance, 1979 was vacated being unlawful and original assessment orders were restored by the Appellate Tribunal.

1999 PTD (Trib.) 14 and 1992 SCC 910 ref.

M. Yousaf, I.T.P. for Appellant.

Anwarul Haq, I.A.C. for Respondent

Date of hearing: 27th April, 2002.

2003 P T D (Trib.) 888

[Income-tax Appellate Tribunal Pakistan]

Before Syed Nadeem Saqlain, Judicial Member, Muhammad Sharif Chaudhry and

Amjad Ali Ranjha, Accountant Members

W.T.As. Nos. 642/LB and 643/LB of 1995, decided on 20th February, 2002.

Per Syed Nadeem Saqlain (Judicial Member); Muhammad Sharif Chaudhary (Accountant Member) agreeing---

Wealth tax---

----Valuation of property---History---Deviation from history without plausible reason in determination of value of property ---Validity--­Deviation from history of the case could not be made in the absence of any solid reasons---Value of the property in question having been assessed at Rs.8 lacs in 1990-91 value determined for the year 1991-92 at Rs.12 lacs and in the year 1992-93 at Rs.15 lacs was excessive and contrary to the history ---Assessing Officer was directed to adopt the value of the said property at Rs.9 lacs and Rs.10 lacs respectively for the years under consideration by the Appellate Tribunal.

Per Amjad Ali Ranjha (Accountant Member).---[Contra].

Nemo for Appellant.

Mahboob Alam, D.R. for Respondent.

Date of hearing: 19th February, 2002.

2003 P T D (Trib.) 906

[Income‑tax Appellate Tribunal Pakistan]

Before Syed Nadeem Saqlain, Judicial Member and Amjad Ali Ranjha, Accountant

Member

W.T.As. Nos.1372/LB and 1373/LB of 2000, decided on 12th June. 2002.

(a) Wealth Tax Act (XV of 1963)‑‑‑

‑‑‑‑Second Sched., Part I, Cl. (8‑A)‑‑Exemption‑‑‑Foreign currency account ‑‑‑Encashment of‑‑‑Such encashed money was used for payment of loan which was originally used for purchase of shares‑‑‑Such shares were claimed exempt from wealth tax being asset created from encashment of foreign currency account‑‑‑Claim was disallowed on the ground that encashed money was only used to pay the loan and payment of an existing loan did not amount to creation of asset‑‑‑Validity‑‑‑Law provides exemption to rupee amounts or assets created out of withdrawal of foreign currency‑‑‑Shares were not directly purchased through foreign currency but were got converted into rupee, and then the encashed money was paid to repay the loan used for purchase of shares‑‑‑Assets were neither created when the foreign currency was converted into rupee nor when encahsed rupees were paid to repay the loan in order to purchase shares‑‑‑Provision of Cl. (8‑A) of Part I of the Second Sched. of the Wealth Tax Act, 1963 would also apply to the assets created out of foreign currency after 29‑5‑1998 but assets through purchase of shares had been created much prior to the encashment of foreign currency account‑‑‑Since shares had already been purchased, though on loan, decrease in liability through repayment of loan could not be by any stretch of imagination considered creation of assets‑‑‑Assets were created when the shares were purchased and any subsequent repayment of loan through encashment of foreign currency could not be treated as the assets created as a result of encashment of foreign currency as envisaged by Cl. (8‑A) of Part I of the Second Sched. of the Wealth Tax Act, 1963 for the purpose of allowing exemption‑‑‑Order passed by the Assessing Officer and affirmed by the First Appellate Authority disallowing the exemption claimed on account of foreign currency was upheld by the Appellate Tribunal.

Black's Law Dictionary, Sixth Edn. ref.

(b) Words and phrases‑‑‑

‑‑"Increase"‑‑‑"Creation"‑‑‑Distinction‑‑‑Increase in something is distinguishable from creation because word `increase' ostensibly implies the existence of something, while creation of a thing denotes bringing something into existence.

Black's Law Dictionary, Sixth Edn. ref.

Muhammad Akbar, C.A. for Appellant.

Mahboob Alam, D.R. for Respondent.

Date of hearing: 16th February, 2002.

2003 P T D (Trib.) 909

[Income‑tax Appellate Tribunal Pakistan]

Before Khawaja Farooq Saeed, Judicial Member and Imtiaz Anjum, Accountant

Member

I.T.A. No. 3700/LB of 2000, decided on 20th July, 2002.

Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑Ss.66‑A, 24(c) 50(1), 62 & Second Sched., Cl. (27) ‑‑‑ C.B.R Circular No. 15 of 1997, dated 6‑11‑1997‑‑‑Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order‑‑­Inadmissible deductions‑‑‑Payment of golden handshake scheme ‑‑‑No deduction of tax at source‑‑‑Such expenses claimed on account of "deferred cost" were allowed by the Assessing Officer‑‑‑Inspecting Additional Commissioner cancelled the assessment being erroneous and prejudicial to the interest of revenue on the ground that no tax was deducted under S.50(1) of the Income Tax Ordinance, 1979 on payment made under golden handshake scheme and such expense, therefore, was not admissible under S.24(c) of the Income Tax Ordinance, 1979‑‑­Validity‑‑‑Amount paid by the company/assessee was salary hence provisions of S.24(c) of the Income Tax Ordinance, 1979 were fully attracted‑‑Assessee having failed to deduct tax on salary paid to employees, the order was `erroneous' and prejudicial to the interest of revenue‑‑‑Cancellation of assessment under S.66‑A of the Income Tax Ordinance, 1979 was legally justified‑‑‑Such amount, however, included gratuity also and cancellation of order could not be extended up to addition of total amount‑‑‑Amount of gratuity was exempt under Cl. (27) of the Second Sched. of the Income Tax Ordinance, 1979‑‑‑Assessment was set aside for determination of total amount of gratuity paid and to what extent it was exempt wholly or partly; how many payments were above the threshold on which tax was deductible and how many employees have paid taxes on this amount by themselves‑‑‑Figures covered in such three categories were to be reduced from the figure after verification and balance if any shall be added in the income of the assessee under S.24(c) of the Income Tax Ordinance, 1979.

1997 PTD (Trib.) 879; Writ Petition No.12126 of 1998; Writ Petition No.282 of 1998; Writ Petition No. 11675 of 1998; PTCL 1998 CL 660; 1998 CLC 158; PLD 1997 Kar. 667 and 1997 SCMR 1232 ref.

2002 PTD 562 rel.

Haji Muhammad Yousaf for Appellant.

Anwar Ali Shah, D.R. for Respondent.

Date of hearing: 5th January, 2002.

2003 P T D (Trib.) 938

[Income‑tax Appellate Tribunal Pakistan]

Before Khawaja Farooq Saeed, Judicial Member and Mazhar Farooq Shirazi, Accountant Member

I.T.A. No.51/LB of 2002, decided on 14th May, 2002.

(a) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑S. 12(9A) & Second Sched., Part IV, Cl. (59)‑‑‑C.B.R. Circular No.F.12(9A) ITP/99, dated 8‑6‑2001‑‑‑C.B.R. Letter, dated 16‑6‑2001‑­Payment of dividend ‑‑‑Assessee is supposed to pay 50% dividend of his reserves at the end of the year or 40% of his profits earned during the year whichever is less, by way of dividend.

(b) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑S. 12(9A)‑‑‑"Profit"‑‑‑Meaning and scope‑‑‑General definition of profit is that it is the difference between receipts and the expenditure‑‑­Regarding expenditure, its genuineness and reliability towards receipts obviously is the greatest test for allowance‑‑‑Result of receipt and genuine expenditure is profit‑‑‑Word "profit" used is S.12(9A) of the Income Tax Ordinance, 1979 is to be defined in actual and normal sense.

(c) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑S. 12(9A) & Second Sched., Part IV, Cl. (59)‑‑‑C.B.R. Circular No.F.12 (9A) ITP/99, dated 8‑6‑2001‑‑‑Income deemed to accrue and arise in Pakistan‑‑‑Deemed income‑‑‑Dividend‑‑‑Calculation of net profit by deducting provision of previous year excess tax and paid 40% dividend on such calculated profit‑‑‑Tax was charged under S.12(9A) read with CI. (59), Part IV of the Second Sched. of the Income Tax Ordinance, 1979 on the ground that previous year excess should be added in the profit and expenses not allowable were also claimed; hence the ratio of 40% fell below the prescribed limit‑‑‑Validity‑‑‑Declared profit was subject to scrutiny and the same could be increased or reduced which meant that assessee could still remain entitled to certain expenses which were allowable to him under law but the same had not been claimed in books but in the Income Tax Return‑‑‑Simple example of such a claim was depreciation of machinery for working in double shifts or in triple shifts‑‑‑Figure on which the assessee had distributed 40% dividend was subject to allowance of depreciation on the basis of number of shifts‑‑‑By taking ail such things into account the dividend distributed was more than 40% of the profit‑‑‑Distribution of the same by the assessee was well within parameters fixed under S.12(9A) read with Cl. (59), Part IV of the Second Sched. of the Income Tax Ordinance, 1979‑‑‑Tax charged by the Department was against the law and practice and the same was deleted by the Appellate Tribunal.

John Smith & Sons v. Moore 12 TC 266; Commissioners of Inland Revenue v. Frere 42. TC 125 and Writ Petition No.9665 of 2001 ref.

Syed Aftab Hamid and Fayyaz Siddique, F.C.As. for Appellant.

Mian Ashiq Hussain and Mrs. Sabiha Mujahid, D.R. for Respondent.

Date of hearing: 2nd May, 2002.

2003 P T D (Trib.) 975

[Income‑tax Appellate Tribunal Pakistan]

Before Khawaja Farooq Saeed, Judicial Member and Mazhar Farooq Shirazi, Accountant Member

I.T.As. Nos. 864/LB to 867/LB of 2002, decided on 30th May, 2002.

(a) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑S. 50(4‑A)‑‑‑Deduction of tax at source‑‑‑Provision of S.50(4‑A) of the Income Tax Ordinance, 1979 shall be applicable to every sale made to the agencies noted therein unless and until specifically exempted from deduction of tax.

(b) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑Ss. 66‑A, 80‑C, 59(1), 62 & Second Sched., Part IV, Cl. (9)‑‑­S.R,O. 828(I)91, Cl. (37A)‑‑‑S.R.O. 30(I)/99, dated 14‑1‑1999‑‑‑C. B. R. Letter C. No.3(7)SS(WHT)/98‑99, dated 10‑6‑1999‑‑‑Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order‑‑‑Exemption from specific provisions‑‑‑Manufacturer‑‑‑Deduction of tax on receipts from exporters‑‑‑Assessment under Self‑Assessment Scheme and normal law‑‑‑Cancellation of such assessments on the ground that deduction of tax at source on such receipt was not assessable under normal law but were liable to tax under S.80‑C of the Income Tax Ordinance, 1979 as assessee did not fall within the purview of Cl. (9) of Part IV of Second Sched. of the Income Tax Ordinance, 1979‑‑‑Assessee contended that payments on which tax was deducted were received from exporters who were not liable to withhold tax had wrongly/unlawfully deducted tax and such deduction of tax would not render those receipts liable under S.80‑C of the Income Tax Ordinance, 1979‑‑‑Validity‑‑­provision of S.66‑A of the Income Tax Ordinance, 1979 were not invoked properly and order of the Inspecting Additional Commissioner was without lawful jurisdiction and the same was cancelled by the Tribunal and consequently order of the Assessing Officer stood restored.

2001 PTD (Trib.) 3810; Union Bank Limited v Federation of Pakistan 1998 PTD 2114; Ravi Spinning Limited v. ACIT/WT. 1998 PTD 3947; Central Insurance Co. and others v. C.B.R. 1993 PTD 766 = 1993 SCMR 1232 and C.B.R. and others v. Sh. Spinning Mills Ltd. 1999 SCMR 1442 = 1999 PTD 2174 ref.

Saleem Rathor for Appellant.

Mrs. Sabiha Mujahid, D.R. for Respondent.

Date of hearing: 18th April, 2002.

2003 P T D (Trib.) 980

[Income‑tax Appellate Tribunal Pakistan]

Before Munsif Khan Minhas, Judicial Member and Muhammad Munir Qureshi, Accountant Member

I.T.As Nos. 6274/LB and 6275/LB of 1998, decided on 27th September, 2002.

(a) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑Second Sched., Part IV, Cl. (9), Ss.80‑C, 62, 55(1) & 59‑A‑‑‑S.R.O. 829(I)/91, dated 24‑8‑1491‑‑‑C.B.R. Circular C.No.1 (155)/DPT‑11/94, dated 28‑5‑1996‑‑‑Exemption from specific provisions‑‑‑Assessment year 1991‑92‑‑‑Late filing of return of income as on 27‑6‑1992‑‑‑Declaration for option to opt out of presumptive tax regime along-with the return‑‑­Condonation‑‑‑Declaration was not accompanied with the return filed under S.55(1) of the Income Tax Ordinance, 1979‑‑‑Assessment was finalized under presumptive tax regime ‑‑‑Assessee contended that matter pertaining to option had been. issued on 28‑8‑1991 which was‑after the last date of filing of return of income for the assessment year 1991‑92 and option filed for assessment year 1991‑92 was also good for subsequent years and the case was qualified to be assessed under normal law‑‑‑Validity‑‑‑Option to opt out of presumptive tax regime in terms of Cl. (9), Part IV of the Second Sched. to the Income Tax Ordinance, 1979 was available only to those assessees who had filed returns of income under S.55(1) of the Income Tax Ordinance, 1979 in time i.e. by 31‑7‑1991 in cases where the calendar year was the income year‑‑­Central Board of Revenue's condonation made it clear that only those assessees/manufacturers who had filed return of income under S.55(1) of the Income Tax Ordinance, 1979 by 31‑7‑1991 were to be treated as having filed option to opt out of the presumptive tax regime alongwith the return for assessment year 1991‑92‑‑‑Condonation announced by the Central Board of Revenue could not apply in assessee's case as the assessee admittedly did not file return of income by 31‑7‑1991 and option was filed even later‑‑‑Provision of Cl. (9), Part IV of the Second Sched. to the Income Tax Ordinance, 1979 was expressly clear that declaration of final and irrevocable option to opt out of the presumptive tax regime was to be furnished in writing alongwith the return of total income filed under S.55(1) of the Income Tax Ordinance, 1979 and assessee had not complied with such express statutory stipulation‑‑­Central Board of Revenue having taken cognizance of the belated issuance of notification regarding option had formally waived the requirement of filing option alongwith the return of income for assessment year 1991‑92 provided the return for assessment year 1991‑92 had been filed "in time" i.e. by 31‑7‑1991‑‑‑Assessee having filed return of income for assessment year 1991‑92 on 27‑6‑1992 was not eligible for the waiver announced by the Central Board of Revenue‑‑­First Appellate Authority had interpreted the law regarding filing of option incorrectly and had wrongly found that the assessee's case qualified for assessment under S. 62 of the Income Tax Ordinance, 1979‑‑‑Order of the First Appellate Authority was vacated and that of Assessing Officer was restored by the Appellate Tribunal.

(1983) 155 ITR 568 distinguished.

(b) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑‑Second Sched., Part IV, Cl. (9)‑‑‑Exemption from specific provisions‑‑‑Declaration of final and irrevocable option to opt out of presumptive tax regime for each year‑‑‑Option filed for one year would not be good for subsequent years‑‑‑Each year is an independent assessment year and statutory stipulation regarding filing of return of income and option to opt out of the presumptive tax regime applies for each year separately.

Agha Hadayat Ullah, D.R. for Appellant.

Shamim A. Syed, C.A. for Respondent.

Date of hearing: 18th July, 2002.

2003 P T D (Trib.) 1053

[Income‑tax Appellate Tribunal Pakistan]

Before Syed Hasan Imam, Judicial Member and Shahid Jamal, Accountant Member

I. T. A. No. 1779/KB of 1999‑2000, decided on 17th May, 2001.

(a) Income‑tax‑‑‑

‑‑‑‑Powers of Appellate Tribunal‑‑‑Scope‑‑‑If the Central Board of Revenue takes a beneficial view in favour of the assessee, it would not be proper on the part of the Tribunal to deprive the assessees of such beneficial treatment in exercise of his judicial discretion.

72 Tax 141 (Trib.) rel.

(b) Income‑tax ‑‑‑

‑‑‑‑Gross profit‑‑‑Export‑‑‑Adjustment of gross profit had to be made in the ratio of F.O.B. value of export and ex factory price of goods sold in Pakistan.

(c) Income Tax Rules, 1982‑‑‑

‑‑‑‑R. 216‑‑‑Computation of export profits and tax attributable to export sales ‑‑‑F.O.B. value of export had to be considered for allocation of gross profit and pro‑ration of expenses.

(d) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑S. 80‑CC‑‑‑Income Tax Rules, 1982, R. 216‑‑‑C.B.R. Circular No.5 of 2000, dated 6‑3‑2003‑‑‑C.B.R. Letter No.3(10) SS (WMT) 1998‑99, dated 30‑8‑1999‑‑‑Tax on income of certain exporters‑‑‑Export sales‑‑­Local sales‑‑‑Pro‑ration of expenses‑‑‑Principle‑‑‑At the first instance F.O.B. value of export and ex factory price of local sales has to be worked out, then ratio of such exports and local sales has to be determined and then in that ratio only such expenses have to be pro‑rated which are otherwise not identifiable or bifurcatable‑‑‑All expenses relatable to export sales should be allocated to exports, all expenses relatable to local sales have to be allocated to local sales, and only expenses which are common or not clearly bifurcated, should be pro­rated in the ratio of F.O.B. export/ex factory local sales.

(e) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑S. 80‑CC‑‑‑Income Tax Rules, 1982, R. 216‑‑‑C.BA. Circular No. 5 of 2000, dated 6‑3‑2000‑‑‑C.B.R. Letter No.3 (10) SS (WMT) 1998‑99, dated 30‑8‑1999‑‑‑Tax on income of certain exporters--Export sales‑‑‑Local sales ‑‑‑Assessee deducted Ocean Freight, from Export Sales to arrive at F.O.B. value of export sales and adjusted gross profit‑‑‑Assessing Officer did not consider it for deduction from gross profit because the entire sales proceeds including proceeds on account of freight, were considered to be deemed income under S.80‑CC of the Income Tax Ordinance, 1979 and no expenses were, allowed against the same‑‑‑Validity‑‑‑For purposes of allocation of gross profit and pro­ration of non‑identifiable expenses, it was F.O.B. value of export as per R.216 of the Income Tax Rules, 1982 which was to be considered, even though tax on such expense had been recovered‑‑‑Tax so collected on the portion representing Freight and ocean charges could not be refunded in view of the presumptive regime in respect of entire export proceeds‑‑­Assessment was set aside by the Tribunal with the direction that F.O.B. value of exports, ex factory sale value of local goods be determined, their ratio be ascertained, and non‑identifiable expenses should be pro­rated in respect of ratio of sales‑‑‑Appeal was disposed of as having set aside by the Appellate Tribunal.

I.T.As. Nos.332/KB of 1998‑99; 1792/KB and 1802/KB of 1998; 1999 PTD (Trib.) 4100; I.T.As. Nos.1792/KB, 1802/KB of 1998; 1693/KB of 1998‑99; 72 Tax 141 (Trib.); 1992 PTD 1; 157 ITR 300 and Eilahi Cotton Mills' case 1997 PTD 1555 ref.

Jawed Zakaria for Appellant.

Qamaruddin, D.R. for Respondent.

Date of hearing: 15th May, 2001.

2003 P T D (Trib.) 1059

[Income‑tax Appellate Tribunal Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member and Agha Kafeel Barik, Accountant Member

W.T.A. No.194/KB of 2000‑01, decided on, 18th September, 2001.

Wealth Tax Act (XV of 1963)‑‑‑

‑‑‑‑Second Sched., Cl. (12)(1) & (17)(b)‑‑‑Exemption‑‑‑House‑‑­Amalgamation of two plots‑‑‑Two plots, adjacent to each other, used for residential purpose situated in two different roads‑‑‑One plot was constructed portion, while the other was used for lawn‑‑‑Exemption allowed by the Assessing Officer was disallowed by the Inspecting Additional Commissioner for the reason that residential house was situated on two various roads‑‑‑Validity‑‑‑Exemption under Cl. (12)(1) of the Second Sched. of the Wealth Tax Act, 1963, on one residential house owned and kept by the assessee for purposes of his own residence could not be restricted to any specific measurements, location, size or for any other reason not warranted under the law‑‑‑No limit of the area had been mentioned in law and one residential house of whatsoever nature had been allowed to be exempted for the computation of the net wealth of the assessee, which could not be denied‑‑‑Only condition under the law was that the property was being used for residential purpose‑‑‑Constructed portion and the lawn being used were the part of residential house and could not be bifurcated for the purpose of wealth tax, as the residential house had not been defined under the Wealth Tax Act, 1963‑‑‑Legal amalgamation of the two plots was not necessary for the purpose of Wealth Tax Act. 1963, as no such condition had been provided under the law‑‑‑Order of the Inspecting Additional Commissioner was vacated by the Appellate Tribunal and that of the Assessing Officer was restored.

PTD 1997 (Trib.) 2106; Calcutta Stock Exchange Association Ltd.'s case (1935) 3 ITR 105; CIT v. Fulabhai Khodabhai Patel (1957) 31 ITR 771; Thakural Poddar v. I.T.O. (1957) 32 ITR 656; Chamber's Dictionary and (1964) 10 Tax 67 rel.

2000 PTD (Trib.) 2133 distinguished.

Jawaid Zakaria and Jan‑e‑Alam, I.T.P. for Appellant.

Zaki Ahmed D.R. for Respondent.

Date of hearing: 18th September, 2001.

2003 P T D (Trib.) 1066

[Income‑tax Appellate Tribunal Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member and S.M. Sibtain, Accountant Member

W.T.A. No.740/HQ of 1991‑92, decided on 22nd November 1999.

Wealth Tax Act (XV of 1963)‑‑‑

‑‑‑‑S.7‑‑‑Valuation of assets how to be determined‑‑‑1/2 share in property‑‑‑Estimation of higher value of ½ share of property than the other ½ share of the same assessment year‑‑‑Validity‑‑‑According to Wealth Tax Rules, 1963, the incidence of taxation is the ownership, of net wealth‑‑‑If during the same assessment year the same quantity of wealth in possession of one co‑sharer is subjected to a lower rate of taxation, it would be highly improper to burden a similarly situated co­-sharer with a higher rate of tax and it would against the principle of equality of laws enshrined in the Constitution of Pakistan (1973)‑‑‑First Appellate Authority rightly reduced the estimated value‑‑‑Appellate Tribunal declined interference in the order and appeal of the Department was dismissed.

1992 PTD 1624 rel.

Fahimul Haq, D.R. for Appellant.

Jawaid Zakaria for Respondent.

Date of hearing: 19th November, 1999.

2003 P T D (Trib.) 1068

[Income‑tax Appellate Tribunal Pakistan]

Before S. Hasan Imam, Judicial Member and Shahid Jamal, Accountant Member

I. T. A. No. 149/KB of 2000‑2001, decided on 22nd June, 2001.

(a) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑Ss. 134, 65 & 62‑‑‑Appeal to the Appellate Tribunal‑‑‑Single appeal against two separate orders and demand notices‑‑Validity‑‑‑Single appeal preferred by the Department, raising grounds against both the orders, was technically defective‑‑‑Appeal was admitted against the main order under Ss.65/62 of the Income Tax Ordinance, 1979 by the Appellate Tribunal in the interest of justice and using its discretion.

(b) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑Ss. 65, 13(1)(aa) & 59(A)‑‑‑Additional assessment‑‑‑Definite information‑‑‑Purchase of Foreign Exchange Bearer Certificates‑‑­Proceedings on suspicion‑‑Validity‑‑‑Initiation of proceedings under S.65 of the Income Tax Ordinance, 1979 on suspicion that Foreign Exchange Bearer Certificates were not sold and unexplained cash was introduced in the garb of sale of the Foreign Exchange Bearer Certificates, was not a definite information on which S.65 of the Income Tax Ordinance, 1979 could be invoked‑‑‑Wealth Tax Returns and re­conciliation statement were before the Assessing Officer before finalization of assessment under S.59(A) of the Income Tax Ordinance, 1979‑‑‑No fresh material had come into possession of Assessing Officer‑­Neither any escapement or under assessment or any information to that effect was brought on record‑‑‑Proceedings initiated under S.65 of the Income Tax Ordinance, 1979 were ab initio illegal‑‑‑Cancellation of order by the First Appellate Authority was maintained by the Appellate Tribunal.

1993 PTD 1108 and 2000 PTD (Trib.) 329 ref.

Zaki Ahmed, D.R. for Appellant.

Javaid Zakaria for Respondent.

Date of hearing: 22nd June, 2001.

2003 P T D (Trib.) 1076

[Income‑tax Appellate Tribunal Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member and S. M. Sibtain, Accountant Member

I.T.A. No.810/KB of 1998‑99, decided on 29th June, 1999.

Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑Ss. 30, 31(1)(b) & 62‑‑‑Income from other sources ‑‑‑Deductions‑‑­Interest income on short term deposit kept under lien for Letter of Credit‑‑‑Interest income earned from the amount kept in STND as Letter of Credit margin in performance of business activity and importing machinery for the industrial unit was declared as business income on the ground that amount kept in STND was Letter of Credit margin for import of machinery which was business/commercial assets and any return on such deposit would retain the character of business income‑‑­Assessing Officer treated such interest as income from other sources under S.30 of the Income Tax Ordinance, 1979 and claim of expenses was disallowed on the ground that all the expenses incurred were of capital nature related to establishment of the industrial unit‑‑‑First Appellate Authority treated such interest as business income and allowed the interest paid on the capital borrowed as expenses on the principle of commercial expediency and directed that income from interest assessed under S.30 of the Income Tax Ordinance, 1979 to be deleted ‑‑‑Validity‑­Interest income received by the assessee qualified to be set off against the interest paid on the amount borrowed from the directors as business income and business expenditures‑‑‑Even if the income earned was treated as income from other sources still the assessee would be entitled to allowance of interest paid under S.31(1)(b) of the Income Tax Ordinance, 1979‑‑‑Order of the First Appellate Authority was upheld by the Appellate Tribunal and appeal of the department was dismissed.

1998 PTD 369; CIT v. Eastern Bank Limited PLD 1982 Kar. 680 and I.T.A. No. 7 of 1987 rel.

1999 PTD (Trib.) 708 distinguished.

Muhammad Umer Farooq, D.R. ‑for Appellant. Jawed Zakaria and Jan‑e‑Alam, I.T.P. for Respondent.

Date of hearing: 29th June, 1999.

2003 P T D (Trib.) 1081

[Income‑tax Appellate Tribunal Pakistan]

Before S. Hasan Imam, Judicial Member and Shahid Jamal, Accountant Member

I.T.A. No. 1778/KB of 1999, decided on 15th, May, 2001.

(a) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑S. 66‑A & Second Sched. Cl. (118‑E), Part IV, Cl. (9)‑‑‑C. B. R. Circular No.7 of 1992, dated 18‑3‑1992‑‑‑C.B.R. Letter No. (84) Dtp-­II/94, dated 9‑7‑1995‑‑‑Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order‑‑‑Exemption‑‑‑Single object manufacturing yarn concern‑‑‑Stray transaction‑‑‑Sale of raw cotton/cotton waste‑‑Exemption was disallowed on sale of raw cotton being in violation of single object for which the company was formed‑‑Validity‑‑‑In process of manufacturing of yarn, the assessee will end up with cotton waste as well as inferior quality of cotton‑‑‑Sale of cotton/cotton waste was not more than 7% of the overall sales and it was definitely a stray 'incident‑‑‑Not right for the Inspecting Additional Commissioner to infer that assessee had deviated from stated objective of business ‑‑‑Assessee had exercised an irrevocable option under Cl. (9) of Part IV of the Second Shed. of Income Tax Ordinance, 1979, opting out of the presumptive regime and C.B.R. Circular No.7 of 1992 stated that if assessee engaged in manufacturing happened to sell part of their raw material meant for their own consumption such incidental sale, if not regular or continuous, would still be covered by the option exercised by the assessee i.e. such income would fall under normal law‑‑‑Denial of exemption on account of stray or incidental transaction was not rational and Inspecting Additional Commissioner was not justified in assumption that assessee had taken a separate business activity and violated the single object clause‑‑‑Action under S.66‑A of the Income Tax Ordinance, 1979 cancelling the order of Assessing Officer was clearly without jurisdiction in circumstances‑‑‑Appellate Tribunal cancelled the order of Inspecting Additional Commissioner and restored that of the Assessing Officer.

1997 PTD (Trib.) 902; (1980) 122 ITR 283; CIT v. Hossen Kasam Dada (1961) 4 Tax 96 (SC); PLD 1977 Lah. 292 and 2000 PTD 280 rel.

(b) Interpretation of statutes‑‑‑

-----Exemption---In matters of exemption and relief the law is to be construed liberally and the relief is not to be denied for technical irritants.

Javed Zakaria for Appellant.

Qamaruddin, D.R. for Respondent.

Date of hearing: 15th May, 2001.

2003 P T D (Trib.) 1085

[Income‑tax Appellate Tribunal Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member and Shaheen Iqbal, Accountant Member

I.T.A. No. 1144/KB of 1997‑98, decided on 8th November, 2002.

Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑Ss. 111(2)(c) & 13(1)(d)‑‑‑C.B.R. Circular Letter No.1(1)DT. 14/91, dated 24‑4‑1991‑‑‑Penalty‑‑‑Concealment of income‑‑‑While making compromise on an agreed assessment, a penalty was levied under an agreement‑‑‑Validity‑‑‑For penalties to be legally valid and justified the mens rea or the guilty intent on the part of the assessee had to be proved beyond any doubt‑‑‑Penalty proceedings being criminal in nature required evidence or proof like in a criminal case‑‑‑Conscious and deliberate suppression had to be proved by the Department through independent evidence which was lacking in the present case‑‑‑Entire case of penalty proceedings was based merely on the agreement of assessee‑‑­Even if the assessee had agreed to penalty, it would not absolve the Department to prove mens rea and deliberate suppression on the part of assessee‑‑‑First Appellate Authority thus rightly found that the penalties could not be legally sustained and had accordingly cancelled the penalty order‑‑‑Appeal of the Department was dismissed by the Appellate Tribunal.

I.T.A. No. 109/HQ of 1989‑90 and Western Automobiles (India) v. CIT (1978) 112 ITR 1048 ref.

1992 PTD (Trib.) 155; 1994 PTD (Trib.) 688; 1994 PTD (Trib.) 1266; Muhammad Muslim v. CIT, Karachi 1980 PTD 227 and 1981 PTD (Trib.) 15 rel.

Inayatullah Kashani, D.R. for Appellant.

Taher Moochhala, C.A. for Respondent.

Date of hearing: 30th October, 2002.

2003 P T D (Trib.) 1097

[Income‑tax Appellate Tribunal Pakistan]

Before Munsif Khan Minhas, Judicial Member and Muhammad Munir Qureshi, Accountant Member

I.T.A. No.4620/LB of 1994, decided on 16th July, 2002.

(a) Income‑tax‑‑‑

‑‑‑‑Revision of return ‑‑‑Assessee had the prerogative to `revise' the return of income before finalization of assessment.

(b) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑-‑S. 12(18)‑‑‑Companies Ordinance (XLVII of 1984), S.73‑‑‑Deemed income‑‑‑Loan‑‑‑Loan from Managing Director for purchase of land‑‑­Alteration of such loan into capital against allotment of shares in the revised balance‑sheet‑‑‑Addition of such loan was made on the ground that the same was not made available the company through cross cheques‑‑‑Explanation of the assessee that revision of the balance‑sheet was the result of an "error" which was corrected with the recommendation of the company's Auditor was rejected ‑‑‑Validity‑‑­Revision of balance‑sheet had been made with intention to evade tax liability under Ss.12(18)/30 of the Income Tax Ordinance, 1979‑‑­Allotment of shares to Managing Director was of no consequence as the company owed loan to him which amount was included in the company's balance‑sheet under the Head "Current Liabilities"‑‑‑Original balance-­sheet was duly signed by the Managing Director and in said balance-sheet amount was unambiguously cited as a "loan" amount due under the Head "Current Liabilities"‑‑‑Revision of such balance‑sheet subsequently after the death of the Managing Director, was clearly an afterthought contrived solely to evade tax liability under Ss.12(18)/30 of the Income Tax Ordinance, 1979‑‑‑Form III was also not filed before the Registrar of Companies within 30 days of the alleged allotment of shares as required under S.73 of the Companies Ordinance, 1984 and the same was filed belatedly when the Assessing Officer requisitioned the same during the course of assessment proceedings‑‑‑Addition made under S.12(18) of the Income Tax Ordinance, 1979 by the Assessing Officer was fully justified in circumstances and relief accorded by the First Appellate Authority was without any justification‑‑‑Order of the Appellate Authority was vacated and order of the Assessing Officer was upheld by the Appellate Tribunal.

2001 PTD 1180 distinguished

Abdul Rasheed, D.R. for Appellant.

Zia Ullah Kayani for Respondent.

Date of hearing: 3rd April, 2002.

2003 P T D (Trib.) 1121

[Income‑tax Appellate Tribunal Pakistan]

Before Syed Kabirul Hassan, Judicial Member and Shahid Jamal, Accountant Member

I.T.As. Nos. 1926/KB of 1999‑2000 and 95/KB of 2000‑2001, decided on 20th April, 2001.

Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑Ss. 62, 61, 56, 65 & 13(1)(aa)‑‑‑Assessment‑‑‑Addition‑‑‑Assessment without issuance of mandatory notice‑‑‑Validity‑‑‑Assessment had been finalized under S.62 of the Income Tax Ordinance, 1979 without issuance of a mandatory notice, be it tinder S.65 or 56 or 61 of the Income Tax Ordinance, 1979‑‑‑Even show‑cause notice under S.13 of the Income Tax Ordinance, 1979 with regard to addition was not issued‑‑­ Notice could not have been issued without having assumed proper jurisdiction for the assessment of income‑‑‑First of all the reasons had to be recorded for issuance of notice under S.65 of the Income Tax Ordinance, 1979, then prior approval was to be taken from Inspecting Additional Commissioner and then jurisdiction was to be assumed by issuance of notice under S.65 of the Income Tax Ordinance, 1979‑‑‑None of the actions having taken place assessment was ab initio illegal and void and was cancelled by the appellate Tribunal and consequently penalty order stood cancelled.

1990 PTD (Trib.) 539; 1990 PTD 389; (1978) 113 ITR 22; 1999 PTD 3892; 1993 PTD 392; 1984 PTD 282; 1993 PTD 1172 and (1997) 39 Tax 30 rel.

M. Jawaid Zakaria for Appellant.

M. Umer Farooq, D.R. for Respondent.

Date of hearing: 20th April, 2001.

2003 P T D (Trib.) 1126

[Income‑tax Appellate Tribunal Pakistan]

Before Khalid Waheed Ahmed, Judicial Member, Imtiaz Anjum and Muhammad Sharif Chaudhry, Accountant Members

I.T.A. No.636/LB of 1997, decided on 16th August, 2002.

Per Khalid Waheed Ahmad, Judicial Member; Muhammad Sharif Chaudhry, Accountant Member agreeing‑‑‑

Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑Ss. 62, 50(4A) & Chaps. VII, [Ss.50 to 54] & VIII [Ss.68 to 84]‑‑­C.B.R. Circular No.63 of 1994, dated 10‑8‑1994‑‑‑Assessment on production of accounts, evidence etc. ‑‑‑Assessment on the basis of agreement between the Pakistan Yarn Merchants Association and the Central Board of Revenue, the consent to which was denied by the assessee‑‑‑Validity‑‑‑Agreement reached between the Pakistan Yarn Merchants Association and the Central Board of Revenue was not applicable to the assessee as it was not member of the said Association‑‑­Case was set aside by the Tribunal and the matter was sent back to the Assessing Officer for de novo action‑‑‑Assessing Officer was directed to assess the income of the assessee in accordance with law on the basis of accounts of the assessee and work out tax liability of the assessee on the basis of income assessed by him and not' on the basis of tax rate agreed between Pakistan Yarn Merchants Association and the Central Board of Revenue‑‑‑Assessing Officer, before doing so, would summon and examine the record of the Association to ascertain whether assessee was really not member of the said Association during the period under consideration‑‑‑If it turned out that the assessee was really member of the Association then the assessment order based on agreement between Central Board of Revenue and the Pakistan Yarn Merchants Association would stand restored.

1988 PTD (Trib.) 1010 ref.

Per Khalid Waheed Ahmad, Judicial Member‑‑‑

Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑Chaps. VII [Ss.50 to 54] & VIII [Ss.68 to 84]‑‑‑C.B.R. Circular No. 63 of 1994, dated 10‑8‑1994‑‑‑Assessment‑‑‑Tax liability in special cases‑‑‑Assessment of yarn commission agents‑‑‑Central Board of Revenue's Circular No. 63 of 1994, dated 10‑8‑1994 issued on the subject of assessment of yarn commission agents in consequence of agreement reached between, the Central Board of Revenue and Pakistan Yarn Merchants Association was not in conformity with the procedure for assessment of income provided under Chaps. VII & VIII of the Income Tax Ordinance, 1979.

Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑Ss. 62, 50(4A), Chaps. VII [Ss.50 to 54] & VIII [Ss.68 to 84]‑‑­C.B.R. Circular No.63 of 1994, dated 10‑8‑1994‑‑‑Assessment on production of accounts, evidence etc. ‑‑‑Assessment on the basis of agreement between the Pakistan Yarn Merchants Association and, the Central Board of Revenue‑‑‑Validity‑‑‑Assessment framed on the basis of an agreement which had no binding force because of not being in accordance with the scheme of assessment provided under the relevant provisions of the Income Tax Ordinance, 1979, was not maintainable in law particularly when the assessee had not given his consent to pay the tax in terms of agreement reached between the Pakistan Yarn Merchants Association and the Central Board of Revenue.

Per Imtiaz Anjum, Accountant Member. ‑‑‑[Minority view].

Nauman Yahya, I.T.P. for Appellant.

Anwar Ali Shah, D.R. for Respondent.

Date of hearing: 25th June, 2002.

2003 P T D (Trib.) 1135

[Income‑tax Appellate Tribunal Pakistan]

Before Syed Nadeem Saqlain, Judicial Member and Imtiaz Anjum, Accountant Member

I.T.As, Nos. 477/LB and 1136/LB of 2002, decided on 28th June, 2002.

(a) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑Ss.66‑A, 23 & Third Sched., Rr.3 & 7‑‑‑Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order‑‑­Deductions‑‑‑Deterioration of gas cylinders‑‑‑Cancellation of assessment on the ground that Assessing Officer had wrongly allowed provision for deterioration of cylinder as such cylinder were assets of the assessee and any business loss or gain on their disposal may be considered under Third Schedule of the Income Tax Ordinance, 1979 as business loss or business gain‑‑‑Validity‑‑‑Departmental Authorities erred in law while invoking S.66‑A of the Income Tax Ordinance, 1979 as word "deterioration" used by the Accountant of the assessee was synonymous for the word "depreciation" which had been used in the Income Tax Ordinance, 1979‑‑‑Department could not get any benefit out of such mistaken use of the word "deterioration" ‑‑‑Depreciation on cylinders were allowable‑‑‑Finding of Inspecting Additional Commissioner on the issue was vacated and assessment order was restored by the Appellate Tribunal.

173 ITR 100; CIT v. Taj Mahal Hotel (1971) 82 ITR 44 (SC) and (1986) 157 ITR 86 (SC) ref.

CIT v. National Air Products Ltd. ITR 126 page 196 and CIT v. Heavy Mechanical Complex Ltd., Taxila 2001 PTD 1354 rel.

(b) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑S.66‑A‑‑‑Powers of Inspecting Additional commissioner to revise Deputy Commissioner's order‑‑‑Deferred income‑‑‑Income from "lease back arrangement"‑‑‑Taxability of deferred income as due cognizance was not taken by the Assessing Officer ‑‑‑Assessee contended that addition of deferred income was not justified as the same had arisen out of lease back arrangement and lease back arrangement was not "sale" but only financial arrangement‑‑‑Validity‑‑‑Issue was remanded to Assessing Officer by the Appellate Tribunal to be re‑examined with the direction that if the deferred income had resulted from "lease back arrangements" then the exemption be allowed and if it was out of any other source the taxability of the same should be decided on the basis of facts and in accordance with the law after affording an opportunity of hearing to the assessee.

1999 PTD (Trib.) 14 and Medipak Ltd., Lahore's case I.T.A. No.624/LB of 1999 rel.

Yousaf Ali Ch., I.T.P. and Iqbal Hashmi for Appellant.

Najum‑ud‑Din, D.R. for Respondent.

Date of hearing; 28th March, 2002.

2003 P T D (Trib.) 1146

[Income‑tax Appellate Tribunal Pakistan]

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

LT.A. No.3121/LB of 2001, decided on 6th September, 2002.

Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑Ss. 66‑A & 17‑‑‑C.B.R. Letter No.17(1)/94, dated 28‑5‑1994‑‑­C.B.R. Letter C. No.1 (1)/DTP‑I‑94, dated 28-5‑1994‑‑‑C. B. R. Circular No. 15 of 1954‑‑‑Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order‑‑‑Interest on securities‑‑­Mercantile Accounting System‑‑‑Interest income from Government Securities was assessed on receipt basis‑‑‑Inspecting Additional Commissioner by invoking provisions of S.66‑A of the Income Tax Ordinance, 1979 directed the Assessing Officer to assess the same on accrual basis as the assessee was maintaining accounts on Mercantile basis in spite of the fact that same interest income was taxed on receipt basis in the subsequent assessment year‑‑‑Validity‑‑‑Inspecting Additional Commissioner failed to establish any loss of revenue to the Department‑‑No change whatsoever had taken place in the method of accounting accepted by the Department over the year‑‑‑Method of accounting adopted by the assessee might be erroneous but for the attraction of S.66‑A of the Income Tax Ordinance, 1979, it would not only be an erroneous order but would be prejudicial to the interest of revenue as well‑‑‑Interest income which was ordered to be charged to tax on accrual basis was taxed on receipt basis in the subsequent assessment year and by not ordering for deletion of such amount in the subsequent year, Inspecting Additional Commissioner taxed the same amount twice‑­Practice of double taxation was deprecated‑‑‑Inspecting Additional Commissioner failed to view the matter in its total perspective and invoked S. 66‑A of the Income Tax Ordinance, 1979 and that too only for one year without realizing its impact in the subsequent year whereas the Department would suffer loss if method of accounting adopted by the assessee was discarded‑‑‑Order passed by the Inspecting Additional Commissioner was annulled, the assessment order was restored by the Appellate Tribunal as one of the basic ingredients that not only that order should be erroneous but it should be prejudicial to the interest of revenue, was altogether missing which was a. prerequisite for invoking S.66‑A of the Income Tax Ordinance, 1979.

1994 SCMR 229 = 1994 PTD 174; Commissioner of Income­-tax, Companies‑III, Karachi v. Krudd Sons Ltd. 1993 PTD (Trib.) 739; Glaxo Laboratories Ltd. v. IAC and others PLD 1992 SC 549 = 1992 PTD 932 and Seth Lalbhai Dalpatbhahi v. Commissioner of Income‑tax, Bombay North 22 ITR 13 (Bom.) rel.

Dr. Ikramul Haq for Appellant.

Mrs. Talat Altaf Khan, D.R. for Respondent.

Date of hearing: 18th July, 2002.

2003 P T D (Trib.) 1158

[Income‑tax Appellate Tribunal Pakistan]

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

I.T.As. Nos. 927/LB and 928/LB of 2001, decided on 30th September, 2002.

(a) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑S. 66‑A‑‑‑Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order‑‑‑Jurisdiction‑‑‑Condition for invoking S.66‑A of the Income Tax Ordinance, 1979‑‑‑Inspecting Additional Commissioner had to establish that the assessment order framed by the Assessing Officer was erroneous as well as prejudicial to the interest of revenue and thereafter he could invoke S.66‑A of the Income Tax Ordinance, 1979.

(b) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑S. 66‑A‑‑‑Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order‑‑‑Audit objection‑‑‑Invoking of provision of S.66‑A of the Income Tax Ordinance, 1979‑‑‑Validity‑‑‑Inspecting Additional Commissioner did not apply his mind while exercising his revisional jurisdiction‑‑‑Inspecting Additional Commissioner relied upon the objection raised by the Audit Department and the same was incorporated in his show‑cause notice but at one stage he defended his Assessing Officer when he was confronted with the audit objections by the Audit and Inspection Department‑‑‑Inspecting Additional Commissioner invoking S.66‑A of the Income Tax Ordinance, 1979 on the basis and recommendation of the Audit Department would suffice warranting interference of the Appellate Tribunal.

(c) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑Ss. 66‑A, 62, 50(4), 50(5), 80‑C, 143‑B & Second Sched., Part IV, Cl. 9, Para. 4‑‑‑C.B.R. Circular No. 12 of 1991, dated 30‑6‑1991‑‑­Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order ‑‑‑Assessee was a manufacturer‑‑‑Import of material for self‑consumption‑‑‑Statement under S.143‑B of the Income Tax Ordinance, 1979 was filed under mistaken notion of law that the same was to be filed by all importers/suppliers along-with other statements required to be filed‑‑‑Assessment was finalized under S.62 of the Income Tax Ordinance, 1979‑‑‑Inspecting Additional Commissioner cancelled the assessment on the ground that allowance of credit of deductions under Ss.50(4) & 50(5) of the Income Tax Ordinance, 1979 was illegal because these deductions constituted full and final discharge of tax liability as declared and admitted in the statement under S.143‑B of the Income Tax Ordinance, 1979‑‑‑Validity‑‑‑Provisions of law were to be interpreted in substance and not in form‑‑‑Income was not chargeable under S.80‑C of the Income Tax Ordinance, 1979‑‑‑Filing of statement under S.143‑B of the Income Tax Ordinance, 1979 could not be considered that assessee had opted for presumptive tax regime in respect of supplies which was a requirement' under Cl. (9) of para. 4 of the Second Schedule of the Income Tax Ordinance, 1979 because unless the assessee opts for presumptive tax regime specifically by mentioning that fact in the return, mere filing of statement under S.143‑B of the Income Tax Ordinance, 1979 would be of no importance and it could not be considered to be erroneous‑Order passed, by the Inspecting Additional Commissioner was cancelled and assessment order of the Assessing Officer was .restored by the Appellate tribunal.

1998 PTD (Trib.) 3699; 2001 PTD (Trib.) 2902; 2001 PTD (Trib.) 3810; 2002 PTD (Trib.) 228 and 2002 PTD (Trib.) 532 ref.

Zafar Dar for Appellant.

Mehboob Alam, D.R. for Respondent

Date of hearing: 15th August, 2002.

2003 P T D (Trib.) 1167

[Income‑tax Appellate Tribunal Pakistan]

Before Khawaja Farooq Saeed, Judicial Member and Imtiaz Anjum, Accountant Member

I.T.As. Nos. 740/LB to 744/LB of 2002, decided on 26th September, 2002.

(a) Income‑tax‑‑‑

‑‑‑‑Finding on an issue‑‑‑Jurisdiction of Tax Authorities‑‑‑Irrelevant issue‑‑‑Principle‑‑ No one, be that an Assessing Officer, Commissioner of Income‑tax (Appeals) or Appellate Tribunal can give a finding on an issue, which is not before it for adjudication‑‑‑Courts or other judicial or administrative officers can dispose the subject to which they have the seizure‑‑‑To give a finding on an issue, which is not the subject‑matter of the appeal or such other proceedings is beyond the jurisdiction of the Authority dealing with such matters‑‑‑Giving a finding in respect of assessment year, which is not pending before an Authority, is a far­fetched idea, which jurisdiction is not available to anybody‑‑­Jurisprudence is clear in its application that no one can give a finding during the proceeding of a case on an issue, which is not challenged before him by the petitioner or the respondent.

(b) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑Ss. 52, 86 & 61‑‑‑C.B.R. Circular No.19 of 1999, dated 14‑9‑1999‑‑­Liability of a person failing to deduct or pay tax ‑‑‑Assessee in default ‑‑­Chargeability of tax under S.52 of the Income Tax Ordinance, 1979 on total payment made on account of supplies for the last five years alongwith additional tax on observation of Audit Authorities in one assessment year‑‑‑First Appellate Authority set aside the order with the direction to pass separate orders for each year‑‑‑Assessments for, each year on such directions‑‑ Validity‑‑‑No legal direction was in the order of the First Appellate Authority which made the present continuation of the old proceedings except for the relevant assessment year only one year was pending adjudication before the First Appellate Authority‑‑‑Finding with regard to other years was an obiter dicta, which could not bind the Assessing Officer to follow his remarks‑‑‑Such remarks did not saddle the Department with the powers to initiate the proceedings for the years which were not pending before him‑‑‑No continuation of the proceedings for the assessment years were independent from the earlier proceedings‑‑‑Proceedings under S.52 of the Income Tax Ordinance, 1979 could be initiated at any time during the financial year‑‑‑If Assessing Officer fails to take cognizance of assessee's default during the financial year from assessee's statements or such other information, tie could proceed after gathering information from assessee books called under S.61 of the Income Tax Ordinance, 1979 for assessment ‑‑‑Assessee under S.61 of the Income Tax Ordinance, 1979 could be asked to produce books of accounts for a period, which was not more than three years prior to the income year‑‑‑Proviso to S.61 of the Income Tax Ordinance, 1979 means that during the course of an assessment, the Assessing Officer could ask for production of books of accounts for four assessment years only‑‑‑Since the determination of the purchases in the absence of statement under S.142 of the Income Tax Ordinance, 1979 could only be from the accounts, the Assessing Officer could not go beyond the period of four assessment years‑‑‑Such limitation for, calling for the books of accounts, had been fixed by the statute and Assessing Officer could not enforce beyond‑the same‑‑­Assessing Officer did not find the assessee to be in default during the financial years, or on the inspection of their books during proceedings under S.61 of the Income Tax Ordinance, 1979 and suddenly became wiser after almost five years without having access to books or any such other relevant material‑‑‑Assessment year for which the notice was issued had been held to be illegal by the First Appellate Authority‑‑­Order was liable to cancellation in view of the fact that the figure determined for holding assessee in default had no relationship with the facts of case‑‑‑If it was for more than one year, it was not to be considered as default on the part of the assessee‑‑‑Assessing Officer was not sure about the amounts, the years for which the amounts pertained, actual name of the recipients of the money and the fact whether the recipients had already paid taxes or not‑‑‑Even Audit party had no access to the books of accounts and their apprehension was on the basis of the balance sheet of the assessee; otherwise it was a case of inordinate delay and the assessment by virtue of S.64 of the Income Tax Ordinance; 1979 of the recipients presumably stood finalized‑‑­Assessing Officer had also no power to call for the books of accounts for the years on which the assessments were made‑‑‑Orders finalized by the Assessing Officer and confirmed by the First Appellate Authority were, cancelled by the Appellate Tribunal and appeal was allowed.

2002 PTD 14 distinguished.

I.T.A. No.5382/LB of 1999; 1999 PTD (Trib.) 3357; 2001 PTD (Trib.) 755; 1996 PTD (Trib.) 65; 2000 PTD 2883; PTCL 1976 CL 598; CIT v. Manager, Madhya Pradesh State Coop. Development Bank Ltd. (1982) 137 ITR 230 and 2000 PTD (Trib.) 2605 ref.

1999 PTD (Trib.) 3757 not infield.

(c) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑S. 52‑‑‑Liability of persons failing to deduct or pay tax ‑‑‑Limitation‑­Law could not be left with unlimited application‑‑‑No clue is given in S.52 of the Income Tax Ordinance, 1979 itself with regard to its application‑‑‑Inference could be drawn from the scheme of law and other provisions of the Income Tax Ordinance 1979.

(d) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑Ss. 52 & 50‑‑‑Liability o persons failing to deduct or pay tax‑‑­Machinery provisions‑‑‑Section 52 of the Income Tax Ordinance, 1979 is only a machinery section introduced to effect the deductions under various provisions of S. 50 of the Income Tax Ordinance, 1979‑‑­Section 52 is not a charging provision and the amount deducted through this mode is adjustable against the demand of the recipient of the money or in other words of the supply contractor.

(e) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑Ss. 52 & 61‑‑‑Liability of persons failing to deduct or pay tax‑‑­Limitation‑‑‑Time for initiation of proceedings and limitation‑‑‑When the Assessing Officer was not permitted to call for books beyond the period of 4 years under S.61 of the Income Tax Ordinance, 1979, how could he be allowed to assess the default of a person beyond it‑‑‑Determination of purchases liable to deduction could only be from the accounts and there was no question about issuance of notice under S.61 of the Income Tax Ordinance, 1979 beyond this period‑‑‑Limitation to issue a notice under S.52 of the Income Tax Ordinance, 1979 could not be extended beyond four assessment years.

(f) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑Ss. 52 & 156‑‑‑Liability of persons failing to deduct or pay tax‑‑­Limitation‑ ‑‑Section 156 of the Income Tax Ordinance, 1979, was not applicable as order under S.52 of the Income Tax Ordinance, 1979 was not basically a rectification of mistake‑‑‑Issue of rectification came into picture where an order had been finalized earlier but when the proceedings under S.52 of the Income Tax Ordinance, 1979 were initiated they were in the absence of an earlier order on the subject.

(g) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑Ss. 52 & 65‑‑‑Liability of persons failing to deduct or pay tax‑‑Assessee in default‑‑‑Definite information‑‑‑Evidence‑‑‑Section 52 of the Income Tax Ordinance, 1979 could not be invoked on mere presumptions, estimates or surmises‑‑‑Information for holding an assessee in default requires even stronger evidence than for re‑opening of case under S.65 of the Income Tax Ordinance, 1979 in term of definite information as the assessee in default had to pay the tax of the other persons.

(h) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑Ss. 52 & 61‑‑‑Liability of persons failing to deduct or pay tax‑‑­Proceedings‑‑‑Limitation‑‑‑Assessing Officer, under S.52 of the Income Tax Ordinance, 1979, had to proceed before the end of the financial year; on inspection of books and on his failure, he could proceed within three years prior to the income year for which he had issued a notice under S.61 of the Income Tax Ordinance, 1979 for assessment.

Khawaja M. Iqbal and Faisal Iqbal Khawaja, F.C.A. for Appellant.

Shahid Jamil Khan, Legal Advisor for Respondent.

Date of hearing: 21st September, 2002.

2003 P T D (Trib.) 1182

[Income‑tax Appellate Tribunal Pakistan]

Before Syed Nadeem Saqlain, Judicial Member and Imtiaz Anjum, Accountant Member

W.T.A. No. 1272/LB of 1996, decided on 16th August, 2002.

Wealth Tax Act (XV of 1963)‑‑‑

‑‑‑‑Ss.17‑B & 5(1)(xv)‑‑‑Protection of Economic Reforms Act (XII of 1992), S.5‑‑‑Finance Act (I of 1995)‑‑‑Income Tax Ordinance (XXXI of 1979), Second Sched., Part IV, Cl. (6-A)‑‑‑S.R.O. 220(I)/91, dated 16‑3‑1991‑‑‑Circulars Nos. 32 & 33 of State Bank of Pakistan (Foreign Currency Account Scheme of State Bank of Pakistan)‑‑‑Powers of Inspecting Additional Commissioner to revise Wealth Tax Officer's order‑‑‑Exemption‑‑‑Foreign remittances‑‑‑Assessment framed by the Assessing Officer was termed as erroneous as well as prejudicial to the interest of revenue for the reason that bona fides of foreign remittances were not ascertained before allowing exemption and it was not verified as to who sent the remittances i.e. remittances have to be appeared in the name of the remitter‑‑‑Credit of the remittances to Bank of the assessee was not sufficient ground to allow exemption of wealth tax ‑‑‑Validity‑‑­Person holding foreign currency was under no legal obligation to disclose the name of the remitter of foreign currency‑‑‑Section 5(1)(xv) of the Wealth Tax Act, 1963 provided that assets brought or remitted were covered by the exemption clause‑‑‑Legislature used the word "brought" alongwith the word "remitted" thus creating a distinction‑‑­Not only when the foreign currency was remitted by someone else that it was covered by exemption clause but foreign currency brought into Pakistan also came within the purview of S.5(1)(xv) of the Wealth Tax Act, 1963‑‑‑Law granting exemption was also to be seen in conjunction with the other laws enacted by the Government from time to time‑‑­Section 5 of the Protection of Economic Reforms Act, 1992 was, also very much relevant which provided that "all citizens of Pakistan resident in Pakistan or outside Pakistan to hold foreign currency accounts in Pakistan and all other persons who held such account, shall continue to enjoy immunity against any inquiry from the Income Tax Department or any other Taxation Authority as to source of financing of foreign currency accounts" ‑‑‑Section 5 of Protection of Economic Reforms Act, 1992 gave absolute and complete immunity to the foreign currency holders irrespective of the fact whether person was resident or non­resident and without ascertaining the source of foreign currency‑‑­Inspecting Additional Commissioner was not within the domain of law while exercising his powers under S.17‑B of the Wealth Tax Act, 1963, since neither the original order passed under S.16(3) of the Wealth Tax Act, 1963 was erroneous nor any prejudice was caused to the Revenue‑‑­Original order was restored and order passed under S. 17‑B of the Wealth Tax Act, 1963 was annulled by the Appellate Tribunal.

1995 PTD (Trib.) 1162; 199.6 PTD (Trib.) 344 and W.T.A. No.533/KB of 1999‑2000 rel.

Zafar Iqbal, F.C.A. for Appellant.

Mrs. Talat Altaf Khan, D.R. for Respondent.

Date of hearing: 28th May, 2002.

2003 P T D (Trib.) 1189

[Income‑tax Appellate Tribunal Pakistan]

Before Khawaja Farooq Saeed, Judicial Member and Imtiaz Anjum, Accountant Member

I.T.As. Nos. 5703/LB, 5704/LB of 1999, 1252/LB to 1256/LB, 1446/LB, 3190/0 and 3191/LB of 2000, decided on 12th August, 2002.

(a) Income Tax Ordinance (XXXI of 1979)‑‑

‑‑‑‑S. 23(1)(viii)‑‑‑Deduction‑‑‑Bonus, disallowance of ‑‑‑Assessee a banking company‑‑‑Amount of bonus was disallowed on the ground that it was merely a provision and not actual payment ‑‑‑Assessee contended that bonus payable to assessee's staff was an ascertainable liability and same was admissible under mercantile system of accounting even if not paid in the same year‑‑‑Validity‑‑‑Provision for bonus could not just be disallowed‑‑‑Department having no case with regard to its non­ verifiability or that it was not as per terms of the employment or that it was against the previous practice of the assessee or a part of which had not been paid in the subsequent year, could not disallow the same under the garb that it was only a provision‑‑Amount of bonus halving properly been claimed as per terms of employment with the employees and being normal practice of the asse9see and also for the reason that the assessee had mercantile method of accounting was allowed in full‑‑‑Addition was deleted by the Appellate Tribunal being illegal.

1985 PTD 413 and 1990 PTD 248 ref.

(b) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑S. 66‑A‑‑‑First Sched., Part V, Para. A‑‑‑Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order‑‑‑Dividend income was assessed @ 5 % as separate block of income‑‑­Taxation of, at the rate applicable to normal business income by the Inspecting Additional Commissioner was cancelled, by the Appellate Tribunal and original order was restored.

1996 PTD 276; 1974 PTD 41 and 2000 PTD 507 rel.

(c) Income Tax Ordinance (XXXI of 1079)‑‑‑

‑‑‑‑Ss. 66‑A, 12(19) & Third Sched., R.1‑‑‑Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order‑‑­Lease income‑‑‑Allowance of ‑depreciation‑‑‑Lease rent ‑‑‑Assessee contended that Inspecting Additional Commissioner worked out the amount of lease rental primarily on hypothetical basis without looking at the lease rentals actually recorded in the books of the assessee and ignored to allow corresponding tax depreciation‑‑‑Validity‑‑‑Appellate Tribunal set aside the orders with the directions to provide an opportunity to the assessee to provide details of actual lease rentals received and with further direction to allow tax depreciation legally admissible under Third Schedule of the Income Tax Ordinance, 1979.

(d) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑Ss. 17 & 32‑‑‑Interest on securities‑‑ ‑Method of accounting‑‑­Addition‑‑‑Government securities‑‑‑Addition to total income accrued on Government securities on accrual basis was confirmed by the Appellate Tribunal, whereas the assessee had offered such income on actual receipt basis.

