PTD 2004 Judgments

2004 P T D (Trib.) 82

[Customs, Central Excises and Sales Tax Appellate Tribunal]

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

Appeal Case No. 7(1114)ST/IB/Transfer of 2000(PB) and 7(1563)ST/IB/Transfer of 2001, decided on 24th April, 2003.

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

----S. 23---Tax invoices---Invoice, not issued in the manner and form prescribed under S.23 of the Sales Tax Act, 1990 was not a valid tax invoice and could not form basis for allowing the claim of deduction/adjustment/refund of tax as the same will constitute a clear violation of the provisions of S.7(2) , of the Sales Tax Act, 1990.

2002 PTD 2457 ref.

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

-----S. 36(2)---Recovery of tax not levied or short-levied or erroneously refunded---Limitation---Deliberate act causing loss to the exchequer would not bar the demand by limitation.

PTCL 1993 CLS 32 and Tax Forum 14, Vol. 5, Issue 12 ref.

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

----Ss. 3, 2(44), 33, 33(2), 34 & Sixth Sched., Item No.33---Finance Act (III of 1998)---Finance Act (XXII of 1997)---Scope of tax---Notice for recovery of non-deposit tax on supply of Soda Ash---Appellant pleaded that he was a distributor for Soda Ash. and during the period involved i.e. before the amendments made through the Finance Acts 1998, the supplies by persons other than importers, manufacturers and producers were not liable, to sales tax or to sales tax registration as per Item No.33 of the Sixth Sched. to the Sales Tax Act, 1990---Taxed supply could not be leviable to tax again on its supply by distributors---Validity--Appellant was not responsible for any output tax until the date he was registered with the Sales Tax Department provided he did not charge or collect any sales tax from the purchaser in excess of what he had actually paid to the principal company and provided he did not avail of any input tax adjustment before the date of such registration--­Appellate Tribunal set aside the Order-in-Original and remanded the case to the jurisdiction of the Deputy Collector of Sales Tax (Adjudication), for de novo decision afresh after examining record and after giving due hearing.

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

----Ss. 23, 2(40)(44), 6(2), 7, 33 & 34---Finance Act XXII of 1997--­Adjustment of Input Tax Rules, 1992---Tax invoices---Taxed supply--Input tax adjustment---Purchase was made, directly from the manufacturer---Cash memos. were issued by the distributor of such manufacturer--Input tax was claimed against such cash memo.--­Auditors observed that cash memos. were not proper sales tax invoices in terms of the format prescribed' under S.23 of the Sales Tax Act, 1990, nor were these the prescribed replacement invoices---Notice for recovery of such tax alongwith additional tax and penal 'action under S.33 of the Sales Tax Act, 1990---Validity---Term "taxed supply" was defined under S.2(44) of the Sales Tax Act, 1990---Provisions of S.6(2) of the Sales Tax Act, 1990 disallowed input tax adjustment on goods specified in Cl. (iv) thereof---Such provision was in addition to condition in CI. (i) of S.6(2) of the "Sales Tax Act, 1990 which required a tax invoice, as defined in S.2(40) read with S.23 of the Sales Tax Act, ,1990 for the purposes of input tax adjustment---Appellant had no case for such reasons---Appellant had an option either to buy from unregistered suppliers or direct from the registered suppliers against the prescribed tax invoices of such registered suppliers---Order-in-Original was confirmed by the Appellate Tribunal---Penalty imposed was remitted as a special case and additional tax was also remitted in excess of 25% subject to payment of such additional tax alongwith determined amount of sales tax within the due date specified by the Appellate Tribunal---In case of any delay or default such order. of total remission of penalty and partial remission of additional tax shall abate automatically and appellant shall pay full liability of tax, additional tax and penalty--­Order-in-Original was modified accordingly by the Appellate Tribunal.

Qazi Waheeduddin for Appellant No. 1 and Issac Ali Qazi for Appellant No.2.

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

Dates of hearing: 22nd May, 1st, 16th, 17th, 18th July, 16th October, 19th November, 2002, 21st April and 2nd October, 2003.

2004 P T D (Trib.) 228

[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.-385/PB/TRF of 2001, decided on 29th August, 2003.

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

----S. 32-A---Special Audit by Chartered Accountant or Cost Accountant---Audit observation/objection/detection---Dismissal of--­Principles---Audit observation/objection/ detection could not be summarily dismissed on the ground that no such observation/objection/detection was made in subsequent audits---Lawful and proper detection could not go a waste and the demand for that period did not extinguish only because the subsequent auditors committed ignorance, laxity, inefficiency in discharging their duties.

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

----Ss. 3, 33 & 34---S.R.O. 508(I)/95 dated 14-6-1995---C.B.R.'s Certificate No.1(62) S & R/2/92 dated 26-11-1995---Scope of tax--­Calculation of suppressed production on the basis of formula ---Supply without payment of sales tax---Auditor's report---Recovery of sales tax alongwith additional tax and penalty on such suppressed production calculated on the basis of formula---Validity---Survey report showed that the input, output ratio was not disturbed due to sizes or varieties and that both inputs and outputs were determined on weight basis ---Assessees failed to show as to why the use of 100 kgs. of the imported concessionary input in a batch of inputs will not produce 201.4 kgs. of output---Detection/observation made in the audit was correct both on fact and in law---Sales and production records had not been maintained correctly and the production and taxable supply had been concealed, as alleged in the show-cause notice ---Assessee had not shown sufficient cause as to why the same should not be accepted and had not advanced any arguments to contest the demand of sales tax---Demand of sales tax was confirmed by the Appellate Tribunal---Appellate Tribunal directed the assessee to pay the principal amount of sales tax to the satisfaction of the Collector of Sales Tax and 50% of the amount of additional tax by the due date otherwise the assessee shall be liable to pay the full amount of sales tax and additional tax---Penalty was remitted---Other penalty was also reduced to an amount equivalent to 5% of the amount of sales tax involved---Order-in-Original was modified by the Appellate Tribunal and the appeal was disposed of accordingly.

Muhammad Naeem Qazi for Appellant.

Hussain Muhammad, Senior Auditor, Bakth-e-Dauran, Senior Auditor, Inamul Haq, Senior Auditor and Al-Haj Gul, D.R. for Respondents.

Dates of hearing: 18th December, 2002; 28th January, 2003, 18th February, 2003 and 29th April, 2003.