1994 PTD (Trib.) 1051 rel.

(e) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑Third Sched., R.7‑‑‑Depreciation allowance ‑‑‑Assessee, a Bank‑‑‑Ad hoc disallowances were made for the reasons that no tax depreciation schedule was provided at the time of assessment and that the claim of depreciation was much higher than the preceding year ‑‑‑Validity‑‑­Accounting depreciation was as per Third Schedule of the Income Tax Ordinance, 1979‑‑‑Claim was there and the requirements of law had been fulfilled ‑‑‑Assessee apparently had failed to calculate the additions chargeable under Cl. (7) of the Third Schedule of the Income Tax Ordinance, 1979‑‑‑Impression came from the contention that the assessee had not claimed depreciation statedly on the assets that have been sold during the year which aspect required further study of the issue‑‑‑Add backs could not be supported unless the same were proved to be as not covered by the provisions of law ‑‑‑Assessee must be confronted before making additions in his accounts, with specific reference to the figure and relevant law‑‑‑Creation of demand by resorting to the discretionary powers was neither the spirit of law nor could be appreciated by the administrative or judicial Authorities of the country‑‑‑Depreciation allowable to the assessee, a Bank in ordinary circumstances should not be a matter of controversy as law in this regard was clear and unambiguous‑‑‑Issue was set aside with such directions by the Appellate Tribunal.

(f) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑S. 23‑‑‑Deductions‑‑‑Provisions for gratuity, bonus and bad debts­Allowability‑‑‑parameters‑‑‑Liability should be an ascertained one; it should be as per rules and regulations and terms of agreement relatable to said entry and should be as per normal method of accounts maintained by such organization.

(g) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑S. 23‑‑‑Deductions‑‑‑Banking company‑‑‑Bad and doubtful debts‑‑­Disallowance of‑‑‑Validity‑‑‑Provision for bad and doubtful debts having been made by the Bank after being convinced that it was not recoverable under his own method of accounts and Bank regulations under which the Bank was operating itself was not to be disallowed.

1976 PTD 237; I.T.As. Nos. 42/KB to 44/KB of 1977‑78; I.T.A. No.776/KB of 1975‑76; I.T.As. Nos. 1897 to 1899/KB of 1973‑74 and I.T.As. Nos.2758/LB to 2761/LB of 1996 rel.

(h) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑S. 24‑‑‑Deductions not admissible‑‑‑Excess perquisite ‑‑‑Disallowance­‑Working produced was not controverted ‑‑‑Appellate Tribunal remanded back to re‑compute the working of excess perquisite.

(i) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑S. 23‑‑‑Deductions‑‑‑Bonus and workers welfare fund‑‑­Disallowance‑‑ Validity‑‑‑Entire amount of bonus' was ascertained and had been paid in the subsequent year which was not disputed‑‑‑Neither the method of accounting was challenged nor the Department doubted its validity‑‑‑Workers Welfare Fund was also an allowable expense under the law‑‑‑Additions made were not maintained by the Appellate Tribunal.

(j) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑S. 23 & Second Sched., Part I, Cl. (91)‑‑‑C.B.R. Letter 1(231) T‑77, dated 1‑1‑1977‑‑‑Deductions‑‑‑Banking company‑‑‑Donation to approved institution‑‑ Disallowance of‑‑‑Ad hoc disallowances under the heads communication, staff service charges, general travelling expenses, motor vehicles, entertainment and Qarz‑e‑Hasna‑‑‑ Validity‑‑‑Donations paid to approved institutions were exempt under Cl. (91) of the Second Schedule of the Income Tax Ordinance, 1979‑‑‑Assessing Officer was left to determine as to which institution was approved out of the list provided by the assessee‑‑‑Issue was set aside by the Appellate Tribunal for determination of the exemption to that extent by the Assessing Officer.

1984 PTD 225 and 1996 PTD (Trib.) 1104 ref.

Khaliq‑ur‑Rehman, F.C.A. for Appellant/Assessee.

Mian Ashiq Hussain for Respondent/Department.

Date of hearing: 2nd March, 2002.

2003 P T D (Trib.) 1204

[Income‑tax Appellate Tribunal Pakistan]

Before Fazalur Rehman Khan, Judicial Member and Mrs. Abida Ali, Accountant Member

I.T.A. No. 772/PB of 1999‑2000, decided on 10th November, 2001.

Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑S. 23‑‑‑Deductions‑‑‑Profit and Loss Account‑‑‑Administrative and general expenses‑‑‑Disallowance since no business was carried out during the year‑‑‑First Appellate Authority directed the Assessing Officer to allow the claimed expenses in view of maintaining of office/staff to capture future prospects and propel maintenance of equipment already installed‑‑‑Validity‑‑‑Appellate Tribunal upheld the order of First Appellate Authority in view of the facts and circumstances of the case, assessee had to retain its office and incur certain expenditure even during the period it did not earn any income‑‑‑Appeal of the Department was rejected.

1969 ITR 118 rel.

Qaiser Ali, D.R. for Appellant.

Muhammad Riaz, C.A. for Respondent.

Date of hearing: 8th November, 2001.

2003 P T D (Trib.) 1207

[Income‑tax Appellate Tribunal Pakistan]

Before Syed Kabirul Hasan, Judicial Member and Agha Kafeel Barik, Accountant Member

W.T.As.. Nos. 113/KB to 116/KB of 1995‑96, ,decided on 31st December, 2001.

(a) Interpretation of statutes‑‑‑

‑‑‑‑ Explanation to a section‑‑‑Purpose, meaning and effect‑‑‑Explanation to the section is not a substantive provision and it is merely an aid to the interpretation of proviso added to the main section‑‑Explanation is added to remove any doubt as to the meaning of any proviso or section‑‑­Explanation does not enlarge the scope of main section which is supposed to explain and an explanation is added to the section by way of clarification to facilitate its interpretation‑‑‑"Explanation" must depend upon its terms and language used in it‑‑‑"Explanation" added by way of clarification to facilitate its interpretation, normally, would apply prospectively, specially when it creates substantive obligation.

PLD 1981 SC 1; PLD 1968 Lah. 202; PLD 1982 Lah. 109; PLD 1969 Lah. 228 and PLD 1982 Lah. 115 rel.

(b) Wealth Tax Act (XV of 1963)‑‑‑

‑‑‑S. 2(5)(ii) [2(e)(ii)], Explanation ‑‑‑C.B.R. Circular No.18 of 1991, dated 2‑7‑1991‑‑‑Assets‑‑‑Addition of "Explanation" of the section‑‑­Effect ‑‑‑Assessee contended that Explanation was inserted in 1991 and would apply prospectively as the same was not a substantive provision and no liability could be created retrospectively and liability created in view of any Explanation added to the main provision would apply, prospectively‑‑‑Validity‑‑‑"Explanation" was added to S.2(5)(ii) of the Wealth Tax Act, 1963 wherein it was mentioned that it shall be effective from 20th day of June, 1979‑‑‑Intention of the Legislature was clearly spelt out by the amendment and categorically the date was mentioned‑‑­"Explanation" was to take effect from 20th June, 1979‑‑‑Tax levied and order of the First Appellate Authority was confirmed by the Appellate Tribunal.

B. P. Biscuit Factory's case 74 Tax 81; PLD 1981 SC 1; PLD 1968 Lah. 202; PLD 1982 Lah. 109; PLD 1969 Lah. 228 and PLD 1982 Lah. 115 ref.

Haji Yousuf for Appellant.

Bakht Zaman, D.R. for Respondent.

Date of hearing: 13th November, 2001.

2003 P T D (Trib.) 1222

[Income‑tax Appellate Tribunal Pakistan]

Before Khawaja Farooq Saeed, Judicial Member and Imtiaz Anjum, Accountant Member

I.T.A. No.2649/LB of 2000, decided on 16th November, 2002.

(a) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑S. 59(1)‑‑‑C.B.R. Circular No.5 of 1997, dated 12‑7‑1997‑‑‑Self­Assessment Scheme 1997‑98‑‑‑Self‑assessment‑‑‑Assessment year 1997‑98‑‑‑Tax paid‑‑‑Self‑Assessment Scheme 1997‑98 had very clearly used the term "tax paid" and for comparison purpose income was of no relevance for qualifying under Self‑Assessment Scheme.

(b) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑As. 66‑A, 59 & 80C‑‑‑C.B.R. Circular No. 5 of 1997, dated 12‑7‑1997‑‑‑Self‑Assessment Scheme 1997‑98, Para. 2(b)‑‑‑Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order‑‑‑Self‑assessment‑ ‑Assessment year 1997‑98‑‑‑Cancellation of assessment on the‑ basis that tax for the year was less than the tax paid in the immediate preceding year‑‑‑Validity‑‑‑Connotation "tax paid" and "tax payable" used in Para. 2(b) of Self‑Assessment Scheme, 1997‑1998 could not be interpreted to exclude the tax payable under presumptive tax regime for the earlier assessment years‑‑‑Scheme applied, to all kinds of taxes paid by an assessee, either under S.80B, 80C or 80D of the Income Tax Ordinance, 1979‑‑For comparison purposes the tax payable for 1996‑97 shall be grossed up by excluding tax payable under any of the above said sections as well as surcharge payable by the assessee during the relevant assessment year 1996‑97‑‑‑Assessing Officer had accepted a return, which was erroneous in law and prejudicial to the interest of Revenue, as the same was not covered within the Scheme of Self-­Assessment which had caused prejudice to the Revenue on both counts, i.e. for the reason of payment of lesser tax and also that the Assessing Officer had no jurisdiction to accept the return, which did not qualify for the Self‑Assessment Scheme‑‑‑Cancellation of order by the Inspecting Additional Commissioner was upheld and appeal of the assessee was dismissed by the Appellate Tribunal.

1999 PTD (Trib.) 2168 ref.

Mirza Anwar Baig for Appellant.

Mrs. Sabiha Mujahid, D.R. for Respondent.

Date of hearing: 12th March, 2002.

2003 P T D (Trib.) 1228

[Income‑tax Appellate Tribunal Pakistan]

Before Muhammad Munir Qureshi,Accountant Member and Khawaja Farooq Saeed Judicial Member

I.T.As. Nos. 4023/LB, 5034/LB and 5035/LB of 1999 decided on 28th June, 2000.

(a) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑Ss. 65(1)(c), 80CC‑4, 50(5AA), 13(1)(aa) & 59‑A.‑‑‑Additional assessment‑‑‑Jurisdiction‑‑‑Excess income over presumptive income‑‑-Definite information‑‑‑In the presence of definite information of excess income over presumptive; income Assessing Officer's recourse to provision of S.65(1)(c) of the Income Tax Ordinance, 1979 was upheld by the Appellate Tribunal---‑Original assessment having beets completed under S.59‑A of the Income Tax Ordinance, 1979, S.65(1)(c) of the Income Tax Ordinance, 1979 permitted excess of income over presumptive income to be assessed under the normal law.

(b) Income Tax Ordinance (XXXI of 1979)--‑‑

‑‑‑‑Ss. 65(1)(c), 59‑A & 62‑‑Additional assessment‑‑‑Jurisdiction‑‑­Initiation of proceeding under S.65(1)(c) of tire Income Tax Ordinance, 1979 by the Assessing Officer after cancellation of assessment .under S.62 of the income Tax Ordinance, 1979, by the Appellate Tribunal which was made subsequent to assessment framed under S.59-A of the Income Tax Ordinance, 1979‑‑‑Validity‑‑‑Assesnment had been made under S.59‑A of the Income Tax Ordinance, 1979 subsequent assessment under S.62 of the Income Tax Ordinance, 1979 was cancelled by the Appellate Tribunal after cancellation of said assessment what remained in the field was the one made under S.59‑A of the Income Tax Ordinance. 1979‑‑‑‑After the cancellation of assessment made under S.62 of the Income Tax Ordinance, 1979,1he Assessing Officer had lost jurisdiction to act under S.65 of the Income Tax Ordinance, 1979 recourse to provisions of S.65(1)(c) thus was in order which was maintained by the Appellate Tribunal.

(c) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑Ss. 13(1)(aa) & 80CC‑‑‑Addition‑‑‑Unexplained excess income over presumptive income was sufficient to invoke provision of' S.13(1)(aa) of the Income Tax Ordinance, 1979 and said provision need not be interpreted narrowly.

(d) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑Ss. 80CC (4), 50(AA), 59‑A, 13(1)(aa) & 62‑‑‑Tax on income of certain exporters‑‑‑Presumptive income ‑‑‑Assessee claimed unusual excess profit over presumptive income calculated on work back basis‑‑­Such profit was brought to tax by resort to provision of S.80CC (4) of the income Tax Ordinance, 1979‑‑‑Validity‑‑‑‑.Excess income over presumptive income imputed on work back basis was available to assessee‑‑‑Assessing Officer was well within his jurisdiction to interrogate the assessee on the same‑‑‑Assessing Officer's contention was that assessee had not been able to establish that such excess income was contrived out of super normal profits statedly available to the assessee out of its regular business of export and the provision of S.13(1)(aa) were required to be invoked‑‑‑First Appellate Authority was of the view that matter needed to be investigated further‑‑‑Assessee had been somewhat evasive in producing comprehensive documentation to establish its bona fides in the matter‑‑‑No prejudice would be caused to assessee if the assessees were to make an attempt again to convince the Assessing Officer that excess, income arose against its regular transactions that had suffered tax under S.80CC(1) of the Income Tax Ordinance, 1979‑‑‑Assessing Officer must not unnecessarily complicate matters and must make a specific requisition of the precise record/documentation if considered necessary in order to arrive at a firm finding on the matter ‑‑‑Assessee must also cooperate fully to facilitate a firm decision making by the Assessing Officer‑‑‑Appeal was disposed of with such direction by the Appellate Tribunal.

1998 PTD (Trib.) 1201 ref.

1997 PTD 1555 rel.

Rizwan Bashir, A.C.A. for Appellant/Assessee.

Mrs. Talat Altaf, D.R. for Respondent/ Department.

Dates of hearing: 11th May and 13th June, 2000.

2003 P T D (Trib.) 1238

[Income-tax Appellate Tribunal Pakistan]

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

M.A. No.347/LB of 2002, decided on 15th August, 2002.

Income Tax Ordinance (XXXI of 1979)---

----Ss. 13(1)(aa) & 156---Addition---Permission/approval---Permission was sought by the Assessing Officer to make addition rather than approval---Validity---Words "approval" and "permission" have different meanings and their impact is also quite different---Assessing officer sought permission for addition and the inspecting Additional Commissioner allowed the same---Addition made after seeking permission from Inspecting Additional Commissioner was not tenable in the eye of law---When law requires a thing to be done in a particular manner, that should be done in that manner or not at all---Approval had never been sought nor granted and the permission allowed for making addition was not tenable in the eye of law---Miscellaneous application having been decided purely on the legal ground in favour of assessee, Appellate Tribunal rectified its earlier order and deleted the addition made under S.13(1)(aa) of the Income Tax Ordinance, 1979.

1994 PTD (Trib.) 1288; 2000 PTD 3788 and 1998 PTD (Trib.) 1935 rel.

Syed Abid Raza Kazmi for Appellant.

Mrs. Talat Altaf, D.R. for Respondent.

Date of hearing: 13th August, 2002.

2003 P T D (Trib.) 1242

[Income-tax Appellate Tribunal Pakistan]

Before Khawaja Farooq Saeed, Judicial Member and Imtiaz Anjum, Accountant Member

W.T.A. No. 1190/LB of 2002, decided on 18th September, 2002.

Wealth Tax Act (XV of 1963)---

----Ss. 2(e)(2) & 2 (5)(ii)---Assets---Open plot owned by a Society---Use of such plot for sports, marriages and social welfare on receipt of nominal charges which were not even equal to maintenance charges---Such open plot was included in taxable wealth on the basis of receipt of rent which was excluded from- taxable wealth by the First Appellate Authority---Validity---Such an important and expensive land could earn millions for the Society but physical and mental nourishment vis-a-vis development of sports and sportsman spirit was more important than making money from commercial plazas or activities of the similar kinds---Such was a non-business activity, not only because it was noble cause but the charge of a token money for providing such facilities could not be considered as a business activity as the same was neither a business of letting out nor the purpose of development of these plots was business---Charge on net assets of a property held by an association of persons was only where such property was held for the purpose of the business of letting out---Society was not involved in the business of the letting out neither it had been formed for such purpose---Such utilization of open plot not held for the purpose of letting out, did not fall within the definition of asset under S.2(e)(ii) of the Wealth Tax Act, 1963--­Order of the First Appellate Authority was upheld by the Appellate Tribunal.

Mrs. Sabiha Mujahid, D.R. for Appellant.

Ch. Yousaf Ali, I.T.P. for Respondent.

Date of hearing: 18th September, 2002.

2003 P T D (Trib.) 1244

[Income-tax Appellate Tribunal Pakistan]

Before Khawaja Farooq Saeed, Judicial Member and Imtiaz Anjum, Accountant Member

W.T.As. Nos.885/LB to 890/LB of 2002, decided on 18th September, 2002.

Wealth Tax Act (XV of 1963)---

----Ss. 18(1)(a), 35, 17 & 14(1)(a)---Penalty for concealment--­Rectification of mistake---Penalty imposed equal to tax with approval of Inspecting Additional Commissioner was enhanced on the basis of period of default in accordance with the provisions of law through rectification under S.35 of the Wealth Tax Act, 1963 on observation of Audit Authorities---Validity---Assessing Officer as well as Inspecting Additional Commissioner were well aware of the existing provisions for purposes of imposition of penalty for the default while passing order under S.18(1)(a) of the Wealth Tax Act, 1963---Vested right of the assessee got secured in the light of original penalty orders had not been dislodged in any manner---Assumption of jurisdiction under S.35 of the Wealth Tax Act, 1963 was not sustainable on facts and law---Penalty imposed equal to tax was reasonable for default under S.14(1)(a) of the Wealth Tax Act, 1963 and the. same had also already stood paid by the assessee---Orders under Ss.18(1)(a) & 35 of the Wealth Tax Act, 1963 were vacated and original orders were restored by the Appellate Tribunal.

1992 SCMR 687 = 1992 PTD 570, 2002 PTD (Trib.) 2695 and 1074 ITR 517 rel.

Muhammad Ajmal Khan for Appellant.

Mrs. Sabiha Mujahid, D.R. for Respondent.

Date of hearing: 12th September, 2002.

2003 P T D (Trib.) 1249

[Income-tax Appellate Tribunal Pakistan]

Before Khawaja Farooq Saeed, Judicial Member sand Imtiaz Anjum, Accountant Member

I.T.A. No.7478/LB of 1996, decided on 6th November, 2002.

Finance Act (V of 1989)---

----S. 7--Levy of tax on capital value of certain assets--Appeal to Appellate Tribunal---Validity---Appellate Tribunal had no jurisdiction to hear the appeal filed under Capital Value Tax Act, as the law did not provide for the same---Language of Corporate Asset Tax Act provided under S.9 the right of appeal against the order of the Assessing Officer by specifying that the provisions of Ss. 23, 24, 25 & 35 of the Wealth Tax Act, 1963 shall so far as may be, apply to an appeal, revision or rectification of an order, under such section as they apply .to an appeal, revision or rectification under the said Act---No such saving had been provided in the Capital Value Tax Act which was a special law and needed strict compliance---Nothing could be imported beyond its intendments---Law was to be applied as it appeared from the plain reading of the language---Department having come to a wrong forum Registrar of the Tribunal was directed by the Appellate Tribunal to de-list the appeal from the record.

Muhammad Asif, D.R. for Appellant.

Date of hearing: 6th November, 2002.

2003 P T D (Trib.) 1361

[Income-tax Appellate Tribunal Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member and Muhammad Akhtar Nazar Mian, Accountant Member

I.T.As. Nos. 1360/KB of 1999-2000 and 2057/KB of 2002, decided on 11th January, 2003.

(a) Income Tax Ordinance (XXXI of 1979)---

----Ss.66-A, 13(1)(d) & 59-A---Stamp Act (II of 1899), S.32---Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order--Return was accepted under S.59-A of the Income Tax Ordinance, 1979 after verification that the stamps of the value fixed on the registered sale-deed of property acquired was properly registered by the District Registrar-Inspecting Additional Commissioner cancelled such order on the ground that Assessing Officer had accepted the declared value of property notwithstanding that it was ridiculously low when compared with the valuation which was required to be made on the basis of Collector's rates and directed for taking appropriate measures towards retrieving loss of Revenue through de novo proceedings ---Validity--­Order passed by the Assessing Officer under S.59-A of the Income Tax Ordinance, 1979 was patently erroneous and prejudicial to the interest of Revenue on the basis of examination of whatever was available on record---Letter issued by the Assessing Officer showed the intention for proceeding under normal law and copy of conveyance deed whereunder the declared value of the property appeared ridiculously low from the valuation if made at the collector's rate---Order of the Inspecting Additional Commissioner was fair to get the opinion or to consider that the prejudice had been caused to Revenue and Inspecting Additional Commissioner was right to consider that the order was erroneous as well as prejudicial to the interest of Revenue---Order by the Inspecting Additional Commissioner under S.66-A of the Income Tax Ordinance, 1979 was maintained by the Appellate Tribunal.

(b) Income Tax Ordinance (XXXI of 1979)---

----S. 59-A---Assessment on the basis of return---Assessment after production of evidence regarding value of property ---Validity--­Section 59-A of the Income Tax Ordinance, 1979 specifically requires that the return can be accepted by the Assessing Officer under this provision of law, when the Assessing Officer was satisfied without requiring the production of evidence that a return furnished under S.55 of the Income Tax Ordinance, 1979 was correct and complete---Once some evidence was required to be produced, the said return could not legally be accepted under S.9-A of the Income Tax Ordinance, 1979 and under the law the said assessment was required to be completed under the provisions of law other than those contained in S.59-A of the Income Tax Ordinance, 1979---Order passed by the Assessing Officer under S.59-A of the Income Tax Ordinance, 1979 was patently erroneous in law in circumstances.

(c) Words and phrases---

----"Consider"---Meaning---Word "consider" refers to hold an opinion which depends on something which prima facie looks to be probably true and does not require/include any incontrovertible evidence.

Chamber's Dictionary ref.

(d) Income-tax---

----Property acquired by assessee---Value, determination of---Principle.

(e) Income Tax Ordinance (XXXI of 1979)---

----Ss 13(1)(d) & 58---Finance Act (IV of 1999)---Addition---Wealth statement--Insertion of the words "or return of wealth" in S.13(1)(d) of the Income Tax Ordinance, 1979 was made by Finance Act, 1999 and for the assessment year 1998-99 the filing of wealth tax return did not absolve the Assessing Officer of his responsibility of obtaining a wealth statement under S.58 of the Income Tax Ordinance, 1979 for proceedings under S. 13(1)(d) of the income Tax Ordinance, 1979.

(f) Income Tax Ordinance (XXXI of 1979)---

----Ss. 13(1)(d) & 58---Addition---Amount actually expended on acquiring property by the assessee exceeded the amount shown in the wealth statement---Addition---Procedure---For assessment year 1998-99 the prescribed procedure for action under S.13(1)(d) of the Income Tax Ordinance, 1979 was to obtain a wealth statement under S.58 of the Income Tax Ordinance, 1979, then to prove with evidence that the amount actually expended on acquiring property exceeded the amount in the wealth statement and only then the such addition under S.13(1)(d) could be made and that also after completing other legal prescribed formalities.

(g) Income Tax Ordinance (XXXI of 1979)---

----Ss. 13(1)(d) & 58---Addition---Addition was made without calling wealth statement by issuance of notice under S.58 of the Income Tax Ordinance, 1979---Validity---Procedural deficiency existed on the part of the Assessing Officer in considering the addition under S.13(1)(d) of the income Tax Ordinance, 1979---Order was set aside by the Appellate Tribunal, with the directions that de novo proceedings may be taken up by calling wealth statement under S.58 and addition under S.13(1)(d) of the Income Tax Ordinance, 1979 may be made if the circumstances so justify after bringing in evidence so as to give the finding that the amount expended in acquiring the immovable property exceeded the amount as shown in the wealth statement.

1993 SCMR 462; 1980 PTD 394; 1995 PTD 90; PLD 1974 Note 129 at p.189; 1993 PTD 1108 = 1993 SCMR 1108 and 1990 SCMR 34 ref.

Arshad Siraj for Appellant.

Inayatullah Kashani, D.R. for Respondent.

Date of hearing: 11th January, 2003.

2003 P T D (Trib.) 1383

[Income-tax Appellate Tribunal Pakistan]

Before Khawaja Farooq Saeed, Judicial Member and Imtiaz Anjum, Accountant Member

I. T. A. No. 1181/LB of 2002, decided on 31st October, 2002.

Income Tax Ordinance (XXXI of 1979)---

----Ss. 66-A, 59(1), 80-D & First Sched., Para IV, Cl.2(b)---C.B.R. Circular No.16 of 1999, dated 11-9-1999, Para 2(b)(iv)---Self-­assessment---Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order---Super tax---Registered firm of professional/medical practitioners---Non-payment of super tax--­Cancellation of assessment finalized under S.59(1) of the Income Tax Ordinance, 1979---Validity---Deletion of super tax by the First Appellate Authority was upheld holding that being a registered firm of professional/medical practitioners it fulfilled the condition of para. 2(B) of Part IV of the First Schedule to the Income Tax Ordinance, 1979--­Basis indicated by the revisional authority did not hold the field and, jurisdiction under S.66-A of the Income Tax Ordinance, 1979 was not lawfully assumed---Order passed by the Inspecting Additional Commissioner was vacated and original assessment order was restored by the Appellate Tribunal.

The Law Lexicon with Legal Maxims and Words and Phrases ref.

Sirajud Din Khalid for Appellant.

Mrs. Sabiha Mujahid, D.R. for Respondent.

Date of hearing: 26th September, 2002.

2003 P T D (Trib.) 1449

[Income-tax Appellate Tribunal Pakistan]

Before Inam Ellahi Sheikh, Chairman and Muhammad Ashfaque Baloch, Judicial Member

I.T.As. Nos. 1545/KB to 1548/KB of 1996-97, decided on 30th January, 2003.

(a) Income Tax Ordinance (XXXI of 1979)---

----S. 23(1)(vii)---Deductions---Interest on borrowed capital (financial charges)---Disallowance proportionately---Investment in tax free securities-Assessing Officer found that investment was made in Khas Deposit Certificates out of borrowed capital and disallowed the proportionate charge of interest attributable to such borrowed funds invested in exempt income while the assessee claimed that such investment was made from his own funds ---Validity---Assessee was entitled to deduction of interest paid in respect of capital borrowed for the purposes of business or profession ---Assessee may borrow funds for employment in his business even if he had invested all his own resources in any other shape---What was required to be seen was whether at the time of making investments, the assessee had made any borrowings which could be related to these investments on that particular time/day--­If at the time of making investment, the assessee had sufficient resources of his own to make investment, then any subsequent or prior borrowings could not be treated as borrowings for such investments---Such could be established from examination of the books of accounts pertaining to relevant date and period of time when investments were made---Question being that of fact, Appellate Tribunal set aside the issue for de novo consideration with the direction that assessee should be provided proper opportunity to substantiate his claim.

(b) Income-tax---

----Profit and Loss Account---Additions---Deletion of---Addition made out of various heads in different years on general observation that examination of evidence revealed that expenses were not fully verifiable were deleted as no instance had been pointed out.

Naveed Haider, A.C.A. for Appellant.

Jawed Iqbal Rana, D.R. for Respondent.

Date of hearing: 30th November, 2002.

2003 P T D (Trib.) 1464

[Income-tax Appellate Tribunal Pakistan]

Before Inam Ellahi Sheikh, Chairman and Muhammad Ashfaque Baloch, Judicial Member

I.T.As. Nos.585/KB and 586/KB of 2002, decided on 30th January, 2003.

(a) Income Tax Ordinance (XXXI of 1979)---

----Ss. 38(6) & 35---Limitation as to set off any carry forward of losses in the case of, firms, partners, etc. ---Unabsorbed depreciation would be available for set off against any income of the assessee in subsequent year under S.38(6) read with S.35 of the Income Tax Ordinance, 1979.

(b) Income Tax Ordinance (XXX1 of 1979)---

----Ss. 66-A, 38(6), 35 & 23(1)(v)---Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order---Rental income--­Unabsorbed depreciation---Brought forward losses---Set off--­Cancellation of assessment on the ground that Assessing Officer had erroneously set-off the income chargeable under head `other income' and house property against the brought forward losses ---Assessee contended that Assessing Officer had not set off the property income or the alleged income from other sources against the brought forward losses but that the set-off had been correctly made against the unabsorbed depreciation and produced a working of unabsorbed depreciation, brought forward from the subsequent years---Validity---Losses of the current year were to be set off against other income of the assessee before unabsorbed depreciation of earlier year which' would protect the unabsorbed depreciation from becoming part of losses under S.35 of the Income Tax Ordinance, 1979 which would lapse after a period of six years---Set-off of rental income against depreciation' of the earlier year was allowed--­Order of the Inspecting Additional Commissioner passed under S.66-A of the Income Tax Ordinance, 1979 was annulled and appeal of the assessee was accepted by the Appellate Tribunal.

1996 PTD (Trib.) 292 and (1964) 51 ITR 693 rel.

Amin Malik, A.C.A. for Appellant.

Ali Hasnain, D.R. for Respondent.

Date of hearing: 26th October, 2002.

2003 P T D (Trib.) 1503

[Income-tax Appellate Tribunal Pakistan]

Before Khawaja Farooq Saeed, Judicial Member and Imtiaz Anjum Accountant Member

I..T. As. Nos. 4466/LB and 4467/LB of 2002, decided on 18th January, 2003.

Income Tax Ordinance (XXXI of 1979)---

----Ss. 30 & 31---Income from other sources---Shop on lease ---Non ­acceptance of lease arrangement on the ground that the same was collusive arrangement between the family as the, same was not registered---Business of local sale and purchase was assessed in the hands of assessee---Validity---Presumption was that such arrangement was to avoid heavy taxation---Held, assessee could not be deprived of such, an arrangement through mere estimates or surmises---Something stronger, was required to counter such presumption as the allegation of mala fide could not be attributed just by the words of mouth--­Assessment should be made treating the assessee as a lease income holder under S.30 of the Income Tax Ordinance, 1979 against which he shall be entitled to allowable expenditure under S.31 of the Income Tax Ordinance, 1979---Appeal was accepted to the extent of leasehold arrangement and regarding claim of expenses, the same were set aside by the Appellate Tribunal.

Shahid Abbas for Appellant.

Muhammad Asif, D.R. for Respondent.

Date of hearing: 18th January, 2003.

2003 P T D (Trib.) 1506

[Income-tax Appellate Tribunal Pakistan]

Before Zafar Ali Thaheem, Judicial Member and Javed Tahir Butt, Accountant Member

I.T.As. Nos.4226/LB to 4229/ LB of 2000, 5177/LB and 5178/LB of 2001, decided on 1st October, 2002.

(a) Income-tax-----

----Proceedings----Legal issue---Issue being purely legal in nature can be raised at any stage of proceedings.

1999 SCMR 1072 rel.

(b) Income Tax Ordinance (XXXI of 1979)-----

----S. 62, proviso---Confrontation of defects in the books of accounts was not necessary for the assessment year commencing prior to 1-7-1993.

1996 PTD 263 rel.

(c) Income Tax Ordinance (XXXI of 1979)---

----Ss. 62, proviso & 132---Assessment or production of books of accounts, etc.---Addition was made without confronting the defects in the books of accounts---Validity---Additions made to the declared results were not maintainable as the mandatory provision of law for issuance of notice under S.62 of the Income Tax Ordinance, 1979 was not fulfilled and the same was deleted by the Appellate Tribunal.

(1999) 79 Tax 263; (1984) 50 Tax 44; (2002) 85 Tax 21; (1999) PCTLR 1098; I.T.A. No.927/LB of 1998; I.T.A. No.6300/LB of 1995; (1967)16 Tax 34 (H.C. Kar.) and PTD (Trib.) 424 rel.

(d) Income-tax-----

----Rejection of accounts---History---Assessing Officer was justified is discarding the declared trading results and estimating and applying G.P. rate of 25 % on the basis of facts as well as assessee's history of rejection of accounts ---G.P. rate applied as per history, was upheld by the Appellate Tribunal---A bit excessive estimated sales was reduced in view of the history.

I.T.A. No.7109/LB of 1996 and I.T.A. No.7956/LB of 1996 rel.

(e) Income Tax Ordinance (XXXI of 1979)-----

----S. 23---Deductions---Financial charges---Disallowance. under the head of financial charges would need proper verification in view of assessee's plea that the matter was in dispute with the Banking Authorities---Issue was set aside for de novo decision after providing an opportunity of being heard to the assessee and ascertaining the facts' of the case.

(f) Income Tax Ordinance (XXXI of 1979)---

----S. 25(c)---Amounts subsequently recovered in respect of deductions, etc.---Addition made under S.25(c) of the Income Tax Ordinance, 1979 having not been pressed before the First Appellate Authority, the same was not adjudicated upon by the Appellate Tribunal as same did not arise from the order of the First Appellate Authority.

Siraj-ud-Din Khalid for Appellant.

D.R. Younas Khalid, I.T.P.

Ahmed Kamal for Respondent.

Date of hearing: 19th September, 2002.

2003 P T D (Trib.) 1522

[Income-tax Appellate Tribunal Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member and S. M. Sibtain, Accountant Member

I.T.As. Nos.2738/KB and 2764/KB of 1993-94, decided on 31st January, 2001.

(a) Income Tax Ordinance (XXXI of 1979)-----

----S. 23---Deductions---Golden Hand Shake Scheme expenses ---Re ­employment of such employees---Disallowance of expenses ---Validity--­Assessing Officer had made a factual mistake while making a disallowance regarding eight employees---Only four employees had been re-employed, the disallowance if any should have to be restricted 'to the payment of only to such employees---Appellate Tribunal set aside the order with the, direction that the copy of Golden Hand Shake Scheme might be obtained and if the Scheme was available to all the employees then total claim may be allowed and in the case of Scheme not available to all the employees then the addition under, the head of Golden Hand Shake Scheme may be restricted to the payment made to the four employees on account of the Scheme.

(b) Income Tax Ordinance (XXXI of 1979)---

----S. 23 (1)(viii)(b)---Industrial Relations Ordinance (XXIII of 1969), Ss.30(4) & 54---Sindh Industrial Relations Rules, 1973, R.69---Bonus--­ Bonus paid up to 60.1 % of the profit, in compliance with the provisions of Industrial Relations Ordinance, 1969, was considered by Assessing Officer as unreasonable and he allowed the bonus up to 30% of the profits and disallowed half of the claim---Validity---Assessing Officer was not justified in disallowing the claim of bonus, both for the factory workers and office employees as it was paid in accordance with the terms of Settlement with Collective Bargaining Agent (CBA) under S.30(4) of the Industrial Relations Ordinance, 1969 read with R.69 of the Sindh Industrial Relations Rules, 1973, the payment being statutory obligation and the assessee in case of failure to pay was punishable with penalty and imprisonment under S.54 of the Industrial Relations Ordinance, 1969 meaning thereby that the failure to make payment would have resulted in the closure of business due to strike by the labour---Regarding co-relation of bonus with profit, the three conditions as laid down in S.23(1)(viii)(b) of the Income Tax Ordinance, 1979 were cumulative and were to be considered together---"Profit" referred in law was the profit before charge of depreciation and payment of bonus--­Payment of bonus as contractual liability was admissible expenditure without reference to the profits, as the assessee had no option in respect of payment of such bonus---Such was an expenditure wholly and solely incurred for the purposes of business---Bonus paid was -in accordance with the past practice of the company and had been allowed in full in previous assessment years---Departmental appeal was dismissed by the Appellate Tribunal.

1973 PTD 2381 rel.

(c) Income Tax Ordinance (XXXI of 1979)-----

----S. 23(1)(iii)(b)---Word "and"---In condition `b' word "and" had been used which clearly indicates the intention of the Legislature for all the three conditions being cumulative.

Zaki Ahmad, D.R. for Appellant (in I.T.A. No.2738/KB of 1993-94).

Jan-e-Alam, C.A. and Javed Zakaria for Respondent (in I.T.A. No.2738/KB of 1993-94).

Jan-e-Alam, C.A. and Javed Zakaria for Appellant (in I.T.A. No.2764/KB of 1993-94).

Zaki. Ahmad, D.R. for Respondent (in I.T.A. No.2764/KB of 1993-94).

Date of hearing: 1st December, 2000.

2003 P T D (Trib.) 1536

[Income-tax Appellate Tribunal Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member

I.T.As. Nos. 212/KB and 213/KB of 1999-2000, decided on 26th January, 2001.

(a) Income Tax Ordinance (XXXI of 1979)-----

----Second Sched., Cl. (86)---Exemption---Educational institution---Grant of exemption---Principle---Criteria for granting exemption to the educational institution is that the same must be established solely for the purpose of educational purpose and not for any other purpose--­Predominant object of the educational society has to be looked into before granting exemption---If predominant object is educational and not earning profit then exemption is granted to the educational institutions--­No other condition is provided in Cl. (86) of the Second Schedule of the Income Tax Ordinance, 1979.

(b) Income Tax Ordinance (XXXI of 1979)-----

----S. 23---Second Sched., Cl. (86)---Deductions---Exemption--Educational institution---Grant of exemption---Expenses distributed to staff/teaching staff---Permissibility--- Not only salaries but also petrol, lubricant for vehicles entertainment, repair and maintenance of vehicles can be distributed to the staff and other teaching staff who were engaged in imparting education and were functioning wholly and exclusively for society's work.

I.T.As. Nos. 177 to 184/KB of 1990-91 rel.

(c) Income Tax Ordinance (XXXI of 1979)---

----S. 66-A---Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order---Examination of accounts---Judicious conclusion by the Assessing Officer could not be termed as "erroneous"---Where the Assessing Officer had applied his mind while making the assessment or granting the exemption after examining the accounts and arrived at a judicious conclusion, such a conclusion could not be termed as erroneous because the Assessing Officer had exercised the quasi-judicial powers vested in him.

(d) Income Tax Ordinance (XXXI of 1979)---

----S. 66-A---Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order---Quality of assessment---Mere poor quality of an assessment would not provide justification for invocation of jurisdiction under S.66-A of the Income Tax Ordinance, 1979.

(e) Income Tax Ordinance (XXXI of 1979)---

----S. 66-A---Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order---Condition for assumption of such jurisdiction---Until and unless two conditions namely that the assessment order is erroneous and at the same time prejudicial to the interest of Revenue are not established, the assessment order cannot be cancelled.

(f) Income Tax Ordinance (XXXI of 1979)---

----S. 66-A, 62 & Second Sched., Cl.(86)---Societies Registration Act (XXI of 1860)---C.B.R. Circular No.2 of 1996, dated 18-2-1996--­Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order---Exemption---Expenses paid in respect of petrol arid lubricants to employees of the Society for Society's work--­Cancellation of assessment on the ground that members of Society had been benefited with the supply of petrol and lubricants at the cost of Society as no vehicle had .been shown in the Depreciation Schedule--.­Such expenses were termed in contravention and in violation of Cl.(86) of the Second Schedule of the Income Tax Ordinance, 1979---Validity--­Amount claimed on account of lubricants, petrol, salaries, entertainments, miscellaneous expenses, repair and maintenance, telephone etc. were incurred on the functioning of Society---No concrete evidence had been brought on record that any violation of Cl. (86) of the Income Tax Ordinance, 1979 was committed by the assessee---Assessing Officer passed conscious order under S.62 of the Income Tax Ordinance, 1979 granting exemption after examining audited books of accounts, ledger, cash books and details of various expenses and Inspecting Additional Commissioner had not established that the assessment orders were erroneous as well as prejudicial to the interest of revenue---No deviation from law or mistake of law was committed by the assessee--­Assessment could not be set aside under the garb of S.66-A of Income Tax Ordinance, 1979---Appellate Tribunal vacated the order of Inspecting Additional Commissioner passed under S.66-A of the Income Tax Ordinance, 1979 and restored that of the Assessing Officer.

1997 PTD (Trib.) 902; 1997 PTD (Trib.) 164; (1988) 171 ITR 698; I.T.As. Nos. 702 and 703/KB of 1996-97; I.T.As. Nos.431/KB and 432/KB of 1995/96; 1984 PTD 137; (1979) 118 ITR 447; 1990 PTD (Trib.) 524; 1983 PTD 201; 1991 PTD 321; 1969 PTD 144; (1993) 203 ITR 108; 1987 PTD 567; Black's Law Dictionary, p.486; Gyprus Juris Secundum, Vol. 30-A, p.867; 1999 PTD 1358; PTCL 1996 Statute 1350; Faisal Plaza v. C.B.R. 1995 PTD 850 and 1975 PTD (Trib.) 1 ref.

I.T.As. Nos. 177 to 184/KB of 1990-91; 1994 PTD (Trib.) 1294; 1996 PTD (Trib.) 1069; 1984 PTD 137 and 1999 PTD (Trib.) 3229 rel.

M. Jawed Zakaria for Appellant.

Vishno Raja Qavi, D.R. for Respondent.

Date of hearing: 18th November, 2000.

2003 P T D (Trib.) 1608

[Income-tax Appellate Tribunal Pakistan]

Before Inam Ellahi Sheikh, Chairman and Muhammad Jahandar, Judicial Member

W.T.As. Nos. 87(IB) to 89(IB) of 2001-2002, decided on 30th January, 2003.

Wealth Tax Rules, 1963-----

----R. 8(2)(c)(ii)---Wealth Tax Act (XV of 1963), Ss. 16(3) & 17B-- Companies Ordinance (XLVII of 1984), S.235---Break up value of shares---Surplus of re-valuation of fixed assets-Inclusion of ---Validity--­Surplus arising out of re-valuation of fixed assets could not be included in the working of the break-up of share valuation---Order passed by the Inspecting Additional Commissioner under S. 17B of the Wealth Tax Act, 1963 was cancelled by the Appellate Tribunal and restored that of the Assessing Officer.

W.T.As. Nos. 211 and 1356/LB of 1999 rel.

(1965) 58 ITR 767 (SC) not relevant.

Abdul Qadeer, F.C.A. for Appellant.

Naushad Ali Khan, D.R. for Respondent.

Date of hearing: 15th January, 2003.

2003 P T D (Trib.) 1629

[Income-tax Appellate Tribunal Pakistan]

Before Javaid Iqbal, Judicial Member and Muhammad Mehboob Alam, Accountant Member

I.T.As. Nos. 1102/KB, 800/KB, 1101/KB and 1100/KB of 2000-2001, decided on 23rd March, 2002.

(a) Income Tax Ordinance (XXXI of 1979)-----

----Ss. 66-A) 24(1) & 16(2)(b)(iv)---Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order---Addition made by the Inspecting Additional Commissioner under S.66-A of the Income Tax Ordinance, 1979 on account of concessional and reduced interest on loan granted by assessee/employer to its employee for purpose of house building and transport was confirmed by the Appellate Tribunal.

I.T.A. No. 652/KB(H.Q) of 1999-2000 rel.

(b) Income Tax Ordinance (XXXI of 1979)---

----Ss. 66-A & 5(1)(cc)---Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order---Jurisdiction---Assumption of jurisdiction by the Inspecting Additional Commissioner under S.66-A of the Income Tax Ordinance, 1979, who made assessment as Chairman of the Panel, was not proper and order passed was cancelled on the point of jurisdiction by the Appellate Tribunal.

2001 PTD 1467; I.T.A. No.-165/HQ of 1999-2000 and I.T.A. No. 1259/KB of 1991-92 ref.

Javed Khurram for Appellant.

Muhammad Ali Indhar, D.R. for. Respondent..

Date of hearing: 23rd March, 2002.

2003 P T D (Trib.) 1636

[Income-tax Appellate Tribunal Pakistan]

Before Javaid Iqbal, Judicial Member and Muhammad Mehboob Alam, Accountant Member

I.T.A. No.2350/KB of 2001, decided on 13th May 2002.

Income Tax Ordinance (XXXI of 1979)---

----S. 156---Rectification of mistake---Rectification sought by assessee from Assessing Officer on, the issues in respect of which the First Appellate Authority had already made his adjudication was not proper--­If there was any mistake of fact or law calling for rectification in the order of First Appellate Authority, the proper. course was to seek rectification from that authority---Original application filed by assessee being incompetent, appeal was also incompetent and the same was dismissed by the Appellate Tribunal.

Ellahi Cotton Mill's case (1983) 48 (Tax) 56; 1992 PTD 1681 and M.A. (Rect.) Nos. 450 to 454/KB, dated 30-3-2001 ref.

1992 PTD 1681 rel.

Muhammad Aleem for Appellant.

Muhammad Ali Indhar, D.R. for Respondent.

Date of hearing; 4th May, 2002.

2003 P T D (Trib.) 1643

[Income-tax Appellate Tribunal Pakistan]

Before Javaid Iqbal, Judicial Member and Muhammad Mehboob Alam, Accountant Member

I.T.A. No. 2160/KB of 2001, decided on 9th April, 2002.

(a) Income Tax Ordinance (XXXI of 1979)---

----Second Sched., Part I, Cl. (176)---Exemption---Power generation business---Interest income on advances made to sister concern--­Taxability--Interest on advanced made to sister concerns were not related to the business of Power generation---Interest .earned on such advances was properly brought to tax by the Assessing Officer and rightly confirmed by the First Appellate Authority.

1999 PTD (Trib.) 708 ref.

(b) Income Tax Ordinance (XXXI of 1979)---

----Second Sched., Part 1, Cl. (176)---Exemption---Power generation business---Interest income on advances made by way of guarantee through Bank to ensure supply of gas by Gas Company to Power Generation Project---Taxation---Validity---Exemption was allowed to the interest earned from account, opened with the Bank for facility of providing guarantee to gas company---Interest was part of income of Power Generation Project and addition made by Assessing Office on this count was deleted by the Appellate Tribunal.

I.T.A. No. 136/KB of 1998-99 rel.

(c) Income Tax Ordinance (XXXI of 1979)-----

----S. 87---Additional tax for failure to pay advance tax---Levy of additional tax under S.87 of the Income Tax Ordinance, 1979 for non­payment of advance was proper.

Moin Khan for Appellant.

Basharat Ahmed Qureshi, D.R. for Respondent.

Date of hearing: 9th April, 2002.

2003 P T D (Trib.) 1652

[Income-tax Appellate Tribunal Pakistan]

Before Muhammad Jahandar, Judicial Member and Mahmood Ahmad Malik, Accountant Member

W.T.A.-No.696/IB of 2000-2001, decided on 25th November, 2002.

Wealth Tax Act (XV of 1963)----

----First Sched., Part I, Para. B---Pakistan Citizenship Act (II of 1951), S.14(1) & (3)---S.R.O. 581(9)/2002, dated 29-8-2002---Rates of wealth tax ---Rebate---Assessee American citizen as well as citizen of Pakistan---First Appellate Authority allowed 50% rebate on wealth tax on the ground that assessee was not citizen of Pakistan at the time of making assessment---Validity---When a Pakistani citizen became an American citizen, he did not cease to be a citizen of Pakistan and such a person could hold a dual nationality---Section 14(3) of the Pakistan Citizenship Act, 1951 provided that the provisions of S.14(1) of the Pakistan Citizenship Act, 1951 shall not apply and shall never be deemed to have been applied at any stage to a person who was having at any time the citizenship of Pakistan ---Assessee who was holding the status of citizenship of U.S.A. did not cease to be a Pakistani citizen and therefore, no talc rebate was available as the same was available to an assessee who "was not resident of Pakistan"---First Appellate Authority was not justified to allow the rebate---Order of the First Appellate Authority was vacated and that of the Assessing Officer restored by the Appellate Tribunal.

Naushad Ali Khan, D.R. for Appellant.

Jamil Ahmad, A.C.A. for Respondent.

Date of hearing: 13th November, 2002.

2003 P T D (Trib.) 1659

[Income-tax Appellate Tribunal Pakistan]

Before Khawaja Farooq Saeed, Judicial Member and Imtiaz Anjum, Accountant Member

R.A. No.708/LB of 2002, decided on 7th January, 2003.

(a) Income Tax Ordinance (XXXI of 1970)---

----S. 12(9A)---Income deemed to accrue or .arise in Pakistan---If the Department could add capital expenditure claim in Profit and Loss Account for determining the net income conversely it could not be allowed to add the previous years profit for determining. the profit of the assessee for the year.

(b) Income-tax-----

----Income---Profit---Meanings---Income has different connotation but all profits are covered within the definition of income---Income has a wider connotation and profit is a part of it, however, a comprehensive and direct definition for the profit is not available.

(c) Income Tax Ordinance (XXXI of 1979)-----

----S. 12(9A) & First Sched, Part IV, Cis. (59) . & (136)---Income deemed to accrue or arise in Pakistan---Application for reference to High Court--Addition was deleted by the Appellate Tribunal. by modifying amount of "after, tax profit" i,e. after deducting previous year profits from such profit, while the assessee himself declared its "after tax profit" in its printed accounts by including previous year profit--­Validity ---Assessee had not added the previous year profit in its profit for the purposes of S.12(9A) of the Income Tax Ordinance, 1979 which was for determination of the funds available with the Company/assessee to know the liquidatory position---Same had got nothing to do with the requirement of S.12(9A) read with Cl: (59) of Part IV of the First Schedule of the Income Tax Ordinance, 1979---Reference application . was dismissed by the Appellate Tribunal.

Biria Brothers (Pvt.) Ltd v. CIT (1966) 13 Tax 76 and Shiri, Vastava and Sons (P.) Ltd. v. CIT (1963) 47 ITR 49 rel.

(d) Income Tax Ordinance (XXXI of 1979)---

----S. 12(9A)---Interpretation---Provision of S.12(9A) of the Income Tax Ordinance, 1979 is a deemed provision of law which had to be applied strictly---Benefit of doubt, by all means goes to the assessee---Section 12(9A), Income Tax Ordinance, 1979 treats an amount to be taxable income which otherwise under normal charging provision may not be an income of the assessee.

(e) Interpretation of statutes-----

---- Liberal interpretation is the essence of justice.

Muhammad Asif, D.R. for Appellant.

Muhammad Sarwar Khawaja for Respondent.

Date of hearing: 7th January, 2003.

2003 P T D (Trib.) 1675

[Income-tax Appellate Tribunal Pakistan]

Before Mahmood Ahmad Malik (Accountant Member) and Syed Masood-ul-Hassan Shah (Judicial Member)

I.T.A. No.49/IB of 2001-2002, decided on 25th January, 2003.

(a) Income Tax Ordinance (XXXI of 1979)-----

----Ss. 50(7D) & 2(16)(b)(a)---Deduction of tax at source---" Company"-­Definition---Words 'instrument of any kind issued' have been used within the context of such instrument issued by any banking company, arty company referred to in sub-clauses (a) & (b) of cl. (16) of S.2 of the Income Tax Ordinance, 1979 'relating to the definition of a "company".

(b) Income Tax Ordinance (XXXI of 1979)-----

----S. 50(7D)---Deduction of tax at source---Instrument---Resolution of Board of Directors---Relationship between the holding company and the subsidiary company or two sister companies for making payment of borrowed sums or making payment of interest on the borrowed sums would stand covered by the provisions of S.50(7D) of the Income Tax Ordinance, 1979 which arrangement was created by a resolution of the Board of Directors and such resolution fell within, the scope of instrument stated in the provisions of S.50(7D) of the Income Tax Ordinance, 1979.

Black's Law Dictionary and Law Lexicon ref.

(c) Income Tax Ordinance (XXXI of 1979)---

----Ss. 24(c) & 50(7D)---Deductions not admissible---Financial expenses/charges claimed, which were paid by the assessee to its holding company on the balance due to it on account of funds borrowed after adjustment -of sales, was disallowed---Addition was deleted by the First Appellate Authority---Appeal by Department ---Assessee contended that the recipient had discharged its liability and the addition under S.24(c) of the Income Tax Ordinance, 1979 could not be made ---Validity--­Matter was to be re-thrashed and re-probed for a decision afresh---Issue was set aside with the direction that the Assessing Officer will consider the contentions of the assessee after affording him proper opportunity and to verify the facts as alleged before the Assessing Officer from the record of assessment of the holding company and also to verify the evidence already produced by the assessee or which might be produced by the assessee from the assessment record of the holding company which could be summoned which NTN was available on record on the certificate issued from the holding company---Order was modified to the extent of issue of deletion of addition under S.24(c) of the Income Tax Ordinance, 1979 and the issue was set aside for the de novo consideration by the Appellate Tribunal.

79 Tax 267 (Trib.) rel.

I.T.A. No.660/IB of 1997-98 ref.

Abdul Jaleel, D.R. for Appellant.

Abdul Basit, FCA for Respondent.

Date of hearing:, 9th, January, 2003.

2003 P T D (Trib.) 1686

[Income-tax Appellate Tribunal Pakistan]

Before S. Hasan Imam, Judicial Member and Muhammad Akhtar Nazar Mian, Accountant Member

I.T.A. No.2019/KB of 1995-96, decided on 9th January, 2003.

Income Tax Ordinance (XXXI of 1979)---

----Ss. 134(3) & 132(4)---Income Tax Rules, 1982, R.11---Appeal to Appellate Tribunal---Appeal on the basis of photostat copy of the impugned order attested by the Oath Commissioner and communicated by the assessee instead of Appellate Authority---Validity---No appeal shall lie unless the order is communicated by the Appellate Additional Commissioner---Supply of copy by the assessee to the Department duly attested by the Oath Commissioner would not be sufficient for the purposes of filing an appeal and 60 days' time limit shall begin from the date of communication of order by the Appellate Additional Commissioner---Admittedly original/certified true copy was not officially supplied to the Department as required under the law---Appeal, in view of S.132(4) read with 5.134(3) of the Income Tax Ordinance, 1979 and R.11 of the Income Tax Appellate Tribunals Rules, 1982, would neither be maintainable nor entertainable on the basis of photostat copy supplied by the assessee---Appeal of the Department was dismissed by the Appellate Tribunal.

Zaki Ahmed, D.R. for Appellant.

Mushtaq Ahmed, F.C.A. for Respondent.

Date of hearing: 1st November, 2002.

2003 P T D. (Trib.) 1689

[Income-tax Appellate Tribunal Pakistan]

Before Syed Masood-ul-Hassan Shah, Judicial Member and Syed Aqeel Zafar-ul-Hasan, Accountant Member

I.T.As. Nos.331/IB and 406/IB of 2001-2002, decided on 8th March 2003.

(a) Income Tax Ordinance (XXXI of 1979)---

----Ss. 24(ff), 24(c) & 50(7B)---C.B.R. Circular No. 6 of 1990, dated 15-7-1990---Deductions not admissible---Addition was made by disallowing the claim in respect of rent of premises for the reason that the amount in question was not paid through crossed cheque and was not allowable under S.24(ff) of the Income Tax Ordinance, 1979---Assessee contended that payment of rent of house property was covered both, by Ss.24(c) & 24(ff) of the Income Tax Ordinance, 1979---Since S.24(c) of the Income Tax Ordinance, 1979 did not require payment to be made through crossed cheque, it was more beneficial to assessee and should have been applied to it and the landlady had already paid tax on the rent in question---Validity---Section 24(c) of the Income Tax Ordinance, 1979 was applicable only to such rent of house property which was hired by a Government a company etc. who, in turn, was liable as a payer, to deduct advance tax at the time of making payment of rent---Since assessee did not fall in any category of tax withholding agent specified in S.50 (7B), the provisions of S.24(c) of the Income Tax Ordinance, 1979 were not attracted---Contention that assessee was covered simultaneously by the provisions of Ss.24(c) & 24(ff) of the Income Tax Ordinance, 1979 was incorrect---Beneficial interpretation of law was not relevant--­Treatment accorded by the Assessing Officer was correct in law---Order of First Appellate Authority upholding the add-back was confirmed by the Appellate Tribunal ---Assessee must pay the rent through crossed cheque as per law contained in S.24(ff) of the Income Tax Ordinance, 1979 and such rent/payment had no nexus with the amount of tax payable by either of the two parties.

1998 PTD 1908; 1998 PTD 1558 and NTR 1992 HC 46 ref.

I.T.As. Nos. 858 to 868/IB of 1996-97 distinguished.

(b) Income-tax----

----Gross profit rate---Rejection of gross profit rate without assessing any reason---Validity---Assessing Officer had accepted the declared sales on the basis of sales certificate issued by the principals of the assessee while no observation at all was recorded about the verifiability or otherwise, of the return version of the assessee---No finding had been recorded either to reject the declared 'version nor any reason given therefor---In absence of specific reasons, the return trading results could not be so substituted with estimate of his own by the Assessing Officer---First Appellate Authority rightly directed that declared GP rate should be accepted Ana the same was upheld by the Appellate Tribunal.

Abdul Jaleel, D.R. for Appellant.

G. Abas Chatha for Respondent.

Date of hearing: 8th March; 2003.

2003 P T D (Trib.) 1698

[Income-tax Appellate Tribunal Pakistan]

Before Inam Ellahi Sheikh, Chairman and Muhammad Jahandar, Judicial Member

I.T.As. Nos.301/IB, 302/IB, 309/IB and 310/IB of 2001-2002, decided on 12th March, 2003.

(a) Income Tax Ordinance (XXXI of 1979)-----

----Ss.108 (b) & 139---Penalty for failure to furnish return of total income and certain statements---Penalty imposed for violation of the provision of 5.139 of the Income Tax Ordinance, 1979 i.e. non-filing of statements in respect of deduction of tax from salaries was deleted by the First Appellate Authority on the ground that jurisdiction in such matters rested with salary circle, where statements were duly filed ---Validity--­Contention that penalty was rightly imposed after providing sufficient opportunity to assessee did not attack the reason given by the First Appellate Authority for deleting the penalty levied for violation of S.139 of the Income Tax Ordinance, 1979---Department had not disputed that such statements had been filed with the salary circle---No interference was made by the Appellate Tribunal.

(b) Income Tax Ordinance (XXXI of 1979)---

----Ss. 108(b), 50, 52 & 139---Penalty for failure to furnish return of total income and certain statements---Provision in law for penalties can only be meant as deterrent against tax evasion and to enforce compliance and not for Revenue generation---Principles.

(c) Income Tax Ordinance (XXXI of 1979)---

-- -S. 108(b), 141 & 142---Penalty for failure to furnish. return of total income and certain statements---Penalties were levied by the Assessing Officer by imposing initial penalty of Rs.2,000 in each of the month under S.139 as well as under S.142 of the Income Tax Ordinance, 1979---Validity---Provision for the levy of penalty of "an amount equal to Rs.2,000 and a further sum equal to Rs.200 for every day during which the default continues" required careful examination---Action for levy of initial penalty and further penalties by a single order was not proper---Initial penalty should have been levied after completing the other formalities of law and if assessee still did not file the required statement, then Assessing Officer should have levied the additional penalties per day after providing further opportunity to the assessee--­Initial penalty of Rs.2,000 was fixed for default under Ss.141 & 142 of the Income Tax Ordinance, 1979---Penalties were ordered to be reduced accordingly by the Appellate Tribunal.

Syed Tariq Jamil, FCA for Appellant.

Naushad Ali Khan, DR for Respondent.

Date of hearing: 12th March, 2003.

2003 P T D (Trib.) 1708

[Income-tax Appellate Tribunal Pakistan]

Before Masood ul Hassan Shah, Judicial Member and Mahmood Ahmad Malik, Accountant Member

M.A. (R) No.23/IB of 2000-2001 and I.T.A. No.736/IB of 1999-2000, decided on 28th January, 2003.

(a) Income Tax Ordinance (XXXI of 1979)---

---S. 156(1) & (3)---Rectification of mistake---Deeming effect---Terms any Income-tax Authority" or "Appellate Tribunal "---Bifurcation exists to the provisions of S.156(1) of the Income Tax Ordinance, 1979 with regard to the terms "any Income-tax Authority" or the "Appellate Tribunal" which had been disjoined from each other by using the word "or" in between them---In subsection (3) of S.156 of the Income Tax Ordinance, 1979, only the words "any Income-tax Authority" have been used but there was no mention of "Appellate Tribunal"---Such appeared to be a cautious omission/intentional omission by the Legislature of not including the words "the Appellate Tribunal" alongwith the words "Income-tax Authority" in the provisions of subsection (3) of S.156 of the Income Tax Ordinance, 109-whereas specifically the said words (the Appellate Tribunal) were mentioned in subsection (1) of S.156 of the Income Tax Ordinance, 1979---Various classes of "Income-tax Authorities" had been enumerated in S.3 under Chap. II of the Income Tax Ordinance, 1979, the Appellate Tribunal had nowhere been included in the categories of "Income-tax Authority".

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

-----S. 221(3)---Rectification of mistake---Application of rectification of mistake to Appellate Tribunal---Deeming effect---Provision of S.221 of the Income Tax Ordinance, 2001 dealing with the rectification of mistake wherein the words "the Appellate Tribunal" have been specifically mentioned alongwith the words "the Commissioner, Commissioner (Appeals)" in subsection (3) of S.221 of the Income Tax Ordinance, 2001---Effect---Income Tax Ordinance, 2001 has made the Appellate Tribunal liable to give deeming effect to the rectification application if no order as passed within the time period as fixed therein.

(c) Income Tax Ordinance (XXXI of 1979)----

----S.156(3)---Rectification of mistake---Rectification application to Appellate Tribunal---Deeming effect---Neither could be inferred nor suggested that the terms "Income-tax Authority" or "such Authority" as used in subsection (3) of S.156 of the Income Tax Ordinance, 1979 could at all be understood to include "the Appellate Tribunal" as well for giving deeming effect to the mistake sought to be rectified through the Appellate Tribunal.

(d) Interpretation of statutes---

---- Deeming provision to be strictly construed. and its scope should not be extended beyond what was intended and required by the Legislature.

(e) Income Tax Ordinance (XXXI of 1979)---

--S.156(3)---Rectification of mistake---Rectification application to Appellate Tribunal---Deeming effect---Request of the assessee for giving deeming effect to the main application for rectification in view of provisions of subsection (3) of S. 156 of the Income Tax Ordinance, 1979 could not be acceded to and the same was refused by the Appellate Tribunal.

PLD 1988 Lah 49; PLD 1984 Kar. 345; PLD 1970 SC 29; Interpretation of Statutes by Shaukat Mahmood; 1991 PTD 258 and (1958) 33 ITR 106 ref.

(f) Income Tax Ordinance (XXXI of 1979)---

---S. 134---Appeal to the Appellate Tribunal---Remand of case--­Scope---Non-speaking order---Issues left undecided---Contention that Appellate Tribunal had no power to remand the case to the Appellate Authority, was not tenable for the reason that an appellate forum provided under any law in the absence of specific provision is having an inherent power to remand the case to the lower forum of which the order has been appealed against if the adjudication by that lower forum is improper or where the impugned order is a non-speaking order and not fulfilling the requirements of a judicial order or where the matters or issues raised have been left undetermined.

(g) Income Tax Ordinance (XXXI of 1979)---

---Ss.135(5) & 156---C.B.R. Circular No.5 of 1997, dated 12-7-1997---Simplied Self-Assessment Scheme--Disposal of appeal by the Appellate Tribunal---Rectification of mistakes---Mistake of law---Remand of assessment---Annulment of assessment---Mistakes of law apparent from record, which were obvious and glaring and going to the roots of the case; were liable to be rectified by way of annulling. the assessment instead of remanding the case to lower forum---Validity---Provision of S.135(5) of the Income Tax Ordinance, 1979 empowered the Appellate Tribunal to cancel or vary the order and to issue such consequential directions as the case may require---No restriction or prohibition existed for the Appellate Tribunal for passing an order of remand or remitting the case back to the First Appellate Authority alongwith consequential directions for rehearing the appeal for deciding the legal and factual issues raised before such authority on merits by giving findings on each issue by a speaking order with reasons of each finding to that effect--­Such order could not be termed as having any mistakes of law apparent from record liable to be rectified---No mistake of law attracting rectification by the Appellate Tribunal as envisaged in provisions of S.156 of the Income Tax Ordinance, 1979 was found---Normally, it was desirable that the forum seized of the matter, in-the hierarchy of the­ forums provided under law for the redressal of the grievances of the parties through appeal or revision etc., should properly adjudicate the issues raised before such forum by giving findings on each such issue with reasons to that effect---Application for rectification was rejected by the Appellate Tribunal in the circumstances.

Understanding the Statutes by S.M. Zafar ref.

Mir Ahmad-Ali for Applicant.

Abdul Jaleel, DR for Respondent.

Date of hearingr25th January, 2003.

2003 P T D (Trib.) 1730

[Income-tax Appellate Tribunal Pakistan]

Before Khawaja Farooq Saeed, Judicial Member and Imtiaz Anjum, Accountant Member

I.T.A. No.4523/LB of 2001, decided on 27th September, 2002.

Income Tax Ordinance (XXXI of 1979)-----

----Ss. 13(1)(aa), 59A, 65, 80CC & 50(5A)---Workers' Welfare Fund Ordinance (XXXVI of 1971), S.4 (2) ---Addition---Excess income over and above the presumptive income---Order was passed under Ss.62/65/135 of. the Income Tax Ordinance, 1979---Addition was made by ignoring the direction of Appellate Tribunal; accounts and without identifying the source of alleged unusual profits other than exports related transaction by virtue of which assessee was not entitled to avail the protection provided under S.80CC(3) of the Income Tax Ordinance, 1979 and also charged workers welfare fund---First Appellate Authority cancelled such order while order under S.4(2) of the Workers' Welfare Fund Ordinance, 1971 was vacated---Validity---On setting aside of orders by the Appellate Tribunal in the second round, it was clearly mentioned that on the basis of facts and provisions of law both the parties were at par and it was in the interest of justice to have proper and final appraisal and Department implemented the direction of setting aside in violation of its spirit---Provision of S.65 of the Income Tax Ordinance, 1979 invoked as. well as addition under S.13(1)(aa) of the Income Tax Ordinance, 1979 read with S.8CC(4) of the Ordinance, had been made in utter disregard of not only the provisions of law but facts of the case inasmuch as the income over and above the imputable income had been treated as unexplained investment without establishing that income other than exports was earned by the assessee---Whatever had been done by the Revenue was nearly harassment and maladministrarion of taxation---Order of the First Appellate Authority was lawful---Appeal of the Department was rejected by the Appellate Tribunal being without merit.

1997 PTD 1555 rel.

1995 PTD 856 ref.

Mrs. Sabiha Mujahid, D.R. for Appellant.

Sarfraz Mahmood, F.C.A. for Respondent.

Date of hearing: 22nd August, 2002.

2003 P T D (Trib.) 1760

[Income-tax Appellate Tribunal Pakistan]

Before Rasheed Ahmad Sheikh, Judicial Member and Amjad Ali Rangha, Accountant Member

M. A. No. 421/LB of 2002, decided on 30th August, 2002.

Income Tax Ordinance (XXXI of 1979)---

----Ss. 156 & 13(1)(a)---Review---Rectification of mistakes---Request to recall order---Nothing wrong with the order passed 'by the Appellate Tribunal, where ground relating to addition made under S.13(1)(a) of the Income Tax Ordinance, 1979 on account of unexplained cash credits was not adjudicated by the Appellate Tribunal on the basis of non ­argument/agitation.

Abdul Hameed Chaudhary, F.C.A. for Applicant.

Javed-ur-Rehman, D. R. for Respondent.

Date of hearing: 28th August, 2002.

2003 P T D (Trib.) 1874

[Income-tax Appellate Tribunal Pakistan]

Before Syed Kabirul Hasan, Judicial Member and Agha Kafeel Barik, Accountant Member

M.As. (Cond.) Nos.162/KB, 163/KB, R.A. No.196/KB and R.A. No.197/KB of 2003 in Ref. I.T.As. Nos. 298 and 585/KB of 1997-98, decided on 8th May, 2003.

(a) Income Tax Ordinance (XXXI of 1979)---

----S. 136(3)---Reference to High Court---Condonation of delay--­Discretion---To condone the delay is discretion of Judges who are deciding the application---Each and every day's delay in filing a reference application has to be explained.

1987 PTD 319 rel.

(b) Income Tax Ordinance (XXXI of 1979)---

----S.136(3)---Reference to High Court---Inordinate delay of 69 days--­Request for condonation of delay---Validity---Department was aware of the fact that the reference applications would become time-barred, because from the facts it appeared that Department had utilized the whole three months in filing the reference applications which had already, become time-barred which could not be explained---Such was the case of sheer negligence and could not be condoned---Condonation applications were dismissed by the Appellate Tribunal in circumstances and consequently reference applications were also dismissed.

1987 PTD 319 rel.

2002 PTD 549; 1979 PTD 429 and 1991 PTD 1056 ref.

Haibbullah Khan, D.R. for Applicant.

Asif S. Kasbati, A.C.A for Respondent.

Date of hearing: 8th May, 2003.

2003 P T D (Trib.) 1903

[Income-tax Appellate Tribunal Pakistan]

Before S. Hasan Imam and Javed Iqbal, Judicial Members

I.T.As. Nos. 1876 to 1878/KB and 3830 to 3833/B of 2002, decided on 6th August, 2002.

Income Tax Ordinance (XXXI of 1979)---

---Ss. 156, 65, 59(1) & First Sched., Part IV, Para. B(2)---Economic Reforms Order (1 of 1972), Arts.7E(1), 7F & 7D--Companies Ordinance (XLVII of 1984), S. 156 & Part VIII), Form A, Para. 5---Rectification of mistake---Rebate---Status of company---Rebate yeas claimed being public company and the same was assessed by the Department--­Assessments were subsequently rectified under S.156 and re-opened under S.65 of the Income Tax Ordinance, 1979 keeping in view the period of limitation that assessee was not a public company as its majority of shares were not held by the Government but by the Corporation and .tax charged from it was too low as compared to the private limited companies---Validity---Majority shares of assessee first acquired by the Federal Government and then transferred to PAKO were deemed to be held by the Federals Government and fulfilling the condition of "public company" including a company in which not less than 50% of shares were held by the Government under definition as provided in Para. B(2) of Part IV of the First Schedule to Income Tax Ordinance, 1979---According to Arts. 7E & 7F of the Economic Reforms Order, 1972, Federal Government shall be deemed to have a majority portion of shares in a company carrying controlling voting rights, or the controlling proprietary interest in an establishment in case aggregate face value of the shares or proprietary interest in such establishment owned by the Federal Government and by an, institution owned or controlled by the Federal Government exceeds 50% of the total voting rights in the issued and paid-up share capital of the company of 50% of the proprietary interest of the establishment---Requirement of definition of Public Limited Company as per Para. B(2) of Part IV of the First Schedule to Income Tax Ordinance, 1979 having clearly been fulfilled by the assessee its status had to be taken as that of Public Limited Company for all the purposes of Income Tax Ordinance, 1979, including the application of tax rates---Order passed under Ss.65 & 156 of the Income Tax Ordinance, 1979 was disposed of and modified accordingly by the Appellate Tribunal.

I.T.As. Nos. 1872 to 1875/KB of 1987-88, I.T.A. No.3820, 52, 51, 1041, 3092 and 3093/KB all of 1987-88, dated 25-6-1988 rel.

1999 PTD 825 and 1993 PTD (Trib.) 1100 distinguished.

I.T.A. No. 1710/KB.of 1999-2000 ref.

Akbar G. Merchant, Yasmeen Ajani, (FCA), Sirajul Haq and Arshad Siraj for Appellant.

Javed Iqbal Rana, Akhtar Mehmood and Aftab H. Rizvi for Respondents.

Date of hearing: 27th April, 2002.

2003 P T D (Trib.) 1924

[Income-tax Appellate Tribunal Pakistan]

Before S. Hasan Imam, Judicial Member

I.T.As. Nos. 124 and 125/KB of 2002, decided on 10th December, 2002.

Income Tax Ordinance (XXXI of 1979)---

----Ss.156, 80D & 138(2)(c) & Second Sched., Cl. (118E) --- Rectification of mistake---Exemption---Refund was claimed of tax paid under S.80-D of the Income Tax Ordinance, 1979 on turnover by way of rectification under S.156 of the Income Tax Ordinance, 1979 in view of judgment of Supreme Court of Pakistan---Rectification application was rejected being barred by limitation---Validity---Application was admittedly filed after the expiry of four years period and it was not open for the assessee to seek time-barred rectification---Intention and purpose of any limitation period set in law was to ensure that no issue was dragged beyond certain limited period of time giving it the impetus of some finality---Action of the Assessing Officer in rejecting the rectification application being time­-barred did not warrant interference in the circumstances---Since law did not provide condonation of delay for certain bona fide reasons the Assessing Officer did not possess power to condone the delay even for bona fide reason---Assessing Officer did possess the power to rectify the order in view of the judgment of Supreme Court in determining refund but could not go beyond the limitation period prescribed by law, while invoking S.156 of the Income Tax Ordinance, 1979---Order of Supreme Court could not be implemented by way of rectification under S.156 of the Income Tax Ordinance, 1979 beyond the limitation period of four years---Remedy was still .available with the assessee under S.138 of the Income Tax Ordinance, 1979 where Commissioner had vast powers to revise the order, either on his own motion or on application made by the assessee and no limitation period was provided for revision of the order by the Commissioner on his own motion and he also possessed powers to condone the delay in case the application was moved beyond the limitation period of 90 days by the assessee under S.138(2)(c) of the Income Tax Ordinance, 1979.

PLD 1997 SC 582 = 1997 PTD 1555 ref.

Qazi Anwer Kamal for Appellant.

Zaki Ahmed for Respondent.

Date of hearing: 16th November, 2002.

2003 P T D (Trib.) 1941

[Income-tax Appellate Tribunal Pakistan]

Before Khawaja Farooq Saeed, Judicial (Member) and Imtiaz Anjum, Accountant Member

M. A. Stay Nos.252 to 254/LB of 2003, decided on 24th April, 2003.

(a) Income Tax Ordinance (XXXI of.1979)---

----Ss. 134(1)(6) & 66-A---Appeal to the Appellate Tribunal---Appeal against order passed under S.66-A of the Income Tax Ordinance, 1979--­Stay of proceedings by the Appellate Tribunal---Assessment after expiry of stay period---Recovery---Request for stay of such recovery since the matter in main appeal was sub-judice before Appellate Tribunal--­Validity---In absence of formal appeal, Appellate Tribunal was not in a position to give a finding on the issue---Stay application was against an order which was not a subject-matter of appeal---Appellate Tribunal did not have any extraordinary jurisdiction to embark upon a subject which was not directly pending before it---Order passed consequent upon the order under S.66-A of the Income Tax Ordinance, 1979 unless reached Appellate Tribunal by itself could not be considered as contiguous or ancillary or auxiliary to an order under S.66-A of the Income Tax Ordinance, 1979 so as to invoke the power of granting stay by the Appellate Tribunal---Stay application being devoid of any legal sanction was dismissed by the Appellate Tribunal.

M. A. (Stay) No.597/LB of 2001 rel.

(b) Income-tax---

----Temporary injunction, grant of---One who has the power to give a decision can also grant temporary injunction.

Naveed A. Andrabi for Appellant.

Muhammad Asif, D.R. for Respondent.

Date of hearing: 24th April, 2003.

2003 P T D (Trib.) 1948

[Income-tax Appellate Tribunal Pakistan]

Before Syed Masood-ul-Hassan Shah, Judicial Member and Mahmood Ahmad Malik, Accountant Member

I.T.As. Nos. 368(IB) and 610 (IB) of 2002, decided on 20th March 2003.

(a) Income-tax---

----Sales--Estimation of sales---Telephone enquiry---Validity---Inquiries conducted with regard to sale of embroidered cloth on order basis were not relevant to the year under appeal---Order of First Appellate Authority deleting income under said head was upheld by the Appellate Tribunal.

(b) Income Tax Ordinance (XXXI of 1979)---

----S. 24(c) & (ff)---Deduction not admissible---Purpose---Purpose of S.24(c) of the Income Tax Ordinance, 1979 was to ensure compliance of tax withholding provisions---Purpose to introduce the provisions of cl. (ff) of S.24 of the Income Tax Ordinance, 1979 was to ensure documentation in taxation system---Since purpose of the two provisions was different the rule that specific provisions of law will have an over­riding effect would not apply.

(c) Income Tax Ordinance (XXXI of 1979)---

----S. 12(18)---C.B.R. Circular No.3 of 1992, dated 27-10-1992--­Income deemed to accrue or arise in Pakistan---Purpose of the provision---Purpose of S.12(18) of the Income-Tax Ordinance, 1979 was to check fictitious loans and to preclude back-dated introduction of creditors---Central Board of Revenue's instruction that "Assessing Officer should not invoke the provisions of S.12(18) of the Income Tax Ordinance, 1979 in respect of genuine loans received by way of crossed cheques pay orders or telegraphic transfers etc. through the banking channels" did not mean to allow loans etc. paid otherwise than through banking channel as the Central Board of Revenue could not make the operation of S.12(18) of the Income Tax Ordinance, 1979 non­functional.

(d) Income Tax Ordinance (XXXI of 1979)---

----Ss. 24(c) (ff) & 50---Deductions not, admissible---Deduction of tax source---Where payment exceeding Rs.50,000 was made under anyone of the heads specified in Cl. (c) of S.24 of the Income Tax Ordinance, 1979 in cash and tax was also deducted under S.50 of the Income Tax Ordinance, 1979, the payment, will still not qualify for deduction because though the provisions of Cl. (c) of S.24 of the Income Tax Ordinance, 1979 had been met the requirements of Cl. (ff) of S.24 of the Income Tax Ordinance, 1979 were not fulfilled---Sections 24(c)(ff) & 50 of the Ordinance were two independent and separate provisions and were not inter-related.

(e) Income Tax Ordinance (XXXI of 1979)---

----S. 24(c)---Deductions not admissible-Rent---Payment, of rent was not made through crossed cheque or by a crossed bank draft the assessee was not entitled to claim deduction on account of the rent paid---Such act may have caused hardship for the assessee but that would not stop operation of the provisions of law---Order of department was upheld by the Appellate Tribunal.

2000 PTD 39; 2002 PTD 1; Corpus Juris Secondum, Vol. LXXXIV, p.46 and 1997 SCC 1097 ref.

(f) Income Tax Ordinance (XXXI of 1979)---

----S. 24(c)---Deductions not admissible---Salary---Where salary exceeding Rs.5,000 was paid to an employee otherwise than through crossed cheque or banking channel, the amount paid would not be allowable as deduction even if the employee had filed returns and paid tax on salaries.

2002 PTD (Trib.) 364 rel.

Abdul Jaleel, D.R. for Appellant.

Ghulam Mohy-ud-Din Kharal for Respondent.

Date of hearing: 20th March, 2003.

2003 P T D (Trib.) 1956

[Income-tax Appellate Tribunal Pakistan]

Before Syed Masood ul Hassan Shah, Judicial Member and Syed Aqeel Zafar ul Hasan, Accountant Member

I.T.As. Nos.432/IB to 434/IB of 2001-2002; decided on 12th April, 2003.

(a) Income Tax Ordinance (XXXI of 1979)---

----S. 129---Appeal to Appellate Additional Commissioner---Legal lacuna---Setting aside of assessment---Annulment---Appellate forum was not meant to fill in the legal lacuna which occur in the orders appealed against before that forum but it had to see as to whether the order had been passed within the given parameters and framework of the law---If there appeared a glaring non-observance of legal formalities by such forum then the appellate forum will have to show restraint in allowing to fill in the legal gaps and lacuna.

(b) Income Ax Ordinance (XXXI of 1979)---

----Ss. 65, 63 & 59(1)---Additional assessment---Best judgment assessment---Approval of Inspecting Additional Commissioner--­Approval for re-opening of assessment under S.65 of the Income fax Ordinance, 1979 was obtained after the finalization of assessment---First Appellate Authority set aside the assessment for de novo consideration--­Validity ---Action of First Appellate Authority of setting aside the assessment order for de novo consideration amounted to providing a time to Assessing Officer to fill in the legal lacuna to the detriment of the interest of assessee which could not be permitted, same was the case of annulment of assessment and not a case of setting aside the assessment--­Order of the First Appellate Authority was modified by the Appellate Tribunal and the assessment made by the Assessing Officer under S.63 of the Income Tax Ordinance, 1979 was annulled instead, of setting aside.

Syed Hassan Mehdi Rizvi for Appellant.

Abdul Jaleel, D.R. for Respondent.

Date of hearing: 12th April, 2003.

2003 P T D (Trib.) 1965

[Income-tax Appellate Tribunal Pakistan]

Before Syed Masood-ul-Hassan Shah, Judicial Member and Syed Aqeel Zafar-ul-Hasan, Accountant Member

R.A. Nos.85/IB to 87-A/IB of 2003, decided on 22nd April, 2003.

Income Tax Ordinance (XLIX of 2001)---

----S. 133(1)---Income Tax Ordinance (XXXI of 1979), Ss. 52/86, 50(3-A), 12(5), 80-AA & 156---Reference to High Court---Assessment framed under Ss.52/86 of the Income Tax Ordinance, 1979 was annulled by the First Appellate Authority being barred by time as the same was to be made within a period of four years as prescribed under S.156 of the Income Tax Ordinance, 1979--Action of the First Appellate Authority was confirmed by the Appellate Tribunal---Question for reference to High Court as to whether Appellate Tribunal was justified in maintaining the annulment of order despite the fact that no period of limitation had been prescribed for initiation/completion of action under Ss.52/86 of the, Income Tax Ordinance, 1979---Validity---Proposed question of law did not appear to be a question of such a nature as necessarily required reference to High Court for decision, since similar reference had already been specifically answered by the superior Courts---Settled and answered proposition need not to be referred again for decision---Appellate Tribunal declined to make reference to High Court and reference applications stand refused.

1999 PTD (Trib.) 3357 and 1996 PTD (Trib.) 65 ref.

(1961) 4 Tax 96 and 2002 PTD 14 rel.

Abdul Jaleel, D.R. for Applicant.

Irfan Khan for Respondent.

Date of hearing: 22nd April, 2003.

2003 P T D (Trib.) 1972

[Income-tax Appellate Tribunal Pakistan]

Before Muhammad Munir Qureshi, Accountant Member and Munsif Khan Minhas, Judicial Member

I.T.A. No. 5856/LB of 1995, decided on 19th October, 2002.

Income Tax Ordinance (XXXI of 1979)---

----Ss. 62 & 144---Assessment on production of accounts, evidence etc, Power to call for information--Rejection of accounts---Rejection of declared version, without any basis regarding un-verifiability of part of the sales and without issuance of notice under S. 144 of the Income Tax Ordinance, 1979 to the parties, was not justified.

Kh. Riaz Hussain for Appellant.

Abdul Rasheed for Respondent.

Date of hearing: 19th October, 2002.

2003 P T D (Trib.) 1973

[Income-tax Appellate Tribunal Pakistan]

Before Rasheed Ahmad Sheikh, Judicial Member

I.T.A. No. 1873/LB of 2001, decided on 28th March, 2003.

Income Tax Ordinance (XXXI of 1979)---

----Ss. 52 & 50(4), Second Sched., Part IV, Cl. (33)---Tax Amnesty Scheme, 2000---Liability of person failing to deduct or pay tax--­Assessee, a registered firm---Capital was enhanced through the declaration of stock in Tax Amnesty Scheme, 2000 just four days before the end of the financial year---Assessing Officer treated the assessee to be an "assessee in default" on the ground that the assessee's business capital during the assessment year was increased by Rs.10,00,000 and he was under legal obligation to deduct tax under S.50(4) of the Income Tax Ordinance, 1979 on his purchases---Validity---Inclusion of stock in the firm's books of account at the fag end of the income year did not hold the assessee to be an "assessee in default"---Peculiar and extraordinary circumstances had been cropped up in the present case consequent upon which capital in business had been increased, in the books of account four days prior to close of the income year---Clause (33) of Part IV of the Second Schedule of the Income Tax Ordinance, 1979 would not attract to the facts of the case as this clause and its proviso catered altogether for different situation which did not exist in the present case for the simple reason that capital in business had never increased while executing normal business activities---Appeal of the Department was dismissed.

Nemo for Appellant.

M.A. Shamsi for Respondent.

Date of hearing: 12th March, 2003.

2003 P T D (Trib.) 1975

[Income-tax Appellate Tribunal Pakistan]

Before S. Hasan Imam, Judicial Member and Muhammad Akhtar Nazar Mian, Accountant Member

I.T.As. Nos. 164/KB and 417/KB of 2002, decided on 16th November, 2002.

Income Tax Ordinance (XXXI of 1979)---

----S. 80D---Societies Registration Act (XXI of 1860)---Finance Act (XII of 1999)---Minimum tax on income of certain persons ---Assessee, a Society registered under Societies Registration Act, 1860---Demand raised was deleted by the First Appellate Authority, assessee being the Society and not Company but yet an Artificial Juridical Person---Validity---No doubt Artificial Juridical persons like Societies Companies, Firms were basically Association of Persons (A.O.P.) but, once they qualified the condition of their respective registration, there were to be assigned their specific status i.e. when a firm was registered by Registrar of Firms, such Association of Persons became a firm and was not to be assigned the status of Association of Persons; a Company when so registered under the Companies Ordinance although still an Association of Persons was to be assigned the status of Company and not that of an Association of Persons similarly a Society when so registered under the Societies Registration Act, 1860, although an Association of Persons was to be assigned the status of an Artificial Juridical Person--­Provisions of S.80D of the Income Tax Ordinance, 1979 were not extended to an Artificial Juridical Person even through Finance Act, 1999---Society being an Artificial Juridical Person was not liable to the charge of minimum tax under S.80D of the Income Tax Ordinance, 1979---Appellate Tribunal maintained the order of First Appellate Authority and dismissed the appeals of Department being devoid of merits.

1998 PTD (Trib.) 2017 rel.

2000 PTD 3388 distinguished.

Zaki Ahmed for Appellant.

Naeemullah Siddiqui for Respondent.

Date of hearing: 16th November, 2002.

2003 P T D (Trib.) 1978

[Income-tax Appellate Tribunal Pakistan]

Before Ehsan-ur-Rehman Sheikh, Judicial Member and Muhammad Sharif Chaudhry, Accountant Member

I.T.As. Nos. 2134/LB, 2135/LB and 2958/LB of 2002, decided on 30th October, 2002.

(a) Income Tax Ordinance (XXXI of 1979)---

----S. 65---Additional assessment---Re-opening of case on the basis of interpretation of law by Courts---Validity---Assessing Officer had reopened the settled case of the assessee relying on the interpretation of law made by the High Court, held, was not justified.

Writ Petition No.8672 of 1999 distinguished.

PLD 1969 SC 322 rel.

(2000) 81 Tax 180 ref

(b) Income Tax Ordinance (XXXI of 1979)---

----Ss. 65 & 80C/80CC/143B---Additional assessment---Re-opening of assessment of company on the basis of audit and inspection report--­Validity---Information on which the Department had relied for re­opening assessee's case under S.65 of the Income Tax Ordinance, 1979 was available in the balance-sheet of the assessee---Assessee's balance­sheet as well as-accounts Were audited ---Assessee company had genuine resources to explain the deposit made with its sister concern--­Information provided by Audit and Inspection Authorities-regarding the deposit of the assessee was hardly a good pretext on the basis of which assessments made under presumptive tax regime under Ss.80C/80CC/143B of the Income Tax Ordinance, 1979 could be reopened or such extreme action could be justified---Allegation regarding non­-application of mind and mechanical action based on audit report was also partly true---Record showed that Assessing Officer himself was not satisfied that action under S.65 of the Income Tax Ordinance, 1979 could be taken on the basis of information provided by the audit and thus he had to raise four or five other points for getting approval from the Inspecting Additional Commissioner---Action under S.65 of the Income Tax Ordinance, 1979 was without any definite information in circumstances.

1992 PTD 1671; 1997 PTD 47 and 2000 PTD 2531 (Trib.) rel

(c) Income Tax Ordinance (XXXI of 1979)---

----S. 65---Additional assessment---Approval of Senior Authority--­Exercise of power of approval by the author of the assessment order--­Validity---First Appellate Authority was justified to hold that prior approval of a Senior Authority had been made mandatory before initiating any action under S.65 of the Income Tax Ordinance, 1979 to put check on power of an Assessing Officer so as to examine the legality and necessity of all the contemplated actions---Provision of taking prior approval will naturally lose its sanctity when the same officer exercises these powers who was also the author of such assessment order--­Functions of Approving Authority which were considered as check on the arbitrary use of S.65 of the Income Tax Ordinance, 1979 by an Assessing Officer were being exercised by the same Inspecting Additional Commissioner who was the author of the original assessment order---Prior approval of Competent Authority was thus lacking in the case.

2001 PTD 1467; 2001 PTD 2247; 2001 PTD, (Trib.) 2919 and 2001 PTD (Trib.) 3810 rel.

(d) Interpretation of statutes---

---- Interpretation placed on a statute by a Court would be applicable prospectively would not affect past and closed matters.

2002 PTD 2904 rel.

(e) Income Tax Ordinance (XXXI of 1979)---

----Ss. 65, 59-A, 80C, 80CC & 143-B---Additional assessment--­Statement under S.143-B of the Income Tax Ordinance, 1979 was filed--­Difference between book profits and imputable income---Re-opening of case under S.65 of the Income Tax Ordinance, 1979---Assessee contended that orders were pasted under S.80C/80CC/143B of the Income Tax Ordinance, 1979 and if order was deemed under S.59-A of the Income Tax Ordinance, 1979, even then the order deemed under S.59A. of the Income Tax Ordinance, 1979 under presumptive tax regime could not make any assessment of total income and such order could not be subjected to action under S.65 of the Income Tax Ordinance, 1979---Validity---Section 65 of the Income Tax Ordinance, 1979 caters for the requirement of normal 'tax regime where declared income was assessed/determined after filing of return under the presumptive tax regime---Under normal tax regime neither the return of income was required to be filed nor any income was assessed/determined--Even in S.80C(7) of the Income Tax Ordinance, 1979 wherein assessment order is deemed under S.59A of the Income Tax Ordinance, 1979, it was not provided that it shall be an assessment order in respect of total income but it was provided that in a case to which subsection (4) of S.80C of the Income Tax Ordinance, 1979 applied an order under S.59A of the Income Tax Ordinance, 1979 shall be deemed to have been made in respect of income referred to in subsection (1) of S.80C of the Income Tax Ordinance, 1979---Section 65 of the Income Tax Ordinance, 1979 could be attracted only when there was a prior order taxing the total income but not where order under S.59A of the Income Tax Ordinance, 1979 was deemed to have been made---Section 65 of the Income Tax Ordinance, 1979 had wrongly been invoked by the revenue in circumstances.

Writ Petition No. 8672 of 1999 and Civil Petition No. 265-K and 362 of 2000 distinguished.

2002 PTD (Trib.) 337; Messrs Master Shahbaz Monnoo v. Commissioner of Income-tax C.T.R. No. 385 of 1991 and 2000 PTD 2193 (Trib.) ref.

1998 PTD 1 (Trib.) and 2000 PTD (Trib.) 2193 ref.

(f) Income Tax Ordinance (XXXI of 1979)---

----S.80CC (4), First Sched: Part I, Para. FF & Part IV; Para. A, Cl. (2) & Eighth Sched.---Tax on income of certain exporters---Imputable income---Calculation---Rebated rate---Normal rate---First Appellate Authority found that assessee's imputable income would be worked back on the basis of rebated rate and not on normal rate which was applicable to a private limited company---Validity---For working of imputable income under S.80CC(4) of the Income Tax Ordinance, 1979, the factor of export rebate could not be ignored ---Assessee's imputable income would be worked back on the basis of rebated rate and not on the basis of normal rate---Assessee's imputable income exceeded the net profit declared by the company in its accounts and the question of taxing any excess of claimed net profit over imputable income under S.65 of the Income Tax Ordinance, 1979 did not arise.

Writ Petition No.8672 of 1999 distinguished.

I. T. As. Nos. 157/LB of 2000 and 781/LB of 1997 ref.

(g) Income Tax Ordinance (XXXI of 1979)---

----Ss. 56 & 65---Notice for furnishing return of total income--­Additional assessment---Simultaneous proceedings under Ss. 56 & 65 of the Income Tax Ordinance, 1979---Validity---When proceedings were initiated and notices were issued under S.56 or 65 of the Income Tax Ordinance, 1979, the proceedings should have been taken to their logical end at the same time proceedings under both the sections could not be taken up---Revenue having issued notice under S.56 of the Income Tax Ordinance, 1979, it should have dropped proceedings by passing a written order or by making a written entry in the order sheet at least and assessee should have been intimated about the same---Dropping of proceedings should be witnessed by a documentary evidence---Revenue .in the present case had pursued simultaneously proceedings under Ss. 56 & 65 of the Income Tax Ordinance, 1979---Appeal of the Department was rejected by the Appellate Tribunal in circumstances.

(h) Income Tax Ordinance (XXXI of 1979)---

----S. 80CC ---Tax on income of certain exporters---Export rebate--­Assessment of difference between book profit and imputable income --­Validity---Assessee was entitled to the benefit of export rebate---If imputable income of the assessee was computed on the basis of rebate rate of tax, it exceeded net profits declared in the books of accounts and the question of any surplus or difference for the purposes of assessment did not arise.

(i) Income Tax Ordinance (XXXI of 1979)---

----S.80CC---Tax on income of certain exporters---Export rebate---Usual profit---Assessment of difference between book profit and imputable income---Validity---Profits declared by the assessee in its books of accounts were usual profits and not unusual profits---Revenue had not doubted any reliable evidence that assessee had claimed unusual profits---Profits claimed by the assessee were protected being supported with audited books of accounts and balance-sheet ---Assessee could not be blamed to have converted his black money into white money under the disguise of total discharge of tax liability under S.80C(4) or S.80CC of the Income Tax Ordinance, 1979 in the circumstances---Surplus of book profits over imputable income could not be charged to tax in ordinary circumstances---Action of the Revenue, held, was unjustified in circumstances.

Writ Petition No. 8672 of 1'799 rel.

1995 PTD 856; 1997 PTD (Trib.) 1143 and. 1999 PCTLR 639 ref.

Muhammad Zulfiqar Ali, D.R. and Sardar Ahmad Jamal Sukhera, L.A. for Appellant (in I.T.As. Nos. 2134/LB and 2135/LB of 2002).

Muhammad Iqbal Kh. for Respondent (in I.T.As. Nos. 2134/LB and 2135/LB of 2002.).

Muhammad Iqbal Kh. for Appellant (in I.T.A. No 2958/LB of 2002).

Muhammad Zulfiquar Ali, D.R. and Sardar Ahmad Jamal Sukhera, L.A. for Respondent (in I.T.A. No.2958/LB of 2002).

Date of hearing: 19th October, 2002.

2003 P T D (Trib.) 2008

[Income-tax Appellate Tribunal Pakistan]

Before Syed Masood-ul-Hassan Shah, Judicial Member and Syed Aqeel Zafar-ul-Hasan, Accountant Member

W.T.As. Nos. 62/IB to 64/IB of 2001-2002, decided on 4th April, 2003.

(a) Wealth Tax Act (XV of 1963)---

----Ss. 16 & 35---Assessment---Rectification of mistake---Rectification of part of assessment order—Merger of the orders ---Part of the assessment order under S.16 of the Wealth Tax Act, 1963 which was rectified under S.35 of the Wealth Tax Act, 1963 may stand rectified as such and the order under S.35 may stand merged in the assessment order but the remaining part remains intact.

(b) Wealth Tax Act (XV of 1963)---

----Ss. 23 & 35---Appeal to Appellate Assistant Commissioner/Commissioner of Income Tax (Appeals) from orders of Wealth Tax Officer rectification of mistake---No bar in the law for exercising both the options simultaneously---Provisions of law relating to appeal under S.23 of the Wealth Tax Act, 1963 and rectification under S.35 of the Wealth Tax Act, 1963 are separate and independent of each other having limitations within their defined fields---Said provisions have a distinction of forums to be approached by the parties---For appeals, the forum is always a higher forum and right of appeal is considered a substantive right provided under the law while' for rectification, the forum remains the same where mistake in its own order are rectified either on its own motion/suo mote or if such mistakes are brought to its notice by any of the parties---No bar in law for exercising both the options simultaneously---Matters under the said provisions are decided in different perspectives of adjudication of rights of parties to that effect--­Law did not create any embargo for availing both the remedies at the same time---Such availing of remedies could be simultaneous or it could be one after the other because the forums which would be seized of the matter would be different in the case of appeal and in the case, of rectification---Scope of rectification is limited and could never be equated for judging the impugned order on the parameters and the extent of scrutiny as was made by the appellate forum.

(c) Wealth Tax Act (XV of 1963)---

----Ss. 23 & 35---Appeal to Appellate Assistant Commissioner/Commissioner of Income Tax (Appeals) from orders of Wealth Tax Officer---Rectification of mistake--Appeal and application, for rectification was simultaneously filed---Order was partly rectified---No action was called for by the First Appellate Authority on the ground that since the order had been rectified and the assessee had not challenged such order, the order framed under S.16(5) of the Wealth Tax Act; 1963 had no worth after its rectification---Validity---Order passed under S.35 of the Wealth Tax Act, 1963 for rectification of mistake could not take away the right of appeal provided under S.23 of the Wealth Tax Act, 1963 or barred any further action or adjudication of appeal by the Authority concerned who was to apply its mind independently and adjudicate grounds and issues raised before it within the sphere of its powers as prescribed under the law---Action of First Appellate Authority was not legally sustainable---First Appellate Authority was obliged under the law to have decided the appeals on merits while keeping in view the grounds raised by the assessee---Case was remitted by the Appellate Tribunal in First Appellate Authority for re-decision on appeal which shall be considered as pending before it and be decided through a speaking order on merits in accordance with law after providing an opportunity of being heard to assessee.

Muhammad Tasawar Mufti, ITP for Appellant.

Abdul Jaleel, D.R. for Respondent.

Date of hearing: 3rd April, 2003.

2003 P T D (Trib.) 2049

[Income-tax Appellate Tribunal Pakistan]

Before Karamat Hussain Niazi, Judicial Member and Syed Aqeel Zafar ul Hasan, Accountant Member

W.T.A. No.833/IB of 1999-2000, decided on 22nd January, 2003.

Wealth Tax Act (XV of 1963)---

----Ss. 14B, 14(1)(c) & 16(5)---S.R.O. No. 1208(I)/95, dated 23-10-1996---C.B.R. Letter C. No.(12)WT/96, dated 30-7-1996--­C.B.R. Circular No.1(15)WT/96, dated 14-12-1996---Wealth Tax Rules, 1963, R.3---Minimum Wealth Tax---Return of Net Wealth was filed on prescribed Form-A for assessment year 1996-97 as on 3-9-1996 relevant to valuation, dated 30-6-1996---Assessment framed under S.16 of the Wealth Tax Act, 1963 was annulled by the First Appellate Authority on the ground that assessee had not filed his wealth tax return prior to 1996-97 and, as such was covered under S.14B of the Wealth Tax Act, 1963---Validity---Assessee was obliged to follow the rule for availing the provisions of S.14B of the Wealth Tax Act, 1963 and file a return in the prescribed Form AA and not Form A---Return filed by the assessee on 30-9-1996 could not be treated as a return in respect of assets covered under S. 14B of the Wealth Tax Act, 1963 as the same did not show that it was a return under S. 14B of the Wealth Tax Act, 1963---Mere mention of tax payable under S. 14B of the Wealth Tax Act, 1963 did not render the return on Form-A as a return valid for purposes of S.14B of the Wealth Tax Act, 1963---Order of the First Appellate Authority in treating the assessee as covered under S.14B of the Wealth Tax Act, 1963 was misdirected and unsustainable in law--­Appellate Tribunal vacated the order of the First Appellate Authority and upheld that of the Assessing Officer---Order under S.16(5) of the Wealth Tax Act, 1963 having been framed in disregard to R.8(3) of the Wealth Tax Rules, 1963 case was remanded for a denovo assessment keeping in view the sub-rule (2) & (3) of R. 8 of the Wealth Tax Act, 1963.

Haroon-ur-Rehman for Appellant.

Dr. Khawaja M. Waqar Khan, ITP for Respondent.

Date of hearing 17th January, 2003.

2003 P TD (Trib.) 2064

[Income-tax Appellate Tribunal Pakistan]

Before Syed Masood-ul-Hassan Shah, Judicial Member and Syed Aqeel Zafar-ul-Hasan, Accountant Member

W.T.As. Nos.246(IB) to 255(IB) of 2001-2002, decided on 27th February, 2003.

Wealth Tax Act (XV of 1963)---

----S. 16---Income Tax Ordinance (XXXI of 1979), S.74(2)--Wealth Tax Rules, 1963, R.8(3)-Assessment---Service of notice---Legal heirs--­Assessee died during the proceedings---Case was represented on behalf of only one of the legal heirs of the deceased assessee through the same Authorized Representative---Assessments were set aside by the First Appellate Authority on the issue that notices must be got served upon all the legal heirs of the assessee for further proceedings---Assessee contended that assessment order was to be annulled instead of setting aside the same as the legal formalities were not fulfilled---Validity--­Legal heir pursing the case was duty bound to have informed his Authorized Representative about the other legal heirs of the assessee for being brought to the notice of the Assessing Officer or to have raised objection during the proceedings that the other legal heirs were not being represented, in the case---Assessing Officer in absence of such information, might have rightly assumed' that there was only one legal heir of the deceased assessee who was being represented through his Authorized Representative---Present case was not of any improper or defective service or non-service---Case of the heir who appeared that he was not properly served or was not served at all because lie pursued the proceedings by representation through Authorized Representative---Case of the assessee at best could be that where the remaining legal heirs of the assessee were not represented in the proceedings and perhaps were not served through any notice to that effect the case was not that of non­-service of notice upon the assessee but was one where the assessee originally representing the case died during the proceedings and then the case was represented through only one of the legal heirs and not all the legal heirs of the assessee---Case was not of the nature where the notices were issued to all the legal heirs and they were not served or were improperly served or their service was defective and then an ex parte assessment order was passed---Action taken by the First Appellate Authority was proper in the given circumstances and the same was maintained by the Appellate Tribunal---Appeal was rejected.

1998 PTD 408; 2002 PTD (Trib.) 272 and 2002 PTD 102 distinguished.

Syed Qalbe Abbas Bukhari for Appellant

Abdul Jaleel D.R. for Respondent.

Date of hearing: 25th February, 2003.

2003 P T D (Trib.) 2148

[Income-tax Appellate Tribunal of Pakistan]

Before S. Hasan Imam, Judicial Member and Shaheen Iqbal, Accountant Member

I.T.As. Nos. 729/KB and 730/KB of 2002, decided on 25th April, 2003.

Income Tax Ordinance (XXXI of 1979)---

----S. 66-A, 31(1) (b) & 62---C.B.R. Circular No. 14 of 1989, dated 6-11-1989---Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order---Income from dividend, share of profits and exempt income from Foreign Currency Bearer Certificates--­Assessment was modified by the Inspecting Additional Commissioner on the ground that expenses were incorrectly allowed under S.31 of the Income Tax Ordinance, 1979 against the income declared by the assessee/appellant from dividend a those expenses were not incurred wholly and necessarily for earning the dividend income--Validity--­Inspecting Additional Commissioner in her order under S.66-A of the Income Tax Ordinance, 1979 hail not established that the expenses claimed under S.31 of the Income Tax Ordinance, 1979 which were allowed by the Assessing Officer in the order framed under S.62 of the Income Tax Ordinance, 1979, were inadmissible for the reason that these were not incurred wholly and necessarily for earning the declared income---Inspecting Additional Commissioner's orders did not discuss separately the nature of expenses incurred and their irrelevancy to the income offered for tax under S.30 of the Income Tax Ordinance, 1979--­Orders being unsupported by any evidence or specific reasons, were unsustainable in law and the same ,were cancelled by the Appellate Tribunal.

1992 PTD 914; 1984 PTD 137 and I.T.A. No. 1501/KB of 1997-98 ref.

Z.H. Jafri for Appellant.

Inaytuallh Kashani, D.R. for Respondent.

Date of hearing: 25th April, 2003.

2003 P T D (Trib.) 2157

[Income-tax Appellate Tribunal Pakistan]

Before Ehsan-ur-Rehman, Judicial Member and Muhammad Munir Qureshi, Accountant Member

I.T.A. No.5724/LB of 2002 and I.T.A. No. 145/LB of 2003, decided on 31st May, 2003.

(a) Income Tax Ordinance (XXXI of 1979)---

----S. 62---Survey for Documentation of National Economy Ordinance (XV of 2000), Preamble---Survey---Estimation of sales---Assessment of higher turnover than assessed by the survey team---Validity---No firm basis existed to justify .the turnover as assessed by the Assessing Officer at. Rs.25 lacs when at the time of survey, a turnover of Rs.17 lacs appeared to have been agreed to---If the Department had any firm evidence that the declaration as made by the assessee was not correct, then the same should have. Been confronted to the assessee formally--­Mere reference to a general enquiry conducted by the Inspector was of no consequence in the eye of law---Inspector did not prepare an inventory of stocks statedly available at assessee's business premises and no copy of the same was ever handed over to the assessee for rebuttal ---Assessing Officer had erred in blindly accepting the Inspector's bald recommendations---Appellate Tribunal directed that sales for the year be assessed at Rs.17 lacs, as agreed to in the survey report.

(b) Income Tax Ordinance (XXXI-of 1979)---

----S. 62---Assessment on production accounts, evidence etc.---Profit and loss expenses---Add backs without confrontation---Validity--­Addition made under various heads without confronting the assessee under S.62 of the Income Tax Ordinance, 1979 were not sustainable in law.

Anwar Ali Shah, D.R. for Appellant.

Syed Ali Imran Rizvi for Respondent.

Date of hearing: 30th May, 2003.

2003 P T D (Trib.) 2176

[Income Tax Appellate Tribunal Pakistan]

Before Khawaja Farooq Saeed, Judicial Member and Imtiaz Anjum, Accountant Member

I.T.As. Nos. 5093/LB to 5095/LB of 2002, decided on 5th June, 2003.

(a) Income Tax Ordinance (XXXI of 1979)----

----S. 134---Appeal to Appellate Tribunal---Right of appeal---Substantive right ---Lis---Meanings---Amendment in statute---Appeal is not merely a matter of procedure but is a right, which every statute provides for against every order by the lowest tier---Such right was a substantive right---Such a right pre-exists and could not be destroyed by an amendment or a subsequent legislation---'Lis' means a right accrued on the date of initiation of proceedings which came into existence immediately after filling of return under S.55 or issuance of a notice under S.56 or S.65 of the Income Tax Ordinance, 1979 as the case may be---Right of appeal became available on the date of `lis' i.e. filing of return or issuance of a notice from the Department.

(b) Income Tax Ordinance (XXXI of 1979)---

----S. 134---Appeal to Appellate Tribunal---Right of appeal provided by law in a statute could not be withdrawn by a subsequent statute against the proceeding, which had been initiated earlier.

(c) Income-tax---

----Limitation---Illegal order -No limitation runs against an illegal order.

(d) Income Tax Ordinance (XXXI of 1979)---

----S. 134---Appeal to Appellate Tribunal---Accrual of right of appeal--­Relevant date---For the purpose of accrual- of the right of appeal the critical and relevant date is the date of initiation of proceedings and not the decision itself.

(e) Income Tax Ordinance (XXXI of 1979)---

----Ss. 134 & 66A---Income Tax Ordinance (XLIX of 2001), S.131--­Filing of appeal against order under S.66-A of the Income Tax Ordinance, 1979 after 1-7-2002 i.e. after promulgation of Income Tax Ordinance, 2001---Department contended that Income Tax Ordinance, 2001 was applicable on the appeal filed after 1-7-2002 and since the appeal had been filed on 28-10-2002, the Income Tax Ordinance, 1979 did not come into picture and appeal under S.131 of the Income Tax Ordinance, 2001 had only been provided against the order passed by the Appellate Assistant Commissioner or Commissioner of Income Tax (Appeals) and not against an order passed by the Inspecting Additional Commissioner under S.66-A of the Income Tax Ordinance; 1979--­Validity---Order under S-66A was decided before 30th of June, 2001--­"Lis" arose when the return was filed by the assessee---Return was filed much earlier than the date of the decision under S.66-A of the Income Tax Ordinance, 1979---Relevant law was the one which was applicable on that date---Provision of Income Tax Ordinance, 2001 did not and could not take away inherent and substantive right provided earlier--­Provision of S.239(4) of the Income Tax Ordinance, 2001 further gave life to all such pending proceedings and the law as was obtaining on 30th of June, 2001 and before shall be applicable on all such proceeding at any stage of the assessment---Right from the start of existence of "lis" the proceeding remained pending till implementation of the final order by the Supreme Court of Pakistan or in between where the parties concerned opt not to continue the , same---Objection raised by the Department was overruled and Appellate Tribunal took up the appeals for regular hearing.

Black's Law Dictionary Sixth Edn., p.1204; PLD 1965 (W.P.) Lah. 214; PLD 1965 (W.P.) Lah. 102; PLD 1963 Kar. 182; AIR 1945 Mad. 106 and Messrs Home Service Syndicate (Pvt.) Limited through Liquidator v. Commissioner of Income-tax/Wealth Tax Company, Zone-I, Lahore 2002 PTD 3106 ref.

Hoosain Kasam Dada (India) Ltd. v. The State of Madhya Pradesh and others (1953) 4 ITR 114; (1963) 50 ITR 761 and (2000) 242 ITR 263 rel.

(f) Income Tax Ordinance (XXXI of 1979)---

----S. 31---Deduction---Expenses, entitlement of---Person became entitled to an expense if he had laid it out or expended same for the purpose of earning of the respective income.

(g) Income Tax Ordinance (XXXI of 1979)---

----Ss. 66-A & 30---Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order---Interest income---Transaction of loan between company and Bank in the name of Director---Assessment was cancelled on the ground that interest income received by the assessee had neither been declared in-the return nor the Assessing Officer had taken cognizance of the fact at the time of completion of assessments and suppression of interest income constitute an - act of concealment of income/furnishing of inaccurate particulars of income which was liable to be taxed in the hands of assessee---Assessee contended that loan was in the name of Director but the entire transactions after its approval had directly been made by the principal company and the Bank---Amount had never come to the kitty of the assessee and the entire transactions were through the Bank account and the limited company---Entire amount of interest received by the assessee had directly been paid to the Bank--­Even if the assessee had earned something it had been paid to Bank the effect of which obviously was nil---Further, even if the case was said to be erroneous it shall not cause any prejudice to the interest of Revenue as his income from interest was equalized with the expenses he had paid as interest to Bank---Validity---Company through a resolution obtained loan in the name of Director with the purpose of tuning up its accounts and smooth running of the affairs of its business---If the assessee individual status as a, legal person was to be retained in between the Bank and the limited company, his entitlement towards allowance of the interest paid to Bank shall not diminish ---Assessee obtained loan from Bank for granting further loan to company thus should have declared the same as his income to claim the interest paid as an expenditure---Element of error was quite strong but prejudice to the interest of Revenue was not there---For invoking jurisdiction under S.66-A of the Income Tax Ordinance, 1979 error and prejudice to interest of Revenue should simultaneously exist---Order passed by the Inspecting Additional Commissioner under S.66-A of the Income Tax Ordinance, 1979 was not a valid or legal order and the same was cancelled by the Appellate Tribunal.

2001 PTD 1158; 2003 PTD (Trib.) 279 and NTR 1990 (Trib.) 240 ref.

1999 PTD (Trib.) 708 rel.

Naveed A. Andrabi for Appellant.

Muhammad Asif, D.R. for Respondent.

Date of hearing: 3rd June, 2003.

2003 P T D (Trib.) 2189

[Income-tax Appellate Tribunal Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member and Muhammad Akhtar Nazar Mian, Accountant Member

I.T.As. Nos. 1381/KB to 1383/KB of 2002, deiced on 20th May, 2003.

(a) Income-tax Ordinance (XXXI of 1979)---

----Ss. 156, 68, 52 & 86---Rectification of mistakes---Registration of firm---Liability of person failing to deduct or pay tax---Change of status---Declaration of status as Registered Firm---Assessments were finalized under S.62 of the Income Tax Ordinance, 1979---Initiation of proceedings under Ss.52/86 of the Income Tax Ordinance, 1979 as the firm had not carried out its obligation as withholding agent under S.50 of the Income Tax Ordinance, 1979---Rectification application under S.156 of the Income Tax Ordinance, 1979 for change of status on the ground that one of the partners had died arid a certificate for change in constitution of firm was duly issued by the Registrar of Firms---Change of status from registered firm to unregistered firm by way of rectification by the Assessing Officer---Validity---Assessing Officer making original orders under S.68 of the Income Tax Ordinance, 1979 had not committed any mistake by distributing profit of the firm amongst the old partners which were shown as partners apparently in the return when the status of registered firm was claimed without having submitted any application for registration in any of the subsequent assessment years---Assessing Officer went beyond her jurisdiction while passing the order under S.156 of the Income Tax Ordinance, 1979 because an evidence not already available on record had been adduced before her to claim that there had been a change in the constitution of firm---Such additional evidence which was not before the Assessing Officer making assessments originally could not be considered by the succeeding Assessing Officer so as to hold that the mistake was apparent from record.

2001 PTD 2658 distinguished.

(b) Income Tax Ordinance (XXXI of 1979)---

----Ss. 68, 62 & 156---Registration of Firm---Change in status--­Rectification---Without rectifying the order under S.68 of the Income Tax Ordinance, 1979 no order changing the status from registered firm to unregistered firm could legally be made by rectifying the order 'under S.62 of the Income Tax Ordinance, 1979 because the status in order under S.62 of the Income Tax Ordinance, 1979 was consequential to what was held in S.68 of the Income Tax Ordinance, 1979---Changing the status of firm by rectifying the order under S.62 of the Income Tax Ordinance, 1979 without rectifying the order under S.68 of the Income Tax Ordinance, 1979 was of no legal consequence a and was nullity in the eyes of law.

(c) Income Tax Ordinance (XXXI of 1979)---

----Ss. 66-A, 68 & 156---Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order---Registered firm---Constitution of firm---Death of a partner---Change of status by rectification--­Cancellation of such order under S.66-A of the Income Tax Ordinance, 1979---Validity---Not only the death of a partner had specifically been mentioned as a situation when the firm would not be dissolved but also one of the clauses of partnership deed impliedly prescribed that the change due to death of partner would not even mean the change in constitution because the legal heirs were considered as partners exercising all rights which the deceased, partner would have exercised if he had been alive---No change occurred in the constitution of firm on stepping into shoes of the deceased partner by legal heirs in the circumstances and firm could still be deemed to be a registered firm---Order 'under S.156 of the Income Tax Ordinance, 1979 passed by the Assessing Officer rectifying the order under S.62 of the Income Tax Ordinance, 1979 and thereby assigning status of unregistered firm was an order which was erroneous on the face of it.

(1984) 49 Tax 158; 1992 PTD 570; PLD 1977 SC 109; 1984 PTD 248 and 1980 PTD 33 ref.

(d) Income Tax Ordinance (XXXI of 1979)---

----Ss. 66-A, 156, 62, 68, 69(1), 52 & 86---Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order--­Rectification of mistake---Registered firm---Non-deduction of tax--­Assessee in default---Change of status by way of rectification --­Validity---Order made by the Assessing Officer under S.156 of the Income Tax Ordinance, 1979 rectifying the order under S.62 of the Income Tax Ordinance, 1979 so as to change the status of the assessee from registered firm to unregistered firm was an order which was erroneous and prejudicial to the interest of revenue and of no legal effects without there being any legal change in the order under S.68 of the Income Tax Ordinance; 1979---Inspecting Additional Commissioner rightly proceeded under S.66-A of the Income Tax Ordinance, 1979--­Restoration of status as registered firm to the firm was maintained by the Appellate Tribunal.

Abdul Qadir Lakhani fox Appellant.

Aijaz Asad Rasool, I.A.C. for Respondent.

Date of hearing: 14th May, 2003.

2003 P T D (Trib.) 2213

[Income-tax Appellate Tribunal Pakistan]

Before Syed Masood ul Hassan Shah, Judicial Member and Jameel Ahmad Bhutto, Accountant Member

I.T.As. Nos.665(IB) to 668(IB) of,1999-2000, decided on 30th June, 2001.

(a) Income Tax Ordinance (XXXI of 1979)---

----Ss. 30, 31, 22 & Second Sched., Part I, Cl.(176)---Income from other sources---Exemption---Interest income ---Assessee contended that interest income although was not from the power generation but was the income from power generation project and was liable to exemption--­Validity---Interest income will be chargeable to tax under S.30 of the Income Tax Ordinance, 1979 in the head "income from other sources" and to be subject to allowances and deductions a$ permissible/admissible under S.31 of the Income Tax Ordinance, 1979---Other income could not be regarded as income from business under S. 22 of the Income Tax Ordinance, 1979 to be made liable to exemption under Cl. (176) of the Second Schedule of the Income Tax Ordinance, 1979 but would be charged to tax under S.30 alongwith allowances and deduction, if any, admissible under S.31 of the Income Tax Ordinance, 1979.

I.T.A. No.136/KB of 1988-89; 1999 PTD (Trib.) 708; 1996 PTD (Trib.) 11; 2000 PTD 363; I.T.A. No.455/IB of 1997-98; I.T.A. No.7410/LB of 1996; 1990 PTD 178; 135 ITR 390t, 122 ITR 139; 217 ITR 369; (2000) 82 Tax 183; 227 ITR 217; 1969 PTD 278; AIR 1965 SC 513; AIR 1970 SC 253; 1977 PTD 20; 1999 PTD (Trib.) 528; I.T.A. No. 1514/IB of 1996-97 and 1997 PTD (Trib.) 879 ref.

(b) Income Tax Ordinance (XXXI of 1979)---

----Ss. 30, 22 & Second Sched., Part I, Cl. (176)---Income from other sources---Exemption---Interest income--when interest income of the assessee had been termed as income from other sources under S.30 of the Income Tax Ordinance, 1979 then such income may be in pre-operational period or post-operational period of the assessee-Such income would be income from other sources and not income from business or profession under S.22 of the Income Tax Ordinance, 1979 and exemption allowable under Cl. (176) of the Second Sched. of the Income Tax Ordinance, 1979 will not be available to the assessee on such income.

(c) Income Tax Ordinance (XXXI of 1479)---

----Second Sched., Part I, Cl. (176) & S.22---Exemption---Business income---Power generation---Profits and gains when accrued to the assessee from an electric power generation would be the income from business under S.22 of the Income Tax Ordinance, 1979 and would attract the exemption vide Cl. (176) of Part 1 of the Second Sched of the Income Tax Ordinance, 1979.

(d) Income Tax Ordinance (XXXI of 1979)---

----S. 30 & Second Sched., Part I, Cl. (76A)---S.R.O., dated 4-1-1995--­Income from other sources---Exemption---Interest income---Exemption to a particular Power Company under Cl. (76A) of Part I of the Second Sched. of the Income Tax Ordinance, 1979 for interest income was inserted vide S.R.O., dated 4-1-1995 and the said clause could not be extended to every power generation project or to be regarded as clarificatory in nature.

(e) Income-tax---

----Exchange gain---Taxability---Exchange gain would be a hypothetical accrual of income which was a gain on revaluation of foreign currency and not a real income and otherwise was in the nature of a capital transaction---Exchange gain on foreign currency deposits is a gain in the nature of a capital 'transaction and not liable to tax---Exchange gain and exchange losses both were co-existent and one could not be overlooked or separated from the other and could not be termed as real income.

(f) Income-tax---

----Sale of scrap---Taxability---Matter was remitted back for de novo consideration by the First Appellate Authority---Department did not point out any infirmity in the order of First Appellate Authority---Appellate Tribunal agreeing with the reasons of First Appellate Authority upheld its order as the matter was still open to substantiate or establish its proposition.

(g) Agreement for Avoidance of Double Taxation between Pakistan and UAE---

----Art. 13---Tax rate---Provisions of double-tax treaty between Pakistan and UAE will be given preference---Tax charged should not exceed 12% as stated in Art. 13 of the Treaty should be kept in mind.

Abdul Jalil, D.R. for Appellant.

Kashif Aziz Jehangiri, A.C.A./AR for Respondent.

Date of hearing: 3rd May, 2001.

2003 P T D (Trib.) 2276

[Income-tax Appellate Tribunal Pakistan]

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

I.T.As. Nos. 3550/LB to 3352/LB of 2002, decided on 8th April, 2003.