2004 P T D (Trib.) 239

[Customs, Central Excise and Sales Tax Appellate Tribunal]

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

Appeal Case No.7(248)ATIB of 1999 (PB), decided on 29th August, 2003.

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

----Ss.2(41)(48), 8(1)(a), 4(a), 13, 22 & Sixth Sched.---Zero rated supply---Exemption-- Input' tax credit ---Allowability---Principles/explanation-" Zero rated supplies' were defined under S.2(48) of the Sales Tax Act, 1990, read with S.4 and the Fifth Sched. thereof--­Supplies against international tenders were zero-rated in terms of Sl. No.4 of the Fifth Sched. of the Sales Tax Act, 1990 read with cl. (a) of S.4 thereof---"Zero-rated supply" as per S.2(48) of the Sales Tax Act, 1990 were charged to sales tax at the rate of zero percent. but S.2(41) includes such zero-rated supply in the definition of "taxable supply" while it simultaneously excludes exempt goods from the definition of taxable supply---Section 8(1)(a) of the Sales Tax Act, 1990 again allows input tax credit on taxable supplies (which includes zero-­rated supply)--- No input tax credit was allowed in respect of goods used in exempt supplies of S.13 of the Sales Tax Act, 1990--Full input tax credit was admissible in respect of goods used in zero-rated supplies, while the output tax in both the cases remains not payable-Zero-rated supplies, could be made of even exempt goods and in such case, the input tax credit relating to the sales tax paid on inputs used in such exempt goods, supplied as a zero-rated supply, shall still be admissible--­Assessees while claiming refund of input tax on materials used in goods supplied as zero-rated goods (against international tenders), had to establish their claim by furnishing all prescribed records of S.22 of the Sales Tax Act, 1990 besides copies of international tender notice, assessee's offer, terms of contract, proof that the price did not include element of sales tax (whether input tax or output tax), input tax invoices, invoices of zero-rated supplies, co-relation between input and output and compliance of the procedure of the Refund Rules etc.

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

----S.4, 10 & 22---S.R.O. 230(I)/97, dated 29-3-1997---C.B.R.'s letter C.No.1/11-STT/97 dated 9-4-1997---Zero-rating---Excess amount to be carried forward or refunded-- Supply of such zero-rated goods---Claim of refund of such input tax---Non-production of record---Rejection of refund claim as inadmissible under S.8 of the Sales Tax Act, 1990, on account of taxable inputs having not been used in the manufacture of taxable supply of goods---Validity---Case was remanded to the Deputy/Assistant Collector of Sales Tax (Refund), for de novo consideration and decision afresh on merits ---Assessees were directed to submit all requisite records, registers, documents (tender notice, bid offer, bid acceptance, input, output ratio, tax invoices of zero-rated supplies, tax invoices of inputs used in zero-rated supplies, etc.) to the Deputy/Assistant Collector and the assessees should appear before him on such dates as were fixed by the Deputy/Assistant Collector, to explain their case and establish their claim---If the assessees failed to submit/produce the requisite documents And/or to establish their claim, the Deputy, Assistant Collector shall be at liberty to decide the claim as unsubstantiated, inadmissible or otherwise---Sanction of refund and the amount of refund shall be considered and allowed on merits subject to the conditions that it was due and admissible under the law/rules---Appeal was disposed of by the Appellate Tribunal accordingly.

Muhammad Jamal, Deputy G.M. (Commercial) and Nazir Lodhi, Deputy Manager (Commercial) for Appellant.

Ishtiaq Ahmad, Law Officer and Bakht-e-Dauran, Auditor for Respondents.

Dates of hearing: 3rd July; 26th November, 2002 and 20th Augustm 2003.

2004 P T D (Trib.) 646

[Customs, Central Excise and Sales Tax Appellate Tribunal]

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

Appeal Case No.7(3125)CU/IB/TRF of 2001(PB), decided on 30th August, 2003.

Per S.M. Kazimi, Member (Technical); Muhammad Sulaiman, Member (Technical) Agreeing---

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

---First Sched. & Ss. 30(b) & 31-A---Import tariff---Classification of goods---Titanium Dioxide---Chinese origin Titanium Dioxide (PGM 100) imported was classifiable under PCT Hdg. 3206.1100 and was liable to customs duty at 45%) (later reduced to 25% w.e.f. 13-6-1997) and the same had to be assessed in terms of Ss.30(b) & 31-A of the Customs Act, 1969.

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

----Ss. 80 & 104---Assessment of duty---Amendment in PCT Hdg. by the owner of goods---Validity---Amendments made and attested in respect of PCT Hdg., whether at the behest of the exporter or of the importer, in the letter of credit, invoice or bill of lading or any other document, were of no consequence because assessment to customs duty (involving PCT classification of goods warehoused) was a function of Customs Officers under S.80 read with S.104 of the Customs Act, 1969.

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

----S. 81---Provisional assessment of duty---Section 81 of the Customs Act, 1969 applies to the innocent case of determination of assessment and does not conceal or shield acts of misdeclaration.

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

----S. 80(2)---Assessment of duty ---Misdeclaration---Effect---Sec­tion 80(2) of the Customs Act, 1969 covers such cases where assessments are made on the basis of statements made (by importer) in the bill of entry but where on subsequent examination or testing of goods or otherwise, it was found that the statement in the bill of entry was not correct in any matter relating to assessment, goods were to be re­assessed to duty appropriately (without any limitation) without prejudice to any other action which may be taken under the Customs Act, 1969.

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

----Ss. 80(2) & 156(1), Cl. (14)---Words "any other action" used in S.80(2) of the Customs Act, 1969 includes an action under Cl. (14) of S.156(1) of the Customs Act, 1969 for the offence of misdeclaration by the importer.

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

----First Sched., Ss. 30(b), 31-A, 32 & 156(1), Cl. (14)---S.R.O. 274(I)/97, dated 11-4-1997---Provisional Collection of Taxes Act (XVI of 1931), S.3---Finance Act (XXII of 1997), Preamble---General Rules for the Interpretation of Harmonized System, Rr. 3 & 4---Import tariff--­Untrue statement, error, etc.---Classification of goods of PCT Hdg. 3206.1100---PCT Hdg. 2823.0000---Titanium Dioxide---Consignment of Chinese origin Titanium Dioxide (PGM-100) was imported from UAE under classification of PCT Hdg. 3206.1100---Subsequently, classification of PCT Hdg. 3206.1100 was changed with PCT Hdg, 2823.0000 on ex-bond bill of entry being contained more than 80% or more by weight of Titanium Dioxide keeping in view the reduction in rate of customs duty and sales tax---Recovery--Validity---Consignment of Chinese origin Titanium Dioxide (PGM-100) imported from UAE was classifiable under PCT Hdg. 3206.1000 (or PCT Hdg. 3206.1100 to be more specific) and should be assessed to customs duty and allied taxes accordingly---Titanium Dioxide ore when finely ground was classifiable as a pigment under Chapter 32, irrespective of the impurities and source or type of ore---By exclusion given under PCT Hdg. 24.16 the Titanium Dioxide imported, which was in powder form, was classifiable under PCT Hdg. 3206.1100---Act of misdeclaration of PCT Hdg. on ex-bond bill of entry was with ulterior motives to evade duty which constituted an offence under S.32(1) of the Customs Act, 1969 and could not be condoned---Appellate Tribunal confirmed the order for recovery of customs duty not paid/short, paid and penalty equivalent to amount of value of imported goods in terms of Cl. (14) of S. 156(1) of the Customs Act, 1969.

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

----S. 156(1), Cl. 14---Punishment for offences ---Mala fides---Change of PCT Hdg. in letter of credit, making amendments in invoice and bill of lading and then putting the stamp on that particular spot to create "confusion anti mislead the Customs Authorities, removing the detained remaining part of consignment were acts of mala fide.

Per Raja Muhammad Khan, Member (Judicial) [Minority view].

Issac Ali Qazi for Appellant.

Al-Haj, D.R., Azam Khan, D.S. and Karamatullah, Inspector for Respondents.

Dates of hearing; 18th and 31st July, 2002.

2004 P T D (Trib.) 681

[Customs, Central Excise and Sales Tax Appellate Tribunal]

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

Appeal Case No. STA‑276/PB of 2003, decided on 11th October, 2003.

(a) Sales Tax Act (VII of (1990)‑‑‑

‑‑‑‑Ss. 7(1) & 8(I)‑‑‑S.R.G. 987(1)/99, dated 30‑8‑1999‑‑‑S.R.O: 578(1)/98, dated 12‑6‑1998‑‑‑C.B.R:'s Letter No.2(77) (ST)/95/ Vol. VII, dated 28‑3‑2002‑‑‑ Determination of tax liability‑‑‑Adjustment of input tax paid on purchase of spare parts for the maintenance of plant and machinery of the Mills‑‑‑Disallowing the same and show cause for recovery‑‑‑Validity‑‑‑Sales .tax paid on identifiable spares, accessories and maintenance materials (e.g. paints, grease, lubricants, tyres, tubes, batteries, etc.) was admissible to input tax credit facility in terms of S.7(1) of the Sales Tax Act, 1990, as these were not covered by S.8(1) of the Sales' Tax Act, 1990 or listed under any notification so issued thereunder‑‑‑Appellate Tribunal set aside the portion of order demanding payment of sales tax and additional tax and penalty as the same was relatable to the procurement of the spare ,.parts, accessories and, maintenance materials required for the essential operation of the, production machinery of factory and confirmed the portion of order demanding payment of input sales tax relatable to the procurement of the spare parts, accessories and maintenance materials required for the maintenance/operation of such goods as were covered by the then provision of S:8(1) of the Sales Tax Act, 1990 or the S.R.O. 578(1)/98, dated 12‑6‑1998.

1999 PTD 1992 ref.

(b) Sales Tax Act (VII of 1990)‑‑‑

‑‑‑‑S. 8(1)‑‑‑Tax credit‑‑‑Disallowance‑‑‑Tax credit in relation to purchases made of goods (including spares, accessories and maintenance materials like tyres, tubes, batteries, grease lubricants, etc., etc.) shall not be admissible if these were procured for the maintenance, repairs, reconditioning or operation of goods (e.g. vehicles, buildings, office equipments, electrical and gas apparatus, appliances, furnitures, fixtures, etc.) covered by S.8(1) of the Sales Tax Act, 1990 or by a notification issued thereunder.

(c) Sales Tax Act (VII of 1990)‑‑‑

‑‑‑‑S. 13‑‑‑S.R.O. 987(1)/99, dated 30‑8‑1999‑‑‑Scope‑‑‑Exemption‑‑­Notification No. S:R.O. 987(1)/99, dated 30‑8‑1999 was for exemption from sales tax on plants and machinery and to input tax adjustment on spares and accessories procured for maintenance and operation of installed plant and machinery of a registered person.

(d) Sales Tax Act (VII of 1990)‑‑‑

‑‑‑‑S. 7‑‑‑S.R.O. 578(1)/98, dated 112‑6‑1998‑‑‑Determination of tax liability‑‑‑ Stock‑in‑trade‑‑‑Word "stock‑in‑trade" had been used in Notification No. S.R.O. 578(1)/98, dated 12‑6‑1998 with reference to the goods mentioned in that very notification 'and implies inapplicability of the said notification where the goods specified therein had been acquired by a registered person on stock in trade‑‑‑Taxable vehicle purchased by a registered textiles mill was inadmissible for input tax credit by the said textile mill under the said notification but when acquired by a registered vehicle dealer/retailer, it shall be treated as stock in trade of such registered vehicle dealer/retailer and shall be eligible to input tax credit by‑the said dealer.

(e) Sales Tax Act (VII of 1990)‑‑‑

‑‑‑‑S. 7‑‑‑S.R.O. 578(1)/98, dated 12‑6‑1998‑‑‑Determination of tax liability‑‑‑ Stock‑in‑trade‑‑‑Reference to "stock‑in‑trade" is not material if such spares were procured for maintenance and operation of production machinery (not listed in Notification No.S.R.O. 578(1)/98, dated 12‑6‑1998) and not for maintenance or operation of any of the goods listed in the said notification.

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

‑‑‑‑S. 34‑‑‑Additional tax‑‑Additional tax on amount of sales tax should be paid as the opportunity cost of money not paid in time‑‑‑Such additional tax is mandatory under S. 34 of the Sales Tax Act, 1990.

Asim Zulfiqar, A.C.A. and Khurram Akbar Khan, A.C.A. for Appellant.