Income Tax Ordinance (XXXI of 1979)---

----Ss. 66-A & 59(1)---Powers of Inspecting Additional Commissioner--­Self-assessment---Assessments were framed under Self-Assessment Scheme---Tax was computed on Form IT-30 and only demand notice was issued without written assessment order---Cancellation of such assessment under S.66-A of the Income Tax Ordinance, 1979 by the Inspecting Assistant Commissioner---Validity---Section 59(1) of Income Tax Ordinance, 1979 provides that to make a valid assessment order the Deputy Commissioner shall have to assess the total income of the assessee on the basis of return filed, whereafter concerned Assessing Officer was, under an obligation to pass an order in writing in pursuance of the assessment done by the Assessing Officer and then in consequence thereof the tax payable will be determined---When an order under S.59(1) of the Income Tax Ordinance, 1979 was passed, none of these steps were taken by the Assessing Officer-Neither the Assessing officer made any assessment nor was there an order in writing---No determination of any tax payable was made as postulated by S.59(1) of the Income Tax Ordinance, 1979---Tax computed on Form IT-30 and demand notice without there being any written assessment order, was not legally sustainable---Order under S.59(1) of the Income Tax Ordinance, 1979 could not be considered a formal order which could be subjected to the revisional jurisdiction of Inspecting Additional Commissioner under S.66-A of the Income Tax Ordinance, 1979---Appellate Tribunal vacated the order passed by the Inspecting Additional Commissioner under section 66-A of the Income Tax Ordinance, 1979 and restored assessments made under S.59(1) by the Assessing Officer for all the years under consideration---Since appeals were decided on legal issue, Appellate Tribunal did not adjudicate on the other issues raised by the assessee in the grounds of appeal.

2002 PTD (Trib.) 1949; 1987 PTD 249; 1999 PTD (Trib.) 2884; 1987 PTD, (Trib.) 129 and 1993 PTD 766 = 1993 SCMR 1232 rel.

Naveed Ahmed Andrabi for Appellant.

Mrs. Talat Altaf Khan and Ikram Tahir, D.Rs. for Respondent.

Date of hearing: 22nd January, 2003.

2003 P T D (Trib.) 2287

[Income-tax Appellate Tribunal Pakistan]

Before Khawaja Farooq Saeed, Judicial Member and Imtiaz Anjum, Accountant Member

R.As. Nos. 96/LB to 100/LB of 2003, decided can 14th April, 2003.

(a) Income Tax Ordinance (XXXI of 1979)---

----Ss. 52 & 61---Liability of person failing to deduct or pay tax--­Prescription of limitation for finalization of assessment---Validity--­Appellate Tribunal had not prescribed any limitation for finalisation of an order under S.52 of the Income Tax Ordinance, 1979---tribunal had only brought to the attention of all concerned the provision of S.61 of the Income Tax Ordinance, 1979, under which books of accounts could be inspected within a period of three years prior to the income year and tits was only an interpretation of the statutory provision obtaining in tile books.

(b) Income Tax Ordinance (XXXI of 1979)---

----Ss. 61 & 52---Notice- for production of books of accounts etc.--­Assessing Officer cannot determine the extent of supplies received by assessee liable to withholding tax if he cannot lay hands to the books of accounts for the relevant period.

(c) Interpretation of statutes---

---- Limits placed on interpretation--Notwithstanding the fact that the Courts were not legislators, however, while interpreting provisions of law a reasonable limitation on the basis of supporting legal provisions could always be highlighted.

(d) Income Tax Ordinance (XXXI of 1979)---

----S. 52---Liability of persons failing to deduct or pay tax---Assessee in default---Notice---Notice for one year---Limitation---Proceedings for the previous years on the basis of same notice---Validity---Notice was issued on 29-5-1991 but proceedings were not continued on the basis of the same---Record did not disclose as to whether the same was withdrawn or not---Order of holding assessee in default, dated 8-2-1999 was for the assessment year 1995-1996 only---Subsequent proceedings for the assessment years 1991-1992 to 1994-95 could not be considered as continuation of the said order---Such notice by no means was in field for the purpose of such assessments.

(e) Income Tax Ordinance (XXXI of 1979)-----

----S. 65---Additional assessment---Definite information ---Meanings--­Words "definite information" have only covered something definite which creates a reason to believe that the income had been assessed--­Any estimate gossip, surmise or reasons to suspect had been excluded from the said definition.

(f) Income Tax Ordinance (XXXI of 1979)---

----Ss. 52, 65 (1) & 50 (4)(a)---Liability of persons failing to deduct or pay, tax ---.Assessee in default---Words "fails to deduct"---Definite information---"Found"---Meanings/explanation---Word "fails to deduct" used in S.52 of the Income Tax Ordinance, 1979 determined that a person had failed to deduct tax which he was legally bound under the provisions of S.50(4)(a) of the Income Tax Ordinance, 1979 and this was determination of a fact---Such connotation could be equated with use of word "found" in sections 13(1)(a), (aa), (b), (c) & (d) of the Income Tax Ordinance, 1979---Words "definite information" in any case speak of an information which should be definite and the words "fails to, deduct" or "found" were obviously stronger than the same.

(g) Income-tax---

----Deeming provisions---Penalty provisions--- Provisions which were called as deeming provisions of income-tax and those which had come as a penalty were not meant to strengthen the muscles of the Revenue Department.

(h) Income-tax---

----Machinery provision---Machinery provision could not be used as substitute of charging provisions of tax law.

Muhammad Asif, D.R. for Appellant.

Kh. Muhammad Iqbal Advocate and M. Faisal Iqbal Khawaja, A.C.A. for Respondent.

Date of hearing: 27th March, 2003.

2003 P T D (Trib.) 2298

[Income-tax Appellate Tribunal Pakistan]

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

I.T.As. Nos.448/LB of 2000, 1783/LB and 1786/LB of 2001, decided on 12th April, 2003.

Income Tax Ordinance (XXXI of 1979)----

----S. 59 (4) &c (55)----Self-assessment---Limitation--Assessment after limitation---Assessment was framed on 30-6-1997 pertaining to the assessment year 1993-94 while the assessment with regard to the assessment year 1994-95 was completed on 25-6-2000---Validity--­Admittedly returns were filed under the Self-Assessment Scheme--­Assessments were supposed to be completed on or before 30-6-1994 and 30-6-1996 Assessing Officer did not follow the procedure envisaged by the law and proceeded to, complete assessments under normal law much later than the stipulated time---Section 59 (4) of the Income Tax Ordinance 1979 was clear or, the issue that order under S.59(1) of the Income Tax Ordinance, 1979 shall be deemed to have been passed on- such date---If no formal order was passed assessment would be considered to be completed by operation of law on such date i.e. by the thirtieth date of June of the financial, year next following the income year in respect of which a return of total income had been furnished---Assessments framed by the Assessing Officer were time barred and the same were directed to be cancelled---Returns filed by the assessee under Self­ Assessment Scheme were therefore, restored by the Appellate Tribunal.

1993 PTD 332 and 1993 PTD (Trib.) 1421 rel.

Ch. Bashir Ahmed for Appellant.

Ashraf Ahmed Ali, D.R. for Respondent.

Date of hearing: 9th April, 2003

2003 P T D (Trib.) 2308

[Income-tax Appellate Tribunal Pakistan]

Before Javed Iqbal, Judicial Member and Muhammad Mahboob Alam, Accountant Member

I.T.As. Nos.800/KB, 1100/KB to 1102/KB of 2000-2001, decided on 23rd March, 2002.

(a) Income Tax Ordinance (XXXI of 1979)---

----Ss. 24(1), 16(2)(b)(iv) & 66-A---Deductions not admissible--­Perquisite---Loan on concessional/reduced rate of interest---Excess perquisite---Addition---Validity---Addition made by the Inspecting Additional Commissioner under S.66-A of the Income Tax Ordinance, 1979 on account of concessional and reduced interest on the loan granted by assessee/employer to its employee for purpose of house building and transport was confirmed by the Appellate Tribunal.

I.T.A. No.652/KB(HQ) of 1999-2000 rel.

(b) Income Tax Ordinance (XXXI of 1979)---

----S.66-A---Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order ---Revision---Review---Rectification--­Power to revise an order was distinguishable from review and rectification.

(c) Income Tax Ordinance (XXXI of 1979)---

----Ss. 66-A & 5(1)(cc)---Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's Order---Jurisdiction---Assessment by the panel consisting of Inspecting Additional Commissioner--­Cancellation of assessment by the same Inspecting Additional Commissioner---Cancellation of assessment by the same Inspecting Additional Commissioner under S.66-A of the Income Tax Ordinance., 1979---Validity---Assessment framed by the pastel consisting of an Inspecting Additional Commissioner as Chairman was found by the Inspecting Additional Commissioner as erroneous and prejudicial to the interest of Revenue and same ought to have referred to the Commissioner of Income Tax for exercising the jurisdiction as Inspecting Additional Commissioner in terms of S.5(1)(cc) of the Income Tax Ordinance, 1979---Assessment made by a panel consisting of Commissioner of Income Tax, the assumption of jurisdiction by the Inspecting Additional Commissioner under S.66-A of the Income Tax Ordinance, 1979 was not proper and order passed by Inspecting Addl Commissioner under S.66-A of the Income Tax Ordinance, 1979 was cancelled on the point of jurisdiction by the Appellate Tribunal.

Javed Khurram for Appellant.

Muhammad Ali Indhar, D.R. for Respondent.

Date of hearing: 23rd March, 2002.

2003 P T D (Trib.) 2321

[Income-tax Appellate Tribunal Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member and Agha Kafeel Barik, Accountant Member

I.T.A. No.2082/KB of 2001 (Assessment year 2000-2001), decided on 12th March, 2003.

(a) Income Tax---

---- Agreement between private parties-Transaction ---Taxability--­Validity---Taxability of a transaction or otherwise is determinable under the law and not through the recitation made in the agreement between the private parties.

(b) Income Tax Ordinance (XXXI of 1979)---

----S. 27---Capital gains---Principle that "when asset itself is lost and the entire source of business is taken away which is separable from the other business of an assessee, the compensation received would be a capital gain and not revenue receipt" is a principle independent of the fact whether the amount received is on account of a voluntary agreement regarding relinquishing the source of income or otherwise---Said principle remains unaltered on transition from Income Tax Ordinance, 1922 to Income Tax Ordinance, 1979 as the fundamentals on the subject remain the same.

(1908) 77 Tax 35 (Trib.) rel.

(c) Income Tax Ordinance (XXXI of 1979)---

----S. 27---Capital gain---Capital receipt---Any voluntary payment to take away the source of income described by whatever name is a capital receipt not liable to tax.

39 Tax 21 rel.

(d) Income-tax---

----Principle of consistency and certainty---Administration of justice-Principle of consistency and certainty occupy a very prominent position in the law of precedence which has to be adhered to in order to maintain discipline in the administration of justice.

(1998) 77 Tax (Trib.) 35; 39 Tax 21 and 75 Tax 108 rel.

(e) Income-tax---

----Splitting of business in three entities---Camouflaged arrangement--­Validity---Department itself had not made any objection in two earlier assessment years and secondly the issue raised was not subject ­matter of appeal---Objection raised was rejected by the Appellate Tribunal.

(f) Precedent---

---- Foreign Courts---Precedence---Reference to---Superior Courts do refer to precedence of foreign origin and follow the precedents laid down by the foreign Courts on corresponding provisions.

(g) Income Tax Ordinance (XXXI of 1979)---

----S. 27---Capital gain---Capital receipt ---Exemption---Principles--­Capital receipts not in the nature of capital gain are exempt from taxation on the principle of law enunciated by the Supreme Court and not on account of any statutory provision.

(h) Income Tax Ordinance (XXXI of 1979)---

----S. 16(2)(c)(1)---C.B.R. letter No. F.7(3) S.Asstt/97-1295-Pt, dated 26-7-1997---Salary---Capital receipts---S. 16(2)(c)(1) of the Income Tax Ordinance; 1979 makes the capital receipt of compensation on termination of employment taxable which was a capital receipt not liable to tax as per earlier decisions of the Courts.

(i) Income Tax Ordinance (XXXI of 1979)----

----S. 14---Second Schedule ---C.B.R. Letter No. F7(3) S. Asstt/ 97-1295-Pt; dated 26-7-1997---Exemption---Principle of law---Premium on issuance of right shares---Clarification of the Central Board of Revenue regarding non-taxability of premium on issuance of right shares to the share-holders is on the basis of principles of law and not on the basis of any clause in the second Schedule to the Income Tax Ordinance, 1979.

(j) Interpretation of statutes---

---- Where two interpretations are equally possible then the one favourable to the subject was to be adopted and where the transaction could equally be placed within or outside the dividing taxing line, the one falling outside should be preferred against the one falling inside.

2001 PTD 1180 rel.

(k) Income Tax Ordinance (XXXI of 1979)---

----Ss. 27, 28 & 16(2)(c)(1)---Sales of Goods Act (III of 1930)---C. B. R. letter No.F7(3) S.Asstt/97-1295-Pt, dated 26-7-1997---Capital gain--­Amount received for surrender of trade mark and intellectual property was taxed as capital gain under S.27 of the Income tax Ordinance, 1979---First Appellate Authority deleted the addition on the ground that where the asset itself is lost and entire source of business of the assessee was taken away the compensation receipts would be treated as capital and not revenue income and such compensation received could not be brought to tax under S.27 of the Income Tax Ordinance, 1979--­Validity---Such was a voluntary agreement of transfer of trade mark and intellectual property bat the same represented the only earning source of the assessee and the agreement did affect the trading structure of the assessee's business and deprived them from their sole source of income-­Neither any evidence existed on record nor produced during the hearing to the effect that either .the trade mark and intellectual property was not the sole income earning apparatus of the assessee or the same had not deprived them of the said source of income---Interest income of the assessee were fruits of a different tree of crop of a different field---Order of the First Appellate Authority was upheld by the Appellate Tribunal and Appeal of the department was dismissed.

(1998) 77 Tax 35 (Trib.); 39 Tax 21; Shahvallis case AIR 1932 PC 139; 75 Tax 108; Vishmudatta Antharajanam v. CIT (1970) 78 ITR 58 (SC)/(HCJ) and 2001 PTD 1180 rel.

1999 PTD (Trib.) 2356; (1992) 66 Tax 11; (1992) 66 Tax 6; I.T.A. No.698/Kb of 1998-99 and 1979 PTD 4 distinguished.

1999 PTD (Trib.) 2356 ref.

Messrs Aqeel Ahmad Abbasi, Legal Advisor alongwith Inayatullah Kashani, D.R. Javed Iqbal Rana, D.R. and Nazeer Ahmed Shorro IAC for Appellant.

Messrs Shahid Pervaiz Jami alongwith Waseem Sheikh FCA for Respondent.

Date of hearing: 1st March, 2002.

2003 P T D (Trib.) 2343

[Income-tax Appellate Tribunal Pakistan]

Before Abdul Majeed Tiwana, Chairman, Mian Abdul Qayyum, Member (Judicial), Zafar-ul-Majeed, Member (Technical) and Masood Ahmed Daher, Member (Technical)

Appeal No. 327/LB of 2001, decided on 22ndaOctober, 2001.

(a) Sales Tax Act (VII of 1990)---

---S. 2(44)---Time of supply---Advance payments---Sales shall be deemed to have taken place at the time when the advance payments were received.

Messrs Mepal Leaf Cement Factory Limited v. Federation of Pakistan 1999 PTD 3907 irrelevant.

(b) Sales Tax Act (VII of 1990)---

----Ss. 33 & 34---Non-payment of tax was not deliberate---Penalties and additional tax---Validity---While sales tax was being paid by other units in the cement industry on the limestone, clay and other minerals, the appellant's claim that non-payment of tax by them was not deliberate, was not tenable.

Per Mian Abdul Qayyum, Member (Judicial) and Masud Ahmad Dher, Member (Technical) [Majority view]-

(c) Sales Tax Act (VII of 1990)---

----S. 3(i)(a)---Constitution of Pakistan (1973), Federal Legislative List-­Part-1, Fourth Schedule: Art. 70(4), Entry at S. No.51 & 49---Sales of Goods Act (III of 1930) S.19---Regulation of Mines and Oil-fields and Mineral Development (Government Control) Act (XXIV of 1948), S.2(4)---Central Adaptation of Laws Order, 1964---[Presidential Order No. 1 1964], Art. 2---Punjab Mining Concession Rules, 1986---Scope of tax---Limestone/clay---Contentions were that Federal Government could charge sales tax only on the minerals used in generation of nuclear energy and that on rest of the minerals only Provincial Government could levy tax and that limestone/clay was mineral, which was not used for the generation of nuclear energy and it could not be charged to tax by the Sales Tax Department---Validity---Federal Government had no authority to charge Sales Tax on Limestone, Gypsum, Bauxite and Latrite which by implication fell within the domain of the Provincial Government---Demand of sales tax in respect of limestone was illegal--­Provincial Governments had full Constitutional jurisdiction on the whole range mineral sector underground or on surface and had the powers to levy taxes if they so choose or decide---Federal Government's jurisdiction to levy taxes -was confined to entry 51 of Fourth Schedule (Art. 70(4) of the Federal Legislative List, Part-1) i.e. mineral oil, natural gas and minerals for use in generation of nuclear energy, rest of the minerals fell within the legal, jurisdiction of the Provincial Government---Provincial Government were exercising their powers and enjoying their rights through the Regulation of Mines and Oil-fields and Mineral Development [(Government Control)] Act, 1948---Mere fact that minerals were not listed in the Sixth Schedule (listing exempted items) of the Sales Tax Act, 1990 did not confer on the Sales Tax Department the legal right to levy 15% Sales Tax.

Messrs Rehman & Rafiq v. Assistant Collector of Sales Tax Sargodha Sales Tax Appeal No.318/LB of 2000 and Appeal No. 164 of 1999 rel.

(d) Sales Tax Act (VII of 1590)---

----S. 2(44)---Time of supply---Advance payments---No sales tax was leviable on the amount of advances 'received---Advance received was the "bailment of money" and there was no provision in the Sales Tax Act, 1990 which authorizes the Department to tax advance payment---Appellant was only liable to pay sales tax on "sales" which actually took place and not on the payment/receipt of any advance amount which was simply bailment of money.

Messrs Mepal Leaf Cement Factory Limited v. Federation of Pakistan PTCL 2000 CL 195 rel.

(e) Sales Tax Act (VII of 1990)---

----S. 33 & 34---Penalties---Additional tax---Since the demand of Sales Tax was illegal, the question of imposition of additional tax and penalty did not arise.

Per Zafar Majeed, Member (Technical) [Minority view]

Sales Tax Act (VII of 1990).---

----S. 3---Constitution of Pakistan (1973)---Fourth Schedule Entry at S.No.51 & 49---Scope of tax---Limestone/clay---Contention was that Federal Government could charge, sales tax only on the minerals used in generation of nuclear energy and that on rest of the minerals only Provincial Government could levy tax---Limestone/clay was a mineral, which was not used for the generation of nuclear energy and it could not be charged to tax by the Sales Tax Department---Validity---No doubt, the entry at S. No.51 of the Fourth Schedule to the Constitution of Pakistan, 1973 restricted the Federal Government to levy of "taxes on mineral oil, natural gas and minerals for use in generation of nuclear energy", but ,the entry at S.No.49 fully empowered the Federal Government to levy taxes on "the sales and purchases of goods imported, exported, produced, manufactured or consumed" ---Federal Government was competent to levy sales tax on the production of minerals in question. [Miniorit view].

Messrs Rehman & Rafiq v. Assistant Collector of Sales Tax Sargodha Sales Tax Appeal No.318/LB of 2000 not relevant.

M. M. Akram for Appellant.

Amer Ahmed, D.R. for Respondent.

Dates of hearing: 12th, 26th September, 5th, 11th, 15th and October, 2001.

2003 P T D (Trib.) 2406

[Income-tax Appellate Tribunal Pakistan]

Before Khawaja Farooq Saeed, Member (Judicial) and Javed Tahir Butt, Member (Accountant)

I.T.A. No. 2554/LB of 2001, decided on 8th December, 2001.

Income Tax Ordinance (XXXI of 1979)---

---Ss. 66-A & 12(18)---Powers of Inspecting Additional Commissioner to revise 'Deputy Commissioner's order---Deemed income---Cash deposit---Construction of plaza---Cash deposited by the assessee in his account was termed as advance received trot through normal banking channel against sale of shops of plaza without pointing out any party/customer---Assessment was cancelled with the direction' to take cognizance of taxability of such deposit, under S.12(18) of, the Income Tax Ordinance, 1979---Validity---Inspecting Additional Commissioner had not brought on record any evidence to establish that the entire amount of cash deposits or any part of these were received as advances from any customer---To attract the provision of S.12(18) of the Income Tax Ordinance, 1979, the amounts must not only be cash but also be received as advance from a person---Any form of cash deposit did not ipso facto make it a cash .advance--Revenue failed to establish, the important nexus of such-deposits with any customers. who paid advances for shop etc. which was a necessary legal requirement---Inspecting Additional Commissioner failed to establish such amount as cash advances---Order passed by the Inspecting Additional Commissioner under S.66-A of the Income Tax Ordinance, 1979 was vacated and that of Assessing Officer made under S.62 of the Income Tax Ordinance, 1979 was restored by the Appellate Tribunal.

PLJ 2001 Lah. 885: I.T,.A. No.681/LB of 1998 and I.T.A. No.259/KB of 1997-98 rel.

Saqib Bashir, ITR for Appellant.

Anwar Ali Shah, D.R. for Respondent

Date of hearing: 29th September, 2001.

2003 P T D (Trib.) 2410

[Income-tax Appellate Tribunal Pakistan]

Before Rasheed Ahmed Sheikh, Judicial Member and Javed Tahir Butt, Accountant Member

M.A. (Stay) No.597/LB of 2001, decided on 13th October, 2001.

Income Tax Ordinance (XXXI of 1979)---

----Ss.134(6), 62/65/132 & 93(2)---Appeal to the Appellate Tribunal--­Stay of recovery---Appeal against order of setting aside was pending before the Appellate Tribunal---Demand was raised in re-assessment against which appeal was pending before the First Appellate Authority--­Stay of recovery of such demand by the Appellate Tribunal---Validity--­Though the appeal against assessment order made under Ss.62, 65 & 132 of the Income Tax Ordinance, 1979 was pending for adjudication before the First Appellate Authority yet the facts remained that if the Appellate Tribunal ultimately declared re-opening of assessment under Ss.62/65 of the Income Tax Ordinance, 1979 to be made without lawful jurisdiction in the appeal pending before it, the entire structure built on the re-assessment order made under Ss. 62, 65 & 132 of the Income Tax Ordinance, 1979 would fall to the ground which would also result into striking down the illegal tax demand created against the assessee---Re­assessment proceedings initiated by the Assessing Officer under Ss.62, 65 & 132 of the Income Tax Ordinance, 1979 were ancillary and incidental to the main appeal pending for adjudication before the Appellate Tribunal under Ss.62/65 of the Income Tax Ordinance, 1979 therefore, Appellate Tribunal was competent to grant stay of outstanding tax demand created as a result of re-assessment order made under Ss.62, 65 & 132 of the Income Tax Ordinance, 1979 provided the main appeal was pending for adjudicating before it---Appellate Tribunal directed that recovery proceedings against the assessee, initiated by way of issuing notice under S. 93(2) of the Income Tax Ordinance, 1979 be stayed for a period of 45 days from the date of passing the present order or till the final disposal of the assessee's appeal whichever happened earlier---Miscellaneous application was accepted by the Appellate Tribunal.

Uzma Butt, Advocate.

Imran Raza Kazmi, D.R.

Date of hearing: 13th October, 2001.

2003 P T D (Trib.) 2434

[Income‑tax Appellate Tribunal Pakistan]

Before Ehsan‑ur‑Rehman Sheikh, Judicial Member and Muhammad Sharif Chaudhary, Accountant Member

I.T.As. Nos.3547/LB and 3548/LB of 1996, decided on 30th January, 2003.

(a) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑S. 66‑A‑‑‑C.B.R. Letter C. No.7 (2) DT‑14/92, dated 13‑8‑1992‑‑‑Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order‑‑‑Agreement between Association of the Recruiting Agents and the Central Board of Revenue‑‑‑Non‑applicability of‑‑‑Rationale and reasons.

(b) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑Ss. 66‑A & 59(1)‑‑‑C.B.R. Letter C. No.7(2) DT‑14/92, dated 13‑8‑1992‑‑‑Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order‑‑‑Assessments finalised under Self­ Assessment Scheme were cancelled by the Inspecting Additional Commissioner under S.66‑A of the Income Tax Ordinance, 1979 on the ground that the same were not in accordance with the agreement executed between Association of the Recruiting Agents and the Central Board of Revenue‑‑‑Validity‑‑‑Appellate Tribunal held that action taken by the Inspecting Additional Commissioner was contrary to law which could not be approved and to meet the ends of justice order passed by the Inspecting Additional Commissioner was cancelled by the Appellate Tribunal.

1998 PTD (Trib.) 3191; 1990 PTD 903 and 1990 PTD 383 rel.

Dr. Ilyas Zafar, Advocate.

Muhammad Zulifiqar Ali, D.R.

Date of hearing: 7th January, 2003.

2003 P T D (Trib.) 2441

[Income‑tax Appellate Tribunal Pakistan]

Before Syed Masoodul Hassan Shah, Karamat Hussain Niazi (Judicial Members) and S. M. Sibtain, (Accountant Member)

W.T.A. No. 37/IB of 1993‑94, decided on 31st August, 2000.

(a) Interpretation of statutes‑‑‑

‑‑‑‑ Fiscal statute‑‑‑Express language of law maker and not the intendment should be looked into and the Courts have not to circumvent or expand the meaning of charging sections and nothing was to be read in or nothing was to be implied into the provisions of law and there was no room for equity about a tax or about a presumption with regard to a tax.

Principles of Interpretation of Statutes by Sh. Shaukat Mehmood and Sh. Nadeem Shaukat paras.163, 164; 1993 PTD 69; 1993 SCMR 274; 1999 PTD 4126; 1989 PTD 909; 1971 PTD 200 and 1977 PTD (Trib.) 43 ref.

(b) Wealth Tax Act (XV of 1963)‑‑‑

‑‑‑‑S. 5(1)(xv)(ii) & Second Sched., Cl. (7(ii))‑‑‑Exemption in respect of certain assets‑‑‑Assets acquired subsequently by disposing of the first asset which was created out of foreign remittances‑‑‑Not exempted‑‑­Principles.

(e) Wealth Tax Act (XV of 1963)‑‑‑

‑‑‑‑S. 5(1)(xv)(ii) & Second Sched., Cl. 7 (ii), 2, 13‑‑‑C.B.R Circular No.8/42‑WT/84, dated 30‑6‑1985‑‑‑Exemption in respect of certain assets‑‑‑Multiple conversion of foreign remittances‑‑‑Contention was that subsequent asset procured or created from an asset originally created out of foreign remittances within the period of exemption as prescribed under S.5(1)(xv) of the Wealth Tax Act, 1963 could enjoy the protection of exemption to be regarded as an asset created out of foreign remit­tances‑ ‑‑Validity‑‑‑Assessee was not entitled to claim exemption under S.5(1)(xv)(ii) & Second Sched., C1.7(ii)] of the Wealth Tax Act, 1963 in respect of asset which was not created directly out of foreign remittances and which in fact was an asset acquired subsequently from the asset which was originally created out of foreign remittances and that the law had not allowed exemption to the subsequent asset procured from the sale or disposal of the first asset created out of foreign remittances‑‑‑Appeal of the Department was accepted by the Appellate Tribunal.

1996 PTD (Trib.) 388; 1993 PTD 766 = 1993 SCMR 1232; 1995 PTD (Trib.) 1162; 1997 PTD (Trib.) 1928; 1991 PTD (Trib.) 135; Principles of Interpretation of Statutes by Sh. Shaukat Mahmood and Sh. Nadeem Shaukat, paras.163, 164; 1993 PTD 69; 1993 SCMR 274; 1999 PTD 4126; 1989 PTD 909; 1971 PTD 200 and 1977 PTD (Trib.) 43 ref.

1999 PTD (Trib.) 1494 rel.

Abdul Jaleel, D.R. for Appellant.

Khawaja Tahir Rashid, I.T.P. for Respondent.

Mir Ahmad Ali: Amicus curiae.

Date of hearing: 22nd July, 2000.

2003 P T D (Trib.) 2465

[Income‑tax Appellate Tribunal Pakistan]

Before Syed Kabirul Hasan, Judicial Member, Muhammad Akhtar Nazar Mian and Abdul Ghafoor Junejo, Accountant Members

M.As. Nos.775/KB to 781/KB of 2001, decided on 26th April, 2003.

Per Syed Kabirul Hasan, Judicial Member‑‑‑

(a) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑S. 156‑‑‑Rectification of mistake‑‑‑Conflicting decisions‑‑‑Issue not raised at the time of main appeal‑‑‑Rectification of‑‑‑Validity‑‑‑Issue not raised at the time of main appeal could not be considered by way of rectification.

I.T.A. No. 14/KB of 1994‑95; I.T.As. Nos. 13/KB and 13A/KB of 1994‑95; I.T.As. Nos. 313/KB and 313A/KB of 1997-­98; I.T.A. No. 314/KB of 1997‑98; 4.T.As. Nos. 69 to 379/KB, 77 & 388/KB of 1998‑99; I.T.As. Nos.371 to 379/KB of 1998‑99; I.T.A. No. 41/KB of 1997‑98 and I.T.A. No. 212‑A/KB of 1989‑90 ref.

Per Abdul Ghafoor Junejo, Accountant Member‑‑

(b) Income‑tax‑‑‑

‑‑‑‑Precedents‑‑‑Coordinate jurisdiction‑‑‑Tribunal was bound to decide by the Authority of precedent where the Court or Tribunal have considered the matter, which is of coordinate jurisdiction.

(c) Income Tax Ordinance (XXXI of 1979)—­

‑‑‑‑S. 156‑‑‑Rectification of mistake‑‑‑Ex parte assessment‑‑‑Agreement for extraction of oil from agricultural land‑‑‑Lease money/rent‑‑­Taxation of‑‑‑First Appellate Authority deleted the addition holding that amount was received by the assessee as compensation on the basis of capital loss of the agricultural land‑‑‑Ex parte assessment against assessee‑‑‑Rectification of on the strength of precedents ‑‑‑Validity‑‑­Compensation lease money which the assessee received out of compulsory acquisition of agricultural land being capital asset for indefinite period was capital loss‑‑‑Compensation received for the loss of a capital asset had been rightly treated as compensation for the loss of the capital‑‑‑Assessing Officer was not justified to tax income/compensation received on. account of compulsory acquisition of agricultural land‑‑‑Order was rectified accordingly.

I.T.A., No.14/KB of 1994‑95; I.T.As. Nos.13/KB and 13A/KB of 1994‑95; I.T.As. Nos.313/KB and 313A/KB of 1997‑98; I.T.A. No.314/KB of 1997‑98; I.T.As. Nos.69 to 379, 77 & 388/KB of 1998‑99; I.T.As. Nos. 371 to. 379/KB of 1998‑99; 41/KB of 1997‑98; I.T.A. No. 212‑A/KB of 1989‑90; I.T.A. No. 146/KB of 2000-2001 and 1999 PTD 1313 ref.

Per Muhammad Akhtar Nazar Mian, Accountant Member.---

(d) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑S. 156‑‑‑Rectification of mistake‑‑‑Presumption based order,‑‑Order based merely on presumptions was rectifiable when it was established that the presumptions were not rightly made.

(e) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑S. 156‑‑‑Rectification of mistakes‑‑‑Ex parte assessment‑‑‑agreement for extraction of oil from agricultural land‑‑‑Lease money/rent‑‑­Taxation of‑‑‑First Appellate Authority deleted the addition by holding that amount was received by the assessee as compensation on the basis of capital loss of the agricultural land‑‑‑Ex parte assessment by the Appellate Tribunal against assessee‑‑‑Rectification of on the strength of precedents‑‑‑Validity‑‑‑Payment received by land owners on acquisition of their lands by the Government for exploration‑and drilling of oil by the oil company were compensated for the loss of capital assets and not chargeable to tax‑‑‑Appellate Tribunal, by following its earlier decision, held .that the decision made by the First Appellate Authority was a good decision and needed no interference‑‑‑Order was rectified accordingly.

1987‑88/KB 212‑A of 1989‑90 rel.

A.S. Jafri for Applicant.

Ghulam Nabi Sethar, D.R. for Respondent.

Date of hearing: 7th February, 2002.

2003 P T D (Trib.) 2499

[Income‑tax Appellate Tribunal Pakistan]

Before Munsif Khan Minhas, Judicial Member and Muhammad Munir Qureshi, Accountant Member

I.T.A. No.2467/LB of 2002, decided on 18th January, 2003.

(a) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑S. 12(9‑A), proviso (ii)‑‑‑Income deemed to accrue or arise in Pakistan‑‑‑Departmental contention that in view of proviso (ii) to subsection (9A) of S.12 of the Income Tax Ordinance, 1979, any dividend distribution for assessment year 1999‑2000 made after 30‑6‑1999 i.e. close of the stipulated income year, would not be relevant to assessment year 1999‑2000 as assessment year 1999‑2000 closed on 30‑6‑1999 and all company operations having a bearing on the determination of this income also came to an end on this date was clearly not tenable.

(b) Income Tax Ordinance (XXXI of 1979)‑---

‑‑‑‑S. 12(9‑A), proviso (ii) & Second Sched., Part IV, Cls. 59, 66‑A‑‑­Finance Act (IV of 1999)‑‑‑Income deemed to accrue or arise in Pakistan‑‑‑ Exemption from specific provisions‑‑‑Assessment year 1999‑2000‑‑‑Dividend, declaration of‑‑‑Dividend declared as on 21‑8‑1998 and 23‑8‑1999 were found to be not relevant to assessment year 1999‑2000 as the dividend declarations had been allegedly made outside the time frame relevant to income year 1998‑99 as evident from the dates of dividend declaration made by the company‑‑‑Consequently, dividend distributions was found to be much less than 40% of the after tax profits declared by the company rendering the company subject to the mischief of S.12(9‑A) of the Income Tax Ordinance, 1979 and the deemed income was determined by the Inspecting Additional Commissioner‑‑‑Validity‑‑‑Both the dividends were placed within the time‑frame relevant to income year 1998‑99 i.e. assessment year 1999‑2000‑‑‑Departmental contention that such dividend did not relate to assessment year 1999‑2000 was misconceived‑‑‑Distribution of dividend could not be related to the current years profit only‑‑‑Dividend was always distributed out of the accumulated, brought forward profits i.e. the retained earnings of the company‑‑‑No provisions of law existed that could compel a company to distribute dividend out of the current years profits only‑‑‑Company may announce a dividend even when loss had been declared currently‑‑‑Section 12(9A) of the Income Tax Ordinance, 1979 came on the statute in July, 1999 while such dividend had already been announced in August, 1998 and May, 1999 and when making these dividend declarations the assessee‑company clearly had no knowledge that S.12(9A) of the Income Tax Ordinance, 1979 will be brought on the statute in July, 1999‑‑‑Company committed no offence to arrange its affairs as to minimize its tax liability under the law‑‑­Section 12(9A) of the Income Tax Ordinance, 1979 provided a specific opportunity to a company to declare dividend equal to 40% of its after tax profits or 50% or the paid‑up capital whichever was less, and so escape levy of tax on deemed income under S.12(9A) of the Income Tax Ordinance, 1979 that would be a necessary consequence in case dividend was not so declared and it would be foolhardy for a company to avoid dividend declaration within the stipulated parameters‑‑‑Dividend distributions made in income year 1998‑99 were properly related to assessment year 1999‑2000 and aggregate of such dividend distributions amount was well over 40% of the after tax profits of the company—­Company was fully protected from the mischief of S.12(9‑A) of the Income Tax Ordinance, 1979‑‑‑Order of the Inspecting Additional Commissioner passed under S.66‑A of the Income Tax Ordinance, 1979 was vacated and reinstated that of the Assessing Officer by the Appellate Tribunal.

(c) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑Second Sched., Part IV, Cl. (59) & S.12(9A)‑‑‑Exemption‑‑‑Cash distribution‑‑‑Exemption from specific provisions‑‑‑Clause 59 of Part IV of the Second Sched. of the Income Tax Ordinance, 1979 made it easier for companies to qualify for exemption and made no express mention of "cash distribution" of dividend as done in S.12(19‑A) of the Income Tax Ordinance, 1979 and instead simply made mention of profit distribution only which appeared to be deliberate and to further facilitate companies in qualifying for exemption and resultantly, a company distributing dividend through a mix of cash distribution and issue of bonus shares be able to qualify for exemption.

(d) Income Tax Ordinance (XXXI of 1979)‑‑‑--

‑‑‑‑Second Sched., Part IV, Cl. (59) & S.12(9‑A)‑‑‑Exemption from specific provisions‑‑‑Qualification for exemption‑‑‑After enactment of Cl. (59) of Part IV of the Second Sched. of the Income Tax Ordinance, 1979 only one interpretation was possible as regards the qualification for exemption front the provisions of S.12(9A) of the Income Tax Ordinance, 1979 and that was that the company 'distribute dividend' equal to 40% of its after tax profits of 50% of the paid‑up capital, which ever was less‑‑‑No requirement was mentioned in Cl. (59) of Part IV of the Second Sched. of the Income Tax Ordinance, 1979 that company distribute dividend in cash only‑‑‑Clause 59 of Part IV of, the Second Sched. of the Income Tax Ordinance, 1979 had effectively reduced the scope of S.12(9‑A) of the Income Tax Ordinance, 1979 and such stipulation of simple dividend distribution and nor cash only dividend distribution was one of the ways in which Cl. (59) of Part IV of the Second Sched. of the Income Tax Ordinance, 1979 had reduced the scope of S.12(9A) of the Income Tax Ordinance, 1979.

(e) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑S. 12(9A)‑‑‑Income deemed to accrue or arise in Pakistan‑‑­Dividend‑‑‑Non‑deposit of dividend warrants by shareholders‑‑‑Fact that some dividend warrants may not be deposited for encashment by shareholders could not be taken to mean that dividend had not been distributed.

(f) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑S. 12(9A) & Second Sched., Part IV, Cl. (59)‑‑‑Section 12(9A) of the Income Tax Ordinance, 1979 and Cl. 59 of Part‑IV of the Second Sched. of the Income Tax Ordinance, 1979 were required to be read together in case of all such public limited listed‑companies that declared profits‑‑‑In case of public limited listed‑companies declaring losses, Cl. (59) of Part IV of the Second Sched. of the Income Tax Ordinance, 1979 did not come into play at all and such companies could escape the mischief of S.12(9A) of the Income Tax Ordinance, 1979 only by declaring `cash dividend' on a scale as to ensure that the reserves did not exceed 50 of the paid up capital, within the time‑frame laid down in provisos (i) & (ii) of S.12(9A) of the Income Tax Ordinance, 1979‑‑‑Built in bias thus existed in favour of companies declaring profits and against companies declaring losses.

(g) Precedent‑‑‑

‑‑‑‑ View of Courts‑‑‑Binding effect‑‑‑View expressed by the High Court was an authoritative pronouncement by the superior judiciary and was thus binding on the Department and all subordinate forums.

Naeem Aklitar Sh., F.C.A. for Appellant.

Abdul Rasheed, D.R. and Shahid Jamil, L.A. for Respondent.

Date of hearing: 23rd November, 2002.

2003 P T D (Trib.) 2530

[Income‑tax Appellate Tribunal Pakistan]

Before Khawaja Farooq Saeed, Judicial Member and Imtiaz Anjum, Accountant Member

W.T.As. Nos.1064/LB, 1667/LB of 1996 and I.T.A. No.5415/LB of 1997, decided on 30th January, 2003.

(a) Finance Act (XII of 1991)‑‑‑

‑‑‑‑S. 12(1)‑‑‑C.B.R. Letter C. No.3(1) WT/93, dated 19‑4‑1993‑‑­Corporate Assets Tax ‑‑‑Assessee a leasing company‑‑‑Assets leased out to various lessees was not disclosed by the assessee‑‑‑Department found that actual owner of such assets was the assessee/leasing company and lease‑hold assets were their fixed assets chargeable to Corporate Assets Tax under the provision of S.7 of the Finance Act, 1991‑‑‑Assessee contended that by virtue of lease the actual owner was the lessee and not the lessor and the same had wrongly been charged to Corporate Assets Tax‑‑‑Validity‑‑‑Agreement was of an ordinary lease rental in which .the asset was not compulsorily sold on completion of lease rental agreement‑‑‑Factual position of the contract was that the assessee was owner of the assets leased out and this was not a case of a hire purchase agreement‑‑‑Ownership remained with the assessee and the lessee was only a beneficiary as he was to utilize the machinery on payment of rental‑‑‑Lessee , did not have right to claim ownership in any form‑‑­Option .to buy was subject to total discretion of the seller who may or may not sell it ‑‑‑Assessee had also the right to transfer the lease to a third party but the lessee did not have any right to further, sublet or transfer any part of the leased machinery/assets‑‑‑Contracts nowhere indicated that such situation existed where a person could say with authority that the lessor was under compulsion to transfer the machinery in lease to. lessee on a fixed or determined value at a subsequent stage‑‑­ownership had been transferred arid was to remain in the name of assessee while the right of alienation also remained with assessee‑‑­Assets had been given on rent by the assessee and no one else had got any right to call such property as his belonging‑‑‑Assets were fully owned by the assessee‑‑‑If other company had shown it as its assets, this could not be used as a lever for misapplication of a. provision of law‑‑­Assessee was fully liable to pay Corporate Assets Tax on such lease­hold assets.

PLD 1986 SC 53 ref.

(b) Finance Act (XII of 1991)‑‑‑

‑‑‑‑S. 12(7)‑‑‑Corporate Assets Tax‑‑‑Additional tax ‑‑‑Penalty‑‑­Appellate Tribunal disapproved the charge of additional tax and penalty on Corporate Assets Tax.

2000 PTD 1057 and W.T.A. No. 1338/LB of 2000 rel.

M. Awais, A.C.A. for Appellant.

Muhammad Asif, D.R. for Respondent.

Date of hearing: 14th November, 2002.

2003 P T D (Trib.) 2547

[Income‑tax Appellate Tribunal Pakistan]

Before Munsif Khan Minhas, Judicial Member and Muhammad Munir Qureshi, Accountant Member

I.T.A. No. 855/LB of 2002, decided on 30th April, 2003.

(a) Income‑tax‑‑--

‑‑‑‑Total income‑‑‑Determination‑‑‑Application of sales tax law/rules‑‑­Relevance‑‑‑Assessing Officer when making a determination of total income for purposes of levy‑of income‑tax was not bound to refer to the sales tax record maintained, as per sales tax law/rules.

(2000) 82 Tax 105.(Trib.) rel.

(b) Income Tax Ordinance (XXXI of 1979)‑‑‑--

‑‑‑‑S. 13(1)(a)‑‑‑Addition‑‑‑Advance from customers‑‑‑Genuineness of parties‑‑‑Record of sales tax‑‑‑Assessing Officer, purely on the basis of sales tax record, was not bound to hold that the cited parties were genuine parties.

(c) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑S.13(1)(a)‑‑‑Addition‑‑‑Advance from customers‑‑‑No documenta­tion‑‑‑Adverse inference‑‑‑Fact that huge amounts had been shown as having been deposited by the specific parties for which no documentation was admitted could only cast an adverse inference against the assessee‑‑­Assessing Officer could not be forced to accept the undocumented transactions.

(d) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑-‑Ss. 13(1)(a) & 62‑‑‑Addition‑‑‑Notice‑‑‑Non‑issuance of specific notice styled as notice under S.13(1)(a) of the Income Tax Ordinance, 1979‑‑‑Validity‑‑‑Notice under S.62 of the Income Tax Ordinance, 1979 had been issued, comprehensively detailing the facts and circumstances on which assessee's explanation was required and reference to S.13(1)(a) of the Income Tax Ordinance, 1979 had been made therein‑‑‑Necessary opportunity had been accorded to assessee‑‑‑No prejudice had been caused to assessee by the alleged non‑issuance of .notice styled as notice under S.13(1)(a) of the Income Tax Ordinance, 1979‑‑‑Objection amounted to legal quibbling and carried no weight.

(e) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑S. 13(1)(a)‑‑‑Addition‑‑‑Independent charging section‑‑‑Section 13 of the Income Tax Ordinance, 1979 was an independent charging section and it was the intent of the Legislature to allow its independent invocation‑‑‑No substantive defect in law and procedure appeared that could render the addition made under S.13 (1)(a) of the Income Tax Ordinance, 1979 to be untenable in law.

(f) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑S. 13(1)(a)‑‑‑Addition‑‑‑Advance from customers‑‑‑Burden of proof of the same was squarely on the assessee when confronted with the credits found to be unexplained as to their source.

(g) Income Tax Ordinance (XXXI of 1979)‑‑‑--

‑‑‑‑S. 13(1)(a)‑‑‑Addition‑‑‑Advance from customers ‑‑‑Undocumented transaction‑‑‑Effect‑‑‑When an assessee chooses to have business dealings with persons placed in the informal sector of the economy and as a consequence the assessee fails to maintain proper documentation for its dealings with such persons, then the assessee must accept the necessary consequences, when the Assessing Officer refused to acknowledge such undocumented transaction.

(h) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑S. 13(1)(a)‑‑‑Addition‑‑‑Advance from customers‑‑‑Genuineness of parties‑‑‑Sales were made against advance amount‑‑‑Contention was that bona fides of such parties automatically stood established on the acceptance of declared sales by the Assessing Officer‑‑‑Validity‑‑‑Fact that the Assessing Officer did not "estimate" sales could not be taken to mean that the bona fides of the persons claimed to have made advance amounts to assessee/company had indeed been established.

(i) Income fax Ordinance (XXXI of 1079)‑‑‑

‑‑‑‑S. 13(1)(a)‑‑‑Addition‑‑‑Advance from customers‑‑‑Genuineness of parties‑‑‑Sale against advances‑‑‑Non‑appearance of persons‑‑‑Record of sales tax‑‑‑Effect‑‑‑Cited persons having not appeared before .the Assessing Officer could not be considered genuine persons under sales tax law when no actual effort had ever been made to look into their bona fides.

(j) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑S. 13(1)(a)‑‑‑Addition‑‑‑Advances from customers‑‑‑Payments through Banks from third parties accounts‑‑‑No documentation ‑‑‑Benami parties‑‑‑Addition of sale to such parties‑‑‑Validity‑‑‑Assessing Officer when making the computation of assessee's income could possibly have estimated sales in view of the un verifiability of the cited persons who had made advance payments and were also shown to have purchased from the assessee‑‑‑Fact that Assessing Officer did not estimate sales could not necessarily be taken to mean that he had accepted the said persons as genuine and verifiable persons when he computed the trading results‑‑‑When Assessing Officer found that such persons were not genuine persons insofar as there was no documentation that could conclusively establish their alleged dealings with the assessee in the context of advance payments made‑‑‑Assessing Officer had no choice but to invoke the provisions of S.13(1)(a) of the Income Tax Ordinance, 1979‑‑‑Assessing Officer could not be compelled to accept the DDs and TTs referred to by the assessee as satisfactory evidence to substantiate remittances allegedly made to the assessee by such parties‑‑‑Mere fact that the assessee had in its possession certain DDs and TTs purportedly made out by the persons who were claimed to have made advance payments to the assessee, was not by itself conclusive evidence of the veracity of assessee's contention, especially when on enquiry made from Banks, the Assessing Officer found that the contention as made by the assessee was not established and the payments had not been made out of the Bank accounts of .such persons‑‑‑First Appellate Authority had rightly upheld the addition made under S.13(1)(a) of the Income Tax Ordinance, 1979 by the Assessing Officer in circumstances.

(1988) 57 Tax 224; (1984) 51 Tax 11; 1993 PTD 1198; (1989) PTD 638; 2000 PTD 1320; (1963) 7 Tax 184; (1973) 27 Tax 229; 1984 PTD 438; (1978) 114 ITR 691 and (1968) 17 Tax 78 ref.

(2000) 82 Tax 105 (Trib.); 1981 PTD 213 and (1978) SCC 226 Muhammad Iqbal Khawaja and Faisal Iqbal Khawaja for Appellant.

Abdul Rasheed, D.R., Dr. Hamid Ateeq, D.C.I.T. and Shahid Jamil, L.A. for Respondent.

Date of hearing: 2nd November, 2002.

2003 P T D (Trib.) 2565

[Income‑tax Appellate Tribunal Pakistan]

Before Syed Nadeem Saqlain, Judicial Member and Javed Tahir Butt, Accountant Member

I.T.A. No.2296/LB of 2001, decided on 27th May, 2003.

Income Tax Ordinance (XXXI of 1979)‑‑‑--

‑‑‑‑S. 16(2) & Second Sched., Part I, Cl. (39)‑‑‑Salary‑‑‑Exemptions‑‑Muzaffargarh Allowance‑‑‑ Generation Allowance‑‑‑ Generation Allowance was exempt while the Muzaffargarh Allowance was not exempt and was part of taxable salary.

I.T.A. No. 4009/LB of 1999 rel.

Talat Altaf Khan, D.R. for Appellant.

Mumtaz‑ul‑Hassan for Respondent.

Date of hearing: 27th May, 2003

2003 P T D (Trib.) 2567

[Income‑tax Appellate Tribunal Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member and Muhammad Akhtar Nazar Mian, Accountant Member

I.T.As. Nos. 498/KB to 501/KB of 2002, decided on 5th May, 2003.

(a) Income Tax Ordinance (XXXI of 1979)‑‑‑--

‑‑‑‑Ss. 65, 55 & 80B‑‑‑Additional assessment‑‑‑Return of total income‑‑­Presumptive income‑‑‑Non‑declaration of presumptive income in return‑­Re‑opening of assessment‑‑‑Validity‑Income covered through presumptive taxation had to be declared in the return required to be filed under S.55 of the Income Tax Ordinance, 1979 by an assessee who had income from sources other than those covered by the presumptive taxation‑‑‑Even if it was presumed that provisions of S.80B of the Income Tax Ordinance, 1979 were applicable to the interest received by the assessee from the company, even then the forms of the returns submitted by the assessee did not show the correct income to be declared legally because income said to be chargeable to tax under S.80B of the Income Tax Ordinance, 1979 had never been included in the returns submitted under S.55 of the Income Tax Ordinance, 1979 ‑‑‑ Returns having not been correctly verified and some source of income which were required to be declared in the return were not so declared, case was fit for proceeding under S.65 of the Income Tax Ordinance, 1979.

(b) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑Ss. 65, 59(1), 50(7D), 80B & 143B‑‑‑Additional assessment‑‑‑Change of opinion‑‑‑Interest income was declared under presumptive tax regime by making payment alongwith return under S.55 of the Income Tax Ordinance, 1979‑‑‑Assessment was completed under S.59 (1) of the Income Tax Ordinance, 1979‑‑‑Re‑opening of assessment ‑‑‑Validity‑‑­Where assessment had been completed under S.59(1) of the Income Tax Ordinance, 1979, there was no occasion with the Assessing Officer to have given any opinion on the issue as to whether the interest income was rightly declared to be so chargeable under S.80B of the Income Tax Ordinance, 1979 or not‑‑‑Even if it is held that the assessee had incorrectly declared interest to be an amount covered under S.80B(1) of the Income Tax Ordinance, 1979, and it was so accepted by the Assessing Officer, then the provisions of S.65 of the Income Tax Ordinance, 1979 would become applicable as the Assessing Officer was led to believe what was not correct‑‑‑Where the amount of interest received was accepted as chargeable under S.80B of the Income Tax Ordinance, 1979 without making any investigation, that acceptance was perverse on the basis of facts on record as the amount of interest received was not an amount as mentioned in S.80B of the Income Tax Ordinance, 1979 since neither tax was deductible nor actually deducted under S.50(7D) of the Income Tax Ordinance, 1979 and by making cash payments, and mala fide submitting the statement purported to be a statement under S. 143B of the Income Tax Ordinance, 1979, the assessee led the Assessing Officer to arrive at a perverse opinion and even then the provisions of S.65 of the Income Tax Ordinance, 1979 would be legally attracted.

(c) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑Ss. 65 & 143B‑‑‑Additional assessment‑‑‑Interest income‑‑‑Filing of statement in the garb of a statement under S.143B of the Income Tax Ordinance, 1979 declaring receipt of the interest legally and factually incorrect leading the Assessing Officer to acceptance of the said statement at its face which amounted to an opinion or view which was perverse in law and on facts‑‑‑Action under S.65 of the Income Tax Ordinance, 1979 was correctly taken by the Assessing Officer.

(d) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑Ss. 65, 59(1), 50(7D), 80B & 143‑B‑‑‑Additional assessment‑‑‑Salary income‑‑‑Interest income on the loan advance to company‑‑‑Return was filed declaring only salary, income‑‑‑Statements under S. 143‑B of the Income Tax Ordinance, 1979 were filed showing interest income, claiming that 10% of the interest income had been deducted by the Company as tax and deposited which had been accepted‑‑‑Later on assessments had been reopened under S.65 of the Income Tax Ordinance, 1979 on the ground that assessee had been assessed at too low a rate because the interest income had incorrectly been subjected to lower rate of tax at 10% of the Income, treating same to be of the nature on which provisions of S.80B of the Income Tax Ordinance, 1979 were applicable although the same were not applicable‑‑‑Validity‑‑‑Action under S.65 of the Income Tax Ordinance, 1979 had rightly been taken by the Assessing Officer because charge of tax under S.80B of the Income Tax Ordinance, 1979 was perverse to which he was led due to filing of a statement purported to be a statement under S.143B falsely indicating that tax had been withheld under S.50(7D) of the Income Tax Ordinance, 1979, although the Company had not withheld any tax and rightly so because in respect of this account or deposit pertaining to the loan no instrument had been issued by the Company and thus S.50(7D) of the Income Tax Ordinance, 1979 was not applicable and the assessee having failed to declare total income from all sources computable under the provisions of the Income Tax Ordinance, 1979 in the return of income filed under S.55 of the Income Tax Ordinance, 1979 had concealed particulars of income and therefore, had made himself liable to action under S.65 of the Income Tax Ordinance, 1979 upon proper appreciation of the information contained in the statement submitted by him in the garb of the statement under S. 143B of the Income Tax Ordinance, 1979‑‑‑Appeal of the assessee was rejected by the Appellate Tribunal.

National Beverages (Pvt.) Ltd. 2001 PTD 633; S.M. Abdullah v. CIT (1966) 14 Tax 161 and H.M. Abdullah v. The I.T.O. 1991 PTD 217 ref.

1997 SCMR 1256 and 2002 PTD (Trib.) 303 distinguished.

Rehan Hassan Naqvi and Ms. Lubna Pervaiz for Appellant.

Inayatullah Kashani, D.R. for Respondent.

Date of hearing: 3rd May, 2003.

2003 P T D (Trib.) 2586

[Income‑tax Appellate Tribunal Pakistan]

Before Ehsan‑ur‑Rehman, Judicial Member and Muhammad Munir Qureshi, Accountant. Member

I.T.As. Nos.878/LB and 879/LB of 2000, decided on 31st March, 2003.

(a) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑S. 52, Expln.‑‑‑Finance Act (IV of 1999)‑‑‑Application of explanation‑‑‑Explanation was fully applicable retrospectively to all assessments pertaining to prior years, whether pending or finalized on 1‑7‑1999.

2000 PTD (Trib.) 466; I.T.As. Nos.5931/LB to 5936/LB of 1996; I.T.As. Nos. 4659/LB to 4660/LB of 1999 and 1997 PTD (Trib.) 879 rel.

I.T.A. No.882/LB of 2000 distinguished.

2001 PTD (Trib.) 1040 per incuriam.

(b) Income Tax Ordinance (XXXI of 1979)‑‑‑--

‑‑‑‑S. 50(4) & 52‑‑‑S.R.O. 368(I)/94, dated 7‑3‑1994‑‑‑S.R.O. 828(I)/91, dated 24‑8‑1991‑‑‑Non‑deduction of tax from payments made for manufacturing of exported cloth‑‑‑Validity‑‑‑In case of "self­ manufactured exports", all supplies of materials utilized in manufacture of finished product for export were exempt from tax deduction under S.50(4) of 'the Income Tax Ordinance, 19'79‑‑‑Assessee was not a self­ manufacturer of cloth that it had exported‑‑‑Cloth had been manufactured by third parties‑‑‑Exemption from tax deduction under S.50(4) of the Income. Tax Ordinance, 1979 from payments made to third party manufacturers of cloth, was not available to the assessee.

(c) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑S. 50(4)‑‑‑Deduction of tax at source‑‑‑Assessing Officer had to scrutinize each and every payment to determine as to which of these payments involved tax withholding. under S.50(4) of the Income Tax Ordinance, 1979 rather than to hold the assessee liable to tax withholding in respect of total payment‑‑‑Validity‑‑‑Assessee must lead necessary evidence and in absence of specific evidence made available by the assessee/payer, the Assessing Officer of payer was justified in treating the aggregate payments made as subject to tax withholding under S.50(4) of the Income Tax Ordinance, 1979 as these payments had been made by the assessee on account of cloth manufactured by third party for the assessee.

(d) Income Tax Ordinance (XXXI of 1979)‑‑‑

----Ss. 52&50(4) ---- S.R.O. 368(I)/94, dated 7-3-1994---- S.R.O. 828(I)/91, dated 24-8-1991--- Liability of persons failing to deduct or pay tax---Exported cloth was got manufactured from third party---No deduction under S.50(4) of the Income Tax Ordinance, 1979 was made at the time of making payment to such third party on the ground that it being an export was exempted from the provision of S.50(4) of the Income Tax Ordinance, 1979‑‑‑Department treated the assessee as "assessee in default" under S.52 of the Income Tax Ordinance, 1979 as the payments made for manufacturing of cloth were for "services rendered"‑‑‑Validity‑‑‑Manufacturing of cloth' by third party utilizing yarn supplied by the assessee was in the nature of "services rendered"‑‑­Weaving units weave cloth strictly as per specifications given to them by the assessee and did not manufacture/sell finished cloth on their own account‑‑‑Such work done was in the nature of "services rendered" and was distinguishable from dying and calendering work that entail value addition to cloth' and the finished production (cloth), though increased in value at the end of the dying/calendering process, remains identifiable ascloth'‑‑‑Where cotton yarn or synthetic yarn was "converted "into cloth by a weaving unit, it changes into a new product and this was not a case "value addition" to cloth and this transformation was only possible because of the services rendered by the weaving unit, "converting" the yarn into cloth in view of such specialized "services rendered" by the third party weaving units, the payments made to them by the assessee were subject to tax withholding under S.50(4) of the Income Tax Ordinance, 1979‑‑‑Such payments made were not akin to "value addition" payments made on account of dying/calendering/finishing of cloth‑‑‑Provision of S.52 of the Income Tax Ordinance, 1979 had been rightly invoked in circumstances.

(e) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑Ss. 86 & 50(4)‑‑‑Charge of additional tax for failure to deduct and pay tax‑‑‑Deductions were not made‑‑‑Charge of additional tax‑‑­Validity‑‑‑Additional tax‑ charged under S.86 of the Income Tax Ordinance, 1979 was essentially consequential to delayed deposit of tax that was required to have been deducted under S.50(4) of the Income Tax Ordinance, 1979 and charge of additional tax was mandatory in cases where default was established and thus there was no escape of such levy.

Hamid Masood, F.C.A. for Appellant.

Anwar Ali Shah, D.R. for Respondent.

Date of hearing: 11th March, 2003.

2003 P T D (Trib.) 2602

[Income‑tax Appellate Tribunal Pakistan]

Before Inam Ellahi Sheikh, Chairman and Munsif Khan Minhas, Judicial Member

I.T.A. No.325/IB of 2002, decided on 19th July, 2003.

Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑Ss. 108 & 50(2)(b)‑‑‑Penalty for failure to furnish return of total income and certain statements‑‑‑Reduction in penalty by First Appellate Authority‑‑‑Appeal for petty amount of penalty ‑‑‑Validity‑‑Mere relief of Rs.3,500 in penalty without involvement of any question of law should have been avoided because filing of the appeal‑ required a lot of expenditure which should best be avoided‑‑‑Appeal was dismissed by the Appellate Tribunal.

Muhammad Boota Khan, D.R. for Appellant.

Nemo for Respondent.

Date of hearing: 19th July, 2003.