Bakht‑e‑Dauran, Senior Auditor, Ismail Bangash, Auditor and Al‑Haj Gul, D.R. for Respondents.

Dates of hearing: 17th September and 8th October, 2003.

2004 P T D (Trib.) 696

[Customs, Central Excise and Sales Tax Appellate Tribunal]

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

Appeal Case No. 7(223)ATIB of 1999 (PB), decided on 18th October, 2003.

(a) Customs Act (IV of 1969)‑‑‑

‑‑‑‑S. 24‑‑‑Ceniral Excises Act (I of 1944), S. 12A‑‑‑Provisions and stores may be exported free of duty‑‑‑Exemption‑‑‑Exemption from customs duty, central excise duty and sales tax was available on such Pakistan origin goods as were required for provisions and stores on any conveyance proceeding to any foreign port, airport or section‑‑‑Quantum of goods to be so exempted depended on the size of conveyance, number of persons on board and length of voyage‑‑‑Scope of exemption did not extend to provisions and stores other than those to be loaded on or supplied to the conveyance which was about to depart to a foreign destination.

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

‑‑‑‑S.12A‑‑‑Customs Act (IV of 1969), S. 24‑‑‑Exemption‑‑‑Provisions and stores may be exported free of duty‑‑‑Supply of meals‑‑‑Layover of international passengers (whether departing or in transit or in transfer) in hotels and supply of meals in such hotels or its restaurants on ground were not covered by the term "provision or stores on conveyance about to depart" ‑‑‑Provisions of S.24 of the Customs Act, 1969 were restricted to the provision and supply of goods (e.g. P.O.L., Food, Beverages, Cigarettes, Duty‑free sale items, gifts/give‑away items, emergency medicines, newspapers, magazines, crockery, cutlery, torches, etc.. etc.) on the conveyance (i.e. ships, aircrafts and road/rail‑carriages) about to depart for a foreign destination‑‑‑Accommodation and food/refreshment for international passengers in hotels or even in airport lounges were not covered by the scope of exemption of S.24 of the Customs Act, 1969.

(c) Customs Act (IV of 1969)‑‑‑

‑‑‑‑S. 24‑‑‑Central Excises Act (I of 1944), S. 12A‑‑‑C.B.R. Letter C. No.1(11) CEB/87, dated 11‑10‑1992‑‑-Provisions and stores may be exported free of duty‑‑‑Exemption‑‑‑Exemption on accommodation and foods to international passenger laid over in city hotels ‑‑‑Validity‑‑­Central Board of Revenue's Letter C. No. 1 (11) CEB/87, dated 11‑10‑1992 restricts the words "subsistence and accommodation" to "ships", "crew" and "passengers" where the length of voyage requires accommodation of crew and passengers on the decks or cabins, as the case may be of the ships ‑‑‑C.B.R. Letter clearly stated that "foods or meals served on international flights fell under the definition of "goods" and the same were exempt from central excise duty under S.24 of the Customs Act, 1969"‑‑‑C.B.R. letter did not speak of any exemption on accommodation and foods to international passengers laid over in the city hotels.

(d) Central Excises Act (1 of 1944)‑‑‑

‑‑‑‑S. 3‑‑‑Customs Act (IV of 1969), S. 24‑‑‑C. B. R. Letter, C. No.1 (1) CEB/87, dated 11‑10‑1992‑‑Non‑payment of central excise duty being not charged on meals served to international passengers laid over in the city hotels in the guise of Central Board of Revenue's Letter C. No. l (11) CEB/87, dated 11‑10‑1992‑‑‑Validity‑‑‑No ambiguity or vagueness existed in the Central Board of Revenue's Letter C.No.1(11)CEB/87, dated 11‑10‑1992 which might misguide not to charge and/or not to pay central excise duty from July, 1990/or even after the date of the said letter‑‑‑Provision of S. 24 of the Customs Act, 1969, or the said Central Board of Revenue's letter did not extend any benefit of exemption to appellant.

PLD 1991 SC 963 ref.

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

‑‑‑‑Ss. 3‑B & 2(17)‑‑‑Goods partially composed of dutiable articles‑‑­Additional duty‑‑‑Levy of additional duty/fixed penalty under S.3‑B of the Central Excises Act, 1944 represented the opportunity cost of money not received by the treasury by the prescribed date and was covered by the term `duty' as defined under S.2(17) of the Central Excises Act, 1944.

(f) Central Excise Rules, 1944‑‑‑

‑‑‑‑Rr. 96‑W & 210‑‑‑Special procedure regarding hotels, restaurants, clubs, caterers, marriage halls or marriage lawns‑‑‑Penalty‑‑‑Breach of rule‑‑‑Penalty discretionary‑‑‑For breach of R.96‑W of the Central Excise Rules, 1944 (e.g. non‑maintenance of prescribed accounts, non-­issuance of the prescribed bill of charges, etc.), penalty under 8.210 of the Central Excise Rules, 1944 could be imposed at the discretion of the Adjudication Officer.

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

‑‑‑‑S. 3(1)‑‑‑Central Excise Rules, 1944, R. 96‑W‑‑‑Duties specified in the First Sched. to be levied‑‑‑Service provided or rendered by Hotels and Restaurants‑‑‑Non‑payment of central excise duty being not charged‑‑‑Validity‑‑‑Duty of the assessee was to issue the prescribed bill of charges for services and to deposit the amount of duty involved in the treasury by the prescribed dates ‑‑‑Assessee had failed to do so and had avoided payment of duty on the ground that he did not bill the same and did not collect the same‑‑‑Notwithstanding the fact whether the assessee actually billed it or not and/or received its payment or not, the liability to pay the duty remained that of the assessee.

(h) Constitution of Pakistan (1973)‑‑‑

‑‑‑‑Art. 260‑‑‑Central Excises Act (I of 1944)‑‑‑Taxation‑‑‑Government taxes‑‑‑Central Excise Duty‑‑‑Government taxes included Central Excise Duty in terms of the definition of the "taxation" as in Art 260 of the Constitution.

(i) Central Excise‑‑

‑‑‑‑Non‑deposit of duty‑‑‑Fraud‑‑‑Non‑issuance of prescribed bill of charges showed the mala fides and non‑deposit of Central Excise Duty, so received in the tax/duty inclusive charges amounted to fraud.