2003 P T D (Trib.) 2620

[Income‑tax Appellate Tribunal Pakistan]

Before Munsif Khan Minhas, Judicial Member and Muhammad Sharif Chaudhry, Accountant Member

W.T.As. Nos. 441/LB and 442/LB of 2002, decided on 8th March, 2003.

Wealth Tax Act (XV of 1963)‑‑‑

‑‑‑‑S. 35‑‑‑Rectification of mistake‑‑‑Order passed by the Inspecting Additional Commissioner under S. 17B of the Wealth Tax Act, 1963 was rectified by the Deputy Commissioner of Wealth Tax under S.35 of the Wealth Tax Act, 1963‑‑‑Validity‑‑‑Only that Authority could rectify an order who had passed it originally and rectification could be made only in respect of a mistake which was apparent from the record‑‑‑If the contention of the Revenue that Inspecting Additional Commissioner's order passed under S.17B of the Wealth Tax Act, 1963 had rightly been rectified by the Deputy Commissioner of Wealth Tax under S.35 of the Wealth Tax Act, 1963 was accepted, then it would not only be against the spirit of law and principle of functional jurisdiction assigned to various Authorities but it would also lead to anarchy and in that case it may happen that the Assessing Officers may start rectifying the orders passed by the Appellate Authorities like Commissioner and Appellate Tribunal which the law did not permit‑‑‑Rectification order passed by the Deputy Commissioner of Wealth Tax under S.35 of the Wealth Tax Act, 1963 was rightly cancelled by the First Appellate Authority which was maintained by the Appellate Tribunal‑‑‑Appeal of the Department was dismissed.

Bashir Ahmad Shad, D.R. for Appellant.

Shahid Pervaiz Jami for Respondent.

Date of hearing: 8th March, 2003.

2003 P T D (Trib.) 2625

[Income‑tax Appellate Tribunal Pakistan]

Before Muhammad Jahandar, Judicial Member and Mahmood Ahmad Malik, Accountant Member

I.T.As. Nos.265(IB) to 267(IB) of 2001‑2002, decided on 31st March, 2003.

Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑Ss. 80‑D & 62‑‑‑Pakistan Telecommunication Employees Trust (Re­organization) Act (XVII of 1996), CI. 44(9)‑‑‑Pakistan Telecommunica­tion Employees Trust (Investment) Rules, 1997‑‑‑C.B.R. Circular No. 10 of 1991, dated 30‑6‑1991‑‑‑S.R.O. 946(I)/1997, dated 6‑10‑1997‑‑­Income from making investment of pension fund ‑‑‑Chargeability of tax under S. 80‑D of the Income Tax Ordinance, 1979‑‑First Appellate Authority deleted such tax on the ground that provisions of S‑80‑D of the Income Tax Ordinance, 1979 were not applicable on income from investment in Government securities, interest on late payment of contributions and profit and loss sharing account because gross receipts from these sources were not received under the head "business" and profession‑‑‑Department pleaded that Investment rules of the trust showed that the business of the trust was to make investment in Government : approved interest bearing securities and shares of listed companies and such earnings of the trust from investments were business income chargeable to tax under the provision of S.80‑D of the Income Tax Ordinance, 1979‑‑‑Validity‑‑‑Pakistan Telecommunication Employees Trust was managed by a Board of .Trustees‑‑‑Purpose of the establishment of the trust was the maintenance of pension fund‑‑‑Pension fund consists of amounts received from the employee's pension fund contribution, donations and investments and profits, gains and other returns accrued on such investments‑‑‑Legal status and scheme given in accounts showed that trust was established to provide gratuity, superannuation, retirement, family and invalid pension. and commutation to the employees‑‑‑Department failed to show that assessee was engaged in any business or industrial undertaking‑‑‑Provisions of S.80‑D of the Income Tax Ordinance, 1979 were applicable on "gross receipts" from "business or profession" profits and gains which were ordinarily chargeable under S.22 of the Income Tax Ordinance, 1979‑‑‑Since income of the assessee fell under the head of "income from other sources" the provisions of S.80‑D of the Income Tax Ordinance, 1979 were not attracted‑‑‑Order of the First Appellate Authority was maintained by the Appellate Tribunal and appeal of the Department was rejected.

I.T.A. No.548(IB) of 1998‑99; I.T.As. Nos. 110, 111(IB) of 1997‑98; I.T.A. No.1143(IB) of 1999‑2000; 1998 PTD (Trib.) 1099; 1980 PTD 322; 1993 PTD (Trib.) 739 and 1994 PTD 1171 (203 ITR 881) irrelevant/distinguished.

1999 PTD (Trib.) 708 and 2000 PTD (Trib.) 3776 ref, Naushad Ali Khan, D.R. for Appellant.

Khalid Mehmood, ACA for Respondent.

Date of hearing: 7th March, 2003.

2003 P T D (Trib.) 2668

[Income‑tax Appellate Tribunal Pakistan]

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

I.T.As. Nos. 387/LB and 388/LB of 2003, .decided on 23rd April, 2003

(a) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑S. 62(1)‑‑‑Assessment on production of accounts, evidence etc.‑‑­Disallowance of expenses without confrontation‑‑‑Validity‑‑‑Factually the assessee was not confronted at all with the defects with regard to the disallowances out of the profit and loss account expenses‑‑‑If Assessing Officer did not conform with the mandatory provisions of S.62(1) of the Income Tax Ordinance, 1979 and failed to confront the assessee with regard to the defects in books of account, all the proceedings conducted subsequent thereto will be considered null and void and unsustainable in the eye of law‑‑‑Since the Assessing Officer did not comply with the provisions of S.62(1) of the Income Tax Ordinance, 1979 on the issue of pointing out defects in the books of accounts and confronting the same to the assessee, disallowance made out of profit and loss account were liable to be deleted.

(b) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑S. 62(1)‑‑‑Assessment on production of accounts, evidence etc.‑‑­ Disallowance of expenses without pointing out any defects in the books of accounts and on the basis of mere stock phrases i.e. personal element',too excessive', unvouched and unverifiable' andnot supported by the vouchers' etc.‑‑‑Validity‑‑‑Assessing Officer used common jargon. i.e. "personal element" and unvouched, ignoring the fact that it was a case of public limited company, which being a juristic and legal person could not be equated with the case of an individual, because a juristic person could not be attributed the element of personal use‑‑­Stricter test was required to bring home that any employee/director of the company had in fact used or availed the same which was not directly or indirectly connected with the business of the company‑‑‑Since Assessing Officer failed to point out any defect in spite of production of books of accounts with all the relevant details, did not cite any instance of unverifiability except using common jargon and stock phrases, and omitted to confront the assessee with the disallowances, the First Appellate Authority was not justified to send back the case for de novo consideration on the issue‑‑‑Order passed by the First Appellate Authority was vacated and addition made in profit and loss accounts was directed to be deleted by the Appellate Tribunal.

2002 PTD 1496; 1991 PTD (Trib.) 643; 1998 PTD (Trib.) 860 and 1989 PTD (Trib.) 39 rel.

(c) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑S. 62(1)‑‑‑Assessment on production of accounts, evidence etc.‑‑­Disallowance of expenses without confrontation and pointing out any defects in the books of account and on the basis of mere stock phrases i.e. personal element',too excessive', unvouched and unverifiable' andnot supported by the vouchers' etc.‑‑‑Setting aside of assessment by the First Appellate Authority‑‑‑Validity‑‑‑All the books of accounts were though produced before Assessing Officer yet he could not point out any defects in the books ‑‑‑Assessee was also not confronted with regard to making addition in the profit & loss accounts‑‑‑In such situation, what compelled the First Appellate Authority to remit the case back to Assessing Officer, except that Department was given premium and an extra opportunity to make up the deficiencies in the assessment order, committed in the earlier round‑‑‑Such practice of remanding case without assigning any substantial reason was deprecated.

Solvex Pakistan Ltd. v. Commissioner of Income‑tax PTR No.2 of 2002 rel.

Asim Zulfiqar, A.C.A. and Shahzad Hussain, F.C.A. for Appellant.

Bashir Ahmad Shad, D. R. for Respondent.

Date of hearing: 3rd April, 2003.

2003 P T D (Trib.) 2683

[Income‑tax Appellate Tribunal Pakistan]

Before Syed Hasan Imam, Judicial Member and Muhammad Akhtar Nazar Mian, Accountant Member

M. A. (Rect) No. 229/KB of 2003 in I. T. A. No. 172/KB of 2002, decided on 12th June, 2003.

(a) Income Tax Ordinance (XXXI of 1979)‑‑‑--

-----S. 156‑‑‑Rectification of mistake‑‑‑Material relied upon for rectification of mistake was not available on record at the time of deciding of appeal‑‑‑By no stretch of imagination it could be presumed that there was mistake apparent from the record of the Tribunal as available at the material time of deciding the appeal.

(b) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑S. 156‑‑‑Rectification of‑ mistake‑‑-Request for rectification on the basis of judgments‑‑‑Validity‑‑‑If practice of accepting the request for recalling the orders was allowed on the basis of judgments on which a party subsequently lays its hands then there would be no end to the assessment or appellate proceedings.

(c) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑S. 156‑‑‑Rectification of mistake‑‑‑‑Very limited jurisdiction was available under S.156 of the Income Tax Ordinance, 1979 which could be exercised only when the mistake was floating on the surface‑‑‑Where an enquiry was required to be made or a reappraisal of the facts or legal provisions was necessary to deviate from the earlier finding, then that was not considered to be a mistake floating on the surface or rectifiable under the law‑‑‑Where an authority had given conscious finding on an issue, then that authority was not empowered under the law to review its own order on the basis of subsequent evidence.

(d) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑S.156‑‑‑Rectification of mistake‑‑‑Subsequent evidence or explanation of law‑could not be allowed to bring on record so as to necessitate action under S.156 of the Income tax Ordinance, 1979.

(e) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑Ss. 52/86‑‑‑Order under Ss.52/86 of the Income Tax Ordinance, 1979 was not an order of assessment.

(f) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑Ss. 156 & 52‑‑‑Rectification of mistake‑‑‑Rectification application on the ground that a mistake apparent from the record had crept in while deciding the appeal insofar as the Appellate Tribunal did not consider a reported case where another Bench of the Appellate Tribunal had held that an order under S.52 of the Income Tax Ordinance, 1979 could be passed only during the period for which a notice under S.61 of the Income Tax Ordinance, 1979 could be issued and there was difference of opinion between the two decisions of the Benches and the earlier decision should be followed by the Appellate Tribunal‑‑‑Validity‑‑‑Appellate Tribunal decided the appeal on the basis of material available on record at the time of making decision of original appeal‑‑‑No mistake was apparent within restricted jurisdiction available under S.156 of the income Tax Ordinance, 1979‑‑‑Application under S.156 of the Income Tax Ordinance, 1979 was rejected by the Appellate Tribunal in circumstances.

2003 PTD (Trib.) 1167; CIT v. Hossen Kassem Dada Kye (1969) 4 Tax 96; I.T.As. Nos. 445 to 449/KB of 1998‑99 and (1995) 72 Tax 165 distinguished..

Munir Ahmed Ansari for Appellant

Zaki Ahmed, D.R. for Respondent.

Date of hearing: 12th June, 2003.

2003 P T D (Trib.) 2689

[Income‑tax Appellate Tribunal Pakistan]

Before Inam Ellahi Sheikh, Chairman and Muhammad Jahandar, Judicial Member

I.T.As. Nos. 838/IB, 839/IB of 2000, 296/IB, 117/IB to 121/IB of 2001‑2002; 589/IB of 1999, 826/IB of 2000 and 277/IB of 2001, decided on 8th January, 2003.

(a) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑S. 13(1)(aa),‑‑Addition‑‑‑Unexplained cash credit‑‑‑Balance shown by the assessee in balance‑sheet as payable was more than what was shown by the creditor in his balance‑sheet‑‑‑Reconciliation was filed by the assessee‑‑‑Addition without pointing out any discrepancy in the reconciliation statement by treating the same as unexplained cash credit‑­Validity‑‑‑Alleged discrepancy had arisen due to time difference in recording transaction in two companies‑‑‑Time difference in recording of transactions was quite common in the business undertakings and for that purpose reconciliations were prepared to ensure .that there were no unexplained differences‑‑‑Assessing Officer had not pointed out any flaw in the reconciliation provided by the assessee-‑‑Reconciliations were also common in the balances shown by the Banks and appearing in the Bank books of the company‑‑‑Such difference could not be made the basis of treating the same as "deemed income" under S.13 of the Income Tax Ordinance, 1979‑‑‑Order of the First Appellate Authority was confirmed by the Appellate Tribunal on the issue.

(b) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑S. 13(1)(aa)‑‑‑Addition‑‑‑Refundable sales tax‑‑‑Addition was made on the ground that assessee had been offering net sales for taxation i.e. after deduction of sales tax from gross sales, thus the same was liable to be added to income‑‑‑Validity‑‑‑Action of the Assessing Officer was misplaced being based on incorrect assumptions and against the facts‑‑­Department failed to point out the provision of law under which said addition was made‑‑‑Such amount was appearing as an asset in the balance‑sheet of the assessee and by no stretch of mind could be treated as income‑‑‑Assessing Officer, at the best, could have asked the assessee to explain as the source from which the credit for said amount had been taken which could only be done if the Assessing Officer had confronted the assessee but no notice was issued to the assessee on this issue at all‑‑­Addition deleted by the First Appellate Authority was maintained by the Appellate Tribunal.

(c) Income tax‑‑‑

‑‑‑‑Expenditure‑‑‑Payment to employee in respect of voluntary separation scheme/golden handshake scheme‑‑‑Addition‑‑‑Addition made was deleted in the one year and set aside in the second year by the First Appellate Authority on the ground that no tax was required‑ to be withheld from payment made in respect of golden handshake scheme or voluntary separation scheme‑‑‑Appellate Tribunal set aside the issue in both the years and remanded the matter to the Assessing Officer with. the same direction as given by the First Appellate Authority.

(d) Income‑tax‑‑‑

‑‑‑‑Expenditure‑‑‑Liability in respect of Workers Participation Fund‑‑­Disallowance of ‑‑‑Validity‑‑‑Assessee was an industrial undertaking and under the relevant law was required to pay 5% of its profits to its workers and it was not the claim of the Department that such fund was not payable at all‑‑‑First Appellate Authority had rightly deleted the addition‑‑‑Appeal was dismissed by the Appellate Tribunal on such issue.

(e) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑S. 52 & 86‑‑‑Liability of persons failing to deduct or pay tax ‑‑‑Short­fall in deduction of tax ‑‑‑Assessee in default‑‑‑‑Validity‑‑‑Action under S.52 of the Income Tax Ordinance, 1979 could be taken if the assessee had failed to deduct tax or having deducted tax failed to deposit the same in the treasury‑‑‑No clear‑cut provision existed authorizing an Assessing Officer to proceed in the case of a shortfall in the deduction of tax‑‑‑First Appellate Authority was justified to hold that Assessing Officer had not proceeded against property‑‑‑Tax deleted by the First Appellate Authority was upheld by the Appellate Tribunal.

(f) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑Ss. 52 & 86‑‑‑Liability of persons failing to deduct or pay tax‑‑­Assessee in default‑-‑Collection of tax is fundamentally the function of the Revenue Officer and not that of the employer‑‑‑Law had thrusted this responsibility on the employer for its own reasons and such responsibility was very heavy‑‑‑Employer was discharging the functions which normally should be carried out by the Revenue Officer; not only that, the employer was also required to file various statements on monthly as well as annual basis for which he was not compensated at all and on the contrary, the employer was always under a threat for penalties for non‑deduction or non‑deposit, of tax or non‑filing of statements‑‑‑Revenue Officer must proceed very judiciously before penalizing the assessee or the employer in circumstances.

(g) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑S. 156 & Third Sched., R.5(1)(c) & 8(4)‑‑‑Rectification of mistake‑‑­Initial depreciation on plant and machinery‑‑‑Objection by Audit and Inspection Authority‑‑‑Addition by rectification‑‑‑Validity‑‑‑Assessing Officer had proceeded to rectify the orders on the basis of observations of the audit party and without application of mind which was the change of opinion and not mistake apparent on record‑‑‑Show‑cause notice had also not been issued in some years‑‑‑One year was also hit by limitation‑‑‑No notice under S.156(2) of the Income Tax Ordinance, 1979 was issued before rectification, of original assessment‑‑‑Department did not dispute with such observations‑‑‑Appellate Tribunal did not interfere in the finding of the First Appellate Authority.

(h) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑Third Sched., Rr. 2, 5(1)(c) & 8 (4)‑‑‑Initial depreciation on plant and machinery‑‑‑Disallowance of initial depreciation claimed on sanitary and water workshop equipment, office equipment, residential equipment etc. being not included in the definition of "plant and machinery" as defined in R.8(4) of the Third Sched. of the Income Tax Ordinance, 1979‑‑‑Validity‑‑‑Rule 8(4) only defined the plant' and notplant and machinery ---Initial depreciation under R.5(1)(c) of the Third Sched. of the Income Tax Ordinance, 1979 ,would be admissible on all the plant and machinery which were not otherwise specified in R. 2‑‑‑Addition deleted on such issue by First Appellate Authority was maintained by the Appellate Tribunal.

(i) Income‑Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑Ss. 88, 156 & 50‑‑‑Charge of additional tax for failure to pay tax with. the return‑‑‑Short payment of tax‑‑‑Levy of additional tax‑‑‑Fist Appellate Authority set aside the levy with the direction to re‑compute additional tax after giving the appeal effect‑‑‑Department had taken stereotype grounds in respect of order passed under S.156 of the Income Tax Ordinance, 1979 and there was no specific ground to challenge the setting aside of levy of additional tax‑‑‑Appeal was misdirected and no prejudice was caused to the revenue by setting aside the same‑‑­Appeal of the Department was dismissed by the Appellate Tribunal.

(j) Income Tax Ordnance (XXXI of 1979)‑‑‑

‑‑‑S. 62‑‑‑Companies Ordinance (XLVII of 1984), S. 156‑‑‑Assessment on production of accounts, evidence etc.‑‑‑Private limited company‑‑­Public limited company‑‑‑Ownership of share‑‑Determination of status­‑‑Rate of tax ‑‑‑Assessee was taxed @ 46% instead of @ 36% by assigning the status of a private company which was upheld by the First Appellate Authority‑‑‑Appellate Tribunal set aside the orders of the departmental officials on the issue of assignment of status of private or public limited company and remanded the matter back to the Assessing Officer to verify the actual ownership of the shares of the company‑If more than 50% shares were held by the Government, then; obviously the assessee had to be treated as a public company‑‑‑Provisions of the relevant Income Tax Law did not distinguish between the ordinary and preference shares or any voting right but simply laid down that a company will be treated as a public company if at least 50% of the shares were held by the Government‑‑‑Assessing Officer was directed by the Appellate Tribunal to verify the ownership of said shares from the concerned quarters in the Government of Pakistan and (or) by examination of the shares certificates or authenticated copies thereof in each year to establish the status of the company.

1990 PTD 825 ref.

Khalid Mehmood A.C.A. for Appellant.

Noshad Ali Khan D.R. for Respondent.

Date of hearing: 8th January, 2003.

2003 P T D (Trib.) 2702

[Income‑tax Appellate Tribunal Pakistan]

Before S. Hasan Imam, Syed Kabirul Hasan, Judicial Members and Agha Kafeel Barik, Accountant Member

I.T.As. Nos.1028/KB, 1029/KB, 1294/KB to 1296/KB of 2000‑2001, 1405/KB to 1407/KB, 1014/KB, 2329/KB, 1412/KB to 1415/KB, 1515/KB of 2001, 731/KB, 166/KB, 732/KB of 2000‑01, 1430/KB, 1439/KB of 2001, 1759/KB of 1999‑2000 and 1827/KB of 1999‑2000, decided on 30th April, 2003:

(a) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑Ss. 30(2)(b), 22,.12(5), 2(11), 2(29A) & 62‑‑‑Income Tax Ordinance (XLIX of 2001), S.18(1)(c)‑‑‑Modaraba Companies and Modarabas (Floatation and Control) Ordinance (XXXI of 1980), Ss 2(c) & 17‑‑­Income from other sources ‑‑‑Modaraba Management Fee‑‑‑Assessment of fee under S.30 of the Income Tax Ordinance, 1979 as Technical fee and not as business income ‑‑‑Validity‑‑‑Modaraba company business was to float Modarabas and to earn management fee‑‑‑Such receipt/income of the Modaraba Company was liable to be computed under the head, "income from other sources" under S.30 of the Income Tax Ordinance,/ 1979.

LTA. No. 618/KB of 1995‑96 distinguished.

I.T.A. No.618/KB of 1995‑96; 1999 PTD (Trib.) 708 and 1997 PTD 460 ref.

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

‑‑‑‑S. 18‑‑‑Income Tax Ordinance (XXXI of 1979), Ss.12(5)(a) & 30‑‑‑ Modaraba Companies and Modarabas (Floatation and Control) Ordinance (XXXI of 1980), S.2(c) & 17‑‑‑Income from business‑‑‑Modaraba Management Fee‑‑‑Management fee defined in S.18 of the Income Tax Ordinance, 2001 qualified the definition of "Fee for technical services" to be charged under S.30 of the Income Tax Ordinance, 1979 as `income from other sources in view of Explanation attached to S.12(5)(a) of the Income Tax Ordinance, 1979 which by all means was relevant so far S.30 of the Income Tax Ordinance, 1979 was concerned.

(c) Interpretation of statutes‑‑‑

‑‑‑‑ Incorrect interpretation‑‑‑Value‑‑‑Incorrect interpretation of law cannot be taken as a gospel truth.

(d) Income‑tax‑‑‑

‑‑‑‑Assessment‑‑‑History‑‑‑Principles‑‑‑If law permits to move in a correct direction, the officers implementing law, may follow the correct path ignoring the history and without taking into consideration the previous and continuous practice adopted for years together.

(e) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑S. 30(2)(b)‑-‑Income Tax Ordinance (XLIX of 2001), S.18(1)(c)‑‑­Modaraba Companies and Modarabas (Floatation and Control) Ordinance (XXXI of 1980)‑‑‑Income from other sources ‑‑‑Modaraba Management Fee‑‑Inclusion of management fee derived by a management company, floating Modaraba share in S.18, of the Income Tax Ordinance, 2001, empowered the department to charge tax on such income under the head "income from business" which did not mean that the Department had been given free hand to charge the income under S.22 of the Income Tax Ordinance, 1979 for the period not falling within the ambit of Income Tax Ordinance, 2001‑‑‑In absence of any such. provision in Income Tax Ordinance, 1979 the Department had no other course except to invoke the provision of S.30 of the Income Tax Ordinance, 1979 for computing the income of Modaraba Company carrying on'‑ business of floating Modarabas and to earn management fee.

(f) Interpretation of statutes‑‑‑

‑‑‑‑ Fiscal statute‑‑‑Department, Tribunal or the Court, must look at all the words of statute and interpret the same in the light of what is clearly expressed.

1971 SCMR 128 and 1997 SCMR 371 rel.

(g) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑Ss. 22 & 30(2)(b)‑‑‑Income Tax Ordinance (XLIX of 2001), S.18(1)(c)‑‑‑Modaraba. Companies and Modarabas (Floatation and Control) Ordinance (XXXI of 1980)‑‑‑Income from business ‑‑‑Scope‑‑­ Extension of ‑‑‑Modaraba Management Fee‑‑‑Appellate Tribunal could not extend the scope of the statute by an analogy that scope of S.22 of the Income Tax Ordinance, 1979 had been extended to management fee in the Income Tax Ordinance, 2001, as the same would amount to prevent a real, clear and supposed anomaly‑‑‑Appellate Tribunal should depend upon the exact wordings of the law prevailing at the relevant time and not upon the subsequent changes in law.

Akbar G. Merchant, F.C.A. and Miss Yasmeen Ajani, F.C.A. for Appellant (in I.T.As. Nos.1028/KB, 1029/KB and 1294/KB to 1296/KB of 2000‑2001).

Aqeel Ahmed Abbasi, Legal Advisor for Respondent (in I. T. As. Nos. 1028/KB, 4029/KB, 1294/KB to 1296/KB.of 2000‑2001).

Shabbir Jamsa, I.T.P. for Appellant (in I.T.As. Nos. 1405/KB to 1407/KB, 1014/KB and 2429/KB of 2001)

Aqeel Ahmed Abbasi, Legal Advisor for Respondent (in I.T.As. Nos. 1405/KB to 1407/KB, 1014/KB and 2329/KB of 2001).

Nemo for Appellant (in I.T.As. Nos.1412/KB to 1415/KB and 1515/KB of 2001).

Aqeel Ahmed Abbasi, Legal Advisor for Respondent (in I.T.As. Nos. 1412/KB to 1415/KB and 1515/KB of 2001).

Khaliq‑ur‑Rehman, F.C.A. for Appellant (in LT.As. Nos.731/KB, 166/KB and 732/KB of 2000‑2001).

Aqeel Ahmed Abbasi, Legal Advisor for Respondent (in I.T.As. Nos.731/KB, 166/KB and 732/KB of 2000‑2001).

Muhammad Rehan Siddiqui, I.T.P. for Appellant (in I.T.A. No.1430/KB of 2001).

Aqeel Ahmed Abbasi, Legal Advisor for Respondent (in I.T.A. No. 1430/KB of 2001).

S. Hassaan Naeem for Appellant (in I.T.A. No.1439/KB of 2001).

Aqeel Ahmed Abbasi, Legal Advisor for Respondent (in I.T.A. No. 1439/KB of 2001).

Khaliq‑ur‑Rehman, F.C.A. for Appellant (in I.T.A. No.1759/KB of 1999‑2000).

Aqeel Ahmed Abbasi, Legal Advisor for Respondent (in I.T.A. No. 1759/KB of 1999‑2000).

Aqeel Ahmed Abbasi, Legal Advisor for Appellant (in I.T.A. No. 1827/KB of 1999‑2000).

Khaliq‑ur‑Rehman, F.C.A. for Respondent. (in I.T.A. No. 1827/KB of 1999‑2000).

Date of hearing: 29th June, 2002.

2003 P T D (Trib.) 2715

[Income‑tax Appellate Tribunal Pakistan]

Before Syed Hasan Imam, Judicial Member and Muhammad Akhtar Nazar Mian, Accountant Member

W.T.As. Nos.309/KB to 312/KB of 2000‑2001, decided on 26th June, 2003.

(a) Wealth Tax Act (XV of 1963)‑‑‑

‑‑‑‑S. 2(5)(ii)‑‑‑Assets‑‑‑Assessment of property in the hands of association of persons‑ ‑‑On the basis of departmental records pertaining to income‑tax, it stood established that association of persons was holding the property for the business of letting it out‑‑‑Such an asset in the hands of association of persons was taxable in view of the provision of S.2(5)(ii) of the Wealth Tax Act, 1963 and the Explanation attached thereto.

(b) Wealth Tax Act (XV of 1963)‑‑‑

‑‑‑‑Ss. 17(1)(a)(b), 17A(2)(b) & 14‑‑‑Wealth escaping assessment‑‑­Limitation for completion of assessment and re‑assessment ‑‑‑Assessee contended that no notice under S.14 of the Wealth Tax Act, 1963 could be served beyond 4 years from the relevant assessment year and no assessment could be made under S.16 of the Wealth Tax Act, 1963 after expiry of 4 years from the end of the relevant assessment year as provided under S.17A(1)(b) of the Wealth Tax Act, 1963‑‑‑Validity‑‑­Assessee was required under the law to submit a return of net wealth under S.14 of the Wealth. Tax Act, 1963‑‑‑By reason of its omission or failure on the part of the assessee to make a return of its net wealth under S.14 of the Wealth Tax Act, 1963, a notice under S.17(1)(a) and not under S.17(1)(b) of the Wealth Tax Act, 1963 was to be served by the Assessing Officer and such a notice could be served within 5 years from the end of the relevant assessment year and the assessment could be completed within two years from the end of the assessment year in which notice under S.17(1)(a) was served, as provided in S.17A(2)(b) of the Wealth Tax Act, 1963‑‑‑Assessnient proceedings initiated and completed were not barred by time.

(c) Wealth Tax Act (XV of 1963)‑‑‑

‑‑‑‑S. 17, proviso‑‑‑Wealth escaping assessment‑‑‑Issuance of notice‑‑­Approval from Inspecting Additional Commissioner‑‑‑Definite informa­tion ‑‑‑Assessee contended that for the issuance of notice under S.17 of the Wealth Tax Act, 1963, approval from Inspecting Additional Commissioner was essential notwithstanding the use of word "or" in the proviso to S.17 of the Act which needed to be read as "and" ‑‑‑Validity‑‑­Word "information" had been used only in sub‑clause (1)(b) and such "information " in possession of the Assessing Officer may or may not be definite‑‑‑Where the Assessing Officer was sure that information was definite he need not seek previous approval of the Inspecting Additional Commissioner and where the information was not definite he had to seek the approval of the Inspecting Additional Commissioner‑‑‑If it was presumed that notwithstanding conspicuous omission of the word "information" in sub‑clause (1)(a) of S.17 the proviso was practically applicable to sub‑clause (a) also, even then there could be no information more definite to what was the declaration of the assessee itself in the income‑tax proceedings ‑‑‑Assessee, in the present case, had itself been showing the business of letting out of property and it could not take diametrically opposite position during the wealth tax proceedings that it and omitted or failed to submit return of net wealth as provided in S. 1.4 of the Wealth Tax Act, 1963‑‑‑First Appellate Authority was not justified in canceling the order of the Assessing Officer in circumstances‑‑‑Order of the First Appellate Authority was cancelled by the Appellate Tribunal and restored that of the Assessing Officer.

Zaki Ahmed, D.R. for Appellant.

Salman Pasha for Respondent.

Date of hearing: 26th June, 2003.

2003 P T D (Trib.) 2721

[Income‑tax Appellate Tribunal Pakistan]

Before Khawaja Farooq Saeed, Judicial Member

I.T.A. No.4861/LB of 2002, decided on 22nd March, 2003.

Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑Ss. 59(1) & 62‑‑‑Self‑assessment‑‑‑Notice for short documents‑‑­Non‑filing of wealth statement‑‑‑Assessment under normal law‑‑­Assessment was annulled by the First Appellate Authority on the ground that signatures on the return and on the notice for short documents did not tally‑‑‑Validity‑‑‑Appellate Tribunal agreed with the First Appellate Authority to the extent of providing an opportunity to the assessee but the case still lacked the qualification of acceptance under Self­ Assessment Scheme‑‑‑Appellate Tribunal modified the order to the extent that the Assessing Officer shall provide another opportunity to the assessee for submission of his statement of assets and liability and if assessee complied with the same within the prescribed period the return shall be accepted‑‑‑In absence of the same Assessing Officer shall proceed ac per law and practice.

Imran Raza Kazmi, D.R. for Appellant.

Nemo for Respondent.

Date of hearing: 22nd. March, 2003.

2003 P T D (Trib.) 2727

[Income‑tax Appellate Tribunal Pakistan]

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

I.T.A. No. 389/LB of 2003, decided on 28th April, 2003.

(a) Income Tax Ordinance (XXXI of 1979)‑‑---

‑‑‑‑‑S. 13(1)(d)‑‑‑Income Tax Rules, 1982, Rr.207A (ii) & (iii)‑‑‑Stamp Act (II of 1899), S.27A‑‑‑Addition‑‑‑Purchase of commercial constructed/rented out property‑‑‑Determination of value according to the District Collector rate rather than to capitalized value on the basis of rent‑‑‑Validity‑‑‑Properties which were covered by R.207A(ii) of the Income Tax Rules, 1982 were the properties having the same kind and character mentioned in R.207A(i) of .the Income Tax Rules, 1982‑‑‑Kind property referred in R:207A(i) of the Income Tax Rules, 1982 was open plots‑‑‑Property which would be covered by R.207A(ii) of the Income Tax Rules, 1982 must also be of the same kind i.e. open property (non ­constructed)‑‑‑Rule 207A(ii) of the Income Tax Rules, 1982 was attracted in ,cases where, though the property was still open but had not been demarcated into plots by Development Authority‑‑‑Value in such­like cases would be determined by District Collector for the purposes of stamp duty attracting S.27A of the Stamp Act, 1899‑‑‑Assessee's property being constructed property and already having been given on rent was covered by R.207A(iii) of the Income Tax Rules, 1982‑‑­Assessing Officer having accepted the Gross Annual Letting Value, he was directed by the Appellate Tribunal to accept the declared value being higher than the capitalized value‑‑‑Addition made was deleted by the Appellate Tribunal.

NTN 1995 (Trib.) 11 and 1991 PTD 488 ref.

(b) Income Tax Rules, 1982‑‑‑

‑‑‑‑R. 207A(iii)‑‑‑Valuation of immovable property‑‑‑Directions by the First Appellate Authority‑‑‑Order must be passed within the confines of the directions‑‑‑First Appellate Authority observed that case of the assessee, was covered by R.207A(iii) of the Income Tax Rules, 1982‑‑­Matter was not agitated by Revenue before the Appellate Tribunal which attained finality‑‑‑Case having been remanded to Assessing Officer, the scope within which the Assessing Officer had to pass re‑assessment order was within the confines of the directions given by the First Appellate Authority‑‑‑Assessing Officer was supposed to apply R.207A(iii) of the Income Tax Rules, 1982 in pursuance of the direction given by the First Appellate Authority‑‑‑Property was a constructed commercial property consisting of number of shops which had been rented out to the different tenants‑‑‑No scintilla existed that assessee's case was covered by R.207A(iii) of the Income Tax Rules, 1982 and the same should be applied to the assessee's case for the purposes of determination of value.

Syed Abid Raza for Appellant.

Nemo for Respondent.

Date of hearing: 5th March, 2003.

2003 P T D (Trib) 2734

[Income‑tax Appellate Tribunal Pakistan]

Before Rasheed Ahmad Sheikh, Khalid Waheed Ahmad, Judicial Members and Abdul Ghafoor Junejo, Accountant Member

W. T. As. Nos. 1439/LB to 1446/LB of 2001, decided on 25th September, 2001.

Per Rasheed Ahmed Sheikh, Judicial Member‑‑‑

(a) Wealth Tax Act (XV of 1963)‑‑‑

‑‑‑‑S. 2(5)(ii)‑‑‑Wealth Tax Rules, 1963, 8(3)‑‑‑Association of persons‑‑­In order to constitute an association of persons, the persons must join in common purpose or common action and the object of the association must be to produce income and it was not enough that the persons received the income jointly.

(b) Wealth Tax Act (XV of 1963)‑‑‑

‑‑‑‑S. 2(5)(ii)‑‑‑Wealth Tax Rules, 1963, R.8(3)‑‑‑Association of persons‑‑‑Essential criterion that attracts the label of association of persons in the hierarchy of income‑tax and wealth tax was the unity of income making purpose rather than the unity of title in the income yielding asset‑‑‑Volition on the part of the members of association was an essential ingredient‑‑‑Where income did not result from any joint venture or joint acts, assessment in the status of an association of persons would not be justified.

Per Rasheed Ahmad Sheikh (Judicial Member); Khalid Waheed Ahmad (Judicial Member), agreeing‑‑‑

(c) Wealth Tax Act (XV of 1963)‑‑‑

‑‑‑‑S. 2(5)(ii)‑‑‑Wealth Tax Rules, 1963, R.8(3)‑‑‑Association of persons‑‑‑Single unit property‑‑‑Divided through a family settlement "Khangi Taqseem Nama" executed between the six associations of persons‑‑‑Assessment, in the hands of single association of persons‑‑­Validity‑‑‑Property was constructed by each association of persons by pooling their resources and soon thereafter a family settlement was executed between the parties whereby shops and flats were demarcated and divided amongst each association of persons‑‑‑Since each association of persons had rented out its part of property, separate lease agreements were executed with its tenants by each association of persons‑‑‑Property tax was also paid separately by each association of persons of its share in the property‑‑‑Department had no evidence with regard to common management or use of the property in question except the sale‑deed of the land and the site plan‑‑‑Such documents did not show that all the 14 co‑owners had united themselves with the object of earning income, profit or gain from the said property‑‑‑Purchase of plot jointly, for construction of building on it was not sufficient evidence to establish that all of them intended to let out the property jointly‑‑‑Co‑owner of each unit was holding the "immovable property" for the, purpose of letting out as on the valuation dates which attracted the provision of S.2(5)(ii) of the Wealth Tax Act, 1963 in .each case separately‑‑‑Order of First Appellate Authority was vacated and that of Assessing Officer was set aside with the direction to process the return of each association of persons independently and work out Gross Annual Letting Value of the portion of the property held by each association of persons in accordance with R. 8(3) of the Wealth Tax Rules, 1963.

1999 SCMR 2182 and CIT v. Harivadan Tribhovandes (1977) 106 ITR 494 rel.

G. Murugeson and Brothers v. CIT (1973) 88 ITR 432; (1979) 117 ITR 256; 1989 PTD (Trib.) 20; 1998 PTD. (Trib.) 2054; Oxford Dictionary the word "association"; W.T.A. No.1226/IB of 1999; 1989 PTD 670; 1999 YLR 340; W.T.As. Nos.365/LB of 1984‑85, 75/LB of 1985‑86 and W.T.As. Nos. 1103 to 1107/LB of 2001 ref.

Per Rasheed Ahmad Sheikh, Judicial Member‑‑

(d) Wealth Tax Act (XV of 1963)‑‑‑

‑‑‑‑S. 2(5)(ii)‑‑‑Wealth Tax Rules, 1963, R.8(23)‑‑‑Association of persons‑‑‑More than one association of persons could be constituted where the property involved was a single unit and did not stand divided through any registered deed but that was divided and demarcated between the co‑sharers on the basis of some valid and genuine piece of documents.

Per Khalid Waheed Ahmad, Judicial Member‑‑‑

(e) Wealth Tax Act (XV of 1963)‑‑‑

‑‑‑‑S. 2(5)(ii)‑‑‑Wealth Tax Rules, 1963, R.8(3) ‑‑‑ Association of persons‑‑Status, determination of‑‑‑Intention‑‑‑Mere ownership by more than one individual in a property was not sufficient to establish the existence of an association of persons‑‑‑For, the purpose of determining the existence of association of persons, the most important factor was the intention of more than one individual who had joined hands for a common purpose or common action to produce income profits or gains‑‑­Mere fact that several persons were the joint owners was in itself not sufficient to establish that an association of persons was in existence.

CIT v. Harivadan Tribhovandes (1977) 106 ITR 494 rel.

(f) Wealth Tax Act (XV of 1963)‑‑‑

‑‑‑‑S. 2(5)(ii)‑‑‑Assets‑‑‑Association of persons‑‑‑Word property' was not defined in the Wealth Tax Act, 1963 or Income Tax Ordinance, 1979‑‑‑"Immovable property" held for certain specified purposes by the association of persons had been brought within the ambit of assets chargeable to wealth tax‑‑‑Immovable property defined asasset' in S.2(5)(ii) of the Wealth Tax Act, 1963 may be a big or small unit or complete building or portion of it.

Per Abdul Ghafoor Junejo (Accountant Member) [Minority view]‑‑‑

Naveed Andrabi for Appellant.

Javed‑ur‑Rehman, D.R. for Respondent.

Date of hearing: 5th September 2001.

2003 P T D (Trib.) 2749

[Income‑tax Appellate Tribunal Pakistan]

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

I.T.A. No. 4547/LB of 2001, decided on 18th March, 2003.

Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑Ss. 66‑A & 59(1)‑‑Powers of Inspecting Additional Commissioner to revise Deputy Commissioner’s order‑‑‑Assessment finalized under Self ­Assessment Scheme without issuance of any formal order was cancelled by the Inspecting Additional Commissioner on the ground that declared income was leis than the income assessed in the preceding assessment year‑‑‑Validity‑‑‑Assessment was framed under S.59(1) of the Income Tax Ordinance, 1979 by the Assessing Officer using a cycle styled pro forma and that too was not properly filled in and was left absolutely blank‑‑‑Provisions of S.59(1) of the Income Tax Ordinance, 1979 had provided that there must be an assessment which could not be made without conscious application of mind‑‑‑Older must be in writing in sequel to the assessment order, the tax due, if any, must also be determined‑‑‑In absence of such finding no order could be treated a proper/legal order‑‑‑Inspecting Additional Commissioner having wrongly invoked S.66‑A of the Income Tax Ordinance, 1979 his order was vacated and that passed under S.59(1) of the Income Tax Ordinance, 1979 was restored by the Appellate Tribunal.

2002 PTD (Trib.) 1949; 1975 PTD (Trib.) 27; (1967) 16 Tax 119 and 1987 PTD (Trib.) 129 rep.

Zulifqar Khan and Miss Uzma Butt for the Appellant.

Mahboob Alam, D.R. for Respondent.

Date of hearing: 28th January, 2003.

2003 P T D (Trib.) 2755

[Income‑tax Appellate Tribunal Pakistan]

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

W.T.As. Nos. 1352/LB to 1355/LB of 2002, decided on 20th December, 2002.

Wealth Tax Act (XV of 1963)‑‑‑

‑‑‑‑S. 16‑‑‑Assessment‑‑‑Property gifted by the assessee was assessed in the hands of assessee as well as in the hands of the donee‑‑‑Validity‑‑­Property after completion of gift transaction could not be assessed in the hands of the donor‑‑‑Even otherwise property or a share in the property could not be assessed in the hands of two different persons‑‑‑PT‑1 Form showed that the property belongs to four persons having 1/4th share each ‑‑‑Assessee after gifting away his share, was no more owner of the property and had rightly not declared the same in his wealth tax return and the Assessing Officer unjustifiably assessed the same in the hands of the assessee‑‑‑Order of both the Authorities below was annulled by the Appellate Tribunal.

Syed Abid Raza Kazmi for Appellant.

Talat Altaf Khan, D.R., for Respondent.

Date of hearing: 12th December, 2002.

2003 P T D (Trib.) 2767

[Income‑tax Appellate Tribunal Pakistan]

Before Khawaja Farooq Saeed, Judicial Member and Imtiaz Anjum, Accountant Member

I.T.A. No.2138/LB of 2002, decided on 22nd July, 2003.

(a) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑S. 66‑A‑‑‑Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order‑‑‑Order which was perfectly legal should not be disturbed under the provision of S.66‑A of the Income Tax Ordinance, 1979.

(b) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑S. 66‑A‑‑‑Powers of Inspecting Additional Commissioner to revise Deputy, Commissioner's order‑‑‑Provision of S.66‑A of the Income Tax Ordinance, 1979 should only be invoked where the error is floating on the surface of the order and does and need any further argument, inquiry or details for establishing the same.

(c) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑S. 66‑A‑‑‑Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order‑‑‑Complete assessment would have a sanctity and should not be cancelled on the basis of fishy inquiries and unnecessary investigations.

(d) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑Ss. 66‑A & 12(12)‑‑‑C.B.R. Circular No.14 of 1992‑‑‑Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order‑‑‑Addition‑‑‑Valuation of shares‑‑‑Break‑up value‑‑‑Fair market value‑‑‑Inspecting Additional Commissioner cancelled the assessment framed under S.62 of the Income Tax Ordinance, 1979 on the ground that purchase price of the shares was accepted without ascertaining the fair market value which was higher than the cost price worked out on the basis of break‑up value‑‑‑Whether .difference in cost and actual value attracted the provision of S.12(12) of the Income Tax Ordinance, 1979‑‑­Re‑valuation was for the purpose of determination of sale value of the shares for a sale transaction‑‑‑No one would sell its belongings at a lesser price than it could fetch in open market‑‑‑No moral or legal restriction existed on a person to sell his belongings at a lesser rate but ordinarily this was not done anywhere in the world except under special circumstances‑‑‑Provision of S.12(12) of the Income Tax Ordinance, 1979 provided of a situation in which if a person had purchased certain assets at less than the fair market value, the Assessing Officer was legally required to reject the same‑‑‑Order of Assessing Officer was erroneous as well as prejudicial to the interest of Revenue in circumstance‑‑‑Appeal of the assessee was rejected by the Appellate Tribunal.

CIT v. T. Narayana Pai 163 ITR 129; 98 ITR 422; 1991 PTD (Trib.) 321; Venkatakrishna Rice Co. v. CIT (1987) 13 ITR 129; 1999 PTD (Trib.) 3229; 1997 PTD (Trib.) 902; 1999 PTD 2851; Commissioner of Wealth Tax, Assam v. Mahadeo Jalan and others (1972) 86 ITR 621 (SC); Commissioner of Income‑tax, West Bengal v. Swadeshi Mining & Manufacturing Co. Ltd. 116 ITR 259; Grindlays Bank Ltd. v. Commissioner of Income‑tax 116 ITR 799; 2002 PTD (Trio.) 2014 and 2002 PTD 720 ref.

Sajid Ejaz for Appellant.

Muhammad Asif, D.R. for Respondent

Date of hearing: 24th October, 2002.

2003 P T D 14

[Karachi High Court]

Before S. Ahmed Sarwana and Muhammad Mujeehullah Siddiqui, JJ

Messrs N. B. TRADING COMPANY, SAMBERIAL (SIALKOT) and others

Versus

COLLECTOR OF CUSTOMS (APPRAISEMENT), CUSTOM HOUSE, LAHORE

and others

Constitutional Petitions Nos. 2559 of 2000, 577, 1034 and 596 of 2002, heard on 1st October, 2002.

(a) Customs Act (IV of 1969)‑‑‑

‑‑‑‑S.185A‑‑‑Jurisdiction of Special Judge, Customs relating to cognizance of criminal offences is entirely distinct and different from jurisdiction of Customs Officials relating to contravention of fiscal provisions of Customs Law giving rise to civil liability.

(b) Customs Act (IV of 1969)‑‑‑

‑‑‑‑Ss. 17 & 123‑‑‑Customs General Order No. 15/1989, dated 21‑10‑1989‑‑‑Constitution of Pakistan (1973), Art.l99‑‑‑Constitutional petition‑‑‑Imported goods meant for transshipment to Inland Dry Ports‑‑‑Customs Officials detained such goods at Karachi Port and after finding various contraventions of law initiated proceedings tinder Customs Act, 1969‑‑‑Contention of petitioners was that Customs Officials at Karachi Port had no jurisdiction to examine such goods, but they could merely pass on information to Customs Officials of concerned Dry Port‑‑­Validity‑‑‑Such action of Customs Officials at Karachi was legally unsustainable‑‑‑High Court allowed Constitutional petitions declaring such action to be without lawful authority and set aside same with directions to respondents to reseal all containers detained and opened by them and allow transshipment thereof to respective upcountry Dry Ports of their destination, and pass on entire information, result of investigation/inquiry and all other material available with them to Customs Officials at respective Dry Ports, who would take actions as warranted by law.

Famous Corporation v. Collector of Customs 1989 MLD 2322; M. Hameedullah Khan v. Director of Custom Intelligence and 3 others 1992 CLC 57 and Shafi Shahid and another v. Director, Intelligence & Investigation (Customs and Excise), Karachi and others C.P. No. 1016 of 1999 fol.

Messrs Nisar Art Press (Pvt.) Ltd. v. Chief Collector of Customs 1997 MLD 1859 ref.

Sohail Muzaffar and Mian Abdul Ghaffar for Appellants.

S. Tariq Ali, Federal Counsel, Raja Muhammad Iqbal, Nadeem Azhar Siddiqui, Dy. A.‑G. for the Custom Officials.

Jawaid Farooqui for the K.P.T.

Dates of hearing: 18th September and Ist October, 2002.

2003 P T D 409

[Karachi High Court]

Before Muhammad Mujeebullah Siddiqui, J

Messrs SAMAN DIPLOMATIC BONDED WAREHOUSE PROPRIETORSHIP CONCERN through its Manager and duly constituted attorney, Karachi

Versus

FEDERATION OF PAKISTAN through Secretary, Ministry of Commerce, Islamabad and 3 others

Suit No. 706 of 2002, decided on 25th November, 2002.

Customs Act (IV of 1969)‑‑‑

‑‑‑‑Ss. 32 & 13(3)‑‑‑Specific Relief Act (I of 1877, Ss. 42 & 54‑‑‑Suit for declaration and mandatory injunction‑‑‑Maintainability‑‑‑Show‑cause notice was issued and licence of plaintiff (importer of liquor) for Diplomatic Duty Free Bonded warehouse was cancelled on the ground that he had dishonestly and fraudulently submitted untrue statement to the Customs Department‑‑‑Plaintiff (Importer) prayed for grant of mandatory injunction and declaration requiring the Collector of Customs to renew the licence without delay; to issue the Import Permit immediately; declaration to the effect that the Department had erred in concluding that the plaintiff had tampered with the invoices and that the action of issuing of show‑cause notice was illegal, mala fide and without jurisdiction; direction to the Customs Authorities to allow the plaintiff to continue in bond of the goods, as the designated period of one year was about to expire and the Department not to charge any penal surcharge from the plaintiff for the custody of goods in the bond ‑‑‑Validity‑‑­Issuance of show‑cause notice and all subsequent acts in pursuance thereof being without jurisdiction and nullity in law, the plaintiff importer could not be asked to have recourse to the forum of appeal provided in the Customs Act, 1969‑‑‑Entire exercise on the part. of Department, in the present case, being without jurisdiction, the plaintiff had right to invoke the jurisdiction vested in the Civil Court which was fully competent to declare such an act as null and void‑‑‑Conditions precedent for exercise of jurisdiction under S.32, Customs Act, 1969‑‑­Principles.

For exercise of jurisdiction under section 32 of the Customs Act, 1969 several situations have been visualized by the Legislature and the conditions precedent have been prescribed in the law.

The conditions precedent for exercise of jurisdiction under section 32 of the Customs Act, 1969 are as follows:‑‑‑

(1) The Department should establish that any person in connection with any matter of Customs has made, signed or delivered or caused to have delivered to an officer of Customs any declaration, notice, certificate or other document whatsoever or has made any statement in answer to any declaration, notice; certificate or other document whatsoever or has made and Statement in answer to any question put to him by an officer of Customs which he is required by or under this Act to answer, knowing or having reason to believe that such document or statement is false in any material particular.

(2) By reason of any such document or statement as aforesaid or by reason of some collusion, any duty or charge has not been levied or has been short‑levied or has been erroneously refunded.

(3) By reason of any inadvertence, error or misconstruction, any duty or charge has not been levied or has been short‑levied or has been erroneously refunded., (4) Where any duty or charge has not been levied or has been short­-levied or has been erroneously refunded and this is discovered as a result of an audit or examination of an importer's accounts or by any means other than an examination of the documents provided by the importer at the time, the goods were imported.

If a law prescribes certain conditions precedent for exercise of jurisdiction then the existence of those conditions are sine qua non for acquiring the jurisdiction. If the conditions precedent are missing or lacking, it would be a case of lack of jurisdiction.

The Department should first make an attempt to furnish evidence that the prevailing price in the country of origin at the time of import was less than declared without which it would be impossible to impute the under invoicing to anyone.

Unless the goods are chargeable to duty and the taxable event occurs under section 18, the question of valuation of goods does not arise.

Thus, upon a point of mere valuation, if a declaration is made by such a person which on inquiry the Customs Authorities find to be too low, that will not be by itself sufficient to prove that the declaration was false to the knowledge of the maker.

In case the burden of establishing the misstatement by mustering evidence is not discharged by the Department, the importer cannot be held guilty of making misstatement within the meaning of section 32 read with section 156 of the Customs Act.

In order, to attract the provisions contained in section 32(1) it was necessary to show that the person who made or filed the declaration or furnished documents was cognizant of or had knowledge or apprehension of the facts that whatever was declared or stated or the document filed was incorrect or untrue in some 'material particular' and the non‑fulfillment of these requirements renders notice to be without jurisdiction.

At all such time an exemption S.R.O. or any of its like provisions hold the field, the Customs Authorities have no jurisdiction to scrutinize question of under‑valuation, calculation of duties and mis-description of goods imported. The Customs Authorities were not justified to levy any penalty under section 32(1) when admittedly there was no motive on the part of the importer. to evade tax due to the exemption in the field. No penalty under section 32(1) is leviable for any alleged under valuation and misdescription where there can be no motive to evade tax and where such declaration would carry no fiscal consequence, any other interpretation shall lead to absurd situation where although no tax would be leviable on the main basic assessment but there could possibly be imposition of penalty. Such exercise was completely without jurisdiction, illegal, void ab initio and of no legal effect.

Although in section 32(1) the word forgery' had not been used but in the context of the present case a great emphasis has been laid on the plea that the importer committed forgery. The expressionforgery' and `false statements' are not defined in the Customs Act. These expressions are defined in sections 463 and 464, P.P.C.

A perusal of the definition of forgery as in sections 463 and 464, P.P.C. shows that an intention to cause damage or injury to the public or to any person, or to support any claim or title, or to cause any person to part with property, or to enter into any express or implied contract, or with intent to commit fraud is necessary to constitute act of forgery. What amounts to making of false documents is clearly defined in section 464, P.P.C. Now applying the above provisions to the facts of the present case it is obvious that the commercial invoices are issued by the supplier and the importer produces certificate from the supplier stating that a mistake was committed by them in describing the units of currency in the invoices and the said mistake was rectified by them. In these circumstances, it was incumbent upon the Department to inquire from the supplier if any such certificate was issued by them or not. In the absence of any verification the act of change in the unit of currency cannot be attributed to the plaintiff. Secondly, the necessary ingredient for making of false document is dishonest and fraudulent intention. In the present case, it is admitted position that no incidence of tax was involved, and as such the question of any tax evasion was not involved and further the Appraising Officer, has clearly stated that neither any excess quantity of liquor was stored in the Bonded Warehouse by the importer nor it was possible to do so. In these circumstances, the question of making any false document or of any dishonest or fraudulent intention does not arise. The expressions dishonestly' andfraudulently' are not defined in the Customs Act and are defined in sections 24 and 25, P.P.C.

In the present case it is admitted position that because of the exemption provision in the field there wad no question of any wrongful gain to the importer or wrongful loss to the Revenue or any other person. In the facts and circumstances of the case the plea that by resorting to under‑invoicing the importer could store more quantity of liquor in the Bonded Warehouse than permissible under the licence appears to be totally presumptive and far‑fetched.

In view of the undeniable fact that no excess quantity of liquor was stored or attempted to be stored by the importer in the Bonded Warehouse, than permissible under the licence, no infringement of any condition laid down in the licence or violation of any provisions of the Customs Act and Rules made thereunder was committed, with the result that the licence granted to the plaintiff could not be cancelled, and the renewal thereof could not be refused by resorting to section 13(3) of the Customs Act.

The Department was, not able to show that the conditions precedent for issuance of notice under section 32 of the Customs Act and cancellation of licence under section 13(3) were existing. The show­-cause notice issued by the Department the order in original in pursuance thereof and the imposition of penalty and the cancellation of the licence in favour of the importer are without jurisdiction, void, ab initio and nullity in law.

For the purpose of acquiring jurisdiction the custom officials are not required to establish beyond reasonable doubt the conditions precedent specified in section 32. For the purpose of acquiring jurisdiction‑a prima facie evidence is required to be shown satisfying the existence of the conditions precedent specified in section 32 and for the purpose of penalties, after acquiring of. jurisdiction, the conditions precedent are required to be established beyond reasonable doubt. In the present case, there are no prima facie circumstances, pertaining to the existence of the conditions precedent for acquiring jurisdiction under section 32 and consequently, all the acts in pursuance of the issuance of the show‑cause notice are without jurisdiction.

The issuance of show‑cause notice and ‑all subsequent acts in pursuance thereof being without jurisdiction and nullity in law, the importer cannot be asked to have recourse to the forum of appeal provided in the Customs Act. The entire exercise on the part of the Department in the present case being without jurisdiction, the importer has right to invoke the jurisdiction vested in the Civil Court and High Court is fully competent to declare such act as null and void.

Tae suit was decreed as prayed. The show‑cause notice and the order in original in pursuance thereof made by the Department were declared to be without jurisdiction and void. Department was directed to renew licence of the importer forthwith and to issue the import permit to the importer .immediately. The Department was directed to allow the importer to continue in bond of the goods and not to charge any penal surcharge from the importer for the custody of the goods in the bond.

Messrs K.G. Traders v. Deputy Collector of Customs PLD 1997 Kar. 541; Abdul Rauf v. Abdul Hameed Khan PLD 1965 SC 671; Messrs Kamran Industries v. Collector of Customs (Exports) PLD 1996 Kar. 68; Lt. & G.M. Ltd. v. Collector of Customs PLD 1988 Lab. 563; M. G. Abrol, Additional Collector of Customs and another v Shand Lal, Chota Lal & Co. and another 1984 ECR 503 SC; Messrs Eastern Rice Syndicate v. Central Board of Revenue PLD 1959 SC 364; Messrs Latif Bros. v. Deputy Collector, Customs, Lahore 1992 SCMR 1083; Rib Tapes (India) (Pvt.) v.. Union of India and others (1986) 8 TCE 171 SC; Ibrahim Textile Mills Ltd. v. Federation of Pakistan PLD 1984 Lah. 47; Oskui Traders v. Collector of Customs 1991 CLC 24 and Collector‑General, Excise and Land Customs, Chittagong v. Imdad Ali 1969 SCMR.708 ref.

Mrs. Navin Merchant for Petitioner.

Syed Tariq Ali, Federal Counsel for Respondents.

Date of hearing: 23rd October, 2002.

2003 P T D 552

[Karachi High Court]

Before S. Ahmed Sarwana and Muhammad Mujeebullah Siddiqui, JJ

Messrs AL‑HAMD EDIBLE OIL (P) LTD. and others

Versus

COLLECTOR OF CUSTOMS and others

Special Customs Appeals Nos. 78, 107, 111, 113, 81, 105, 125, 127, 119, 121, 123, 108, 110, 112, 79, 82, 106, 122, 124, 126, 117, 118, 120, 114, 115, 116, 109, 153, 156, 155 and 154 of 2002, heard on 17th October, 2002.

(a) Customs Act (IV of 1969)‑‑‑

‑‑‑‑S.32‑‑‑Untrue statement, error etc‑‑‑Applicability of S.32‑‑‑Scope‑­Provision of S.32, Customs Act, 1969 relates to a situation where a person makes any statement or files any document which is false in any material particular by reason of which any duty or charge is not levied or is short levied or, is refunded‑‑‑Customs Authority is empowered to issue to the person concerned a notice to show cause as to why he should not pay the loss of revenue suffered by the Department and after giving him a hearing, beside any other action under law, may order for payment of the same, if a case is made out‑‑‑Entire provision of S.32, Customs Act, 1969 revolves around the central point of loss of revenue suffered by the Customs Department on account of conduct of may person‑‑‑If the Department has not suffered any loss on account of the conduct of the importer, the question of applicability of S.32 of the Customs Act, 1969 does not arise.

(b) Customs Act (IV of 1969)‑‑‑

‑‑‑‑Ss.16, 32 & 156(1), Cls.(9), (14)‑‑‑Imports and Exports (Control) Act (XXXIX of 1950), S.3(1)‑‑‑Negative List of the Import, Trade and Procedure Order, 2001‑2002‑‑‑Import of RBD Palm Oil‑‑‑Collector of Customs issued show‑cause notice to the importers, inter alia, under Ss.16 & 32, Customs Act, 1969 read with S.3(1) of the Imports and Exports (Control) Act, 1950 on the ground that imported RBD Palm Oil did not meet the prescribed PSI Standards for Palm Oil Edible Grade (for cooking purpose) and was not fit for human consumption and after giving an opportunity of hearing to the importers found them guilty of violation of Ss.16 & 32 of the Customs Act, 1969 prohibiting import of goods falling within the Negative List of the Import, Trade and Procedure Order, 2001‑2002 and ordered outright confiscation of all the consignments of RBD Palm Oil in terms of S.156(1), Cls (9) & (14) of the Customs Act, 1969 read with S.3(iii) of the Imports and Exports (Control) Act, 1950‑‑‑Validity‑‑‑Held, in view of the conflicting reports from the Customs House Laboratory, four of which were in favour of the importers and one against them and in the presence of the reports of PCSIR & HEJ Institute of Chemistry in favour of the Importers, they had imported RBD Palm Oil of edible grade‑‑‑When the import of RBD Palm Oil was permissible, contention that RBD Palm Oil in question which according to Customs Laboratory Report was not fit for human consumption fell within the description of Cl. H‑1 of the Banned Items described as "any edible oil product not fit for human consumption and could not be imported" was repelled‑‑‑When the import of RBD Palm Oil was allowable, its import could not be prohibited by a Notification by describing the same as a product not fit for human consumption which product after due process and treatment could be made fit for human consumption and which allegedly had always been, the, procedure followed in the past‑‑‑Clause H‑1 of the Banned Items, therefore, had to be read harmoniously so as to comply with the legal requirements of law and at the same time not to cause any impediment in the business activities and revival of the economy‑‑‑Importers, in view of apprehension expressed by the Department that the goods in present form were not fit for human consumption and ought not be released in the public interest, categorically assured that the imported RBD Palm Oil in question shall be sold after proper treatment/process and adding Vitamin A etc. to bring the same within the PSI standards‑‑‑High Court, in circumstances, allowed the appeal of importers in terms of seven conditions specified in the judgment.

(c) Interpretation of statutes‑

‑‑‑‑ Every provision of law must be construed in harmony with the other provisions of law so as to avoid any conflict.

(d) Customs Act (IV of 1969)‑‑­

‑‑‑‑S.199‑‑‑West Pakistan Pure Food Ordinance (VII of 1960)‑‑‑Process to take samples of goods‑‑‑Scope‑‑‑Import of RBD Palm Oil‑‑‑Customs Officer is empowered to take samples of goods on the entry, clearance or at any time the goods are being passed though the customs area for examination or testing to ascertain the value thereof and in case of goods intended for consumption as food if he is authorised by a general or special order of the Provincial Government‑‑‑Where the department had failed to produce or refer to any general or special order authorizing the Department to take samples of RBD Palm Oil under the provisions of West Pakistan Pure Food Ordinance, 1960 or any other statute, provisions of S.199, Customs Act, 1969 would not in any way authorise the Customs Officer to confiscate the goods under the West Pakistan Pure Food Ordinance, 1960, if the sample did not meet the PSI Specification‑‑‑Principles.

Collector of Customs v. Batala Ghee Mills (Pvt.) Ltd. C. P. No.288‑K of 2000 fol.

(e) Customs Act (IV of 1969)‑‑‑

‑‑‑‑S.32‑‑‑Negative List of the Import, Trade and Procedure Order, 2001‑2002, Cl. H‑1‑‑‑Import of RBD Palm Oil‑‑‑If any product which in its‑ imported or raw form is not fit for human consumption but can be made fit for human consumption after carrying out the due treatment/process in Pakistan, would not fall in the Negative List and would not be covered by S.32, Customs Act, 1969.

Sohail Muzaffar for Petitioners (in Sp. Customs Appeal No.78 of 2002 and others).

Mazhar, Imtiaz Lari for Petitioners (in Sp. Customs Appeal No. 153 of 2002 and others).

Raja Muhammad Iqbal alongwith Abdul Majeed, Principal Appraiser for Respondents.

Date of hearing: 17th October, 2002.

2003 P T D 565

[Karachi High Court]

Before S. Ahmed Sarwana and Muhammad Mujeebullah Siddiqui, JJ

Messrs CIBA‑GEIGY (PAKISTAN) LTD. Through Manager Treasury and Duly

Constituted Attorney, Mahmood Riaz Siddiqui

Versus

COLLECTOR OF CUSTOMS (APPRAISEMENT), CUSTOM HOUSE, KARACHI and 3 others

Constitutional Petition No. D‑2807 of 1993, decided on 13th September, 2002.

(a) Customs Act (IV of 1969)‑‑‑

‑‑‑‑Ss. 19, 202, 223 & 224 [as inserted by Finance Act (L of 1975)]‑‑­S.R.O. 1147(I)/89, dated 27‑11‑1989‑‑‑C.G.O. No.11 of 1986 [as amended by C.G.O. No. 11 of 1992, dated 8‑10‑1992]‑‑‑C.G.O. No.6 of 1987 [as amended by C.G.O., dated 29‑6‑1995]‑ ‑Constitution of Pakistan (1973), Art. 199‑‑‑Constitutional petition‑‑‑Bank guarantee, discharge of‑‑‑Import of raw material to be used in manufacture of exempted drugs‑‑‑Petitioner furnished Bank guarantee in lieu of payment of customs duty‑‑‑Petitioner after utilizing raw materials obtained consumption certificate and submitted for release of Bank guarantee‑‑­Authority did not cancel Bank guarantee, but issued notice to Bank for encashment of guarantee, and threatened to initiate proceedings in terms of S.202 of the Customs Act, 1969‑‑‑Validity‑‑Petitioner had applied for issuance of consumption certificates well in time, but same had been issued by authority with delay .of few days ‑‑‑C.B.R. had stated in C.G.O. No.6 of 1987 that once consumption certificate was issued in prescribed period, limitation period stipulated in S.R.O. 1187(I)/89 would stand complied with from such date‑‑‑Delay caused in submission of consumption certificate before Customs Authority was on account of delay in receiving the same‑‑‑Stipulation stood complied with by virtue of such directions, and customs officials ought to have discharged Bank guarantees as directed by C.B.R.‑‑‑High Court accepted Constitutional petition, declared impugned notices to be without lawful authority and Bank guarantees submitted by petitioner were ordered to be cancelled forthwith.

(b) Customs Act (IV of 1969)‑‑‑

‑‑‑‑S. 223‑‑‑Orders, instructions and directions issued by Central Board of Revenue‑‑Binding on all Customs Officers by virtue of S.223 of Customs Act: 1969‑‑‑Attitude of tax officials should always be assessed friendly‑‑‑Such attitude on their part would be conducive in creating better environment for investment/industrialization in the country, thereby boosting economy resulting in tremendous increase in tax collection‑‑‑Customs Officer's attitude to the contrary was bound to affect adversely, tending to erode confidence of taxpayers in tax administration, destroying environment of investment/industrialization creating problems for Central Board of Revenue and increasing unnecessary litigation‑‑‑High Court emphasised on Central Board of Revenue to take appropriate action against delinquent and unscrupulous tax officials.

Abid S. Zuberi for Petitioner.

Raja M. Iqbal for Respondents.

Date of hearing: 13th September, 2002.

2003 P T D 577

[Karachi High Court]

Before S. Ahmed Sarwana and Muhammad Mujeebullah Siddiqui, JJ

COMMISSIONER OF INCOME‑TAX, COMPANIES‑II, KARACHI

Versus

Messrs MUHAMMAD USMAN HAJRABAI TRUST IMPERIAL COURTS, KARACHI

Wealth Tax Appeals Nos. 80, 81, 82 and 172 of 2002, decided on 12th November, 2002.

(a) Wealth Tax Act (XV of 1963)‑‑‑

‑‑‑‑Ss. 2(2), 2(9), 3, 17‑B & 21‑‑‑Income Tax Ordinance (XXXI of 1979), S.2(16)(bb) [as added by Finance Ordinance (XIV of 1983)]‑‑­Companies Ordinance (XLVII of 1984), S.2(7)‑‑‑Charge of wealth tax‑‑­Trust, whether a company‑‑‑Trust not included in charging S.3 of Wealth Tax Act, 1963 or in definition of "company" as given in S.2(7) of Companies Ordinance, 1984‑‑‑According to S.2(2) of Wealth Tax Act, 1963, words and expressions used, but not defined in the Act would have meanings assigned to them under Income Tax Ordinance, 1979.‑‑‑Trust was included in definition of "company" as given in S.2(16)(bb) of Income Tax Ordinance, 1979‑‑‑Such fiction of law was not found in, definition of "company" as given in S.2(9) of Wealth Tax Act, 1963‑‑­Held, since expression "company" as used in Wealth Tax Act, 1963 was defined in S.2(9) thereof, same could not be interpreted with reference to definition of expression "company" as given in the Income Tax Ordinance, 1979‑‑‑Trust was not liable to charge of wealth tax.

(b) Interpretation of statutes‑‑‑

‑‑‑‑ Definitions given in a statute‑‑‑Not applicable to other statutes unless adopted through legislation by incorporation or reference‑‑‑Definitions given in a particular statute are to be employed for the purpose, of that statute only until and unless said definitions are adopted by any other statute through legislation by incorporation or reference.

(c) Interpretation of statutes‑‑‑

‑‑‑‑ Taxing statute‑‑‑One has to look merely at what is clearly stated therein‑‑‑No room for any intendment ‑‑‑No presumption as to a tax‑‑­Nothing is to be read in ‑‑‑Nothing is to be implied‑‑‑One can only look fairly at the language used.

Government of Pakistan and others v. Messrs Hashwani Limited PLD. 1990 SC 68 rel.

(d) Interpretation of statutes‑‑‑

‑‑‑‑ Fiscal statutes‑‑‑Tax on any person is to be levied by clear and unambiguous words‑‑‑Expressions used in charging sections are not to be stretched by any process of interpretation, so as to bring a person within tax net not falling under clear and plain language of statute.

Government of Pakistan and others v. Messrs Hashwani Limited PLD 1990 SC 68; Pakistan Textile Mills Owners Association, Karachi v. Administrator of Karachi PLD 1963 SC 137; Messrs Hirjina & Co. (Pakistan) Limited v. Commissioner of Sales Tax Central, Karachi 1971 SCMR 128; Cape Brandy Syndicate v. Island Revenue Commissioner (1921) 1 KB 65 and Commissioner of Income‑tax v. Mst. Wazirunnisa Begum 1972 SCMR 116 ref.

Aqeel Ahmad Abbasi for Appellant.

Nemo for Respondent.

Date of hearing: 12th November 2002.

2003 P T D 589

[Karachi High Court]

Before S. Ahmed Sarwana and Muhammad Mujeebullah Siddiqui, JJ

COMMISSIONER OF INCOME‑TAX, COMPANIES‑I, KARACHI

Versus

Messrs NATIONAL INVESTMENT TRUST LTD., KARACHI

Income Tax Cases Nos. 103 and 104 of 2002, decided on 13th November, 2002.

(a) Interpretation of statutes‑‑‑

‑‑‑‑Fiscal statute‑‑‑While interpreting a fiscal statute, there is no room for any intendment, inference or presumption‑‑‑Plain words used by Legislature are to be looked only for application of a particular provision.

(b) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑Ss. 23(1), Expln. (b), 32 & 50(6‑A)‑‑‑Dividend‑‑‑Deduction of tax from income of dividend‑‑‑Such deduction would be made at the time of making payment to a shareholder not being a company, but not at the time of declaration of dividend‑‑‑Expression "paid" as used in Expln. (b) to S.23(1) of the Income Tax Ordinance, 1979 means actually paid or incurred according to method of accounting on the basis of which income is computed, but same is restricted to Ss. 18, 24 & 31 of the Ordinance only‑‑‑Such explanation is general in terms and would not be applied to other sections of the Ordinance as fiction of law is restricted to the extent specified in statute and its scope is not to be extended‑‑‑Intention of Legislature is clear from the fact that do such Explanation has been inserted in S.50(6‑A) of the Ordinance.

(c) Interpretation of statutes‑

‑‑‑‑ Fiscal statute‑‑‑Fiction of law is restricted to the extent specified in statute and its scope is not to be extended.

(d) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑S. 136(1)‑‑‑Question of law‑‑‑Reference to High Court‑‑‑Scope‑‑‑Not every question of law, but only substantial question of law would be referred to High Court‑‑‑Where law was very clear and no ambiguity was to be resolved or no interpretation was required, then question of law would not be referred to High Court.

Aqeel Ahmed Abbasi for Applicant.

Nemo for Respondent.

Date of hearing: 13th November, 2002.

2003 P T D 593

[Karachi High Court]

Before S. Ahmed Sarwana and Muhammad Mujeebullah Siddiqui, JJ

SALEEM HAJI REHMATULLAH DADA, KARACHI

Versus

COMMISSIONER OF INCOME‑TAX, COMPANIES‑V, KARACHI

I.T.A. No.869 of 1999, decided on 3rd October, 2002.

(a) Administration of justice‑‑‑

‑‑‑‑ Relief available to a person in law should not be denied on account of technicalities.

(b) Taxation‑‑‑

‑‑‑‑ Tax Officer, duty of‑‑‑Duty of Tax Officer is to act in accordance with law and keep principle of justice in view.

(c) Administration of justice‑‑‑

‑‑‑‑ Justice should not be crucified on the altar of technicalities.

(d) Taxation‑‑‑

‑‑‑‑ Assessee should not be required to perform impossibilities, which in itself amounts to negation of justice.

(e) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑S. 99(2)‑‑‑Refund, claim for‑‑‑Period of limitation provided in S.99 of the Income Tax Ordinance, 1979‑‑‑Applicability‑‑‑Such period would be relevant, when a refund was assessed in assessment order for a particular period.

(f) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑Ss. 2(20)(e), 96(2), 99, 100, 156(4) & 136(1)‑‑‑Refund of addition on repayment of loan, claim for‑‑‑Loan advanced to appellant by company was deemed as dividend and taxed under S.2(20)(e) of the Ordinance‑‑­Appellate Authority confirmed such addition, but Tribunal set aside assessment with direction to re‑examine‑‑‑Appellant in re‑assessment proceedings taken in year 1998 claimed refund on the ground that loan taken by him in, assessment year 1986‑87 had been repaid during assessment year 1987‑88‑‑‑Assessing Officer declined such request‑‑‑Appellant then made written request for refund under S.96(2) of the Ordinance‑‑‑Assessing Officer treated such request as an application for rectification relating to assessment order for assessment year 1987‑88, and found same hit by limitation envisaged under S.156 of the Ordinance‑‑‑Tribunal upheld rejection of application‑‑‑Validity‑‑‑Refund to appellant became available because of finalization of assessment for assessment year 1986‑87 through order, dated 31‑3‑1998‑‑‑Present case was not of rectification as assessment for assessment year 1987‑88 was completed on the basis of facts and circumstances prevailing on 30‑4‑1988‑‑‑Question of rectification did not arise as !here was no mistake apparent on record‑‑‑Present claim for refund was not governed by provisions contained in Ss.99 & 156 of the Income Tax Ordinance, 1979, thus, period of limitation provided therein was not relevant‑‑­Appellant was entitled to refund of addition made under S.2(20)(e) of the Ordinance by the way of consequential relief‑‑‑High Court answered question in affirmative and accepted appeal.

Irfan Saadat Khan for Appellant.

Nasrullah Awan for Respondent.

Date of hearing: 3rd October, 2002.

2003 P T D 739

[Karachi High Court]

Before Muhammad Mujeebullah Siddiqui and Azizullah M. Memon, JJ

Messrs GEAR ROBBING LIMITED

Versus

COMMISSIONER OF INCOME‑TAX and another

I.T.A. No. 859 of 2000, decided on 25th September, 2002.

(a) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑Ss. 80‑C, 61 & 62‑‑‑Presumptive tax regime‑‑‑Entirely different from normal assessment of tax‑‑‑Neither any total income is computed nor any expenses are allowed in such regime, rather entire sales are deemed to be income, on which fixed tax is recovered‑‑‑No concept of probe, inquiry or proceedings in such regime, thus, question of issuance of notice under Ss.61 & 62 of the Ordinance would not arise.

(b) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑Ss.80‑C, 65, 61 & 62‑‑‑Presumptive tax regime‑‑‑Re‑opening of assessment‑‑ Issuance of notice to assessee under Ss. 61 & 62 of the Ordinance‑‑‑Requirement of ‑‑‑Assessee did not opt to appear and file return before Assessing Officer after having been served with notice for re‑opening of assessment, but only addressed letter to Deputy Commissioner of Income‑tax‑‑‑Assessing, Officer proceeded to finalise assessment under S.80‑C of the Ordinance ‑‑‑Validity‑‑‑Assessee had disentitled himself from benefit, which he could have availed by making compliance of notice issued to him by Assessing Officer, who had no option but to finalize assessment in absence of assessee‑‑‑No body could be allowed to take advantage of his wrong‑‑‑Where assessment had been finalized under S.80‑C of the Ordinance, the question of issuance of notice under Ss.61 & 62 of the Ordinance would not arise‑‑‑No substantial question of law requiring any consideration or interpretation by High Court had been raised‑‑‑High Court dismissed appeal in limine.

(c) Practice and procedure‑‑‑

‑‑‑‑ No body could be allowed to take advantage of his own wrong.

M. Ather Saeed for Appellant.

2003 P T D 752

[Karachi High Court]

Before Muhammad Mujeebullah Siddiqui and Azizullah M. Memon, JJ

Messrs B.C.C.I. (OVERSEAS) LTD.

Versus

COMMISSIONER OF INCOME‑TAX and others

I.T.A. No. 411 of 1999, decided on 26th September, 2092.

Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑Ss.66‑A(1‑A)(a)(b), 129, 134 & 137‑‑‑Decision in appeal filed against order of Deputy Commissioner of Income‑tax‑‑‑Rule of merger‑‑‑Applicability‑‑‑Extent‑‑‑Rule of merger is restricted to the extent of a point or issue, which is subject‑matter in appeal‑‑‑Merely by filing of an appeal on one point, the entire order of Deputy Commissioner of Income‑tax would not merge in order of Appellate Authority.

PLD 1992 SC 49 = 1992 PTD 932 ref.

Rehan Hasan Naqvi anli Miss Lubna Pervez for Appellant.

Muhammad Farid for Respondents.

2003 P T D 760

[Karachi High Court]

Before Muhammad Mujibullah Siddiqui and Azizullah M. Memon, J

Messrs HINOPAK MOTORS LIMITED

Versus

FEDERATION OF PAKISTAN and others

Constitutional Petition No. D‑1944 of 1999, decided on 24th September, 2002.

(a) Sales Tax Act (VII of 1990)‑‑‑

‑‑‑‑Ss. 2(33)(a), 3, 34, 36 & Sixth Sched., Sr. No.33 [as same stood up to 30‑6‑1997].‑‑‑Constitution of Pakistan (1973)., Art.199‑‑‑Constitutional petition‑‑‑Supply of imported parts to customers in their original shape without subjecting such goods to any manufacturing process‑‑‑Demand of sales tax on supply of such imported goods‑‑‑Validity‑‑‑Entry No.33 of Sixth Schedule of the Sales Tax Act, 1990 allowed exemption to supplies made in Pakistan by any person except made by manufacturer‑‑Where an assessee was engaged in supply of goods manufactured by itself as well as supply of goods imported by it, then sales tax would be payable on supply of goods manufactured by assessee, while supplies of goods not manufactured by such assessee would enjoy exemption‑‑‑‑ Language of law was very clear, but if there was any ambiguity, same would be resolved in favour of the assessee‑‑‑Assessee could not be subjected to levy of sales tax in respect of supplies which were exempted from sales tax under provisions of Entry No.33 of Sixth Schedule of the Act as same stood up to 30‑6‑1997‑‑‑High Court accepted Constitutional petition and cancelled the impugned show‑cause notice being illegal, without jurisdiction, void and inoperative.

(b) Interpretation of statutes‑‑‑

‑‑‑‑ Fiscal statutes, interpretation of ‑‑‑Preamble‑‑‑Assessee is to be taxed by a clear and unambiguous language‑‑‑If there is any ambiguity or doubt, same is always to be resolved in favour of assessee.

Muhammad Ather Saeed for Petitioner.

Raja Muhammad Iqbal for Respondent.

2003 P T D 773

[Karachi High Court]

Before Zahid Kurban Alvi and Mushir Alam, JJ

MATIARI SUGAR MILLS LTD.

Versus

PAKISTAN MINISTRY OF FINANCE and others

Constitutional Petition No. 1457 of 1999, decided on 30th November, 2000.

(a) Interpretation of statutes‑‑‑

‑‑‑‑‑Fiscal statutes‑‑‑Such enactments have to be given their literal meaning‑‑‑No inference can be made especially when none is required‑‑‑If any inference is required, then same should be to the benefit of taxpayer.

(b) Sales Tax Act (VII of 1990)‑‑‑

‑‑‑‑Ss.2(25), 3(1‑A), 14 & 19‑‑‑Registered person‑‑‑Further tax, levy of‑‑‑Exception‑‑‑Proof‑‑‑Registration compulsory under S.14 read with S.19 of the Sales Tax Act, 1990‑‑‑Inference would be that tax would be liable and payable by those persons or companies, who are registered or liable to be registered‑‑‑Recovery of further tax from persons other than a registered person under S.3(1‑A) of the Act‑‑‑Such provisions would enable same to persons falling within definition of S.2(25) of the Act‑‑­Assessee claiming exemption has to show that persons to whom taxable supply is made is registered or liable to be registered under the Act.

Farough Naseem for Petitioner.

Saleem Thepdawala and Akhlaque Ahmed for Respondents.

Syed Tariq Ali, Standing Counsel.

2003 P T D 777

[Karachi High Court]

Before Muhammad Mujeebullah Siddiqui and Azizullah M. Memon, JJ

ENGRO CHEMICAL PAKISTAN LTD.

Versus

ADDITIONAL COLLECTOR OF CUSTOMS and others

Special Custom Appeal No.25 of 2002, decided on. 26th September, 2002.

(a) Central Excises Act (I of 1944)‑‑‑

‑‑‑‑Ss.36‑C‑‑‑Sales Tax Act (VII of 1990), Ss. 46 & 47‑‑‑Customs Act (IV of 1969), Ss. 196‑‑‑Appeal/reference before High Court‑­Scope‑‑‑Failure of Tribunal to pass proper speaking order by considering all questions of facts and law raised by the parties‑‑‑Effect‑‑‑Tribunal a final forum for deciding facts‑‑‑Scope of appeal before High Court limited to questions of law arising out of order of Tribunal‑‑‑Disposal of appeal by Tribunal by a summary and slipshod order deprecated‑‑‑Every judicial order should be a speaking order‑‑‑Failure of Tribunal to pass proper judicial order by considering all questions of facts and law raised before it would amount to negation of justice as in such case High Court would not be able to decide questions of law.

(b) Administration of justice‑‑‑

‑‑‑‑ Every judicial order should be a speaking order.

Aziz A. Shaikh for Appellant.

M. Fariduddin for Respondents.

2003 P T D 818

[Karachi High Court]

Before S. Ahmed Sarwana and Muhammad Mujeebullah Siddiqui, JJ

ASSISTANT COLLECTOR, CUSTOMS AND CENTRAL EXCISE, DIVISION

III, SUKKUR

Versus

Messrs MARI GAS COMPANY LIMITED

Special Central Excise Appeal No.75 and Civil Miscellaneous Application No. 868 of 2002, decided on 24th October, 2002.

(a) Central Excises Act (I of 1944)‑‑‑

‑‑‑‑S.3‑B‑‑‑"Shall pay" and "shall be liable to pay" ‑‑‑Distinction and connotation‑‑‑Clear distinction exists between the phrase 'shall pay' and shall be liable to pay'‑‑‑Use of the phraseshall pay' makes it mandatory on the person to pay the amount while the use of the words 'he shall be liable to pay' gives a discretion to the concerned functionary of the Department to impose additional tax or waive the same totally if in his opinion, the circumstances so required‑‑‑Use of the words `he shall be liable to pay' in S.3‑B of the Act also vests in the Adjudicating Officer, the discretion to levy or forego the additional sales tax in case of failure of person to pay the sales tax keeping in view the facts and circumstances of the case and the reason for non‑payment.

Shamroze Khan and another v. Muhammad Ameen PLD 1978 SC 89 ref.

(b) Central Excises Act (I of 1944)‑‑‑

‑‑‑‑Ss.36‑C & 3‑B‑‑‑Central Excise Rules, 1944, Rr.53, 10 & 210‑‑­S.R.O. 546(I)/94, dated 9‑6‑1994‑‑‑S.R.O. 552(I)/89 dated 3‑6‑1989‑‑­Levy of additional duty‑‑‑Claim of the Department was that if a person who under Central Excises Act, 1944 was liable to pay tax but failed to pay the same for any reason, he was duty bound to pay additional tax at the rate stated in S.3‑B of the Act and no officer of the Excise Department had any discretion to waive or reduce the additional tax stated in the said section‑‑‑Validity‑‑‑Fact of late payment was conceded by the assessee but the enforcement of Central Excise duty under S.3(b) was contested by it on the ground that the late payment made due to circumstances beyond its control as out of the 100% of the total income of the assessee, it was paying 93% to Government of Pakistan in shape of development surcharge and excise duty thus leaving a balance of only 7% for the assessee and it was not at all possible for the assessee to pay the excise duty from this 7% as the major buyer (WAPDA) of the respondent had defaulted to make payment to the assessee‑Considering that delay was beyond the control of the assessee and was not due to any wilful act of the assessee, Tribunal had rightly remitted the penalty and the additional duty which was punitive in nature‑‑‑Finding of the Tribunal did not suffer from any legal infirmity and was consequently maintained.

Arif Moton for Appellant.

Syed Mohsin Imam for Respondent.

Date of hearing: 24th October, 2002.

2003 P T D 986

[Karachi High Court]

Before Muhammad Mujeebullah Siddiqui and Azizullah A. Memon, JJ

D.G. KHAN CEMENT COMPANY LIMITED through Deputy Manager Marketing

Versus

DEPUTY COLLECTOR OF CUSTOMS, APPRAISEMENT GROUP‑VII, CUSTOM HOUSE, KARACHI and another

Special Customs Appeal No. 142 of 2002, decided on 1st January, 2003.

Customs Act (IV of 1969)‑‑‑

‑‑‑‑S.19‑‑‑S.R.O. 484(I)/92 dated 14‑5‑1992‑‑‑Exemption from customs duty‑‑‑Objectives‑‑‑Plant and machinery‑‑‑Dump trucks imported by cement manufacturer and supplier are component parts of the industrial process and fall within the purview of "plant and machinery" as contemplated in S.R.O. 484(I)/92, dated 14‑5‑1992‑‑‑Expression "installed" does not necessarily mean fixed in position but it is also used in the sense of inducted or introduced and also means to place an apparatus in position for service or use‑‑‑Concession under the said notification is extended to the mobile machinery imported by cement industry for excavation/transportation of rocks from leased area to the factory‑‑‑Concessions/exemptions in tax matters are generally granted with intention of boosting the industrialization, manufacturing business and trade activities and while interpreting such notifications such intention has to be kept in view‑‑‑Principles.

In the present case the appellant has set up a pant for manufacturing of cement and when the Tribunal has conceded that certain goods have been imported which are meant for setting up of a new unit or expansion, balancing or modernization, it means, that the imported goods are component parts of the industrial process. It goes without saying, that when a new unit is set up then expansion, balancing or modernization of the existing unit is carried out by addition to the plant and machinery and not otherwise. If any thing is raw material, or stock in trade or is not connected with the existing plant or machinery it would not expand or modernize the existing industrial unit. Thus it is contradictory in terms to say, on one hand that the imported goods are meant for setting up of a new unit or for expansion, balancing or modernization and on the other hand, it is contended that it is not a part of industrial unit or is not used in the industrial process when the Tribunal has said that the Condition No. 1, to the effect that it is not locally manufactured is not disputed then it has to be conceded that it is a plant and machinery, because in the said notification it is contained that the Federal Government is pleased to exempt such plant and machinery, as is not manufactured locally. The words "is not manufactured locally" are used with reference to the plant and machinery and nothing else.

Generally the exemption notifications are self‑contained and they are complete code in themselves until and unless a specific reference is made in the notification to the particular P.C.T. heading or classification with reference to the Customs Tariff or any other law. A perusal of S.R.O. 484(I)/92 shows that for the purpose of exemption no reference is made to the customs tariff or P.C.T. heading. The indemnity bond prescribed with the notification contains that "the Federal Government has granted exemption subject to the condition given, in the notification". It further clarifies the intention of the Federal Government to the effect that, the machinery as defined in the notification shall enjoy exemption without recourse to the classification contained in Pakistan Customs Tariff, para. No.1, of definition of machinery contained in the notification shows that it means "machinery" operated by power of and description, such as is used in any industrial process. It cannot be denied that a vehicle is a machinery and is operated by the power. The Tribunal, in the present case, while trying to create a distinction between the "use in any industrial process" and "use within any industrial process" has accepted that the dump truck may be "used with any industrial process, meaning thereby that the use of dump truck in the process of manufacturing of cement is accepted. So far the distinction sought to be drawn by the Tribunal is concerned that it is, "used with the industrial process" and not, "in the industrial process", it is a mere jugglery of words and has no real significance, The public functionaries and the authorities acting in judicial or quasi judicial capacity are always required to act in a reasonable manner and not to resort to mere hair splitting with intention to deny a benefit available to the taxpayers. Such attitude is contrary to the very purpose of issuing a concessionary notification. The concessions/exemptions in tax matters are generally granted with intention of boosting the industrialization, manufacturing business and trade activities and while interpreting such notifications this intention should always be kept in view. So far the interpretation of expression, `instalment' adopted by the Tribunal is concerned, it is too narrow, conservative and smacks of remaining oblivious of the progress and development in the field of industry which is taking place at very rapid speed. In realm of industry such advancements are taking place which apparently seem non‑industrial but they are part and parcel of the industrial process and that while interpreting the word "installation" a liberal view should be taken. The expression "installed" does not necessarily mean fixed in position but it is also used in the sense of inducted or introduced. It also means to place an apparatus in position for service or use. It requires no emphasis that with the development in the required of industry a large variety of plants and machineries have been manufactured which are merely purchased or imported and kept in position without being fixed and they immediately provide service and are used for the purpose of industrialization and manufacturing., The C.B.R. has rightly directed in the letter, dated 6‑12‑1994, that the mobile machinery imported by cement industry for excavation/ transportation of, rocks from leased area to factory may be extended, the concession of S.R.O. 484(I)/92. The law, as well as, language are not static, but are dynamic and with the developments taking place, the words are acquiring new dimensions, new meanings and new connotations. A developing and progressive society, economy system of taxation and system of law has to keep pace with the developments, otherwise it will lose its touch with the living realities and shall become obsolete.?

The dump trucks fall within the purview of plant and machinery as contemplated in the S.R.O. 484/(I)/92, dated 14-5‑1992.

Salman Ikram Raja for Appellant.

Qazi Faez Isa for Respondents.

Date of hearing: 26th September, 2002.

2003 P T D 1047

[Karachi High Court]

Before S. Ahmed Sarwana and Muhammad Mujeebullah Siddiqui, JJ

Messrs ROSE COLOUR LABORATORIES NAYAB NO. 1 (PVT.) LTD.

Versus

CHAIRMAN, C.B.R. and others

C. P. No. D‑1239 of 1992, decided on 11th November, 2002.

(a) Customs Act (IV of 1969)‑‑‑

‑‑‑‑S.32‑‑‑Scope and application of S.32, Customs Act, 1969‑‑­Provisions of S.32, Customs Act, 1969 relate to three different and distinct categories of short levy or refund etc., i.e. in relation to any declaration or statement which is false in any material particular; where there is some collusion and where there is any inadvertence, error or misconstruction on the part of the Department.

(b) Customs Act (IV of 1969)‑‑‑

‑‑‑S.32(2)(3)‑‑‑S.R.O. 530(I)/90, dated 7‑6‑1990‑‑‑Custom Tariff Section Notes V to XVI‑‑‑Constitution of Pakistan (1973), Art.199‑‑­Constitutional petition‑‑‑Short levy of Customs Duty‑‑‑Show‑cause notice under S.32(2)(3), of Customs Act, 1969‑‑‑Limitation‑‑‑Department had not alleged that the short levy was on account of a ‑misstatement or misdeclaration made by the importer in a certificate or other document or was on account of any statement which was false in any material particular or on account of ‑some collusion‑‑‑Show‑cause notice simply stated that the import duties in respect of the consignment, were found to have been short levied because the assessment should have been correctly made under PCT Heading 9010.1090 chargeable to the Customs Duty @ 50% and sales tax @ 12.50% instead of "free" which clearly indicated that it was a result of inadvertence, error or misconstruction on the part of the Customs Department and was, therefore, not due to misdeclaration or misstatement made or a false document submitted, by the importer‑‑­All the documents relating to the import were presented to the Department which ordered clearance of the goods‑‑‑Inadvertence, error or misconception on ,the part of Department in clearing the goods exempt from duty was evident on the relevant official record wherein it was stated on post importation scrutiny of the document it was detected that the subject goods did not qualify for the exemption .under S.R.O. 530(I)/90 dated 7‑6‑1990 viz. definite in Section Note V to Section XVI of the Customs Tariff‑‑‑Show‑cause notice thus nowhere mentioned of a misstatement, false .statement or any collusion on the part of the importer which resulted in short levy of the Custom Authorities‑‑‑Show‑cause notice, in circumstances, was not covered by S.32(2), Customs Act, 1969 but was covered by S.32(3) of the said Act which at the relevant time required the Customs Authorities to issue a show‑cause notice within six months of the relevant date‑‑‑Notices, in the present case, having been issued after more than 15 months of the expiry of the relevant date was barred by limitation and thus was without lawful authority and of no legal effect and was accordingly set aside by the High Court.

Zamiruddin Ahmed for Petitioner.

Jawaid Farooqui for Respondents Nos.2 and 3.

S. Ziauddin Nasir, Standing Counsel.

Date of hearing: 13th September, 2002.

2003 P T D 1093

[Karachi High Court]

Before S. Ahmed Sarwana and Muhammad Mujeebullah Siddiqui, JJ

COMMISSIONER OF INCOME‑TAX, COMPANIES‑II, KARACHI

Versus

Syed KHALID JAMAL

Income Tax Case No. 173 of 2002, decided on 19th November, 2002.

(a) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑Ss. 59(1) & 65‑‑‑Self‑assessment‑‑‑Return of total income accompanying with Wealth Tax Return finalised under Self‑Assessment Scheme was reopened on account of under‑valuation of plot shown in Wealth Tax Return‑‑‑Appellate Authority set aside such order, which judgment was upheld by Tribunal‑‑‑Validity‑‑‑Filing of ‑ Wealth Tax Return alongwith Income Tax Return was a condition precedent‑‑­Assessing Officer was obliged to scrutinize Wealth Tax Return and after detecting any concealment to exclude return of income from purview of Self‑Assessment Scheme‑‑‑Since return had not been excluded from purview of Self‑Assessment Scheme, inference would be that Assessing Officer, after examining Wealth Tax Return already available on record, had not found initially any case of concealment of income‑‑‑Tribunal had rightly decided issue and rejected the reference application‑‑‑High Court dismissed direct reference application in limine.

(b) Income-Tax---

‑‑‑‑Change of opinion‑‑‑Test‑‑‑Where on examination of same material earlier examined by the Assessing Officer, if he comes to a conclusion different from the one arrived at the earlier examine, on of information, then same would be a case of change of opinion.

Messrs National Beverages (Pvt.) Ltd. v. Federation of Pakistan 2001 PTD 633 rel.

Aqeel Ahmed Abbasi for Appellant.

Nemo for Respondent.

Date of hearing: 19th November, 2002.

2003 P T D 1106

[Karachi High Court]

Before S. Ahmed Sarwana and Muhammad Mujeebullah Siddiqui, JJ

Messrs KARIM CONTAINERS (PVT.) LTD, Versus

CUSTOMS, CENTRAL EXCISE

Constitutional Petition No.D‑1865 and Civil Miscellaneous Applications Nos.4713, 4714 and 4720 of 2002, decided on 5th November, 2002.

Sales Tax Act (VII of 1990)—­

‑‑‑‑S. 46‑‑‑Civil Procedure Code (V of 1908), O. XXXIX, R. 2(2‑A), (2‑B) & S.141‑‑‑Constitution of Pakistan (1973) Art.199‑‑‑Constitutional petition‑‑‑Grant of stay under S.46(4), Sales Tax Act, 1990 against recovery of tax by the Appellate Tribunal‑‑‑Contention of the assessee was that after expiry of such interim order staying the recovery of tax, on expiration of period of six months, the time be extended to the appellate proceedings pending before the Customs, Excise and Sales Tax Appellate Tribunal in view of the principles provided under O.XXXIX, R.2(2‑B), C.P.C.‑‑‑Validity‑‑‑Appellate Tribunal under the Sales Tax Act, 1990 exercised jurisdiction under Special Act and thus equitable provisions in O.XXXIX, C.P.C. which was a general law pertaining to the procedure as well as the jurisdiction regarding the matters seized of by the Court of civil jurisdiction and in respect of ancillary matters; could not be extended to the proceedings pending before the Tribunal under S.46, Sales Tax Act, 1990‑‑­Principles.

Zahoor Textile case's PLD 1999 SC 880 and Nazir Ali M. H. Gangji v. Commissioner of Income‑tax 1994 PTD 958 ref.

Sattar Silat for Petitioner.

Date of hearing: 5th November, 2002.

2003 P T D 1155

[Karachi High Court]

Before S. Ali Aslam Jafri, J

INCOME TAX RECOVERY OFFICER and 2 others

Versus

CENTRAL BOARD OF REVENUE

Suit No. 1649 of 1999, decided on 16th September, 2002.

Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑S. 162‑‑‑Civil Procedure Code (V of 1908), S.79. & O.VII, R.11‑‑­Constitution of Pakistan (1973), Art. 174‑‑‑Bar of suits in Civil Courts‑‑­Suit filed against Government Officials‑‑‑Maintainability‑‑‑Suit was filed against Government Officials in their official capacity without impleading "Pakistan" as a defendant was bad in form and not maintainable under the law‑‑‑Suit was also barred under S.162 of the Income Tax Ordinance, 1979‑‑‑Application under O.VII, R.11 of the Civil Procedure Code, 1908 was granted and plaint was rejected being not maintainable and barred under the law on both counts‑‑­Remaining applications also stood disposed of having become infructuous.

Batala Engineering Company Ltd. v. ITO, Lahore 1973 SCMR 282; Releigh Investment Company Ltd. v. Governor‑General-in‑Council PLD 1947 PC 19; Commissioner of Income Tax, West Punjab v. Tribune Trust PLD 1947 PC .247; Secretary, B. and R. Government of West Pakistan and 4 others v. Fazal Ali Khan PLD 1971 Kar. 625, Manahem S. Yeshoova v. Union of India and others AIR 1960 Born. 196 and Province of Punjab through Member, Board of Revenue, Lahore and others v. Muhammad Hussain through his Legal Heirs and others PLD 1993 SC 147 rel.

Plaintiff and his Counsel (absent).

Raja Muhammad Iqbal for Defendant No. 1.

Muhammad Farid for Defendant No.2.

Date of hearing: 16th September, 2002.

2003 P T D 1264

[Karachi High Court]

Before Shabbir Ahmed and Azizullah M. Memon, JJ

COMMISSIONER OF INCOME-TAX

Versus

Messrs SPRING FIELD SECONDARY SCHOOL, KARACHI

Income Tax Appeals Nos. 180, 181 and 182 of 1998, decided on 18th February, 2003.

Income Tax Ordinance (XXXI of 1979)---

----Ss.2(16)(b) & 80-D---Societies Registration Act (XXI of 1860), S.1--­"Company"---Body Corporate, duly registered under the Societies Registration Act, is not a "Company" as defined in S. 2(16)(b), Income Tax Ordinance, 1979 as such minimum tax @ 0.5% is not leviable on its turnover/gross receipts under S.80-D of the Income Tax Ordinance, 1979---Principles illustrated.

The societies registered under the provisions of Cooperative Societies Act is not a 'company' within the meaning of section 2(16)(b) of the Income Tax Ordinance, 1979.

Clause (a) of section 2(16) of the Income Tax Ordinance, 1979 covers the Companies registered under the Companies Ordinance. 1984, whereas, clause (b) covers the other institutions i.e. Corporations incorporated by or under an enactment, such as, (1) National Bank of Pakistan, (2) Pakistan Insurance Corporation. (3) Industrial Bank of Pakistan, (4) Agricultural Development Bank of Pakistan, (5) Pakistan International. Airlines. These are the illustrations of the Corporations formed by' orunder' a statute. These are the statutory corporate bodies which are covered by section 2(16)(b). The terms 'by' or `under' are synonymous and interchangeable terms. The expression "law in force for the time being" also relates to a particular statute under which a body is directly established and to no other law. The intention of the Legislature is to embed only such corporate bodies into the definition of company, which are directly established, constituted, and created by the relevant statute itself. However, where the body has been formed by private individual and subsequently, registered under the relevant law, it would not be a body formed under the law, rather would be a body formed otherwise, but registered under the law.

The Societies, registered under the Societies Registration Act cannot be equated with the companies registered under the Companies Ordinance or incorporated under a statute, therefore, such bodies cannot be treated as company as defined in section 2(16)(b) of the Income Tax Ordinance, 1979.

Commissioner of Income Tax, Sukkur Zone, Sukkur v. Messrs Attia Higher Secondary School, Khairpur Income Tax Appeal No. 372 of 1999 and Commissioner of Income Tax, Wealth Tax v. Messrs Engineering Cooperative Housing Society 2000 PTD 3388 ref.

Javed Farooqui for Appellants.

Rehan Hassan Naqvi and Miss Lubna Parvez for Respondents.

Date of hearing: 14th February, 2003.

2003 P T D 1276

[Karachi High Court]

Before Shabbir Ahmed and Azizullah M. Memon, JJ

Miss SUMBLEEN ANWAR and others

Versus

DEPUTY COMMISSIONER OF INCOME-TAX

Wealth Tax. Appeals Nos.80 to 85 of 2001, decided on 18th February 2003.

(a) Wealth Tax Act (XV of 1963)---

----S.35--Rectification of mistake---Scope.

At any time within four years from the date of any order passed by him, or it, the Commissioner, the Wealth Tax Officer, the Appellate Additional Commissioner or the Appellate Tribunal may, on his, or its, own motion rectify .any mistake apparent from the record and shall, within a. like period, rectify any such mistake which has been brought to the notice of the Wealth Tax Officer, the Commissioner, the Appellate Additional Commissioner or the Appellate 'Tribunal, as the case may be, by an assessee. Provided that no such rectification shall be made which has the effect of enhancing the assessment unless the assessee has been given a reasonable opportunity of being heard in the matter.

(b) Administration of justice---

----Courts would be deemed to have inherent jurisdiction in the interest of orderly dispensation of justice in a case for which there is no provision in law for a conceivable eventuality.

(c) Wealth Tax Act (XV of 1963)---

----S. 35---Rectification of mistake---Scope---Provisions of S.35, Wealth Tax Act, 1963 gives jurisdiction for rectification of mistakes by exercising suo motu power by the Authority, who has passed the order or for rectification of such mistake brought to the notice of the said Authority by an assessee.

(d) Interpretation of statutes--

---Maxim: "Expressio unius est exclusio alterius"---When a statute mentions one or more things of a particular class, it may be regarded as silently excluding other things of the same class or similar classes not expressly mentioned---Such rule is not absolute in its application, however, while construing a statute the construction which is most agreeable to justice or reasons is to he preferred.

(e) Interpretation of statutes---

----Enabling provision---Effect---General rule with regard to the effect of an enabling provision is expressed in -maxim "expressio unius est exclusio alterius"---Express provision shuts the door to further implication---If there be anyone rule of law clearer than other, it is the rule that when the Legislature has expressly prescribed one or more particular modes of dealing with matter, such expression always excludes any other mode.

Craies on Statute Law, Seventh Edn., 1971, p.255 quoted.

(f) Wealth Tax Act (XV of 1963)---

----S. 35---Power of rectification of mistake---Scope and ambit of such power-- -Limitations on the power or jurisdiction of the designated authority in rectification of mistake in the order in point of time are i.e. within four years from the date of order passed and that the Authority who has passed the order can suo motu rectify or such mistake can be rectified on the request of an assessee---Right to apply by any Income Tax. Authority has been excluded from S.35, Wealth Tax Act, 1963--­Income Tax Tribunal, in the present case, had erred in law by assuming the jurisdiction for rectification on the application by the Income Tax Authority---High Court set aside the order of rectification by the Tribunal in circumstances.

1998 PTD 3900; 2000 PTD 1169; C.P. No. 1132 of 1999; Mehran Associates Limited v. Commissioner of Income-tax, Karachi 1993 PTD 694 = 1993 SCMR 274; Messrs Hirjina & Co. (Pakistan) Ltd., Karachi v. Commissioner of Sales Tax, Central, Karachi 1971 SCMR 128; Nasimul Haque Malik v. Chief Secretary to Government of Sindh, Karachi 1996 SCMR 1264 and Collector of Customs (Appraisement), Karachi and others v. Messrs Abdul Majeed Khan and others 1977 SCMR 371 ref.

Commissioner of Income tax, Rawalpindi v. Wolf Gang Matzke 1975 PTDD 61 distinguished.

(g) Interpretation of statutes---

---- Fiscal statute---While construing a taxing provision one has to look merely at what is clearly said---Nothing is to be read in and nothing is to be implied---When a statute directs a thing to be done in a particular manner or by certain persons or entities it implies that it shall not be done by any other person or in any other manner---Such principle of construction is based upon probable institution of the Legislature---What cannot be done directly cannot be done indirectly.

Mian Muhammad Nawaz Sharif v. President of Pakistan PLD 1993 SC 473 ref.

Rehanul Hasan Naqvi with Miss Lubna Pervaz for Appellants.

M. Arif Moton and Khursheed A. Hashmi, D.A.-G. for Respondents (on Court's Notice).

Date of hearing: 28th January, 2003.

2003 P T D 1285

[Karachi High Court]

Before S. Ahmed Sarwana and M. Mujeebullah Siddiqui, JJ

SITARA CHEMICAL INDUSTRIES LTD. and another

Versus

DEPUTY COMMISSIONER OF INCOME-TAX

Constitutional Petition No.D-1225 of 2000, decided on 21st March, 2003.

(a) Income Tax Ordinance (XXXI of 1979)---

----Ss. 62 & 12(12)---Companies Ordinance (XLVII of 1984), Ss.284, 285, 286, 287 & 288---Constitution of Pakistan (1973), Art. 199--­Constitutional petition---Merger of two public listed-companies-- Petitioner, the transferee company filed, its Return of income wherein the assets of transferred Company were shown as the assets of the petitioner-company in accordance with the provisions, of the Amalgamation Scheme approved by the High Court---Amalgamtion Order by the Court indicated that one company was transferred to the other on the basis of book value and the transferee Company got revalued the assets of the transferred---Difference of fair market value and sale/purchase value of the assets---Deemed income--Assessing Officer issued notice under S.62, Income Tax Ordinance, 1979 to the transferee Company to the effect that the surplus created by the said Company being, in fact, difference in the fair market value and the assets of the Company acquired by the transferee Company at cost price/book value, why the difference of the created reserve and the written down value as per books of the transferor should not be added under S.12(12) of the Income Tax Ordinance, 1979 to the total income of the transferee Company;--Validity---Issuance of notice by the Assessing Officer could not be said to be without jurisdiction and lawful authority---Any order restraining the Assessing Officer from asking any question or deciding any question which was within his statutory duty and power would disturb the entire system laid down by the Income Tax Ordinance, 1979 which the High Court refrained to do so---Petitioner, in circumstances, should file its reply to the notice supported by case-law and allow the Assessing Officer to consider the same and pass a written order with reasons therefore as required by S.62, Income Tax Ordinance, 1979--­Principle.

CIT v. Amsons Dairies Ltd. 1971 PTD 1075 = 1971 SCMR 589 and CIT v. Messrs Bufco Tanneries PLD 1966 Lah. 244; Roche Pakistan Ltd. v. Dy. CIT 2001 PTD 3090; Julian Hoshang Dinshaw Trust v. ITO 1992 PTD 1; Kamran Industries v. Collector of Customs PLD 1966 Kar. 68; Adamjee Insurance Company v. Pakistan (Secretary MOF) 68 Tax 176; Usmania Glass Sheet Factory v. Sales Tax Officer PLD 1971 SC 205; Shagufta Begum v. I.T.O. PLD 1989 SC 360; Khalid Mehmood v. Collector of Customs 1999 SCMR 1881; Al-Ahram Builders (Pvt.) Limited v. I.T.A.T. 1993 SCMR 29 and Ameen Textile Mills (Pvt.) Limited v. CIT and others 2000 SCMR 201 ref.

(b) Income Tax Ordinance (XXXI of 1979)---

----Ss. 62 & 12(12)---Constitution of Pakistan (1973), Art.199--­Constitutional jurisdiction of High Curt---Scope---Assessing Officer had issued notice to the petitioner under S.62 of the Income Tax Ordinance, 1979---Petitioner assailed the said notice through Constitutional petition without resorting to the available statutory remedies ---Validity--­Existence of adequate remedy under the Income Tax Ordinance, 1979--­Practice of approaching the High Court directly without resorting to the remedies available under the specific statutes disapproved---Impugned notice issued under S.62 of the Income Tax Ordinance by the Assessing Officer was strictly in accordance with law and was neither without jurisdiction nor mala fide and since adequate alternate remedies under the provisions of the Income Tax Ordinance, 1979 were available, High Court declined to interfere and dismissed the petition.

The High Court under Article 199 of the Constitution of Islamic Republic of Pakistan on the application of an aggrieved party, if it is satisfied that no other adequate remedy is provided by law, is authorized to make an order directing the person performing within the territorial jurisdiction of the Court, functions in connection with the affairs of the Federation, to refrain from doing anything he is not permitted by law to do or to do anything he is required by law to do. Thus jurisdiction can be exercised only if there is no other adequate remedy provided by law. Under the Income Tax Ordinance, if a person is aggrieved by an order passed by an Assessing Officer, the-Ordinance provides an appeal against such an order to the Commissioner of Income Tax and a second appeal to the Income Tax Appellate Tribunal and if the person is still dissatisfied with the order of the Tribunal, he can request the Tribunal to refer the question of law arising from the order of the Tribunal for an opinion of the High Court under section 136(1) of the Ordinance; and if the Tribunal refuses to do so, he can file an application to the High Court under section 136(2) for an opinion by the High Court. A party cannot be allowed to bypass an ordinary remedy provided by the statute in favour of a Constitutional petition under Article 199 of the Constitution. The superior Courts have always expressed disapproval of the practice of approaching the High Court directly without resorting to the remedies available under the specific statutes and have declined to interfere in matters where the High Court had refused to exercise its discretionary jurisdiction for the aforesaid reason.

Impugned Notice issued under section 62 of the Ordinance to the petitioner was strictly in accordance with law and was neither without jurisdiction nor mala fide and because adequate alternate remedies under the provisions of the Income Tax Ordinance, 1979 were available to the petitioner. Constitutional petition under Article 199 of the Constitution was not maintainable, which was accordingly dismissed with costs.

Shagufta Begum v. I.T.O. PLD 1989 SC 360; Khalid Mehmood v. Collector of Customs 1999 SCMR 1881; Al-Ahram Builders (Pvt.) Limited v. I.T.A.T. 1993 SCMR 29 and Ameen Textile Mills (Pvt.) Limited v. CIT and others 2000 SCMR 201 ref.

Per M. Mujeebullah Siddiqui, J. agreeing with S. Ahmed Sarwana, J.---

(c) Income Tax Ordinance (XXXI of 1979)---

----Ss. 62 & 12(12)---Companies Ordinance (XLVII of 1984), Ss. 284, 285, 286, 287 & 288---Constitution of Pakistan (1973), Art.199--­Constitutional petition---Amalgamation of two public listed-companies with the approval of High Court---Issuance of show-cause notice under S.62, Income Tax Ordinance, 1979 to the transferee Company on filing of its Return of Income---Validity---Deputy Commissioner of Income Tax has the jurisdiction to consider the consequences- and effects of the amalgamation of Companies, for the purpose of issues pertaining to the income-tax---Show-cause notice issued by the Deputy Commissioner of Income-tax under S.62 of the Ordinance was within his competence and no objection could be taken to such notice.

Fazilka Electricity Supply Co. Ltd. v. Commissioner of Income Tax, Delhi (1959) 36 ITR 411; Commissioner of Income-tax v. Haji Abdul Maji Khan Zaman & Co. 1973 PTD 459; Central India Industries Ltd. v. Commissioner of Income-tax, West Bengal (1975) 99 ITR 211; Commissioner of Income Tax v. Bharat Development (P.) Ltd. (1982) 135 ITR 457; Commissioner of Income Tax v. Karimi Industries 1983 PTD 100; Forbes Forbes Campbell & Company Ltd. v. Commissioner of Income-tax, Bombay (1984) 150 ITR 529 and Commissioner of Income Tax, Karnataka v. Master Raghuveer Trust (1985) 151 ITR 368 ref.

Muhammad Akram Shaikh, Sirajul Haq Memon and Hashim Padhiar for Petitioners.

Aqeel Ahmad Abbasi alongwith DCIT Sajidullah Siddiqui for Respondent.

S. Ziauddin Nasir, Standing Counsel.

Dates of hearing: 28th and 29th January, 2003.

2003 P T D 1301

[Karachi High Court]

Before S. Ahmed Sarwana and Muhammad Mujeebullah Siddiqui, JJ

PAKISTAN OXYGEN LIMITED, KARACHI

Versus

CENTRAL BOARD OF REVENUE, ISLAMABAD and 2 others

Constitutional Petition No.D-422 of 1990, decided on 5th November, 2002.

Constitution of Pakistan (1973)---

----Art. 199---Constitutional jurisdiction of High Court---Scope---Levy of sales tax---Validity---No appeal was preferred by the petitioner against the levy of sales tax---Petitioner could not show that the impugned order was palpably without jurisdiction or mala fide---Contention of the petitioner was that remedy by way of appeal and; revision was not adequate---Held, appropriate writ could lie issued if the High Court was satisfied that no other adequate remedy was provided by law---Tendency to bypass the remedy provided under the relevant statute was deprecated.

Nizamuddin Ahmad v. Commissioner of Sales Tax 1971 SCMR 68; Hafiz Muhammad Arif Dar v. Income Tax Officer 1989 PTD 485 and Al-Ahram Builders v. Income Tax Appellate Tribunal and 1992 PTD 1671 ref.

I. H. Zaidi for Petitioner.

Jawaid Farooqi for Respondents.

Date of hearing: 5th November, 2002.

2003 P T D 1309

[Karachi High Court]

Before S. Ahmed Sarwana and Muhammad Mujeebullah Siddiqui, JJ

COMMISSIONER OF INCOME-TAX, COMPANIES-III, KARACHI

Versus

Messrs AZLAK ENTERPRISES (PVT.) LTD., KARACHI

I.T.R. No.64 of 1994, decided on 13th November, 2002.

Income Tax Ordinance (XXXI of 1979)---

----Ss. 18 & 136---Zakat and Ushr Ordinance (XVIII of 1980), S.25--­Reference to the High Court ---Asset---Khas Deposit Certificates are an asset ---Zakat is a charge on the assets and not an expenditure for earning interest---Payment of Zakat on Khas Deposit Certificates---Allowable deduction---Provision of S.25(1)(a), Zakat and Ushr Ordinance; 1980 allows special concession regarding deduction of Zakat from taxable income while determining the liability of an assessee--Income Tax Appellate Tribunal thus was justified in allowing deduction of Zakat attributable to the exempt, income towards the taxable income-Principles.

Arif Moton for Applicant.

Z.H. Jafri for Respondent.

Date of hearing: 13th November, 2002.

2003 P T D 1321

[Karachi High Court]

Before S. Ahmed Sarwana and Muhammad Mujeebullah Siddiqui, JJ

COMMISSIONER OF INCOME-TAX, COMPANIES-III, KARACHI

Versus

CENTRAL INSURANCE CO. LTD., KARACHI

I.T.C. No. 175 of 2002, decided on 19th November, 2002.

Income Tax Ordinance (XXXI of 1979)---

----Fourth Sched., R.5 & Ss.12(9-A), 136(2)---Reference to the High Court---Computation of income/profits and gains of an insurance company---Principles---Jurisdiction of the Assessing Officer ---Scope--­Profits and gains of business of insurance and tax payable thereon had to be computed in accordance with the rules contained in the Fourth Schedule of the Income Tax Ordinance, 1979---Provisions contained in S.12(9-A), Income Tax Ordinance, 1979 extending the jurisdiction of the Assessing. Officer having not been included in the Fourth Schedule of the Ordinance, Income Tax Appellate Tribunal had rightly deleted the addition to which no exception could be taken---Principles pertaining to the assessment of Insurance Company being established, Appellate Tribunal had rightly rejected the Reference application---Reference application under S.136(2), Income Tax Ordinance, 1979 stood dismissed in limine.

The principles pertaining to the computation of income/profits and gains of an Insurance Company are fully established to the effect that to the exclusion of any other provision contained in the Income Tax Ordinance, the profits and gains of business of insurance and the tax payable thereon shall be computed in accordance with the rules contained in the Fourth Schedule. The jurisdiction of the Assessing Officer in the matter of computation of the profits and gains and the tax payable thereon are limited to the provisions contained in the Fourth Schedule and the Assessing Officer can make adjustments to the extent provided in Rule 5 of the Fourth Schedule in respect of profits and gains of any business of insurance other than life insurance and the jurisdiction of the Assessing Officer is not extended to any other provision contained in the Ordinance until and unless included in the Fourth Schedule itself.

Department in the present case, being unable to show that the provisions contained in section 12(9-A) had been included in the Fourth Schedule to the Income Tax' Ordinance, thereby extending the jurisdiction of the Assessing Officer the Tribunal had rightly deleted the addition to which no exception could be taken. Since the general principlespertaining to the assessment of Insurance Company already stood established, therefore, the Tribunal rightly rejected the reference application to which no exception can be taken.

Commissioner of Income-tax v. Messrs Alpha Insurance Company PLD 1981 SC 293; Commissioner of Income Tax v. Messrs Mercantile Fire and General Insurance Co. Ltd. 1989 PTD 142; Commissioner of Income-tax v. International General Insurance Company 1991 PTD 401; 1998 PTD (Trib.) 1103; (1964) 51 ITR 773; Commissioner of Income Tax v. Premier Insurance Company Ltd. 1989 PTD 1022; Adamjee Insurance -Company v. Central Board of Revenue 1989 PTD 1090 and E.F.U. General Insurance Company Ltd. v. Federation of Pakistan PLD 1997 SC 700 ref.

Aqeel Ahmed Abbasi for Applicant.

Date of hearing: 19th November, 2002.

2003 P T D 1333

[Karachi High Court]

Before S. Ahmed Sarwana and Muhammad Mujeebullah Siddiqui, JJ

COLLECTOR OF CUSTOMS APPRAISEMENT through Assistant Collector of Customs (Appraisement Law), Customs House, Karachi

Versus

CUSTOMS, EXCISES AND SALES TAX APPELLATE TRIBUNAL, BENCH-II, KARACHI and another

Special Customs Appeal No. 144 of 2002, decided on 5th March, 2003

(a) Interpretation of statutes---

---- Court has to try to reconcile various provisions of the statute and to give such an interpretation which makes all of them co-existing without rendering any of them redundant and superfluous and the ambiguity, if any, is to be resolved in favour of citizens.

(b) Import Policy Order, 1999-2000---

---Chap.4---Imports and Exports (Procedure) Order, 1999, Chap.8--­NRI Scheme---Imports specifically authorized under Para. 8.1 read with para. 8.1(III)(II) of the Imports and Exports Procedure Order, 1999 and the imports not permissible under para. 8.1(IV)(I) of the said Order operate in different spheres---Neither there 's any contradiction in the two provisions nor there is any overlapping; their areas of- application are distinguishable---Import of Prime Mover/Trucks is permissible under the NRI Scheme read with Import Policy Order, 1999 and the importer of said item had not contravened any provisions of the Customs Act, 1969---Principles.

No provision of the Import Policy Order, 1999 and Imports and Exports (Procedure) Order, 1999 .is rendered redundant or superfluous. There are two categories of banned `items specified in the Import Policy Order, 1999. The first category is of qualified banned items and the other category is of unqualified/absolutely banned items. Because of the expression "unless specifically authorized" contained in Chapter 4 of the Import Policy Order 1999, pertaining to the negative list the ban is qualified, meaning thereby that if import of the said items is specifically authorized, the ban shall be lifted and on account of specific authorization of import the said banned items shall become importable items. The Prime Mover (Trucks) fall within the first category of qualified banned items and on account of specific authorization contained in Para. 8.1 read with Para. 9.1 (III) (II) of the Imports and Exports (Procedure) Order, 1999 the ban is lifted and the import of the truck is permissible in law.