(j) Central Excise Rules, 1944‑‑‑

‑‑‑‑R. 10(3)‑‑‑Recovery of duty short‑levied or erroneously refunded‑‑­Show‑cause notice‑‑‑Limitation‑‑‑Shaw‑cause notice, dated 20‑6‑1998 for the duty evaded during the period from 7 of 1990 to 6 of 1995 was not barred by limitation of the provisions of R.10(3) of the Central Excise Rules, 1944.

(k) Central Excises Act (I of 1944)‑‑

‑‑‑‑S. 3‑‑‑Duties specified in the First Sched. to be levied‑‑‑Service provided or rendered by Hotels and' Restaurants‑‑‑Non‑payment of Central Excise Duty‑‑‑Calculation‑‑‑Duty involved shall be calculated on work back method as the charges were inclusive of taxes and duty‑‑­Instead of the duty being levied as 10% of the amount of charges billed, it should be (100/11) or about 9.09% of the amount of duty‑paid charges billed.

Isaac Ali Qazi for Appellant.

Ishtiaq Ahmad, Law Officer, Fazal Amin, Senior Auditor, Hussain Muhammad, Senior Auditor, Bakht‑e‑Dauran, Senior Auditor, Abdul Khaliq, D.S., Wahid Gul, Auditor and Al‑Haj Gul, D.R. for Respondents.

Dates of hearing: 17th January; 12th February; 17th, 18th September; 17th October; 5th November; 10th, 11th December, 2002; 7th January; 6th February; 30th April; 5th May and 15th October, 2003.

2004 P T D (Trib.) 710

[Customs, Central Excise and Sales Tax Appellate Tribunal]

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

Appeal Case No.7(872)CU of IB/2000(PB), decided on 15th November, 2003.

Customs Act (IV of 1969)‑‑‑

‑‑‑‑Ss. 30, 31‑A, 79, 98, 104 and 156(1), Cls. (10‑A), (51), (53), (57), (58), (77)‑‑‑S.R.O. 108(1)/95, dated 12‑2‑1995‑‑‑Customs General Order 25 of 1988‑‑‑Date for determination of rate of export duty‑‑‑Effective rate of duty‑‑‑Goods imported into Pakistan as on 1‑2‑2000‑‑‑Ex‑bond bill of entry was filed on 10‑2‑2002 at Gadoon before the actual arrival and warehousing of the goods and that too mis-declaring that the goods had been into‑bonded on 8‑2‑2002 to avail benefit of S.R.O. 108(1)/95, dated 12‑2‑1995‑‑‑Recovery of duty and sales tax‑‑‑Validity‑‑‑Date for determination of applicable and effective rate of import duty was prescribed under S. 30 of the Customs Act, 1969 as re‑affirmed by S.31‑A of the Customs Act, 1969‑‑‑Ex‑bond bill of entry could be filed under S.104 of the Customs Act, 1969 at any time within the period of warehousing under S. 98 of the Customs Act, 1969 i.e. for a period of one year from the date of their "admission" into the warehouse ‑‑‑Ex-­bond bill of entry filed before the goods were admitted in a licensed warehouse was not a valid ex‑bond bill of entry under 5.104 read with S.98 of the Customs Act, 1969‑‑‑Goods of ex bond bill of entry, dated 2‑2‑2000 entered in warehouse on 12‑2‑2000 were not entitled to the benefits of S.R.O. 108(1)/95, dated 12‑2‑1995‑‑‑Rate of duty on Ally goods was not contingent on the date of import but was contingent on the date of filing a consumption bill of entry (or date of arrival of conveyance carrying the goods, whichever was later) under S.79 of the Customs Act, 1969 or on the date of filing a valid ex‑bond bill of entry under S.104 of Customs Act, 1969 (after admission of the goods in a warehouse in terms of S.98 of the Customs Act, 1969 but before the expiry of period of the permissible warehousing)‑‑‑Applicable and effective rate of duty in relation' to "imported" goods was to be determined with reference to the crucial date as prescribed by S.30 read with S.31‑A of the Customs Act, 1969‑‑‑Claim that duty to be assessed with reference to the date of actual import of goods into Pakistan was not based a firm ground because assessees had not come with clean hands by filing ex‑bond bill of entry before actual admission of the goods in their PWL 23/92 and also by misdeclaring that the goods were warehoused on 8‑2‑2000 when actually those were warehoused on 12‑2‑2000‑‑‑Order of Adjudicating Officer was confirmed and appeal of appellant was dismissed by, the Appellate Tribunal.

Qazi Waheeduddin for Appellant.

Al‑Haj Gul, D.R., Fazlur Rehman, D.R., Abu Nasar Shlija, A.C., Rashid Khan, Superintendent, Azam Khan, D.S. and Mir Zaman, Inspector for Respondents.

Dates of hearing: 1st, 22nd July; 1st, 7th August; 1st, 7th, 14th October of 2002 and 21st August, 2003.

2004 P T D (Trib.) 1018

[Customs, Central Excises and Sales Tax Appellate Tribunal]

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

Customs Appeals Nos.K‑1841 to K‑1859 of 2001, decided on 22nd May, 2003.

(a) Customs Act (IV of 1969)‑‑‑

‑‑‑S. 19‑‑‑Constitution of Pakistan (1973), Art. 18‑‑‑S.R.O. 504(I)/94, dated 9‑6‑1994‑‑‑General' power to exempt from customs‑duties‑‑­Compressors of refrigerators, import of‑‑‑Withdrawal of concession on the presumption of existence of locally made compressors‑‑‑Validity‑‑‑In absence of any evidence of sale of compressors by the Company in the market, the mere establishment of a plant of compressors for the use of the same in the refrigerators being manufactured in its industrial unit would not permit the Customs Department to take away the concession of customs‑duty on the import of compressors under the S.R.O. 504(I)/94, dated 9‑6‑1994, which would amount to restrict the market to the refrigerators being manufactured by the company and allow the said unit to create monopoly in the business at the cost of healthy and free competition in violation of Constitution for providing fair opportunity of lawful business under Art. 18 of the Constitution of Pakistan (1973).

(b) Customs Act (IV of 1969)‑‑‑

‑‑‑‑S. 19‑‑S.R.O. 504(I)/94, dated 9‑6‑1994‑‑‑Customs General Order No.7, dated 4‑3‑1998‑‑‑General power to exempt from customs‑duties‑‑­Refusal of the legitimate statutory concession made available by the Government through the departmental instructions in the form of Customs General Order would amount to undo the effect of notification issued under S.19 of the Customs Act, 1969.