The second category is of unqualified banned items. The ban referred to in Para. 8.1 (IV) (I) of the Imports and Exports (Procedure) Order, 1999 pertains to unqualified/absolutely. banned items and such items in the negative list, which are not otherwise specifically authorized to be imported under any other provision of law. It appears that Para. 8.1 (IV) has been included in the Imports and Exports (Procedure) Order, 1999 as a matter of abundant caution and for clarification that notwithstanding specific authorization contained in Para. 8.1 read with Para. 8.1 (III) of the Imports and Exports (Procedure) Order, 1999, the items specified in Para. 8.1 (IV) shall not be permitted to, be imported. In Para 8.1 (IV) (I) the machinery or equipment import of which has been banned in the Import Policy Order in force, or through orders or instructions made thereunder has not been allowed to be imported under the NRI Scheme. For instance it is provided in Article 2.10 of the Import Policy Order, 1999 that imports under cash shall be permissible from all countries except from Israel or goods originating from this country. Thus, the ban is unqualified and absolute and shall not be permitted under the NRI Scheme, notwithstanding the provision that the Pakistanis residing and working abroad can import new and second-hand machinery against their own earnings. There are several other instances of qualified ban in the Import Policy Order, 1999. For example under Article 2.7 the Importers in Common Bonded Manufacturing Warehouses Schemes, shall be allowed to import all banned items mentioned in Appendix `F' which are actually required for production of export items. Likewise under Article 2.11 (iii) the import of second-hand machinery i.e., sugar plants, cement plants, oil refinery, chemical plants, thermal power plants, hydel power plants, cranes, road rollers (except viberatory road rollers and hydraulic shovels) and machine tools (specified vide Appendix "C"), manufactured locally as provided in CGO 07/98, dated the 24th March, 1998 is not to be imported. However, this ban shall not apply to the projects already initiated and to the cases of relocation of complete high-tech units from abroad on case to case basis. Thus, the imports specifically authorized under Para. 8.1 read with Para. 8.1 (III) (II) and the imports not permissible under Para. 8.1 (IV) (I) operate in different spheres. Neither there is any contradiction in the two provisions nor there is any overlapping. Their areas of application are distinguishable.

The Import of Prime Mover/Trucks is permissible under the, NRI Scheme read with Import Policy Order, 1999 and the importer has not contravened any provision of the Customs Act, 1969.

Akhtar Hussain for Appellant.

Ch. M. Iqbal for Respondent No.2.

Date of hearing: 31st January, 2003.

2003 P T D 1354

[Karachi High Court]

Before S. Ahmed Sarwana and Muhammad Mujeebullah Siddiqui, JJ

GUL BOTTLERS (PVT.) LTD. through Executive Director, Sukkur, Sindh

Versus

ADDITIONAL COLLECTOR-II, CUSTOMS AND CENTRAL EXCISE, CUSTOM HOUSE, S.I.T.E. HYDERABAD

Special Central Excise Appeal No.28 of 2002, decided on 14th February, 2003.

Central Excise Rules, 1944---

----R.10---Notice of recovery of duty short-levied or erroneously refunded ---Limitation---Assessee had deposited the instalments of duty levied and claimed adjustment in respect of the remaining demand on account of a judgment passed by Lahore High Court, however, on insistence of the Department the entire demand for the 3rd quarter was paid by the assessee---No misdeclaration or false information was given by the assessee; no collusion between the assessee and any other person was found; no fraud, whatsoever was practised by the assessee and if the additional duty was not levied by the departmental offices the same was due to their inadvertence and consequently the period of limitation as prescribed in R.10(1) of Central Excise Rules, 1944 was attracted within which a show-cause notice was to be served on the assessee---Any notice of recovery beyond the period of limitation provided in R.10 was barred by time and excise duty could not be recovered/enforced beyond that period---Period of limitation provided in R.10(1) of the Central Excise Rules, 1944 being attracted to the facts of the present case, the show­-cause notice and the demand created in pursuance thereof was held to be illegal, unlawful and void ab initio---Show-cause notice and all subsequent orders in pursuance thereof were quashed by High Court in appeal.

Aziz A. Shaikh for Appellant.

Fariduddin for Respondent.

Date of hearing: 16th January, 2003.

2003 P T D 1370

[Karachi High Court]

Before S. Ahmed Sarwana and Muhammad Mujeebullah Siddiqui, JJ

COMMISSIONER OF INCOME-TAX, CENTRAL ZONE-A, KARACHI

Versus

Messrs. TARIQ MULTIPURPOSE INDUSTRIES LIMITED, KARACHI

Income Tax Reference No.79 of 1994, decided on 14th February, 2003.

(a) Income-tax Act (XI of 1922)---

----S. 4(3)(vii)---Forfeiture of advance money resulting from the failure of the intending purchaser to exercise the option of purchasing the property was not a casual income enjoying the exemption from the chargeability of income-tax.

Alnoor Sugar Mills Ltd., Karachi v. Commissioner of Income Tax. Central Zone `B'. Karachi 2002 PTD 728 ref.

(b) Income-tax---

----Capital receipt----Forfeiture of advance money resulting from the failure of the intending purchaser to exercise the option of purchasing the property was a capital receipt.

Alnoor Sugar Mills Ltd., Karachi v. Commissioner of Income Tax. Central Zone `B'. Karachi, 2002 PTD 728; Travancore Rubber and Tea Co. Ltd. v. Commissioner of Income Tax 2001 PTD 1094; Tattersall's case (1939) 7 ITR 316; CIT v. Travancore Rubber and Tea Co. Ltd. (1991) 190 ITR 508; Maula Bux v. Union of Indian AIR 1970 SC 1955; Shree Hanuman Cotton Mills v. Tata Air Craft Ltd. AIR 1970 SC 1986 and London and Thames Hasven Oil Wharves Ltd. v. Attwooll (Inspector of Taxes) (1968) 70 ITR 460 ref.

M. Arif Moton for Appellant.

Rehan Hasan Naqvi for Respondent.

Date of hearing: 21st January, 2003.

2003 P T D 1377

[Karachi High Court]

Before Shabbir Ahmed and Azizullah M. Memon, JJ

SHAHI CARPET (PRIVATE) LIMITED through Managing Director/Chief Executive, Karachi

Versus

COMMISSIONER OF WEALTH TAX/INCOME-TAX, COMPANIES-II, KARACHI and another

Wealth Tax Appeals Nos. 505 to 510 of 2000, decided on 28th February, 2003.

(a) Wealth Tax Act (XV of 1963)---

----S.2(16)(ii)---Net wealth---Tax is to be calculated after taking into consideration the `debts owed' by the assessee on the valuation date and incurred in relation to the assets (property) subjected to wealth tax.

(b) Question of law---

---- Where any party challenges the conclusion drawn from a set of facts and circumstances, it is a question of law.

(c) Appeal---

---- Question of law---Question of fact---Point of law can be raised at any stage including the appeal---Question of fact, however, is not permissible to be raised, for the first time in appeal.

(d) Wealth Tax Act (XV of 1963)---

----S. 2(16)---Findings reached by the Wealth Tax Officer, affirmed by Commissioner (Appeals) and the Appellate Tribunal that the adjustment of "loan claimed' against the property was already repaid before the assessment year and other liabilities appearing in the balance sheet had no nexus with the property subjected to wealth tax, were the findings of fact and on that findings no other conclusion was possible under the law except that "liabilities claimed" were not allowable under S. 2(16), Wealth Tax Act, 1962.

Messrs Abbot Laboratories Ltd. v. Commissioner of Income Tax, Central Zone, Karachi 1989 PTD 602; Oil India Co. Ltd. v. Commissioner of Income-tax, Central Calcutta (1982) 137 ITR 156; Commissioner of Income-tax v. International (Pvt.) (1982) 137 ITR 184; General Tyre and Rubber Co. v. Commissioner of Income-tax (Civil Reference No.25 of 1'979; I.T.C. No.93 of 1992; Commissioner of Income-tax v. Kotrika Venkataswamy and Sons (1971) 79. SC 449; Commissioner of Sales Tax (Central), Karachi v. Karachi Oils Seed Industries 1987 PTD 64Commissioner of Sales Tax, Lahore v. Suleman &. Company 1980 PTD 188; Orient Road Ways v. Commissioner of Income-tax 2000 PTD 999 = 233 ITR 351; Commissioner of Income-tax v. Banswara Textile Mills Ltd. 2000 PTD 2087 = 235 ITR 743; Commissioner of income-tax v. Gulf Engineering Company 2000 PTD 2227 and Commissioner of Income-tax, Lahore v. Government Jallo Rosin and Turpentine Factory, Lahore PLD 1976 Lah. 1135 = 1976 PTD 206 ref:

Province of Punjab v. Federation of Pakistan PLD 1956 FC 72 distinguished.

Muhammad Javaid Khurrum for Appellants.

Aqeel Ahmed Abasi for Respondents.

Date of hearing: 21st February, 2003.

2003 P T D 1387

[Karachi High Court]

Before S. Ahmed Sarwana and Muhammad Mujeebullah Siddiqui, JJ

Messrs MERCURY GARMENT INDUSTRIES through Partner Muhammad Razi

Versus

CENTRAL BOARD OF REVENUE through Secretary, Ministry of Finance, Government of Pakistan, Islamabad and 2 others

Constitutional Petition No.D-1002 of 1993, decided on 12th March, 2003.

Customs Act (IV of 1969)---

----S. 19---Pakistan Customs Tariff Classification (PTC) No.4011 Fol(a)(i) & 4011.9910---C.B.R. Letter dated 15-3-1993---Constitution of Pakistan (1973), Art.199---Constitutional petition---Exemption---Import of tyres for tractors for agricultural purposes---Refusal to grant exemption by the Department on account of erroneous description of the imported item by C.B.R. functionaries---Department seeking clarification from the C.B.R. and obtained Bank guarantees from the imported meanwhile---Petitioner (importer) seeking the relief of declaration that the proposed action of the Department calling for the encashment of the Bank guarantees was illegal and restraining the Department from initiating proceedings for encashment of the Bank guarantees-­Contention of the importer was that Department had refused to allow the concession to the importer for the reason that they wanted classification from C.B.R. if the description under the PTC Hdg. 4011.9910 word used was "stripped" or `striped'---Description by C.B.R. under the relevant PTC Hdg. admittedly used the word "stripped" and not "striped" but confusion had been confounded by the Second Secretary, C.B.R., because of an intentional incorrect spelling of the word in the Letter dated 15-3-1993---Validity---High Court deprecated such attitude on the part of Tax Official who were supposed to be assessee friendly and were not supposed to adopt such attitude which smack of arbitrariness, mala fide and resulting in causing harassment to the assessees---Citizens were entitled to better treatment at the hands of Tax Officials to promote the tax culture in the country---Goods imported by the importer conformed to the description made under PTC Hdg. No.4011-9910 as the same stood at the time of import and in accordance with the C.B.R. decision contained in the letter dated 15-3-1993 importers were thus entitled to the concession and were not liable to pay any customs duty, regulatory duty or sales tax, as it was a duty free import in the relevant period---Department, in circumstances, was directed to release the Bank guarantee furnished by the importer and issue necessary instruction to the functionaries to extend friendly attitude to assessees.

Abid Hameed Puri for Petitioner.

Raja M. Iqbal and Sajjad Ali Shah, Standing, Counsel for Respondents.

Date of hearing: 5th March, 2003.

2003 P T D 1411

[Karachi High Court]

Before Amir Hani Muslim, J

Messrs ALUMINIUM PROCESSING INDUSTRIES INTERNATIONAL (PVT.) LTD., through Director and Chairman and another Karachi

Versus

FEDERATION OF PAKISTAN through Chairman, Central Board of Revenue, Islamabad and 2 others

Suits Nos. 297 and 412 of 1999, decided on 24th January 2003.

(a) Civil Procedure Code (V of 1908)---

----O.XIII, R.4---Document can only be marked as "exhibited" if the same is produced by a witness.

(b) Sales Tax Act (VII of 1990)---

---Ss. 45-A, 46, 30 & 51---Specific Relief Act, (I of 1877), Ss. 42, 54 & 55---Suit for declaration and permanent injunction against show-cause notice under S. 45-A, Sales-Tax Act, 1990 issued by the Member, Judicial (C.B.R.) to the plaintiff-- Maintainability---Powers of the Central Board of Revenue and the Collector to call for records ---Scope---Provision of S. 45-A, Sales Tax Act, 1990 is applicable to all the orders passed by the Officers of the Sales Tax either in original or in appeal, and non-filing of appeal by either party would not debar the Board from exercising powers under S. 45-A of Act to examine the legality or, propriety of an order except that during the pendency of the appeal the power, under S. 45-A could not be exercised---Powers under S. 45-A, however, could not be exercised to examine the legality or propriety of an order passed either by the Appellate Tribunal under S.46 or by the High Court---Show-cause notice under S. 45-A Sales Tax Act, 1990 having lawfully been issued by the Member Judicial, Central Board of Revenue and suit being barred under S. 51, Sales Tax Act, 1990, High Court dismissed the suit in circumstances.---[Flying Board and Paper Products v. Deputy Collector-II 2002 PTD 7 dissented from].

Flying Board and Paper Products v. Deputy Collector-II 2002 PTD 7 dissented from.

Abbasiya Cooperative Bank v. Muhammad Ghaus PLD 1997 SC 3; Falaknaz v. Karachi Building Control Authority 2001 YLR 2542: Kassam Haji Abbas Patel v. I.T.O., Contractors Circle 1982-PTD 361; Eduljee Dinshaw Ltd. v. Income Tax Officer PLD 1990 SC 399; Glaxo Laboratories Limited v. Inspecting Assistant Collector of Income Tax PLD 1492 SC 549; Pakistan Electric Fittings Manufacturing Co. Ltd, v. C.I.T. 2000 PTD 2407; Iftikhar Hussain Shah v. Pakistan 1991 SCMR 2193; Muhammad Ibrahim v. Group Captin Salahuddin 1987 SCMR 218; Central Insurance Co. v. Central Board of Revenue 1993 SCMR 1232; Koohinoor Textile v. Federation of Pakistan 2002 PTD 121; 2002 PTD 128 and Assistant Collector Customs v. Khyber Electric Lamps 2001 ­SCMR 838 ref.

Dr. Farogh Naseem and Irfan Aziz for Plaintiffs.

Fariduddin for Defendants.

Abdul Mujeeb Prizada alongwith Syed Khalid Shah and Raja M. Iqlial for Defendant (in Suit No.412 of 1999).

Sajjad Ali Shah, Standing Counsel alongwith Anwarul Haq, Collector (Adjudication), Sales Tax and Sirzameen, Senior Auditor, Large Tax Payers Unit for Defendants.

Dates of hearing: 20th to 24th January, 2003.

2003 P T D 1477

[Karachi High Court]

Before Azizullah M. Memon and Muhammad Mujeebullah Siddiqui, JJ

COLLECTOR OF SALES TAX (EAST), KARACHI

Versus

CUSTOMS, EXCISE, SALES TAX APPELLATE TRIBUNAL, KARACHI and another

Special Sales Tax Appeal No.27 of 2002, decided on 10th March, 2003.

(a) Sales Tax Act (VII of 1990)---

----S. 47---Civil Procedure Code (V of 1908), O.XLVII, R. 1(c)—­Review by High Court---Maintainability---Inherent jurisdiction under C.P.C., exercise of---Provisions of Civil Procedure Code, 1908 being not applicable at all, question of exercise of inherent jurisdiction under C.P.C. would not arise---Power of review or appeal cannot be exercised under the inherent jurisdiction and has to be conferred specifically by law---No power of review having been vested in the High Court under Sales Tax Act, 1994, review application was not maintainable--­Principles.

The Sales Tax Act, 1990 is a complete code in itself and a special law shall exclude the provisions contained in general law. The Sales Tax Act contains all the substantive as well as procedural law, pertaining to the charge/levy, assessment and appeals pertaining to the Sales Tax.

C.P.C. is not applicable at all, therefore, the question of exercise of inherent jurisdiction- under C.P.C. does not arise.

Leaving aside the C.P.C., it would not be covered under inherent jurisdiction, exercised by every Court, because the matters pertaining to review and appeal do not fall within the purview of inherent jurisdiction, as they are neither incidental nor ancillary to the main proceedings. The matters, such as correction of arithmetic errors or any mistake, which does not require independent examination can fall within the inherent jurisdiction of every Tribunal, Court or Judicial Authority. Power of review or appeal however, cannot be exercised under the inherent jurisdiction and has to be conferred specifically by law. Since no such power is vested in the High Court under Sales Tax Act, review application is not maintainable.

(b) Civil Procedure Code (V of 1908)---

----O. XLVII, R.1(c)---Review---Maintainability---Principles---Negligent and indolent applicant for review---Effect.

The review is not meant for negligent ~and indolent persons, because it is specifically provided in Order XLVII, Rule 1(c) that a person aggrieved from a decree or order can submit a review application if he has discovered a new and important matter or evidence which, after the exercise of due diligence, was not within his knowledge or could not be produced by him at, the time when the decree was passed or order made.

In the present case, the counsel for the appellant (Government Department) had not been able to show that the facts sought to be raised in the review application, could not come to the knowledge of the appellant after due and diligent search. If the objection was filed in the Tribunal, as alleged, and it was. not considered by the Tribunal, it ought to have been in the knowledge of the concerned departmental officer. Now the only course open to the competent authorities was to take suitable appropriate action against the delinquent officials of the department and to recover the losses caused to State Revenue from their salary.

Raja Muhammad Iqbal for Appellant.

Abid S. Zuberi for Respondent No.2.

Date of hearing: 10th March, 2003.

2003 P T D 1496

[Karachi High Court]

Before S. A. Sarwana and Muhammad Mujeebullah Siddiqui, JJ

Messrs PAKISTAN PAPER PRODUCTS LTD.

Versus

APPELLATE TRIBUNAL CUSTOMS, EXCISE AND SALES TAX & others

Special Custom Appeals Nos. 13,-14 and 15 of 1998, decided on 13th November, 2002.

(a) Customs Act (IV of 1969)---

------Ss. 32, 80 & 81---Show-cause notice for short levy of duty after period of six months, issuance of---Validity---Where original duty was provisionally assessed under S.81 of the Act, then limitation would start running from date of final adjustment in pursuance of final assessment under S.80 for purpose of S.32 of the Act.

(b) Customs Act (IV of 1969)----

----Ss. 32, 80 & 81---Show-cause notice for alleged short levy after six months of levy of original duty, issuance of---Validity---Burden was on Department to show that original assessment was provisional, and not final---Since Department had failed to discharge such burden assessee was entitled to benefit of doubt---Such demand/show-cause notice was barred by limitation---High Court allowed appeals with direction to refund forthwith to assessees the amount recovered from them in pursuance of time-barred demand/show-cause notice.

Abul Khair for Appellants.

Raja M. Iqbal and Khursheed A. Hashmi, D.-A.G. for Respondents.

Date of hearing: 13th November, 2002.

2003 P T D 1563

[Karachi High Court]

Before S. Ahmed Sarwana and Muhammad Mujeebullah Siddiqui, JJ

Messrs CITIBANK N.A. through Principal Officers and Senior, Country Operations Officer, Karachi

Versus

PAKISTAN through Secretary, Ministry of Finance, Federal Secretariat, Islamabad and another

Constitutional Petition No. D-770 of 1995, decided on 31st October, 2002.

Income Tax Ordinance (XXXI of 1979)---

----Ss. 52 & 129---Constitution of Pakistan (1973), Art. 199--­Constitutional petition---Prayer for quashment. of order, whereby petitioner was treated as an assessee in default in terms of S.52 of the Income Tax Ordinance, 1979---Maintainability---Appropriate writ could be issued under Art. 199(1) of the Constitution, if High Court was satisfied that no other adequate remedy was provided by law---Petitioner could assail impugned order in appeal under S.129 of the Income Tax Ordinance, 1979---Tendency of bypassing the remedy provided under relevant statute was deprecated---Impugned order was neither palpably without jurisdiction nor mala fide---High Court dismissed Constitutional petition.

Nizamuddin Ahmad v. Commissioner of Sales Tax 1971 SCMR 68; Hafiz Muhammad Arif Dar v. Income-tax Officer 1989 PTD 485 and Al-Ahram Builders v. Income Tax Appellate Tribunal 1992 PTD 1671 fol.

Fazle Ghani Khan for Petitioner.

Nemo for Respondent.

Date of hearing: 31st October. 2002.

2003 P T D 1571

[Karachi High Court]

Before S. Ahmed Sarwana and Muhammad Mujeebullah Siddiqui, JJ

COMMISSIONER OF INCOME-TAX, ZONE-C, KARACHI

Versus

Messrs AGHA'S SUPER MARKET, KARACHI

Income Tax Case No. 157 of 2002, decided on 5th November, 2002.

Income Tax Ordinance (XXXI of 1979)-----

----Ss. 50(4), 52, 86 & 156---Failure to deduct tax at source---Passing orders under Ss.52 & 58 of the Income Tax Ordinance, 1979 after six years from the end of financial year, when such default was committed--­Appellate Authority annulled such order being barred by limitation--­Tribunal dismissed appeal filed by Revenue on the ground that order was. beyond period of four years prescribed under S.156 of the Income Tax Ordinance, 1979---Tribunal also dismissed reference application filed by Revenue on the ground that law did no provide unlimited time for framing of orders under Ss. 52 & 58 of the Ordinance, thus, time limit available under S.156 of the Ordinance would be applicable---Validity---Tribunal had rightly rejected reference application as principle of law involved in questions proposed therein already stood decided by High Court in 2002 PTD 14---High Court dismissed reference application in limine.

2000 PTD (Trib.) 2883 ref.

Commissioner of Income-tax v. Kamran Model Factory 2002 PTD 14 fol.

Jawaid Farooqi for Applicant.

Nemo for Respondent.

Date of hearing: 5th November, 2002.

2003 P T D 1720

[Karachi High Court]

Before Shabbir Ahmed and Azizullah M. Meman, JJ

COMMISSIONER OF INCOME-TAX, COMPANIES-I, KARACHI

Versus

Messrs UNITED LINER AGENCIES OF PAKISTAN (PVT.) LTD,. KARACHI

Income Tax Case No.32 of 1993, decided on 8th February, 2003.

Income Tax Ordinance (XXXI of 1979)---

----Ss. 14(1), 22(c), 151, 136(2) & Second Sched., Cl. (72)---Profit earned on Khas Deposit Certificates under National Saving Schemes--­Assessee claimed exemption on such profit in terms of Cl.(72) of Second Shed. of the Income Tax Ordinance, 1979, but Assessing Officer treated the same as "business" in terms of S.22(c) of the Ordinance ---Appellate Authority restored statutory exemption claimed by the assessee--­Appellate Tribunal approved the findings of Appellate Authority --­Validity---Khas Deposit Certificates were in assessee's name---Securities of Khas Deposits were owned by company and appeared as its assets in balance-sheet---Exemption claimed by company, but declined by Assessing Officer had been restored by Appellate Authority---Tribunal had rightly declined to refer question as decision of Appellate Authority had been approved---Question raised could not be said to have arisen out of the order of Tribunal---Recipient of interest/profit was none other than assessee, who had invested amount in their account---High Court decided reference in affirmative in favour of the assessee.

Nasarullah Awan for Applicant.

Hyder Raza Naqvi for Respondent

2003 P T D 1805

[Karachi High Court]

Before Attaur Rehman and Muhammad Mujeebullah Siddiqui, JJ

COMMISSIONER OF SALES TAX, CENTRAL ZONE-B, KARACHI

Versus

Messrs PAKISTAN MACHINE TOOL FACTORY LTD., KARACHI

S.T.R.No. 158 of 1992, decided on 22nd July, 2002.

(a) Sales Tax Act (III of 1951)-----

----S. 17---Advisory jurisdiction of High Court---Scope---Whip exercising such jurisdiction, High Court is supposed to give its opinion on a particular point of law referred by Tribunal or admitted by High Court on an application submitted by a party to proceedings ---opinion o High Court should be confined only to the point referred and should no extend to any other point.

(b) Sales Tax Act (III of 1951)-----

----Ss. 3 & 17(1)---S.R.O. 125(1)/70, dated 29-6-1970---Sales tax, levy of---Exemption claimed in respect of gear boxes and axles manufactured by assessee---Assessing Officer refused to grant exemption as such parts being automotive vehicles parts did not form part of machinery as defined in S.R.O. 125(1)/70---Appellate Authority-found assessee entitled to exemption on ground that definition of machinery was very wide, thus, automotive vehicles and spare parts of machinery were covered by the same---Tribunal upheld findings of Appellate Authority ---Validity--­For bringing a machinery or component parts of any machinery within definition of machinery given in said S.R.O. two conditions precedent have to be satisfied at one and same time i.e. such machinery should be operated by power of any description, and same should be such to be used in any industrial process---Second condition was lacking in case of manufacture and sale of gear boxes and axles produced by assessee as they were being used for automotive vehicles---Exemption was, thus, not available to assessee, and same had rightly been refused by Assessing Officer---Appellate Authority and Tribunal had misdirected themselves in extending exemption to assessee by misinterpreting definition of machinery given in S.R.O.---High Court answered question in the negative.

1991 PTD 1060 ref.

(c) Interpretation of statutes---

---- Fiscal provision of a statute is to be construed liberally in favour of taxpayer---Tax is to be levied by a clear and unambiguous legislation--­Any doubt or ambiguity in matter of levy of tax is to be resolved in favour of citizen/subject/taxpayer.

1993 SCMR 274 ref.

(d) Taxation------

----Exemption from levy of tax, grant of or claim of---Effect stated.

Grant of exemption from levy of any tax and claim of any exemption by any taxpayer envisage levy of tax and the effect of grant of exemption is that a particular income in the case of income-tax and a particular transaction in case of sales tax shall be allowed to go untaxed, which was otherwise subject to levy of tax. In other words, the act of exemption is that a tax is allowed to be evaded by the Legislature itself.

(e) Interpretation of statutes---

----Fiscal statute---Exemption---Provisions relating to exemption from levy of tax---Such provisions are not to be interpreted liberally, but have to be interpreted and applied strictly---Exemption is to be allowed in such case only where an assessee is able to establish that same is covered by exemption provision on all fours.

(f) Interpretation of statutes---

---- No word or expression or a few words should be taken from the context in which they are used and then be interpreted in isolation--­Provision of law is to be read and interpreted as a whole---If there is any scheme of law, when entire scheme is to be taken together consideration and not part thereof is to be considered in isolation.

Construction of Statutes by Crawford, Chap. XIX, para. 188 and 1999 PTD 1060 ref.

(g) Taxation---

---- Exemption from levy of tax---Where more than one conditions have been prescribed for availing an exemption and they are not in the alternative, then all such conditions should be satisfied simultaneously for availing exemption.

Ms. Masooda Siraj for Appellant. Khalid Javed for Respondent.

Date of hearing 3rd March, 2002.

2003 P T D 2020

[Karachi High Court]

Before Anwar Zaheer Jamali and Gulzar Ahmed, JJ

COMMISSIONER OF INCOME TAX

Versus

NATIONAL REFINERY LTD.

I.T.Cs. Nos.68 to 70 of 2002, decided on 18th April, 2003.

(a) Income Tax Ordinance (XXXI of 1979)---

----S. 136(1)---Jurisdiction of High Court to consider a question of law--­Scope---High Court would consider only such question of law, which had arisen out of order of Tribunal or which had been raised before Tribunal and had been dealt with by Tribunal or question which had not been raised before Tribunal, but had been dealt with by Tribunal or question which had been raised before Tribunal but had not been dealt with by Tribunal.

CIT v. Gohar Ayyub 1995 PTD 1074 and Iram Ghee Mills (Pvt.) Ltd., Lahore v. Income Tax Appellate Tribunal 1998 PTD 3835 ref.

(b) Income Tax Ordinance (XXXI of 1979)---

----S. 136(1)---Questions of law raised before High Court materially were different from those referred by applicant to Tribunal for reference to High Court---Questions raised before High Court had been neither raised nor considered by Tribunal---High Court dismissed applications being not maintainable.

Muhammad Farid for Appellant.

Muhammad Athar Saeed for Respondent.

Date of hearing: 3rd April, 2003.

2003 P T D 2073

[Karachi High Court]

Before Anwar Zaheer Jamali and Gulzar Ahmed, JJ

COMMISSIONER OF INCOME-TAX

Versus

Messrs PASKIN (PVT.) LTD.

I.T.R. No.13 of 1994, decided on 8th May, 2003.

(a) Income Tax Ordinance (XXXI of 1979)---

----Second Sched., Cl. (125-A) & S.136---Exemption---Service charges received by assessee for tailoring and stitching leather garments for others---Exemption on such income refused by Assessing Officer was allowed by Appellate Authority and upheld by Tribunal---Validity--­Term "manufacture" not defined in Income Tax Ordinance, 1979, thus, help, had to be taken from dictionary for ascertaining its ordinary meaning ---Assessee had cut leather (raw material), stitched cut pieces to make them into jackets, stitched buttons and made Kajs to make jackets complete---Assessee had used skill of hand as well as of machinery in doing such job---Jackets made by assessee were in large quantity---Job undertaken by assessee was of manufacture of leather garments--­Immaterial for purpose of Cl. (125-A) of Income Tax Ordinance, 1979, whether process of manufacturing of leather garments was undertaken by assessee for itself or others---Such service charges would obviously by profits and gains derived by the assessee from manufacturing of leather garments---High Court answered the question ill affirmative.

Messrs Kaiser Apparels (Pvt.) Ltd. v. The I.T.O I.T.Rs Nos.263/KB of 1988-89 and 189/KB of 1989-90 ref.

(b) Words and phrases---

-----"Manufacture" ---Meaning

Black's Law Dictionary, 6th Edn., p.965 and 21st Century Dictionary, Revised Edn., p. 837 ref.

(c) Words and phrases---

----"Manufacture"---Connotation---Such term is used for describing process of making of goods or any material produced by hand or by machinery or any other process from raw material in large quantities.

Nasrullah Awan and Arif Moton for Applicant.

Nemo for Respondent

Date of hearing: 23rd April, 2003.

2003 P T D 2090

[Karachi High Court]

Before S. A. Sarwana and Muhammad Mujeebullah Siddiqui, JJ

AKHTAR HUSSAIN through Attorney

Versus

COLLECTOR OF CUSTOMS (APPRAISEMENT), CUSTOMS HOUSE, KARACHI and 3 others

Constitutional Petition No. 16 of 2003, decided on 19th April, 2003.

(a) Customs Act (IV of 1969)---

----Ss.32, 79, 219 & 223---Customs General Order 12 of 2002--­Amendment in the Bill of Entry is permissible under law---Importers in the present case, had opted for first appraisement and through C.G.O.12 of 2002, the CBR had instructed that the importers may not be charged for misdeclaration under S.32, Customs Act, 1969 where the importers had opted for first appraisement for the determination of correct description PCT heading and quantity of goods---Effect---Any administrative order, violative of the provisions contained in the statute was bad and invalid to the extent of inconsistency---Instructions issued by the C.B.R. under S.219, Customs Act, 1969 were binding on all the officers of the Customs employed in the execution of Customs Act, 1969 by virtue of provision contained in S.223 of the Customs Act, 1969---If, as in the present case, there was any conflict in the instructions issued by the CBR and the instructions/orders issued by the officer subordinate to the CBR, instructions/orders issued by the subordinate official were invalid and inoperative to the extent of the conflict.

(b) Customs Act (IV of 1969)---

----Ss.32 & 79---Standing Order 5 of 2002---Standing Order 9 of 2002--­Orders/Instructions contained in Para. B of Standing Order No.5 of 2002 and to the extent in Standing Order 9 of 2002 that, "henceforth no importer shall routinely be permitted examination of imported goods under the first proviso of S.79(1) of the Customs Act, 1969 and that "after filing of Bill of Entry" only machine number of set of document shall be entertained for the customs purpose by the Collectorate illegal, void, without jurisdiction and having no legal effect---Importers were bound under the law to allow amendment in the Bill of Entry and in the case of option given for first appraisement for the determination of correct description, PTC heading and quantity of goods, no importer shah be charged for misdeclaration under S.32, Customs Act, 1969.

Navin S. Merchant for Petitioner.

Syed Tariq Ali, Standing Counsel assisted by Dr. Tariq Hudda, Additional Collector for Respondents Nos. 1 and 2.

Wazir H. Rizvi for Respondent Nos.4.

Date of hearing: 28th January, 2003.

2003 P T D 2127

[Karachi High Court]

Before Mushir Alam, J

Messrs DEWAN SCRAP (PVT.) LIMITED and another

Versus

CUSTOMS, CENTRAL EXCISE AND SALES TAX APPELLATE TRIBUNAL and others

Suit No. 1746 of 1999, decided on 22nd April, 2003.

(a) Customs Act (IV of 1969)---

----Ss.217(2) & 194-C---Civil Procedure Code (V of 1908), S.79--­Constitution of Pakistan (1973), Art. 174---Suit against Customs, Central Excise and Sales Tax Appellate Tribunal and functionaries of the Customs Department---Maintainability---"Special jurisdiction" and "general jurisdiction" ---Former ousts the latter---Special jurisdiction is conferred and created under the special enactment and the moment such jurisdiction is created, general jurisdiction conferred on the Civil Court is ousted provided the jurisdiction so created under the Special Law confers jurisdiction to decide the controversy raised before the Civil Court---If a hierarchy is provided for to challenge such orders, Civil Court will not assume the role of the Appellate Court, as by entertaining such controversies, it will stretch its jurisdiction and encroach upon jurisdiction of another forum---Suit against Customs, Central Excise and Sales Tax Appellate Tribunal, which is deemed to be Court cannot be entertained by Civil Court/High Court in exercise of its original civil jurisdiction---Suit against the Tribunal, therefore, is not maintainable to challenge the manner of exercise of jurisdiction by the Tribunal---If the Tribunal passes an order which is not in. accordance with law then the remedy is to assail such order before the Appellate forum provided under the Customs Act, 1969 itself---Neither Appellate Tribunal, nor the Collector of Customs were body corporate of persons who in their personal designated capacity could be impleaded and sued for the acts done in purported exercise of their jurisdiction---No suit to challenge the decision of the Tribunal, therefore, can be filed in view of the bar contained in S.217(2), Customs Act, 1969---Principles.

Al Ahram Builders (Pvt.) Ltd. v. Income Tax Appellate Tribunal 1993 SCMR 29; Khalid Mehmood v. Collector of Customs. Custom House, Lahore 1999 SCMR 1881; The President-Referring Authority v. Mr. Justice Shaukat Ali PLD 1971 SC 585; Mst. Khadija Karim v. Zia-ur-Rehman Khanzada and 7 others PLD 1999 Kar. 223; Haji Abdul Aziz v. Government of Balochistan through Deputy Commissioner, Khuzdar 1999 SCMR 16; IDBP v. Allied Bank of Pakistan - PLD 1986 SC 74; Philips Electrical Industries of Pakistan Limited v. Pakistan and others 2000 YLR 2724; Sandalbar Enterprises (Pvt.) Ltd. v. Central Board of Revenue and others PLD 1997 SC 334; Flying Kraft Paper Mills (Pvt.) Ltd., Charsadda v. Central Board of Revenue, Islamabad 1997 SCMR 1874; Messrs Al-Iblagh Limited, Lahore v. The Copyright Board; Karachi and others 1985 SCMR 758; Gulzar Ahmad Khan v. The Chief Election Commissioner of Pakistan, Islamabad and 7 others PLD 1997 Lah. 643; Collector of Customs, Port Muhammad Bin Qasim, Karachi and 2 others v. Algemenet Annnnemingsmattschappij D. Blankevoort & ZN. B.V. and another HCA No.255 of 1999; Collector of Central Excise, Karachi and 2 others v. Messrs Shell Pakistan Limited and others H.C.As. Nos.185 to 289 of 1999; Collector of Customs (Appraisement), Karachi and 2 others v. Messrs K.G. Traders (Clearing and Forwarding Agents) and 2 others H.C.A. No.213 of 1997; Khalid Mehmood's case 1999 SCMR 1881; Gadron (Industries) Limited v. Government of Pakistan and others 1999 SCMR 1072; Collector of Customs, Customs House, Lahore and 3 others v: Messrs S.M. Ahmad & Company (Pvt.) Limited, Islamabad 1999 SCMR 138; Sindh Industrial Trading Estate Ltd. v. Central Board of Revenue PLD 1975 Kar. 128; Abdul Karim and 2 others v. The Province of the Punjab through the Collector, Muzaffargarh and another PLD 1994 Lah. 334; Haji Razak v. Usman and 9 others PLD 1975 Kar. 944 and Fauji Foundation and others v. Yousuf 1985 CLC 2799 ref.

(b) Customs Act (IV of 1969)-----

----S.194-C---Order-in-original had been challenged before the Tribunal at Quetta ---Mere fact that some of the sitting of the' Tribunal had taken place at Karachi would not give cause of action at Karachi, in such a situation, it was the dominant cause of action that would govern the jurisdiction in such matter.

Sandlalbar Enterprises (Pvt.) Ltd. v. Central Board of Revenue PLD 1997 SC 334; Abdul Rahim Baig v. Abdul Haq PLD 1994 Kar. 388 and Mehboob Ali Soomro v. S.R.T.C. 1999 CLC 1722 ref.

(c) Customs Act (IV of 1969)-----

----Ss.194-C & 195-B---Appellate jurisdiction of Customs, Central Excise and Sales Tax Appellate Tribunal---Nature, scope and extent discussed at length.

Khawaja Shams-ul-Islam for Plaintiffs.

Raja M. Jrshad and S. Tariq Ali, Standing, Counsel for defendant No.2.

Akhter Hussain for Defendant No.3.

Date of hearing: 9th April, 2003.

2003 P T D 2241

[Karachi High Court]

Before Saiyed Saeed Ashhad, C.J. and Ghulam Rabbani, J

PAKISTAN INDUSTRIAL DEVELOPMENT CORPORATION (PVT.) LTD.

Versus

FEDERATION OF PAKISTAN and another

Constitutional Petition No.D-1776 of 1993, decided on 10th April, 2003.

(a) Customs Act (IV of 1969)---

----Ss.33 & 32---Constitution of Pakistan (1973), Art. 199--­ Constitutional petition--- Maintainability---Refund, claim of --Limitation---Payment made by a party by way of customs duty, sales tax, excess duty etc. inadvertently, mistakenly, in ignorance of exemption provided by any statute, rules or regulations, notifications whether voluntarily or involuntarily, the period of limitation of six months provided in S.33, Customs Act, 1969 would not be applicable and the affected party would be at liberty to claim the refund of the amount paid mistakenly or inadvertently either by filing a suit or a Constitutional petition---Essential requirements.

The object of providing limitation inter alia, in sections 32 and 33 of the Customs Act, 1969 is to finalise the transactions within the period specified therein so that there may not be any adverse financial implication after the expiry of the period mentioned therein, for which provisions for contingency are made in a yearly budget.

The payment made by a party by way of customs duty, sales tax, excess duty etc. inadvertently, mistakenly, in ignorance of exemption provided by any statute, rules or regulations, notification(s) whether voluntarily or involuntarily then the period of limitation of six months provided in section 33, Customs Act, 1969 would not be applicable and the affected party would be at liberty to claim the refund of the amount paid mistakenly or inadvertently either by filing a suit or a Constitutional petition.

For claiming refund of tax or duty or other charges paid by way of mistake or inadvertence or under a wrong provision of law, rule or regulation the limitation of six months provided in section 33 of the Customs Act, 1969 would not be applicable, was not meant to be understood so as to assume that the party would be free to claim refund of a tax or any other charge or levy paid under a mistake of fact or law at his sweet-will at any time after the expiry of 20 years. In such a case if a suit was filed for refund then it ought to have been filed within the statutory period provided under the relevant Article of First Schedule to the Limitation Act, or if the refund of the same was to be claimed by invoking Constitutional jurisdiction of High Court then the petitioner ought to have approached the Court promptly meaning thereby that the petition should not suffer from laches which might defeat the claim.

Though the period of six months provided in section 33 of the Customs Act, .1969 would not be applicable in the present case yet the petitioner would not be free to challenge and to initiate legal proceedings for the refund of the excessive amount at his sweet-will after a period of fifteen years. The petitioner was required to strictly follow the provisions of the statute of limitation for filing a suit and to have acted prudently, diligently and promptly if it chose to invoke the. Constitutional jurisdiction of High Court. The petitioner's inaction for fifteen years had allowed the period of three years for filing the suit for refund of the excess payment by way of customs duty and sales tax under section 32 of the Customs Act to elapse. The inordinate delay in filing the Constitutional petition, which had gone unexplained .as the reasons advanced therefore were without any weight and substance would be a stumbling block in the way the maintainability of Constitutional petition on the ground of laches. Challenge or filing objections in 1988 after 10 years of the impugned assessment would not furnish them fresh period of limitation, from the date of the order by which their objections were decided on the principle that once on account of inaction, indolence, or imprudence a party had allowed the period of limitation for initiating legal proceedings to elapse or had unnecessarily delayed then a representation,, claim, application, review petition filed/submitted after expiry of the period of limitation for initiating such proceedings would not be entertainable and would not revive the period of limitation for filing suit and a Constitutional petition filed by the defaulting party would suffer from laches.

In the present case the petitioner failed to establish that it agitated the impugned assessment before the Customs Authorities before 1988 or filed a suit for refund of the excess payment by way of customs duty and sales tax within the statutory period. The petitioners were not diligently pursuing the departmental remedies before, the Custom Authorities and in not filing the civil suit for refund would not entitle them to invoke the Constitutional jurisdiction of High Court as they had not acted prudently which was one of the essential requirements for invocation of the Constitutional jurisdiction of High Court.

The petitioners had .not approached the High Court with clean hands. They have suppressed material facts inasmuch as they did not clearly state as to when they challenged the levy of customs duty and lodged a claim for refund of excess customs duty and the entire sales tax paid by them. Even during the course of arguments petitioners did not come forward with clear and specific statement as to when the petitioners had taken up the matter prior to 1988 with the respondents for challenging the levy and claiming the refund. The petitioner also failed to file a suit for recovery of excess payment.

Unexplained delay in filing a Constitutional petition would be fatal depending upon the facts and circumstances of the case.

Pfizer Laboratories Ltd. v. Federation of Pakistan and others PLD 1998 SC 64 fol.

Abdul Aziz Ayoob v. Assistant Collector of Customs PLD 1990 Kar. 378; Mushtaq Ahmed and others v. Government of Pakistan and others 1998 SCMR 749 = 1998 PLC (C.S.) 488; Manzoor Hussain and, 6 others v. Zulfiqar Ali and 8 others 1983 SCMR 137; Deen Carpets Limited v. Iqbal Ghuman, I.T.O. and another PLD 1989, SC 516; Muhammad Aman and 2 others v. Atta Muhammad and another 1982 SCMR 270; Allah Nawaz Sheikh v. Punjab Appellate Tribunal, Lahore and another 1997 SCMR 573 and Shahbaz Khan Muhammad v. Islamic Republic of Pakistan and another 1975 SCMR 4 ref.

(b) Constitution of Pakistan (1973)---

----Art. 199---Constitutional jurisdiction of High Court ---Laches--­Effect---Inordinate delay in filing Constitutional petition, which had gone unexplained, and reasons advanced being without any weight and substance, would be a stumbling block to the maintainability of Constitutional petition- --Principles.

Pfizer Laboratories Ltd. v. Federation of Pakistan and others PLD 1998 SC 64; Abdul Aziz Ayoob v. Assistant Collector of Customs PLD 1990 Kar. 378 Mushtaq Ahmed and others v. Government of Pakistan and others 1998 SCMR 749 = 1998 PLC (C.S.) 488; Manzoor Hussain and 6 others v. Zulfiqar Ali and 8 others 1983 SCMR 137; Deen Carpets Limited v. Iqbal Ghuman, I.T.O. and another PLD 1989 SC 516; Muhammad Aman arid 2 others v. Atta Muhammad and another 1982 SCMR 270; Allah Nawaz Sheikh v. Punjab Appellate Tribunal, Lahore and another 1997 SCMR 573 and Shahbaz Khan Muhammad v. Islamic Republic of Pakistan and another 1975 SCMR 4 ref.

Aziz A. Shaikh for Petitioner.

Sajjad Ali Shah, Deputy Attorney-General for Pakistan for Respondents.

Date of hearing: 28th March, 2003.

203 P T D 2642

[Karachi Lahore High]

Before Anwar Zaheer Jamah and Gulzar Ahmed, JJ

Messrs INTERGLOBE COMMERCE PAKISTAN (PVT.) LTD.

Versus

GOVERNMENT OF PAKISTAN and others

Constitutional Petition No. D‑373 of 2003, decided on 4th July, 2003.

Customs Act (IV of 1969)‑‑‑

‑‑‑‑S. 21‑‑‑Notification S.R.O. 400(I)/97, dated 31‑5‑1997‑‑‑Notification S.R.O. 435(I)/2001, dated 18‑6‑2001‑‑‑Constitution of Pakistan (1973), Art. 199‑‑‑Constitutional petition‑‑‑Exemption from customs duty‑‑­Factual inquiry‑‑‑Technical aspect of equipment‑‑‑Locally manufactured parts‑‑‑Compatibility with imported equipment‑‑‑Dispute was with regard .to import. of equipment for oil exploration project‑‑‑Components which could not be locally manufactured were exempted from import duty‑‑­Engineering Development Board had decided that the disputed components could be locally manufactured, therefore, such components were not exempted under the Notification S.R.O. 400(I)/97, dated 31‑5‑1997 and Notification, S.R.O. 435(I)/2001, dated 18‑6‑2001‑‑‑Plea raised by the importer was that the locally manufactured components were not compatible with the imported equipment and the Board had not provided opportunity of hearing to the importer‑‑‑Validity‑‑‑High Court in exercise of Constitutional jurisdiction would not enter into disputed questions of fact and more so when the technicalities of manufacturing of equipment was involved‑‑‑Law had itself created a forum for determining the disputed question about the status of imported equipment‑‑‑Importer had submitted to such forum and after elaborate determination of all relevant aspects, the Board had decided against the importer‑‑‑Function of Engineering Development Board was only to determine the question as to whether the equipment imported was being locally manufactured or not‑‑‑Board was not supposed to determine the compatibility or suitability of the imported equipment with that of the equipment manufactured locally‑‑‑Law did not make any provision for determi­nation of compatibility or suitability‑‑‑Engineering Development Board had examined and gone through the material placed by the importer and had also provided him opportunity of hearing and thereafter had passed the order‑‑‑Such order did not suffer from any illegality requiring interference by High Court in Constitutional jurisdiction‑‑‑Petition was dismissed in circumstances.

Sohail Jute Mills Ltd. v. Federation of Pakistan PLD 1991 SC 329; Messrs Gulshan Weaving Mills Ltd. Lahore v. Collector of Customs, Lahore PTCL 1999 (CL) 186; Abdul Rehman Yusuf Mapara v. Collector of Customs 1988 MLD 795; Messrs Globe Textile Mills Ltd. v. Central Board of Revenue, Islamabad 1989 CLC 1962 and Messrs Arshad & Company v. Capital Development Authority, Islamabad 2000 SCMR 1557 ref.

Dr. Amjad Hussain Bukhari for Petitioner.

S. Mehmood Alam Rizvi, Standing Counsel for Respondent No. 1.

Akhtar Hussain For Respondent No.5.

Date of hearing: 16th May, 2003.

2003 P T D 2791

[Karachi High Court]

Before Saiyed Saeed Ashhad, C.J. and Ghulam Rabbani, J

Messrs FATIMA ENTERPRISES LTD.

Versus

FEDERATION OF PAKISTAN and others

Constitutional Petition No.D‑350 of 1995, decided on 16th July, 2003.

Customs Act (IV of 1969)‑‑‑‑

‑‑‑‑S. 156(24)‑‑‑Constitution of Pakistan (1973), Art. 199---Constitutional petition‑‑‑Levy of customs duty‑‑‑Measurement of commodity in land/shore tank at the port of discharge‑­the petitioner and Customs Authorities was with regard to quantity of palm oil imported Petitioner claimed that the oil received by it was less than the quantity imported while the Authorities imposed the duty on the basis of quantity of oil present on board the raised by the petitioner was that the quantity to be taken for levying the customs duty was the quantity discharged in land/shore I, Customs Authorities had taken quantity found in the tanks on vessel‑‑‑Validity‑‑‑No provision of law existed which barred measurement of liquid commodity in land/shore tank at the port of discharge‑‑‑Measurement of liquid in tank on board the be taken as final‑‑‑Measurement of liquid at a place other then the ship was not barred under the provisions of S.156(24) of Customs Act, 1969, provided such measurement was made in presence of all the concerned parties‑‑‑Effective quantity of oil for the purpose of levy of custom duty would be the quantity of off discharged in the land/shore tanks at the port‑‑‑Levy of customs duty by the Authorities as per quantity found in the tank on board the vessel at the port of destination was neither in accordance with law nor inconformity with established practice relating to the discharge of liquid consignment High Court directed the Authorities to decide the question of refund the excess customs duty as claimed by the petitioner‑‑‑Petition was allowed accordingly.

Amoco Oil Co. v. Parpada Shipping Co. Ltd. (1989) 1 Lloyd's Law Rep. 369; Trading Corporation of Pakistan v. Inter‑continental Oceanic Enterprises Corporation and 2 others 2000 CLC 1892 and Bruusgaard Kiosteruds Dampskibs Aktieselskab v. Secretary of State AIR 1940 Bom, 294 ref.

Mazhar Lari for Petitioner.

Sajjad Ali Shah, D.A.‑G. for Respondents.

Date of hearing: 27th May, 2003.

2003 P T D 2798

[Karachi High Court]

Before S.A. Sarwana and Muhammad Mujeebullah Siddiqui, JJ

Messrs A.H. INTERNATIONAL (PVT.) LTD., KARACHI through Director

Versus

ASSISTANT COLLECTOR OF CUSTOMS and 3 others

Constitutional Petition No.D‑1024 of 2003, decided on 2nd September, 2003.

(a) Customs Act (IV of 1969)‑‑‑-

‑‑‑S.13(3)(4)‑‑‑Customs Rules, 2001, Rr.239 & 240‑‑‑Constitution of Pakistan (1973), Art.199‑‑‑Constitutional petition‑‑‑Licence for private warehouse‑‑Suspension of such licence by Collector of Customs‑‑­Conditions.

A cumulative reading of the provisions contained in sub­sections (3) and (4) of section 13 of the Customs Act, 1969 and Rules 239 and 240 of the Customs Rules, 2001, leads to the conclusion that the power of Collector of Customs to suspend the licence granted under section 13 of the Customs Act, 1969 is circumscribed with the following conditions:‑‑

(1) Proceedings considering the cancellation of licence under subsection (3) of section 13 be pending, meaning thereby that a show­ cause notice for proposed cancellation is duly served on the licensee.

(2) During the pendency of proceedings for the cancellation of licence as explained above, the Collector of Customs is of the opinion that it is expedient to suspend the licence.

(3) The opinion is to be recorded in writing by the Collector of Customs himself and not by any subordinate or any superior official.

(4) The opinion so recorded should reflect the application of mind by the Collector of Customs himself which is indicated by the expression, "the reasons to be recorded m writing, therefore, by him appearing in sub‑rule (1) of rule 240 of the Customs Rules. The opinion must contain the reasons for entertaining such view.

(5) The reasons contained in the opinion recorded by the Collector of Customs himself, under sub‑rule (1) of rule 240 shall be communicated to the licensee within twenty‑four hours of such suspension.

The order of suspension of licence is to be made by Collector of Customs himself which is apparent from a bare reading of subsection (4) of section 13 and sub‑rule (1) of rule 240.

(b) Customs Act (IV of 1969)‑‑‑--

‑‑‑‑S.13(3)(4)‑‑‑Customs Rules; 2001, Rr. 239 & 240‑‑‑Constitution of Pakistan (1973), Art.199‑‑‑Constitutional petition‑‑‑Licence for private warehouse‑‑‑Cancellation/Suspension of such licence‑‑‑Collector of Customs, in the present case, had not recorded any opinion as to why it was expedient to suspend the licence and had also failed to record the reasons for the same in writing himself as required under the law‑‑­Reasons contained in the letter of Assistant Collector sent subsequently could not be deemed to be the compliance of law as an officer competent to pass an order was required to do so himself and the recording of reasons by his subordinate in a subsequent communication was not warranted in law‑‑‑If an order passed by a Competent Authority was not in accordance with the law then the subsequent compliance of the conditions prescribed in law even by himself would not cure the defect and the recording of reasons by subordinate Authority had no legal 'validity‑‑‑Reasons for suspension of licence were to be communicated to the licensee within twenty four‑hours of the suspension‑‑‑Where there was no communication of reasons to the licensee within twenty‑four hours of the suspension order as required by law, such suspension order, was liable to be struck down‑‑‑High Court, however, directed that notwithstanding the setting aside of the suspension order the proceedings initiated by the Department under show‑cause notice shall continue and be decided in accordance with law.

(c) Administration of justice‑‑‑

‑‑‑‑If an order passed by a Competent Authority was not in accordance with the law then the subsequent compliance of the conditions prescribed in law even by itself would not cure the defect and the recording of reasons by subordinate Authority would have no legal validity.

Mrs. Navin Merchant for Petitioner.

Raja Muhammad Iqbal for Respondents Nos. 1 to 3.

Date of hearing: 2nd September, 2003.

2003 P T D 2809

[Karachi High Court]

Before Mushir Alam, J

DREAM WORLD LIMITED through Director and Chief Executive

Versus

Messrs COTECNA INSPECTION S,A., KARACHI and another

Suit No. 1020 of 1996, decided on 17th March, 2003.

(a) Inspection, Valuation and Assessment of Imported Goods Rules, 1994---

‑‑‑‑R. 2(f)(g)‑‑‑S.R.O. 1108(I)94, dated 14‑11‑1994‑‑‑Clean Report of Finding (CRF) and Attested Invoice‑‑‑Distinction‑‑‑Attested Invoice is not CRF‑‑‑Both such documents entirely two different and distinct documents to be‑ used for different purposes‑‑‑Attested Invoice only certifies that invoiced goods were inspected, but same does not verify value of goods‑-‑Such verification with Assessed Tariff Codes and dutiable value is reflected in CRF.

(b) Inspection, Valuation and Assessment of Imported Goods Rules, 1994‑‑‑

‑‑‑‑Rr. 4, 7 & 8‑‑‑ S.R.O. 1108(I)94, dated 14‑11‑1994‑‑‑Import of goods in terms of R.4 of Inspection, Valuation and Assessment of Imported Goods Rules, 1994‑‑‑Pre‑shipmen inspection‑‑‑Procedure stated.

Importer wishing to import goods into Pakistan in terms of Rule 4 of I.V.A. Rules is required to obtain "CRF" certificate, and for said purpose in terms of sub‑rule (1)(a) to R it is his duty to provide documents mentioned therein to Pre‑shipment Inspection Company (PSI) to carry out the requisite pre‑shipment inspection.

When any shipment is required to be effected in, terms of Rule 4(1)(f), the final invoice is required to be "duly attested by means affixing security label" with relevant import reference, and date of attestation and confirmation that the goods described in the invoice have been inspected. In terms of sub‑rule (g) thereof, such attested invoice can be used only for purpose to negotiate the instrument for payment for the bank. The responsibility of PSI Company in terms of Rule 7 is to carry out the inspection and issue CRF certificate.

CRF certificate in terms of rules 7 and 8 is to be transmitted by PSI Company to its liaison office in Pakistan. Such liaison office m turn used to issue CRF certificate to import with a copy to Customs Authority. CRF certificate is not required to be issued and handed over in the country of origin/inspection.

Bill of Entry in terms of IVA Rule 4(5) is required to be filed alongwith copy of "CRF" certificate, and in case such certificate is not provided, same is to be obtained by importer from liaison office of PSI Company by presenting the invoice copy with security label.

This separate document (CRF certificate), is used for purposes of determining liability in terms of duty, other charges and taxes leviable under Customs Act.

(c) Inspection, Valuation and Assessment of Imported Goods Rules, 1994‑‑‑--

‑‑‑‑‑R. 8‑‑‑S.R.O. 1108(I)94, dated 14‑11‑1994‑‑‑Customs Act (IV of 1969), S.25‑‑‑Value of imported goods as indicated in CRF certificate‑‑­Jurisdiction of Customs Authority to ascertain and verify such value‑‑­Scope‑‑‑Customs Authority under R.8 of Inspection, Valuation and Assessment of Imported Goods Rules, 1994, has power to ascertain and verify value as indicated in CRF certificate issued by PSI Company‑‑­Such certificate, once accepted, would be an assessed value in terms of Customs Act and considered to be an assessment order passed by Customs Authority‑‑‑Such order is amenable to same remedy as available to importer to challenge such valuation before hierarchy provided under Customs Act.

The Collector of Customs, Karachi and others v. Messrs New Electronics (Pvt.) Limited and 59 others PLD 1994 SC 363; Messrs Kaghan Impex and others v. Deputy Collector, Custom‑II and others 1993 CLC 1838; Messrs Sasta Autos v. Government of Pakistan through Secretary, Ministry of Finance, Islamabad 1991 MLD 1582; Messrs Latif Brothers v. Deputy Collector, Customs 1992 SCMR 1983; Mian Muhammad Latif v. Province of West Pakistan through the Deputy Commissioner, Khairpur and another PLD 1970 SC 180 and Hamid Hussain v. Government of Pakistan PLD 1974 SC 336 ref.

(d) Inspection, Valuation and Assessment of Imported Goods Rules, 1994‑‑‑--

‑‑‑‑‑R. 8‑‑‑S.R.O. 1108(I)94, dated 14‑11‑1994‑‑‑Clean Report of Finding (CRF)‑‑‑Burden of proof‑‑‑ Valuation shown in CRF issued by Pre­ shipment Inspection Company alleged to be illegal, void and/or against documentary evidence‑‑‑Burden to prove such fact would lie on importer.

Ghulam Nabi v. Central Board of Revenue through Chairman and 2 others PLD 1997 Quetta 22 ref.

Muhammad Sharif for Plaintiff.

Khalid Rehman for Defendant No.1.

Raja Muhammad Iqbal for Defendant No. 2

Date of hearing: 5th March, 2003.

2003 P T D 2821

[Karachi High Court]

Before S.A. Sarwana and Muhammad Mujeebullah Siddiqui, JJ

Syed MUHAMMAD RAZI

Versus

COLLECTOR OF CUSTOMS (APPRAISEMENT), CUSTOM HOUSE, KARACHI and 2 others

Constitutional Petition No. D‑713 of 2003, decided on 21st August 2003.

(a) Customs Act (IV of 1969)‑‑‑--

‑‑‑‑Ss. 32 & 223‑‑‑Customs General Order No. 12 of 2002, dated 15‑6‑2002‑‑‑Assessment of duty and taxes on goods and release thereof and any action directed under S.32, Customs Act, 1969 do not amount to performance of quasi‑judicial functions‑‑‑Such acts are purely in the nature of executive functions, performed in the execution of provisions contained in the Customs Act, 1969, therefore, directions contained in Customs General Order No. 12 of 2002, dated 15‑6‑2002 are binding on the Customs Officials‑‑‑Principles.

It is provided in section 223 of the Customs Act, 1969 that all Officers of the Customs and other persons employed in the execution of Customs Act shall observe and follow the orders, instructions and directions of the Board. The sole exception is provided in the proviso according to which the Board shall not issue such orders, instructions or directions which tend to interfere with the discretion of the appropriate Officer of Customs, in the exercise of his quasi‑judicial function. The assessment of duty and taxes and the release thereof and any: action directed towards the initiation of proceedings under section 32 of the Customs Act, 1969 do not amount to performance of quasi‑judicial function. Such acts are purely in the nature of executive functions, performed in the execution of provisions contained in the Customs Act, 1969. Thus, directions contained in the Customs General Order No. 12 of 2002, dated 15‑6‑2002 are binding on the Customs Officials.

(b) Customs Act (IV of 1969)‑‑‑--

‑‑‑‑Ss.32 & 223‑‑‑Customs General Order No.12 of 2002, dated 15‑6‑2002‑‑‑Customs General Order No.12 of 2002, dated 15‑6‑2002 providing clear instructions on the option of first appraisement system, the importer could not be charged for misdeclaration under S.32, Customs Act, 1969‑‑‑Action on the part of Customs Officials whereby imported goods assessed to duty and taxes were not allowed to be released and show‑cause notice was issued were thus not sustainable in law and such actions were liable to be struck down as illegal and without lawful authority‑‑‑Principles.

(c) Customs Act (IV of 1969)‑‑‑--

‑‑‑‑Ss.2(rr), 168, 171, 186 & 180‑‑‑Constitution of Pakistan (1973), Art. 199‑‑‑Constitutional petition‑--"Seized"‑‑‑Meaning and scope‑‑­"Seized" and "detained"‑‑‑Distinction‑‑‑Principles‑‑‑"Notional seizure"‑­Concept‑‑‑For the purpose of seizing the goods under the Customs Act, 1969, it was not necessary to take it physically into custody the goods in respect of which some offence had been committed or was believed to have been committed‑‑‑Constructive possession of the goods would also amount to seizure for the purpose of Customs Act, 1969‑‑‑Whenever, any seizure of goods occurred in consequence of an order in writing or by verbal instructions or conduct having the consequences of depriving the owner of his rights of ownership of the goods in accordance with the law and the reasons as contemplated under S.171, Customs Act, 1969 were not communicated to the person from whose physical or constructive possession the goods were seized, the order/act of seizure became illegal and invalid‑‑‑Non‑issuance of notice under S.180, Customs Act, 1969 within two months of the seizure of goods, would entitle the person from whose possession the goods were seized to return thereof‑‑‑Goods imported, in the present case, were duly assessed to duties and taxes, however, the importer was not allowed to get the goods imported to be released on payment of duties and taxes as assessed by the Customs Authorities and show‑cause notice under S.180 of the Act was also issued which was beyond a period of two months as specified in S.168(2) of the Customs Act, 1969‑‑‑Held, there was a "notional seizure" of the goods within contemplation of S.168(1) of the Customs Act, 1969 with effect from the date the goods were assessed to duties and taxes, as the importer was not allowed to remove/release the same and provisions contained in Ss. 171 & 168(2), Customs Act, 1969 became operative from the said date and the violation of mandatory provisions contained in the said provisions was apparent on record‑‑‑Show‑cause notice issued being beyond the period of two months from the date of seizure of the goods was illegal and without lawful authority. ­High Court directed the Customs Authorities to return the goods to the importer forthwith after recovery of customs duty and other taxes as assessed by the Customs Officials.

Ilam Khan v. Government of Pakistan 1983 CLC 786 and Haji Noor‑ul‑Haq v. Collector of Customs 1998 MLD 650 fol.

Khanan Jan v. Deputy Collector Central Excise and Land Customs PTCL 1983 CL 184 ref.

Khawaja Shamsul Islam for Petitioner.

S. Ziauddin Nasir. Standing Counsel assisted by S. M. Tariq Huda, Additional Collector of Customs, Wajid Ali, Deputy Collector of Customs and Wazir Rizvi for Respondents.

Date of hearing: 21st August, 2003.

2003 P T D 2835

[Karachi High Court]

Before Syed Sayeed Ashhad and Zahid Kurban Alavi, JJ

Messrs BRIGSTOCKE EDULJEE & Co.

Versus

ASSISTANT COLLECTOR OF CUSTOMS (APPRAISING INTELLIGENCE BRANCH), GOVERNMENT OF PAKISTAN, CUSTOMS HOUSE, KARACHI and others

Constitutional Petition No. 1322 of 1998, decided on 20th May, 2000.

Customs Act (IV of 1969)‑‑‑

‑‑‑‑Ss.157, 181 & 202‑‑‑Confiscation of imported goods or option to pay redemption fine‑‑‑Authority issued show‑cause notice to importers and clearing agents to the effect that under the guise of importing `yellow peas' which were not dutiable, they had imported goods in containers which was dutiable to avoid payment of duty and had deprived the Government of the customs duty and other taxes‑‑‑Authorities took into custody containers and gave option to importers either to get the containers released after paying redemption fine as determined or to have containers confiscated‑--Importers had categorically stated at the bar that they did not wish to get said containers released and question of payment of redemption fine would not arise‑‑‑Authorities, in view of said statement of importers, would be free to do what they liked with the containers in their custody and would not claim redemption fine from the importers.

PLD 1974 SC 5; PLD 1988 Lah. 177; PLD 1989 Kar. 391 and PLD 1992 SC 291 ref.

Naeem Ahmed for Petitioners.

Raja Muhammad Iqbal and Syed Zaki Muhammad, A.A‑G. for Respondents.

Date of hearing : 20th April, 2000.

2003 P T D 2840

[Karachi High Court]

Before Zahid Kurban Alavi and Mujibullah Siddiqui, JJ

Messrs CHIRAGH OIL PRODUCTS

Versus

COLLECTOR OF CUSTOMS (EXAMINATIONS), CUSTOMS HOUSE, KARACHI

Special Customs Appeal No. 28 of 1999, decided on 13th September, 2001.

Customs Act (IV of 1969)‑‑‑

‑‑‑‑S.196‑‑‑Special Customs Appeal before High Court—­Maintainability-‑‑High Court could not entertain a special customs appeal where legal point raised before High Court neither was agitated before Tribunal below nor had arisen out of decision of Tribunal.

Sohail Muzaffar for Applicants.

Raja Muhammad Iqbal for Respondent.

Date of hearing: 13th September, 2001.

2003 P T D 2844

[Karachi High Court]

Before S. A. Sarwana and S. Zawar Hussain Jafari, JJ

Messrs HINOPAK MOTORS LIMITED through Managing Director

Versus

FEDERATION OF PAKISTAN through Secretary, Ministry of Finance, Islamabad and others

Constitutional Petition No. D‑716 of 2000, decided on 25th October, 2002.

Sales Tax Act (VII of 1990)‑‑‑

‑‑‑‑Ss. 2(44) & 34‑‑‑Constitution of Pakistan (1973), Art.199‑‑­Constitutional petition‑‑‑Ad hoc deposits ‑‑‑Chargeability of sales tax‑‑­Show‑cause notice was issued by Authorities to the petitioner to the effect that at the time 4f receipt of advance payment of value of supply, tax was charged for the value at the rate of 18% of the value, but later on it was paid to the Government at the rate of 12.5% and in. that way petitioner did not pay/deposit differential amount of tax 5.5% which was collected by petitioner from the customers‑‑‑Petitioners in the show­ cause notice was also directed to show as to why he should not pay additional tax leviable under S.34 of Sales Tax Act, 1990‑‑‑Petitioner had sought declaration in his Constitutional petition to the effect that ad hoc deposits received by him did not fall within the ambit of S.2(44) of Sales Tax Act, 1990 and that proposed levy of sales tax on ad hoc deposits was illegal, invalid and of no legal effect‑‑‑Petitioner had stated that question in dispute had already been decided by the High Court in the case reported as 2002 PTD 2440 and that matter in dispute could be decided in the light of the said judgment‑‑‑Matter was remanded to Additional Collector to decide same in accordance with reported judgment and also to decide issue of alleged short deposits of 5.5% by the petitioner after giving him opportunity of hearing.

Pak Suzuki Motor Company Limited v. Federation of Pakistan 2002 PTD 2440 ref.

Muhammad Ather Saeed for Petitioner.

Raja Muhammad Iqbal for Respondents.

Date of hearing: 25th October, 2002.

2003 P T D 2849

[Karachi High Court]

Before Anwar Zaheer Jamali and Gulzar Ahmed, JJ

Messrs JAPAN STORAGE BATTERY LTD.

Versus

COMMISSIONER OF INCOME‑TAX, COMPANIES ZONE‑I, KARACHI

I.T.Cs. Nos. 192 to 199 of 2002, decided on 18th April, 2003.

(a) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑S.136(1)(2)‑‑‑Reference to High Court‑‑‑Questions proposed for reference must be questions of law arising out of the order of the Tribunal‑‑‑Principles.

A "point of law" could not be equated with the expression "question of law" and that to form a question of law in real sense the question referred must be a disputed or disputable question of law. To get decision from the High Court the question referred should be problematic or debatable question and not an obvious or simple on the point of law. A question of law not relating to general interest but relevant only in the case‑of an individual assessee for that very assessment year, does not fall within the ambit of question of law to be referred to the High Court for its opinion under section 136(1) or 136(2) of the Income Tax Ordinance, 1979. The reply to a question referred to the High Court in the affirmative or negative should normally settle a pattern of guidance both for the Revenue as well as the assessee besides the Tribunal who had sought the advice in the first instance, therefore, the practice on the part of Revenue or the assessee which, at times, is aided by the Tribunal to treat the High Court as Appellate Court needs to be disapproved. Factual controversies should not be allowed to be converted into legal issues only by dint of draftsmanship or employment of legal language in a style which is usual to the framing of such questions. In case Tribunal is not certain if the question framed raises a substantial legal issue, it must refuse to make a reference as in that case the assessee or the Revenue will have to approach under section 136(2) and satisfy the High Court before admission that the question raised/framed is of substance. Every question of law need not be referred to the High Court but only a question having some substance needed to be so referred. Only those questions of law which arise out of order of Tribunal and are of general importance are the questions of law which could be referred to the High Court under section 136(1) or 136(2) of the Income Tax Ordinance, 1979.

Commissioner of Income‑tax, Lahore v. Messrs Immion Internation, Lahore 2001 PTD 900; CIT v. Basanta Kumar Agarwalla (1983) 140 ITR 418; Lungla (Sylhet) Tea Co. Ltd. v. Commissioner of Income‑tax, Dacca Circle, Dacca 1970 SCMR 872 and Erum Ghee. Mills (Pvt.) Ltd. v: Income‑tax Appellate Tribunal, Lahore 1998 PTD 3835 ref.

(b) Income Tax Ordinance (XXXI of 1979)‑‑‑--

‑‑‑‑S. 136(1)(2)‑‑‑Reference to High Court‑‑‑Findings of fact‑‑‑Finding that some element of fee for technical services was hidden in the declared payment of royalty to the assessee was a finding of fact based on record and did not involve any legal implication; if from any angle the assessee was entitled to claim benefit of principle of promissory estoppel, then it was for the Department to examine whether on given facts such a case was made out or not and there was no dispute that the assessees were not liable to pay tax on technical services fee, and the question whether an amount equivalent to 25 % of royalty received by the assessee was actually paid as hidden technical services fee to the assessee was nothing but a question of fact which had already been answered, by the Deputy Commissioner of Income‑tax upon examination of relevant record and for valid reasons‑‑‑No question of law having been raised, application for reference was dismissed by the High Court.

1986 SCMR 1917; PLD 1991 SC 546; 1998 SCMR 1404; 2001 PTD 991; 1970 SCMR 872; 2001 PTD 900; 2001 PTD 3090; Commissioner of Income‑tax, Lahore v. Messrs Immion Internation, Lahore 2001 PTD 900; CIT v. Basanta Kumar Agarwalla (1983) 140 ITR 418; Lungla (Sylhet) Tea Co. Ltd. v. Commissioner of Income‑tax, Dacca Circle, Dacca 1970 SCMR 872 and Erum Ghee Mills (Pvt.) Ltd. v. Income‑tax Appellate Tribunal, Lahore 1998 PTD 3835 ref.

Mazhar Jafri for Applicant.

Aqeel Ahmed Abbasi for Respondent.

2003 P T D 2862

[Karachi High Court]

Before Sabihuddin Ahmed and Zahid Kurban Alavi, JJ

SINDH ENGINEERING LIMITED

Versus

CUSTOMS, EXCISE AND SALES TAX APPELLATE TRIBUNAL, KARACHI‑---and others

Special Customs Appeal No. 15 of 2000, decided on 25th May, 2000.

Sales Tax Act (VII of 1990)‑‑‑

‑‑‑‑Ss.13 & 47‑‑‑Exemption from sales tax‑‑‑Claim for‑‑‑Importers imported a consignment of 93 units of Mazda Pick‑up and cleared same and claimed exemption from sales tax in terms of S.R.O. 500(1)/88 dated 26‑6‑1988‑‑Claim of importers was rejected by Authorities on ground that said exemption was not available to importers as the same was withdrawn subsequently vide S.R.O. 1105(1)/93 dated 18‑10‑1993 which was published in Official Gazette on 18‑11‑1993‑‑‑Case of importers throughout had been that withdrawal of exemption would become operative only from date of actual publication of Gazette and not from the date mentioned at the top of notification‑‑‑Customs Authorities did not accept contention of importers‑‑‑Customs, Excise and Sales Tax Tribunal accepted contention of importers to the extent that it was important to determine when a notification was brought to public knowledge, but Tribunal had distinguished importer's case observing that importers were State‑owned enterprise and change (in withdrawal of exemption) ought to be in their knowledge‑‑‑Validity‑‑‑Reason assigned by Tribunal was untenable, because importers were an entity duly registered under Companies Ordinance, 1984 and though controlling shares could be held, by Government, same were also held by private parties and it was elementary that a company was a separate legal entity from its shareholders‑‑‑Assumption that importers should have prior knowledge of change in taxation matters, was entirely conjectural‑‑­Unless a notification expressly stipulated that it would become effective from a particular date, it would take effect from the date of its actual publication in the Gazette‑‑‑Importers, in circumstances, were entitled to exemption claimed by them to their consignment.

Muhammad Ishaq v. Chief Administrator Auqaf PLD 1977 SC 639 ref.

Arif Khan for Appellant.

Raja Muhammad Iqbal for Respondents.

Date of hearing: 25th May, 2000.

2003 P T D 2864

[Karachi High Court]

Before Muhammad Mujeebullah Siddiqui, Ata‑ur‑Rehman and Sarmad Jalal Osmani, JJ

Messrs MULTICARE DISTRIBUTION SERVICES (PRIVATE) LIMITED through Managing Director

Versus

DEPUTY COLLECTOR, AUDIT DIVISION‑1, SALES TAX (EAST), GOVERNMENT OF THE PAKISTAN, KARACHI and others

Constitutional Petition No.D‑808 of 2001, decided on 26th March, 2002.

Sales Tax Act (VII of 1990)‑‑‑--

‑‑‑‑Ss.45 & 46‑‑‑Constitution of Pakistan (1973.), Art. 199‑‑­Constitutional petition‑‑‑Abolition of post of Collector (Appeals)‑‑­Transfer of cases‑‑‑Petitioner filed appeal against order of Deputy Collector before Collector of Customs, Excise and Sales Tax (Appeals)‑‑During pendency of appeal, the post of Collector (Appeals) was abolished and his jurisdiction was transferred to the Customs, Excise and Sales Tax Appellate Tribunal and after making amendments in the Customs Act, 1969 and Central Excises Act, 1944, provisions were made for transfer of all appeals pending before Collector (Appeals) under said two enactments to the Customs, Excise and Sales Tax Appellate Tribunal‑‑‑Due to inaptitude or inadvertence, on part of Draftsman, consequential amendment, pertaining to transfer of appeals, pending before Collector (Appeals) under the Sales Tax Act, was not made and petitioner was left in lurch‑‑‑During pendency of Constitutional petition filed by the petitioner, Central Board of Revenue ordered that appeals against an order passed by officer of Sales Tax would lie to Appellate Tribunal‑‑‑Consequent to said order of Central Board of Revenue, appeal filed by petitioner before Collector (Appeals) stood transferred to Customs, Excise and Sales Tax Appellate Tribunal, for adjudication according to law‑‑‑Petitioner could pursue its remedy before Customs, Excise and Sales Tax Appellate Tribunal in accordance with law.

Jawaid Siddiqui for Petitioner.

Raja Muhammad Iqbal for Respondents.

Date of hearing: 26th February, 2002.

2003 P T D 1

[Lahore High Court]

Before Nasim Sikandar and Jawwad S. Khawaja, JJ

Messrs TANZEB TEXTILE INDUSTRIES, FAISALABAD

Versus

C.I.T., FAISALABAD ZONE, FAISALABAD

C.T.R. No. 1 of 1983, decided on 4th September, 2002.

(a) Central Excises Act (I of 1944)‑‑‑

‑‑‑‑S.3(4)‑‑‑Excise duty on production bass‑‑‑Nature‑‑‑Such duty is one of many indirect taxes., which though paid by producers at production stage, falls on consumer, thus, producer is obliged to include same in his cost of production.

(b) Central Excises Act (I of 1944)‑‑‑

‑‑‑‑S.3‑‑‑Section 3, Central Excises Act, 1944 is not only a charging section, but also partakes assessment provisions‑‑‑Stages of enforcement of the Act stated.

Like any other fiscal statute, Central Excises Act, 1944, has three stages of enforcement. The first stage is charge of duty or tax otherwise also called imposition. The second stage is that of assessment and the third is of collection or recovery. Section 3 of Central Excises Act, 1944 is somewhat different from usual fiscal statutes inasmuch as it is not only a charging section, but also partakes the assessment provisions.

Provisions of section 3(4) of the Act are both charging as well as machinery in the sense that these provide for the levy on a particular kind of machinery or installations at a particular fixed rate. In this manner, half of the assessment stage is reached and covered inasmuch as only the fixed amount of tax keeping in view the nature and number of machinery is to be calculated.

(c) Central Excises Act (I of 1944)‑‑‑

‑‑‑‑S.3(1)(4)‑‑‑Excise duty, levy of ‑‑‑Exciseable goods actually produced or production expected to be achieved by certain kinds of machinery‑‑­Distinction‑‑‑Duty is charged in first case on actual basis, while in second case on expected or capacity basis‑‑‑Most relevant factor in both situations remains the production of exciseable goods‑‑‑Nature and essence of duty in both such cases remains the same‑‑‑Earlier method of recovery of excise duty on yardage .basis and its subsequent conversion on capacity of machines basis was only a change in method of collection of levy, but the levy as such had nut undergone any change whatsoever.

(d) Central Excises Act (I of 1944)‑‑‑

‑‑‑‑S.3(4)‑‑‑Excise duty‑‑‑Method of collection‑‑‑Only an incident of administration and not essence of duty of excise, which was attracted by manufacture itself.

Muhammad Younis v. Central Board of Revenue PLD 1964 SC 113 fol.

(e) Central Excises Act (I of 1944)‑‑‑

‑‑‑S.3(4)‑‑‑Levy, duty of tax, whether floating or fixed does not lose its nature and character merely for the reason of change in basis for computation or collection.

A. Sanyasi Rao and another v. Government of Andhra Pradesh and others (1989) 178 ITR 31 and 1936 AC 352 ref.

(f) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑S.136‑‑‑Central Excises. Act (1 of 1944), S.3(4)‑‑‑S.R.O. No.1552(I)/74, dated 20‑12‑1974‑‑‑S.R.O. No. 1553(I)/74, dated 20‑12‑1974‑‑‑Central Excise General Order No.3 of 1974‑‑‑Excise duty on production capacity basis‑‑‑Charge and determination of duty‑‑­Assessee claimed amount as excise duty paid on capacity basis and charged same to profit and loss account‑‑‑Assessing Officer did not agree `and as done in previous years, amount of excise duty was taken as an item of trading and manufacturing account‑‑‑First Appellate Authority accepted appeal of assessee, but Tribunal concluded that excise duty levied on capacity basis for all practical purposes was identical in nature to duty levied on actual production basis, thus, same was an item debitable to manufacturing and trading account‑‑‑Validity‑‑‑Excise duty had not undergone any change except that only method of calculation of levy had been changed from yardage basis to capacity of machinery‑‑‑­Central Board of Revenue had elucidated in Circular No.2 of 1974 in details the basis of computation of excise duty‑‑‑Not allowing abatement on account of closure of machinery during a month would not by itself change the nature of levy to enable same to be taken to profit and loss account‑‑‑Profit and loss account was drawn after incoming and outgoings in respect of manufacturing trading were duly settled‑‑‑Where a machinery or some of installed machinery in .a factory at relevant time remained closed for some time during a year or part of the year, a payment of fixed levy for that period would only increase overall cost of production made earlier or subsequently, but would not as such affect profit and loss account‑‑‑High Court answered reference in affirmative that in given circumstances, excise duty paid by assesses was debitable to manufacturing and trading account.

1978 PTD (Trib.) 5 ref.

M. Saleem Ch., M. Iqbal Hashmi and Manzoor Ahmad Sh. For Appellants.

Muhammad Ilyas Khan and Mian Ashiq Hussain for Respondents.

Date of hearing: 18th January, 2002.

2003 P T D 50

[Lahore High Court]

Before Nasim Sikandar and Muhammad Sair Ali, JJ

Messrs WAK (PRIVATE)' LIMITED, LAHORE

Versus

COLLECTOR, CENTRAL EXCISE & SALES TAX (ADJUDICATION), CUSTOMS HOUSE, LAHORE and another

Sales Tax Appeals Nos. 460 and 461 of 2002, decided on 19th September, 2002.

(a) Sales Tax Act (VII of 1990)‑‑‑

‑‑‑‑Ss.36, 36(1), 46 & 47‑‑‑Central Excise Rules, 1944, Rr.10 & 10(3)‑‑­Central Excises Act (I of 1944), S.36(c)‑‑‑Demand of excise duty any sales tax with additional duty/tax and penalty‑‑‑Tribunal set aside order in original and remanded case to authority for de novo proceedings‑‑­Authority issued amended show‑cause notices; one under R.10(3) instead of R.10 of Central Excise Rules, 1944 as mentioned in earlier notice; and other under S.39(1) instead of S.36 of Sales Tax Act, 1990 as mentioned in earlier notice ‑‑‑Vires of new notices and competency of authority to issue same was challenged before Collector (Adjudication), who through short order deferred decision on such objection to be taken up with final disposal of case‑‑‑Tribunal refused to interfere with such order of Collector‑‑‑‑Validity‑‑‑Quasi‑judicial authority could postpone its decision on a legal objection to be taken up for adjudication alongwith merits of case‑‑‑Appellant could press such objection before Adjudicating Authority, who was still seized of the matter, and in case of an adverse finding, appellant would have a right of appeal before Tribunal‑‑‑No question arose out of order of Tribunal to be entertained by High Court under S. 36(c) of Central Excises Act, 1944 or S.47 of Sales Tax Act, 1990‑‑‑High Court dismissed appeal in limine.

(b) Sales tax‑‑‑

‑‑‑‑ Adjudicating Authority or Trial Court could very well defer consideration of a legal objection for taking up with merits of the case at the time of recording final decision.

Ali Sibtain Fazli for Appellant.

2003 P T D 60

[Lahore High Court]

Before Tassaduq Hussain Jilani and Asif Saeed Khan Khosa, JJ

MUHAMMAD ASHRAF

Versus

COLLECTOR OF CUSTOMS, CUSTOMS HOUSE, LAHORE and 2 others

Customs Appeal No.5 of 1997, heard on 1st October, 2002.

Customs Act (IV of 1969)‑‑‑

‑‑‑‑Ss.2(s), 156(1) & 169‑F‑‑‑Confiscation of 4680 tolas gold of foreign origin being smuggled out to India‑‑‑Validity‑‑‑Gold had been seized at a place, which was at a distance of two and a half kilometers from Indian Border‑‑‑Gold had admittedly been recovered from car, which had been impounded‑‑‑Appellant had not given tenable explanation either during investigation or before Adjudicating Officer for possession of such a huge quantity of gold‑‑‑Three forums of competent jurisdiction had concurrently found that such gold was being smuggled out‑‑‑No question of law had been raised by appellant to warrant interference in impugned orders‑‑‑High Court dismissed appeal as having no merits.

Irfan Masood Sheikh for Appellant.

A. Karim Malik for Respondents.

Date of hearing: 1st October, 2002.

2003 P T D 76

[Lahore High Court]

Before Nasim Sikandar and Muhammad Sair Ali, JJ

JAHANGIR KHAN TAREEN

Versus

COLLECTOR OF CUSTOMS, CUSTOMS HOUSE, LAHORE and 2 others

Customs Appeal No. 367 of 2002, heard on 5th September, 2002.

Customs Act (IV of 1969)‑‑‑

‑‑‑‑S. 196‑‑‑Civil Procedure Code (V of 1908), S.148‑‑‑Time fixed by Tribunal in its order‑‑‑Application for extension in time was dismissed by Tribunal‑‑‑Validity‑‑‑Tribunal as a judicial forum was competent to entertain a prayer for extension in time‑‑‑Application for extension of time made before Tribunal irrespective of its title and the provision of law under which same was purported to have been made would be deemed pending before Tribunal for consideration and disposal in accordance with law‑‑‑High Court disposed of appeal accordingly.

Umar Atta Bandial for Appellant.

A. Karim Malik for Revenue alongwith Lutaf Ullah Virk, Collector Customs for Respondents.

Date of hearing: 5th September, 2002.

2003 P T D 78

[Lahore High Court]

Before Nasim Sikandar and Muhammad Sair Ali, JJ

Messrs RABEEL'S, 209/2ND FLOOR ZULQURNAIN CHAMBER, GANPAT

ROAD, LAHORE

Versus

COLLECTOR OF CUSTOMS, DRY PORT, MUGHALPURA, LAHORE and

another

Customs Appeal No. 129 of 1998, heard on 4th September, 2002.

(a) Customs Act (IV of 1969)‑‑‑

‑‑‑‑Ss. 25 & 196‑‑‑Assessment of value of goods on the basis of Valuation Advice, dated 29‑7‑1997 circulated by Controller of Customs (Valuation) after discarding the declared value‑‑‑Appellant challenged such valuation before Tribunal with partial success‑‑‑Validity‑‑‑Appellant had sought before Tribunal avoidance of application of such valuation advice on the ground that Letters of Credit in his case had been established before the issuance of such advice‑Vires of such advice in the perspective of S.25(14) of the Customs Act had never been agitated before Tribunal nor its application had been resisted on the ground that a proper notification in that regard having not been issued under S.25(14) of the Act, such circular had not assumed the status of subordinate legislation to be binding upon department and assessee‑importer‑‑‑Such question having not been ruled upon by the Tribunal it could not be said to have arisen out of order of Tribunal, thus, same could not be agitated before High Court in the one guise or the other‑‑‑No question of law arose out of order of the Tribunal‑‑‑High Court dismissed the appeal in circumstances.

(b) Customs Act (IV of 1969)‑‑‑

‑‑‑‑S. 196‑‑‑Question to be examined and answered by High Court under S.196 of Customs Act, 1969‑‑‑Scope‑‑‑Such question could only be the one, which had been ruled upon by Tribunal.

Mian Abdul Ghaffar for Appellant.

Khan Muhammad Virk for Respondents.

Date of hearing: 4th September, 2002.

2003 P T D 456

[Lahore High Court]

Before Naseem Sikandar and Muhammad Sair Ali, JJ

Messrs TAQIUR REHMAN, FAISALABAD

Versus

DEPUTY COLLECTOR CUSTOMS (IMPORT), DRY PORT, FAISALABAD

Customs Appeal No.228 of 2002, decided on 24th July, 2002.

(a) Customs Act (IV of 1969)‑‑‑

‑‑‑‑Ss. 181 & 196‑‑‑Notification/order issued by Central Board of Revenue under first proviso to S.181 of the Customs Act ‑‑‑Validity‑‑­Such order had the force of statute‑‑‑High Court or Tribunal could not allow a relief which was opposed to such order/notification.

(b) Customs Act (IV of 1969)‑‑‑

‑‑‑‑Ss. 180, 181 & 196‑‑‑Option to pay fine in lieu of confiscated goods‑­Release of confiscated goods by Tribunal on payment of nominal fine or penalty‑‑‑Validity‑‑‑Such practice had encouraged importers of banned items, which could not be followed any further after a judgment of High Court.

(c) Customs Act (IV of 1969)‑‑‑

‑‑‑‑Ss.180, 181 & 196‑‑‑S.R.O. No.1374(I)/98, dated 17‑12‑1998‑‑­Import Policy Order, 2001‑‑‑Option to pay fine in lieu of confiscated goods‑‑‑Import of dump trucks in violation of Import Policy Order, 2001‑‑‑Show‑cause notice not contested by appellant‑‑‑Authority found the charges established and confiscated vehicles‑‑‑Tribunal upheld suck order‑‑‑Validity‑‑‑No question of law arose out of order of Tribunal‑‑­Appellant had not contested import of consignment or the fact that same was not hit by prohibition contained in Import Policy Order‑‑‑Appellant ought to have raised all factual issues and defence at the first opportunity available to him before Adjudicating Authority‑‑‑Such silence on his part, even if not taken as admission, made his case a lot weaker‑‑­Examination of vehicles had been carried out by Departmental Authorities and those had been found hit by mischief of import Policy Order, 2001‑Reference of Tribunal to expert opinion obtained by it in an identical case could not in any, manner be said to have rendered its order to be without rational basis‑‑‑Appellant had never contested or requested for physical examination of vehicles outside Departmental Authorities‑‑‑No case for remand for fresh physical examination of vehicles at this stage was made out‑‑‑High Court dismissed the appeal in circumstances.

Abid Hasan Minto with Muhammad Akram Nizami for Appellant.

A. Karim Malik for the Revenue.

2003 P T D 575

[Lahore High Court]

Before Ch. Ijaz Ahmad, J

PERVAIZ KASHANIAN

Versus

COLLECTOR OF CENTRAL EXCISE AND LAND CUSTOMS‑and another

Writ Petition No. 2571 of 1990, heard on 16th May, 2002.

Customs Act (IV of 1969)‑‑‑

‑‑‑‑Ss. 194‑A & 194‑C‑‑‑Constitution of Pakistan (1973), Art. 199‑‑­Constitutional petition‑‑‑Considerable interval between hearing arguments and announcing order‑‑‑Effect‑‑‑Judgment was reserved by Competent Authority after hearing arguments on 19‑2‑1986‑‑‑Petitioner filed written arguments on 27‑11‑1986‑‑‑Appeal was dismissed on 12‑7‑1988 after considerable delay‑‑‑Validity‑‑‑Impugned order was not sustainable in eyes of law and was in violation of principle of natural Justice and fairplay‑‑‑High Court set aside impugned order and remanded case two Appellate Tribunal for its fresh decision within specified time.

S. Iftikhar‑ud‑Din Haider Gardezi's case 1996 SCMR 669; Crescent Sugar Mills' case PLD 1982 Lah. 1 and Sh. Mehmood Ahmad's case PLD 1987 SC (AJ&K) 21 ref.

Sardar Jamal A. Sukhera for Petitioner.

Sh. Izharul Haq for Respondents.

Date of hearing: 16th May, 2000.

2003 P T D 808

[Lahore High Court]

Before Nasim Sikandar and Muhammad Sair Ali, JJ

SAITEX SPINNING MILLS, LAHORE

Versus

COMMISSIONER OF INCOME‑TAX, ZONE‑3, LAHORE

P.T.R. N.32 of 1996, heard on 23rd September, 2002.

Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑Ss. 136(2) & 65‑‑‑Additional assessment‑‑‑Re‑opening of assessment on the ground that declared value of land purchased by assessee (public limited company) was found to be low, when compared with value of similar transaction declared by another assessee‑‑‑Validity‑‑‑Mere reference to a declared value by another assessee would not by itself be a definite information to become a sufficient ground to re‑open a completed assessment‑‑Idea of sanctity of a completed assessment was certainly averse to re‑opening based upon conjectures and surmises‑‑­Hardly appeared any conceivable good reason for a public limited company to under‑state value of purchased land‑‑‑In such cases, a definite information could be said to be available only, if a legally acceptable proof of higher payment came to light or was discovered by the Assessing Officer‑‑‑Payment through financial or banking institution could be one of the instances of such proof‑‑‑Assessing Officer in such­like cases must identify the source wherefrom under‑stated funds had emanated‑‑‑Determination of value of land in the present case was open to exception and no definite information was available with Assessing Officer for invocation of provisions of S.65 of the Ordinance‑‑‑Sale price of real estate purchased by a company, determination of‑‑‑Criteria stated.

E.F.U. General Insurance Co. Ltd. v. Federation of Pakistan PLD 1997 SC 700 and Central Insurance Co. v. Central Board w Revenue 1993 SCMR 1232 ref.

Ikramul Haq for Appellant.

Muhammad Ilyas Khan for Respondent.

Date of hearing: 23rd September, 2002.

2003 P T D 863

[Lahore High Court]

Before Nasim Sikandar and Muhammad Sair Ali, JJ

COMMISSIONER OF INCOME‑TAX/WEALTH TAX, FAISALABAD ZONE, FAISALABAD

Versus

Messrs IBRAHIM & SONS, FAISALABAD

I.T.A. No. 7774/LB of 1996, decided on 24th October, 2002.

(a) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑Ss. 59 & 136‑‑‑Appellate jurisdiction of High Court‑‑‑Self­--Assessment Scheme‑ ‑Substantial question of law‑‑‑Scope‑‑‑Acceptance of a return filed under Self‑Assessment Scheme is restricted to a particular assessment year even in the case of an assessee‑‑‑Unless the controversy and the issue involved is of wide implication the same cannot be said to raise a substantive legal controversy‑‑‑Appeal is not maintainable in circumstances.

(b) Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑Ss. 59‑A, 66‑A & 136‑‑‑Appeal‑‑‑Self‑Assessment Scheme‑‑­Substantial question of law‑‑‑Income Tax Commissioner cancelled the return filed by assessee under the Self‑Assessment Scheme but the Income Tax Appellate Tribunal allowed the appeal and set aside the order passed by the Commissioner‑‑‑Validity‑‑‑Every question of law need not be referred to High Court and that only a question having some substance needed to be so referred‑Question framed by the Authorities being neither of law nor had raised a substantial legal controversy between the parties, High Court declined to answer the same in circumstances.

CIT v. Messrs Imminan International, Lahore P.T.R. No.20 of 1991 and The Lungla (Sythet) Tea Co. Ltd. v. Commissioner of Income­-tax, Dacca Circle, Dacca 1970 SCMR 872 ref.

Mian Yousaf Umar, Advocate.

2003 P T D 878

[Lahore High Court]

Before Tassaduq Hussain Jillani and Asif Saeed Khan Khosa, JJ

Messrs RAVI AUTOS (PVT.) LIMITED, LAHORE

Versus

CUSTOMS EXCISE AND SALES TAX APPELLATE TRIBUNAL, BENCH‑III, CUSTOM HOUSE, LAHORE and another

Custom Appeal No.392 of 2002, heard on 21st November, 2002.

Customs Act (IV of 1969)‑‑‑

‑‑‑‑S.25(1)(2)‑-‑Customs General Order No.25 of 1973‑‑‑Customs Valuation Letter No.173/98‑VIII/17083, dated 9‑6‑1999‑‑‑Importer had imported two consignments of the goods in question and in terms of entries made in the Bills of Entry the declared value of those goods was 160 pounds PMT‑‑‑Goods in question had been provisionally assessed at the rate of $ 450 and released‑‑‑Assistant Collector Customs had found that the normal value of goods was 350 pounds PMT‑‑‑Importer accordingly, had been directed to pay the remaining duty and taxes‑‑Tribunal had affirmed the order of the Assistant Collector Customs‑‑­Validity‑‑‑Nothing was on record to indicate that the Customs Authorities had at any stage finally concurred with the declared value of the goods as given in the Bill of Entry‑‑‑Admittedly the goods were provisionally released‑‑‑Assistant Collector Customs was within his powers to make the final assessment in the light of evidence produced before him and the evidence which found favour with the said Authority was the value invoice of the Controller of Customs (Evaluation) which was based on the evidence of physical import of identical goods at the same value which had been determined by the Assistant Collector Customs‑‑‑Importer did not produce any rebuttal evidence either before the Assistant Collector Customs or before the Appellate Tribunal to the effect that similar goods were imported at the price declared by it in the Bill of Entry‑‑‑Contention of the importer that it was taken by surprise by the evidence on the basis of which the value had been determined was not tenable on the basis of evidence on record‑‑­Concurrent findings of fact by Courts below of competent jurisdiction was not against the evidence on record and no question of law had been raised to warrant interference‑‑‑Appeal was accordingly dismissed by the High Court.

1969 SCMR 708 ref.

Jawahar A. Naqvi for Appellant.

A. Karim Malik for Respondents.

Date of hearing: 21st November, 2002.

2003 P T D 890

[Lahore High Court]

Before Tassaduq Hussain Jillani and Asif Saeed Khan Khosa, JJ

IRFAN TAYYAB

Versus

COLLECTOR, CUSTOMS (ADJUDICATION), COLLECTORATE OF

CUSTOMS, SALES TAX & CENTRAL EXCISE (ADJUDICATION), FAISALABAD

Custom Appeal No. 271 of 2001, heard on 16th October, 2002.

Customs Act (IV of 1969)‑‑‑

‑‑‑‑S.25(1)(2)‑‑‑Notification S.R.O. No.1375(I)/99, dated 28‑12‑1998‑‑­Valuation of imported goods‑‑‑Importer had not challenged the concurrent findings of fact with regard to the description/classification of goods and had impugned the judgment of the Appellate Tribunal insofar as it arbitrarily determined the value of the goods in question‑‑‑Goods had been imported, bills of entry had been filed prior to the amendment in S.25 of the Customs Act and the value of goods, therefore, had to be determined in accordance with old subsections (1) & (2) of S.25 of the Customs Act‑‑‑Neither the Customs Department nor the Tribunal had referred to any piece of evidence relatable to the price of the goods in the country of their origin which persuaded them to determine the price accordingly‑‑‑Validity‑‑‑Goods in question were imported prior to the amendment in S.25 of the Customs Act brought about by a notification and it had not been disputed that their value had to be determined in the light of the criterion laid down in old S.25 of the Customs Act which spoke of the value of goods in question "in open market" which was to be the country of origin of the goods‑‑‑Tribunal, while fixing the price of the goods in question had referred to invoices which according to it were produced before it but those were not placed on record‑‑‑Department had not placed on record anything to indicate the basis/material on which the Tribunal was persuaded to fix the price as it did‑‑‑Prices fixed by the Tribunal was without any reference to any material on record, was arbitrary and not in accord with the mandate of the then S.25 of the Customs Act, 1969‑‑‑Judgment of the Appellate Tribunal was set aside to the extent of value of the goods in question‑‑‑Value of the goods declared by the importer was ordered to be considered as the value of the goods for the purposes of assessment‑‑‑High Court partly allowed the appeal in the circumstances.

1992 SCMR 1083 and PLD 1989 Lah. 89 ref.

Noman Akram Raja for Appellant.

A. Karim Malik for Respondent.

Date of hearing: 16th October, 2002.

2003 P T D 899

[Lahore High Court]

Before Jawwad S. Khawaja, J

Messrs FAISAL ENTERPRISES

Versus

FEDERATION OF PAKSITAN through Ministry of Finance, Islamabad and 4

others

Writ Petition No. 18535 of 2002, heard on 31st October, 2002.

Sales Tax Act (IX of 1991)‑‑‑

‑‑‑‑S.14‑‑‑General Order No.9 of 1999, dated 22‑9‑1999‑‑‑Constitution of Pakistan (1973), Art.199‑‑‑Constitutional petition‑‑‑Re‑audit of a registered person‑‑‑Petitioner was a person registered under the Sales Tax Act, 1991 and had been audited for the period, October, 2000 to June, 2001‑‑‑Certain amount had been found due from the assessee which allegedly had been paid together with penalty thereon‑‑­Department had started proceedings with the object of conducting a second audit for the same period ‑‑‑Assessee had claimed that this could not be done except in exceptional circumstances and that too after permission from the Collector concerned‑‑‑Validity‑‑‑Department would furnish the assessee with the information available with it and the reasons which were the basis for re‑audit ordered by the Collector ‑‑‑Assessee would be afforded opportunity to explain his own point of view‑‑‑‑If the assessee had committed any illegality or had deprived the Department of revenue, Department would be entitled to proceed against the assessee in accordance with the provisions of Sales Tax Act, 1991‑‑‑Petition was disposed of accordingly.

Ali Sibtain Fazli, Nasar Ahmad and Ahmad Sibtain Fazli for Petitioner.

A. Karim Malik and Mazhar Waseem, Dy. Collector for Respondents.

Date of hearing: 21st October, 2002.

2003 P T D 946

[Lahore High Court]

Before Tassaduq Hussain Jilani and Asif Saeed Khan Khosa, JJ

Messrs UNITED LEATHER TANNERY (PVT.) LTD. BHIMBER, AZAD

KASHMIR through Chief Executive

Versus

CUSTOMS, CENTRAL.EXCISE AND SALES TAX, APPELLATE TRIBUNAL

ISLAMABAD BENCH and another

Customs Appeal No. 1 of 1999, decided on 16th October, 2002.

Customs Act (IV of 1969)‑‑‑

‑‑‑‑S.156(1)(10‑A)(90)‑‑‑S.R.O. 500(I)/84, dated 14‑6‑1984‑‑‑S.R.O. 490(I)/85, dated 23‑5‑1985‑‑‑S.R.O. 480(I)/88, dated 26‑6‑1988‑­S.R.O. 938(I)/89, dated 27‑9‑1989 and S.R.O. 611(I)/89 dated 12‑6‑1989‑‑‑Import of machinery by the appellant free of Customs duty and taxes under S.R.O. 500(I)/84 dated 14‑6‑1984 which was applicable to specific areas and were meant to promote industrial development in specified areas‑‑‑Subsequent removal of the said machinery by the appellant from place B' to placeS' against the provisions of S.R.O. 500(1)/84, dated 14‑6‑.1984‑‑‑Appellate Tribunal had validated the ex parte order of the Collector of Customs against the appellant ‑‑‑Validity‑‑­Collector at place S' had the requisite jurisdiction to proceed against the appellant as the machinery in question had undesirably been removed by the appellant to placeS' and the same had in fact been seized and recovered at place S'‑‑‑Contention of the appellant that the Collector at placeS' did not have the requisite jurisdiction to proceed against him was repelled in circumstances‑‑‑Record showed that appellant had sought an adjournment of the proceedings before the Collector and it was thus quite clear that throughout those proceedings appellant was aware of the same and had deliberately avoided joining the same‑‑‑Criminal case had also been instituted against the appellant in wake of seizure and recovery of the machinery in question wherein appellant had been declared an absconder by a Court of competent jurisdiction‑‑‑Appellant had made himself scarce‑‑‑Appellant could not be allowed to take premium of his own deliberate default in circumstances‑‑‑Appellant had imported the relevant machinery by taking advantage of the said S.R.O. and with a declared intention to install the said machinery in one such area and its subsequent removal from that area to place 'S' was thus incentive ­incompatible‑‑‑Invocation of other S.R.Os. by the appellant was an afterthought as no such ground had been taken or urged by the appellant before the Tribunal‑‑‑Appellant had furnished a bond to the Collector of Customs to abide by the conditions laid down in the said S.R.O. failing which appellant would pay the relevant duties and taxes and also the penalty in that regard‑‑‑One of the conditions in the said S.R.O. had provided for penalty in case of removal of the machinery to an area other than that for which the same had been imported within ten years from its installation, after agreeing to the said conditions and after taking advantage of the said S.R.O., appellant could not be allowed at the present stage to turn around and claim that penalty could not be imposed upon it on account of an established violation of the conditions of the said S.R.O.‑‑‑Appeal was accordingly dismissed by the High Court.

Muhammad Bashir Kayani for Appellant.

A. Karim Malik for Respondents.

Dates of hearing: 15th and 16th October, 2002.

2003 P T D 960

[Lahore High Court]

Before Tassaduq Hussain Jillani and Asif Saeed Khan Khosa, JJ

COLLECTOR OF CUSTOMS, LAHORE

Versus

AZEEM AHMAD

Custom Appeals Nos.333, 338 to 348, 351 to 354, 356 to 366, 419 to 421, 462, 420 to 442 and 444 to 476 of 2002, heard on 14th October, 2002.

(a) Customs Act (IV of 1969)---

‑‑‑‑Ss. 2(s), 156(89), 181 & 187‑‑‑S.R .O. 1374(I)/98, dated 17‑12‑1998, Table I, Column 4 & Table III, Sr. No.4‑‑‑C.G.O. No. 4/93, dated 7‑7‑1993‑‑‑Smuggled vehicles‑‑‑Authority confiscated vehicles, but Appellate Tribunal directed release thereof on payment of fine equal to 100% of assessed duty in lieu of confiscation in addition to payment of assessed duty in accordance with C.G.O. No.4/93, dated 7‑7‑1993‑‑­Validity‑‑‑Such vehicles were smuggled goods, as no duty or tax had been paid on them prior to 1.7‑12‑2000 and value whereof had exceeded Rs.50,000‑‑‑Such vehicles clearly fell within mischief of Column No.11 of Table I read with Sr. No.4 of Table‑III of S.R.O. 1374(I)/98, dated 17‑12‑1998 laying down that no option would be given to pay fine in lieu of confiscation of vehicles specified therein, for which duties and taxes were paid by 15‑3‑2000‑‑‑Respondents could exercise such option only if they had paid customs duties and taxes by such target date‑‑‑Reference by Tribunal to other notifications issued by Central Board of Revenue granting amnesty with regard to vehicles would be relevant only if S.R.O. 1374(I)/98 itself was vague and precedents were needed to explain intent of law‑maker‑‑‑Option granted by Tribunal to respondents was not in accord with intent of law‑‑‑High Court accepted appeals filed by Department and set aside impugned judgments holding confiscation to be in order.

1993 ITR 1 (SC); AIR 1984 SC 1164 and 1993 PTD (Trib.) 12 ref.

(b) Customs Act (IV of 1969)‑‑‑

‑‑‑‑S. 181‑‑‑Transfer of Property Act (IV of 1882), S. 41‑‑‑Smuggled vehicles‑‑‑Liability to pay duty, tax and fine‑‑‑Respondents claimed to be bona fide purchasers of vehicles‑‑‑Validity‑‑‑Nothing on record to indicate that respondents had purchased such vehicles from someone‑‑‑Even otherwise purchase of such vehicles from first owners would not absolve respondents from liability of Customs duties, taxes and fine under law.

(c) Customs Act (IV of 1969)‑‑‑

‑‑‑‑S. 187‑‑‑Provisions of S.187 of the Act‑‑‑Nature and object‑‑Burden of poof of bona fide transaction‑‑‑Principles‑‑‑Provisions of S. 187 of Customs Act are mandatory, which put onus of proof of a bona fide transaction entirely on a person from whose possession a smuggled goods has been recovered.

Object of provisions of S.187 of the Act is two‑fold. Firstly, when a person is charged with an offence under Customs Act, the burden of proof is cast upon him to show that he had lawful authority to commit that act. Secondly, when a person is found in possession of any goods, the burden of proof is cast upon him to show that he was holding such goods under some lawful authority, permission or licence etc.

(d) Customs Act (IV of 1969)‑‑‑

‑‑‑‑Ss. 181, 194‑A & 196‑‑‑S.R.O. issued by Central Board of Revenue under S.181 of, the Act‑‑‑Jurisdiction of Tribunal and High Court‑‑­Scope‑‑‑In view of explicit provision in S.R.O., any expression of opinion by Court would tentamount to interference in policy making domain of Competent Authority‑‑‑Such exercise could not, be undertaken by Tribunal or High Court in such proceedings.

(e) Customs Act (IV of 1969)‑‑‑

‑‑‑‑Ss. 156(89), 161 & 196‑‑‑Smuggled vehicles‑‑‑High Court upheld order of confiscation passed by Authority‑‑‑Contention of owners was that release of vehicles on payment of fine, duties and taxes would be more profitable to State than the Revenue, which such vehicles might fetch in auction in event of their confiscation‑‑‑Validity‑‑‑Giving findings on such question would not fall within ambit of appellate jurisdiction of High Court‑‑‑Chairman, Central Board of Revenue might examine the desirability of looking into such, aspect and proceed accordingly.

Ch. Muhammad War Iqbal and A. Karim Malik for Appellants.

Mian Abdul Ghaffar, Sh. Ziauddin Qamar, Mian Abdul Qadoos, Saqib Saleem and Ch. Sagheer Ahmad for Respondents.

Dates of hearing: 3rd and 14th October, 2002.

2003 P T D 984

[Lahore High Court]

Before Nasim Sikandar and Muhammad Sair Ali, JJ

COMMISSIONER OF INCOME‑TAX AND WEALTH TAX, SIALKOT ZONE, SIALKOT

Versus

Messrs MUHAMMAD SIDDIQUE

W.T.A. No.423(IB) of 1996‑97 and I.T.As. Nos.190 to 194 of 1999, decided on 7th November, 2002.

(a) Wealth tax‑‑‑

‑‑‑‑Remand‑‑‑Remand order generally does not operate to the prejudice of revenue.

(b) Wealth Tax Act (XV of 1963)‑‑‑

‑‑‑‑S. 27‑‑‑Wealth Tax Rules, 1963, Rr. 8(3) & (8‑1A) ‑‑‑Appeal‑‑­Jurisdiction of High Court‑‑‑Question of fact ‑‑‑Dispute was with regard to valuation of price of property‑‑‑Validity‑‑‑If a particular property disclosed at a particular rate was worth more than the disclosed price, such was an issue of fact which could not give, rise .to a question of law to be resolved and answered by High Court‑‑‑Only a substantial question of law can be referred to the High Court for consideration, and answer‑‑­None of the questions raised by the Authorities being substantial questions of law; answers were declined.

Waseem Majeed Malik for Appellant.

Nemo for Respondent.

Date of hearing: 7th November, 2002.

2003 P T D 1006

[Lahore High Court]

Before Maulvi Anwarul Haq and Abdul Shakoor Paracha, JJ

COLLECTOR OF CENTRAL EXCISE AND SALES TAX, PNCA, RAWALPINDI

Versus

PAKISTAN OILFIELD LTD., RAWALPINDI

Tax Appeals Nos. 30 to 46 of 2002, heard on 21st October, 2002.

(a) Central Board of Revenue‑‑‑

‑‑‑‑ Any interpretation placed by the C.B.R. on a statutory provision cannot be treated as a pronouncement by a forum competent to adjudicate whether judicial or quasi judicial.

(b) Central Board of Revenue‑‑‑

‑‑‑‑ Administrative direction of C.B.R.‑‑‑Applicability and scope‑‑­C.B.R. cannot issue any administrative direction of the nature which may interfere with the judicial or quasi judicial functions entrusted to the various forums functioning under the statute and that the interpretation of any provisions of the law can be rendered judicially by the hierarchy of forums provided for under the law like Collector or the Appellate Tribunal.

Messrs Central Insurance Co. and others v. The Central Board of Revenue, Islamabad and others 1993 SCMR 1232 ref.

(c) Central Excises Act (I of 1944)‑‑‑

‑‑‑‑S.R.O. 344(I)/2000, dated 17‑6‑2000‑‑‑S.R.O. 94(I)/2002, dated 13‑2‑2002‑‑‑P.C.T. Headings 2711.1100, 3814.0000 and 2710.0039‑‑­Solvent Oil‑‑‑Levy of central duty‑‑‑Short payment of central duty on `Solvent Oil' had been alleged on the ground that the respondents had been paying the duty treating the said product to be falling under PCT Heading 2711.1100 whereas the correct heading was 3814.0000‑‑­Collector Central Excise by his order had found that the said product was to be classified under Heading 3814.0000‑‑‑Appellate Tribunal had found that the said product was to be classified under Heading 2710.0039 and modified the order of the Collector accordingly‑‑‑Additional duty and penalty was also remitted ‑‑‑Validity‑‑‑PCT Heading 27.11 pertained to Petroleum Gas and other gaseous hydrocarbons whereas admittedly product in question was in liquid form‑‑‑Respondent had not pressed their plea that the product in question was liable .to be charged under the said heading before the Tribunal‑‑‑Against the statutory notification S.R.O. 344(I)/2000, dated 17‑6‑2000 placing the said product under PCT Heading 3814.0000 Tribunal had opted to follow ruling of the Central Board of Revenue, dated 9‑6‑2001‑‑‑Propriety‑‑‑Any interpretation placed by the C.B.R. on a statutory provision could not be treated as a pronouncement by a forum competent to adjudicate whether judicial or quasi‑judicial ‑‑‑Said ruling of the C.B.R. had affected the merits of the case‑‑‑High Court accordingly allowed the appeal with a direction to the Appellate Tribunal to decide the appeals filed by the respondents afresh without being influenced by the said ruling of the C.B.R.

(d) Central Excises Act (I of 1944)‑‑‑

‑‑‑‑S.35‑C(3)‑‑‑S.R.O. 344(I)/2000, dated 17‑6‑2000‑‑‑S. R. O. 94(I)/2002, dated 13‑2‑2002‑‑‑PCT Headings 2711.1100, 3814.0000 & 2710.0039‑‑‑Limitation‑‑‑Filing of appeal‑‑‑Supply of copies‑‑‑Failure of the Appellate Tribunal to provide the copies had resulted in delay in filing of the appeals and otherwise the appeals were in time from the date of delivery of said copies as the copies had been obtained on 18‑12‑2001 and the appeals had been filed on 8‑1‑2002‑‑‑Appeals were accordingly found to be within time.

Mian Qamaruddin Ahmad for Appellant.

Farhat Nawaz Lodhi for Respondent.

Date of hearing: 21st October, 2002.

2003 P T D 1017

[Lahore High Court]

Before Maulvi Anwarul Haq and Mian Hamid Farooq, JJ

I.C.C. TEXTILES LTD.

Versus

FEDERATION OF PAKISTAN and others

Writ Petition No.9705 of 1992, decided on 4th April, 2002.

(a) Central Excises Act (I of 1944)‑‑‑

‑‑‑‑Ss. 2(20) & 3‑‑‑Levy of excise duty‑‑‑Not all goods or services, but only excisable goods and services were made subject to levy of excise duty.

Modi's Refreshment Room and Bar, Karachi v. Islamic Republic of Pakistan and others PLD 1983 Kar. 214; Hirjina & Co. v. Islamic Republic of Pakistan and another 1993 SCMR 1342; South Bihar Sugar Mills Ltd. and another v. Union of India and another AIR 1968 SC 922 and Abdul Rahim and others v. Messrs United Bank Ltd. of Pakistan PLD 1997 Kar. 62 ref.

(b) Interpretation of statutes‑‑‑

‑‑‑‑ Taxing statutes‑‑‑For resolving question as to whether or not a particular matter falls' within taxing statutes, one has to look merely at what is clearly said in such statute and there is no room for any intendment ‑‑‑Nothing is to be implied or read in such statute‑‑‑One can only look fairly at the language used.

A & B Food Industries Limited. v. Commissioner of Income­-tax/Sales, Karachi 1992 SCMR 663; The Commissioner of Agricultural Income‑tax, East Bengal v. B.W.M. Abdur Rehman, Manager, Taki Bara Taraf Wards Estate 1973 SCMR 445 and Tenant v. Smith 1892 AC 150 ref.

(c) Central Excises Act (I of 1944)‑‑‑

‑‑‑‑Ss. 2(20), 3, 3(1) [as added by Finance Ordinance (XVI of 1969)], S.3‑C(b) & First Sched., Item 14.14, Column No.2‑‑‑Central Excise Rules, 1944, R. 96‑ZZI ‑‑‑Excise duty on service, levy of‑‑‑Scope‑‑­Advances loans, lease or Musharka finance made financial institutions etc.‑‑‑Not subject to levy of excise duty, rather services provided or rendered in respect thereof were made subject to such duty‑‑‑Arranging payment was the matter between such companies and their clients, borrowers, customers, lessees.

Ghulam Mustafa Jatoi v. Addl. D. & S. Judge/Returning Officer N.A. 158, Naushero Feroze and others 1994 SCMR 1299 and Messrs Janana De Malucha Textile Mills Ltd., Habibabad, Kohat v. Federal Government of Pakistan and others C.P. No.D‑690 of 1993 ref.

Modi's Refreshment Room and Bar, Karachi v. Islamic Republic of Pakistan and others PLD 1983 Kar. 214 and Hirjina & Co. v. Islamic Republic of Pakistan and another 1993 SCMR 1342 rel.

(d) Central Excises Act (I of 1944)‑‑‑

‑‑‑‑Ss. 3‑C(b) & 4(3)‑‑‑Excisable service‑‑‑Excise duty, collection of‑‑‑Whether or not duty is dependent on charges for services, facilities and utilities‑‑‑Nothing in S.4(3) of the Central Excises Act, 1944 to make subjecting to duty of any service, facilities and utilities at a rate dependent on charges therefor alone‑‑‑Possibility or probability of services, facilities or utilities being not dependent on charges therefor stood catered for in the Act.

Excise and Taxation Officer, Karachi and another v. Burmah Shell Storage and Distribution Company of Pakistan and 5 others 1993 SCMR 338 ref.

(e) Central Excises Act (I of 1944)‑‑‑

‑‑‑‑S. 3, 3‑C(b), 4(3) First Sched., Item 14.14 (presently 8193.4000) [as amended by Finance Act (XII of 1991), S'.2(5) & Finance Act (VII of 1992), S.4(8)]‑‑‑Excisable service‑‑‑Excise duty, levy and collection of‑‑‑Services were subject to duty at the rate not dependent on charges, therefor‑‑‑Government had nothing to do with taxation of price of goods or charges for service, which were to be fixed by manufacturer, producer or importer of goods and persons, who provided or rendered services‑‑‑Only rate of duty was to be fixed under the Act, which was to be collected. in respect of such services.

(f) Central Excises Act (I of 1944)‑‑‑

‑‑‑‑Ss. 3, 3‑C(b), 4(3), First Sched., Item 14.14 (presently 8193.4000) [as amended by Finance Act (XII of 1991), S.2(5) & Finance Act (VII of 1992),, S.4(8)]‑‑‑Constitution of Pakistan. (1973), Art, 199.‑Constitutional petition ‑‑‑Excisable services‑‑‑Excise duty; rate of‑‑­Reasonableness‑‑‑Question as to whether certain rate of duty was reasonable or not, could not be gone into by High Court in exercise of its Constitutional jurisdiction.

Anoud Power Generation Limited v. Federation of Pakistan and others PLD 2001. SC 340 and Messrs Elahi Cotton Mills Ltd. and others v. Federation of Pakistan through Secretary Finance and 6 others PLD 1997 SC 582 rel.

(g) Interpretation of statutes‑‑‑

‑‑‑‑ Taxing statutes‑‑‑Question of reasonableness cannot enter a judicial mind while construing a taxing measure for determining its Constitutional-‑validity‑‑‑Only consideration, which is germane is whether­ legislation challenged is permitted by Constitution‑‑‑Reasonableness or otherwise of such statute is matter of legislative policy and is not for Court to adjudicate upon‑‑‑Judicial approach is to allow Legislature flexibility at the joints, particularly when a taxing statute is under attack.

Interpretation of Statutes by N.S. Bindra. 7th Edn., p. 771 and P.K. Kutty Haji and others v. Union of India and others (1989) 176 ITR 481 fol.

Imtiaz Rashid Siddiqui for Petitioner.

A. Karim Malik, S.M. Masood and Shazeb Masood for Respondents.

Dates of hearing: 23rd, 25th to 31st October 1st, 5th to 8th, 12th to 15th and 17th November, 2001.

2003 P T D 1037

[Lahore High Court]

Before Tassaduq Hussain Jillani and Asif Saeed Khan Khosa, JJ

Messrs FLYING BOARD AND PAPER PRODUCTS (PVT.) LTD., LAHORE through Manager

Versus

DEPUTY COLLECTOR OF CUSTOMS DRYPORT, LAHORE

Custom Appeals Nos. 430 to 450 of 2002, heard on 23rd October, 2002.

Customs Act (IV of 1969)‑‑‑

‑‑‑‑Ss.196 & 25‑‑‑Import of goods‑‑‑Determination of value‑‑‑Appellant's claim in appeal was that 14 Bills' of Entries produced by the appellants before the Tribunal evidencing the decline of prices had not been considered by the Tribunal‑‑‑Validity‑‑‑Tribunal had considered this piece of evidence and had given a definite finding i.e. that those pertained to the orders passed by the High Court in writ petitions tiled by the appellants in terms of which the goods were directed to be released on provisional assessment of their value subject to the final adjudication .by the Collector‑‑‑Orders of the High Court could not have a binding force and the final adjudication had to proceed on its own merits‑‑‑Such aspect of the finding of the Tribunal had not been challenged by the appellants in grounds of appeal‑‑‑Ex‑bond period of the goods subject‑matter of the appeals admittedly fell within the period starting from 7‑12‑1996 to 22‑2‑1997‑‑‑Nine Bills of Entries considered by the Tribunal for assessing the market value of the goods in .question admittedly pertained to the said period‑‑‑No question of law had been raised for consideration in terms of S.196 of the Customs Act. 1969‑‑‑High Court accordingly dismissed the appeal in circumstances.

Kh. Zia Ullah for Appellants.

A. Karim Malik for Respondent.

Date of hearing: 23rd October, 2002.

2003 P T D 1040

[Lahore High Court]

Before Nasim Sikandar and Muhammad Sair Ali, JJ

Messrs SHAZIA SIDDIQ (PVT.) LTD. (FORMERLY SSRS K.J.M. INTERNATIONAL (PVT.) LTD., LAHORE

Versus

INCOME‑TAX APPELLATE TRIBUNAL (LAHORE BENCH), LAHORE and 2 others

I.T.A. No.360 of 1998, decided on 21st November, 2002.