(c) Customs Act (IV of 1969)‑‑‑

‑‑‑‑S.219‑‑‑Departmental instructions‑‑‑Conflict with statutory law‑‑­Effect‑‑‑If departmental instructions are issued in conflict with statutory law or to undo any such law, the same would not have any legal effect.

(d) Customs Act (IV of 1969)‑‑‑

‑‑‑S. 19‑‑‑S.R.O. 504(I)/94, dated 9‑6‑1994‑‑‑General power to exempt from customs‑duties‑‑‑Import of compressor‑‑‑Knocked down condition‑­Built up condition‑‑‑Knocked down condition of compressors can better be defined by the manufacturers and unless the technical distinction between the knocked down and built up condition is notified by the Government, in the light of technical distinction to be made by the original manufacturers, the general definition' of the two being made by the functionaries of the Government in their discretion through artificial manner, would not take away the concession in the customs‑duty given under the S.R.O. 504(I)/94, dated 9‑6‑1994.

(e) Customs Act (IV of 1969)‑‑‑

‑‑‑S. 19‑‑‑Constitution of Pakistan (1973), Art. 18‑‑‑Customs General Order No.7, dated 24‑3‑1998‑‑‑S.R.O. 504(I)/94, dated 9‑6‑1994‑‑­General power to exempt from customs‑duties‑‑‑Compressors of refrigerators, import of‑‑‑Knocked down condition‑‑‑Built‑up condi­tion‑‑‑Withdrawal of concession on the ground that benefit of S.R.O. 504(I)/94, dated 9‑6‑1994 could only be extended in case of import of compressors in knocked down condition and not in built‑up condition and since compressors were imported in complete built‑up condition, the same were not entitled to special concession‑‑‑Validity‑‑‑Withdrawal of exemption in customs‑duty on compressors under S.R.O. 504(I)/94, dated 9‑6‑1994,, through Customs General Order without technical interpretation of the term "knocked down condition" and issue of notification by the Government accordingly, was not legal and the Customs General Order being violative of the S.R.O. 504(I)/94, dated 9‑6‑1994 would be of no consequence‑‑‑Even Customs General Order was not specifically made applicable in case of import of compressors and again the functionaries through a misconception were withholding the legitimate benefits available to the importer‑‑‑Neither the certificate given by the importer and approved by the Customs Authorities lost its validity and legal status nor Customs General Order was made applicable to, the import of compressors as such‑‑‑Interpretation of notification by the Department under which the compressors were being imported on concessionary duty through Customs General Order was against its spirit of the scheme and policy of law‑‑‑Appellant/importer was entitled to concession of customs‑duty under S.R.O. 504(I)194, dated 9‑6‑1994 and the same was illegally refused on the basis of Customs General Order No.7, dated 24‑3‑1998 and such concession would be deemed to have always been so available to appellant/ importer‑‑‑Appeal was allowed by the Appellate Tribunal.

United Refrigeration Industries (Pvt.) Ltd. v. Federation of Pakistan and another PTCL 2001 CL 423; Hirjana & Co. v. Commissioner of Sales Tax 1971 SCMR 128 and Government of Pakistan v. Hashwani Hotels. PLD 1990 SC 68 rel.

Abdul Ghaffar Khan for Appellant.

Departmental Representative for Respondent.

Date of hearing; 22nd May, 2003.

2004 P T D (Trib.) 1036

[Customs, Central Excise and Sales Tax Appellate Tribunal]

Before Mian Abdul Qayyum, Member Judicial and Zafar-al-Majeed, Member Technical

C. A. No. 1664/LB of 2001, decided on 6th February, 2002.

Customs Act (IV of 1969)---

----S. 157---Extent of confiscation---Confiscation of Oil Tanker being non-duty paid in spite, of verification of by the manufacturing company--­Validity---Verification by the local manufacturer may be accepted and such certificate should be considered as authentic and the seized vehicles be released without giving further hardship to the owners---Seized vehicle was not of foreign origin but was locally assembled and could not be confiscated---Confiscation order was set aside by the Appellate Tribunal with the direction that confiscated vehicle be released to its lawful owner without any condition.

M. Aslam Khan Babar for. Appellant.

Imran Tariq, D.R. for Respondents.

Date of hearing: 30th January, 2002.

2004 P T D (Trib.) 1046

[Customs, Central Excise and Sales Tax Appellate Tribunal]

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

C. A. No.2351/LB of 2001, decided on 8th February, 2002.

Customs Act (IV of 1969)---

----S. 157---Smuggling---Confiscation---Extent---Validity---Locally assembled Oil Tanker---Confiscation on being non-duty paid in spite of verification of by the manufacturing company---Legality---Particulars of seized vehicle tallied with the particulars of the locally assembled vehicle as mentioned in report of the Company---Seized vehicle being a locally assembled vehicle, the question of its being of foreign origin did not arise and for such reason same could not have been confiscated on the ground of its having been smuggled in the country---Imposition of penalty was also. uncalled for---Order was set aside by the Appellate Tribunal with the direction that confiscated vehicle be released to its lawful owner without any condition.

Muhammad Aslam Babar for Appellant.

Imran Tariq, D.R. for Respondent.

Date of hearing: 31st January, 2002.

2004 P T D (Trib.) 1068

[Customs, Central Excise and Sales Tax Appellate Tribunal]

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

Ex. As. Nos.1046/LB, 1261/LB and 1262/LB of 2001, decided on 9th February, 2002.

(a) Central Excise Rules, 1944---

----R. 43(2)---Closure of production---Notice of closure be given---Stoppage of production---Notice by the Association of manufacturers--­Validity---Joint declaration of closure given by the Association of manufacturers to the Department could not be treated as a notice of closure required to be given under R.43(2) of the Central Excise Rules, 1944.

(b) Central Excises Act (1 of 1944)---

----S. 3---Central Excise Rules, 1944, R.9---S.R.O. 456(I)/96, dated 13-6-1996---S.R.O. 772(1)96, dated 12-9-1996---Excise duties specified in the First Schedule to be levied---Levy of excise duty on the basis of production which was not cleared in protest against the levy of duty--­Validity---Collector of Customs & Central Excise himself reported to Central Board of Revenue that no clearances were made during the period of levy of duty, therefore, no duty was payable by them--­According to S.3 of the Central Excises Act, 1944 read with R.9 of the Central Excise Rules, 1944, central excise duty was no doubt leviable on production of excisable goods but payment thereof was to be made at the time of clearance of the same---Order was set aside by the Appellate Tribunal.

Malik Muhammad Arshad for Appellant.

Adeel Hassan for Respondent.

Date of hearing: 7th February, 2002.

2004 P T D (Trib.) 1077

[Customs, Central Excise and Sales Tax Appellate Tribunal]

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

Customs Appeal No.296 of 2003, decided on 26th June, 2003.

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

----S. 25---General Clauses Act (X of 1897), S.22---Customs General Order No.21 of 1973---Value of imported and exported goods--­Classification of goods---Past and closed transaction---Existing practice, departure from- --Prospective effect---For deciding the issue of classification it was necessary for the Central Board of Revenue through Tariff Classification Committee to issue a ruling of the correct classification which shall have a prospective effect--Customs Department having all along been constantly assessing the goods under the declared classification any departure from the same would require a public notice and the changed practice will not affect the past and closed transaction as envisaged under S.22 of the General Clauses Act, 1897.

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

----S. 80---Assessment of duty---Existing practice, departure from--­Prospective effect---Principles---Where there was a question of departure from existing practice, whether or not governed by express order of higher authority, the Collector of Customs should, if the proposed departure was in the direction of an assessment more favourable to the importer, adhere to the existing practice and make a reference to the Central Board of Revenue accepting duty meanwhile from the assessee, under protest, if the assessee so required---Where the Collector of Customs contemplated a change to a higher assessment than had been the practice, he should not take action upon his view until he had obtained orders, but such orders would not have retrospective effect.

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

----S. 80---Assessment of duty---Past practice---Procedural change--­Effect ---When a procedural change takes place the past practice of a Customs House with regard to assessment of goods shall not ordinarily be reopened in respect of short levy of duty or the levy of excess duty, it must be held that such short levy or excess levy had been due to error or misconstruction on the part of the officers of Customs.

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

----S. 80---Assessment of duty---Change in classification of goods--­Effect---With the change in classification on the basis of a ruling, no doubt, the law was not altered but the law had been acted upon in a particular manner through tariff rulings, and in the light of a particular interpretation being already implemented, on the basis of which certain amount of duty was charged---Said departmental practice Shall continue till the same was changed---As soon as it was altered it shall be effective from the date of change---Even otherwise, an innocent person paying duty on goods in a bona fide manner to the satisfaction of the rules, was protected from being further harassed.

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

----S. 8---Assessment of duty---Constant practice is not to be changed in an arbitrary manner-- -Interpretation that had been constantly acted upon by the Customs Authorities that acquired the force of law as a departmental practice was not to be changed in an arbitrary Sinner, as it would be extremely unfair to make a departure from the same after a lapse of many years and thereby disturbing the rights that had been acquired and settled by a long and consistent course of Practice.

(f) Interpretation of statutes---

---- Any administrative order violative of the provisions contained in the statute is bad and invalid to the extent of inconsistency.

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

----Ss. 219 & 233---Power to make rules---Officers of Customs to follow Board's orders, ---Conflict between instructions issued by Central Board of Revenue and instructions or orders issued by the officer subordinate to Central Board of Revenue---Effect---Instructions issued by Central Board of Revenue under S.219 of the Customs Act, 1969 are binding on all the officers of the Customs employed in the execution of Customs Act, 1969 by virtue of provision contained in S.233 of the Customs Act, 1969---If there is any conflict in the instructions issued by the Central Board of Revenue and the instructions or orders issued by the officer subordinate to the Central Board of Revenue, the instructions/orders issued by the subordinate official will be invalid and inoperative to the extent of conflict.

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

----Ss. 25 & 202---Constitution of Pakistan, (1973), Art. 4---General Clauses Act (X of 1897). S. 22---Customs General Order No.21 of 1973 ---Value of imported and exported goods---Classification of goods--­Issue regarding classification of goods was referred to Central Board of Revenue---Matter was pending before Tariff Classification Committee--­During pendency, Adjudicating Officer passed an order by deciding the issue and demanded duty with threat to initiate action under S.202 of the Customs Act, 1969---Validity---In view of provisions of S.22 of the General Clauses Act, 1897 and the direction given vide Customs General Order No.21 of 1973, the manner in which order had been passed revealed haste, lack of application of mind and arbitrariness---Once the classification issue relating to goods in dispute stood seized by Central Board of Revenue, the Adjudicating Officer should have waited for the final outcome of the Classification Committee's decision---Once the matter was referred to Classification Committee by Central Board of Revenue, the office of Collector Adjudication became coram non judice---Order passed by Adjudicating Officer had not been decided in accordance with law and the same was hit by due process clause of Art. 4 of the Constitution---Appellate Tribunal declared the order as illegal and set aside for de novo consideration after settlement of classification by the Central Board of Revenue.

Akhtar Hussain v. Collector of Customs; C.P. No. 16 of 2003 rel.

Ms. Navin S. Merchant for Appellant.

Wahid Bux, Departmental Representative for Respondent

Date of nearing: 26th June, 2003.

2004 P T D (Trib.) 1324

[Customs, Central Excise and Sales Tax Appellate Tribunal]

Before Raj Muhammad Khan, Member (Judicial)

Appeal No. Cus.434/PB of 2003, decided on 13th December, 2003.

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

----S.180---Issue of show-cause notice before confiscation of goods o­r imposition of penalty---Three mandatory conditions to be fulfilled before confiscation of goods or imposition of penalty: that the owner of the goods or the person against whom the penalty is to be imposed must be informed in writing of the grounds on which it is proposed confiscate the goods or to impose the penalty instead of informing him in writing he is to be informed verbally provided he gives his consent to the Adjudicating Officer in writing; after conveying him the grounds for confiscation of goods or imposition of penalty in the manner as stated, he is then to be given a chance for making representation in writing; he may verbally make the representation against the proposed action provided he indicates his such choice in writing; such representation is to be made within a reasonable time, which is to be specified by the Adjudicating Officer and he is given reasonable opportunity of being heard.

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

----S. 180---Issue of show-cause notice before confiscation of goods or imposition of penalty---Three conditions as given in S.180 of the Customs Act, 1969 are to be followed step by step in chronological order and not simultaneously.

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

----Ss. 180, 2(s), 16, 156(1), Cl. 89 (8) & 157(2)---Imports and Exports (Control) Act (XXXIX of 1950), S.3(1)---S.R.O. 374(I)/2002, dated 15-6-2002---Issue of show-cause notice before confiscation of goods or imposition of penalty---Outright confiscation of seized cloth--­Validity---Admittedly show-cause notice had not been issued to the accused by the Adjudicating Officer in any form provided for under S.180 of the Customs Act, 1969---Accused had not been treated in accordance with the mandatory requirement of S.180 of the Customs Act, 1969---Adjudicating Officer could not pass order either for confiscation of goods or for imposition of penalty on accused ---Order-in­ Original was not legally sustainable which was set aside by the Appellate Tribunal with the direction that the seized goods shall be released to its owner on payment of leviable duty and taxes as prayed for---Fine imposed against the vehicle and penalty imposed against the owner of the goods was remitted.

Arbab Saiful Kamal for Appellant.

Fazal-ur-Rehman, D.S./D.R. for Respondents.

Date of hearing: 20th November, 2003.

2004 P T D (Trib.) 1328

[Customs, Central Excise and Sales Tax Appellate Tribunal]

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

Appeal Case No.7(840)ST/IB, of 2001(PB), decided on 8th January, 2004.

(a) Sales Tax Act (VII of 1990)‑‑‑

‑‑‑S. 2(16)‑‑‑Central Excises Act (1 of 1944), S. 2(13)‑‑‑Manufacture‑‑­Tobacco‑‑‑Re‑drying process of curing process of harvested crop of un­manufactured tobacco‑‑‑Harvested tobacco, cured tobacco and re‑dried tobacco are all covered by the terminology of "un‑manufactured tobacco" of H.S. Code 24.01‑‑‑Although, terms "un‑manufactured tobacco" and "re‑dried tobacco" are not defined in the Sales Tax Act, 1990, S.2(13) of the Central Excises Act, 1944 defined that "curing includes wilting, drying, fermenting and any process of rendering an un­manufactured tobacco fit for marketing or manufacture" which shows that cured tobacco is still an un‑manufactured tobacco 'and not a manufactured tobacco.

2002 PTD 776; Union of India v. Delhi Cloth and General Mills AIR 1963 SC 791 and Bholanath Sreemany v. Addl. C.C.T. (1978) 42 STC 430 SC ref.

(b) Sales Tax Act (VII of 1990)‑‑‑

‑‑‑‑S. 2(16)‑‑‑Manufacture or produce‑‑‑Tobacco‑‑‑Harvested tobacco, cured tobacco, cut tobacco, stemmed tobacco, dried tobacco and re‑dried tobacco were neither converted into any other distinct article nor were changed; transformed or reshaped to make it capable of being put to use differently and distinctly‑‑‑Tobacco, whether harvested, cured, cut, dryed or re‑dried, remains an unmanufactured tobacco and the process carried out was for preservation of the tobacco, for preservation of its aroma, for ease of packing, to prevent moulding or drying and the reshaping (cutting, stemming, stripping, packaging, casing) was not for putting it to use any differently‑‑‑All these processes were incidental or ancillary to prepare (not manufacture) the un‑manufactured tobacco fit for being manufactured into a manufactured tobacco or a,, smoking tobacco like cigarettes, cigar, cigarillos, cheroots, or smoking tobacco‑‑­Unless the un‑manufactured tobacco commences the stage of conversion into a smoking tobacco (or manufactured tobacco), it. could not be called a transformation, conversion or change to alter its character as an un­ manufactured tobacco‑‑‑Neither any new article or new product was obtained by the processes of curing/re‑drying nor was the unmanu­factured tobacco converted into a manufactured tobacco‑‑‑Even the commodity classification and coding did not change‑‑‑Tobacco, before curing/re‑drying and even thereafter, remains classifiable under H.S. Code 24.01 as un‑manufactured tobacco.

(c) Sales Tax Act (VII of 1990)‑‑‑

‑‑‑‑S. 2(16)‑‑‑C.B.R. Letter C. No.3(41) STP/98, dated 18‑6‑1999‑‑­Manufacture or, produce‑‑‑Tobacco‑‑‑Process of re‑drying‑‑‑Process of re‑drying is not covered by the terminology "manufacture or produce" under S.2(16) of the Sales Tax Act, 1990.

(d) Sales Tax Act (VII of 1990)‑‑‑

‑‑‑‑S. 2(16)‑‑‑Manufacture or produce‑‑‑Word "process" and "manufacture" are distinct and the word "manufacture" essentially means to bring a new article into the market.

(e) Sales Tax Act (VII of 1990)‑‑‑

‑‑‑‑S. 2(16)(b)(c)‑‑‑Manufacture or produce‑‑‑Tobacco‑‑‑Process of curing, drying and re‑drying of un‑manufactured tobacco‑‑‑Although, certain processes had been specifically included in the definition of "manufacture" i.e. Cl. (b) & (c) of the S.2 (16) of the Sales Tax Act, 1990, the process of curing, drying and re‑drying of un‑manufactured tobacco had not been included therein‑‑‑Process of cutting, packaging and repacking, as used in Cl. (c) of S.2(16) of the Sales Tax Act, 1990 did not affect the outcome of the case because these processes are carried on un‑manufactured products (un‑manufactured tobacco) and the products/articles still, after such cutting/packing/repacking remain un­manufactured products (un‑manufactured tobacco) without any change in use, nature, demand and clientele.

(f) Sales Tax Act (VII of 1990)‑‑‑

‑‑‑‑Sixth Sched: S. No.2 & S.2(16)‑‑‑Agricultural produce of Pakistan, not subject to any further process‑‑‑Tobacco‑‑‑Levy of tax cured/ redried tobacco ‑‑‑Validity‑‑‑Cured/redried tobacco being un­manufactured tobacco of P.C.T. Hdg 2401.1000 shall be exempt from ‑the levy of sales tax as agricultural produce of Pakistan, not subject to any further process of manufacture in terms of S. No.2 of the Sixth Schedule to the Sales Tax At, 1990‑‑‑Order regarding sales tax, additional tax and penalty on the exempt supply of un‑manufactured tobacco cured, dried/redried tobacco was set aside by the Tribunal.

(g) Sales Tax Act (VII of 1990)‑‑‑

‑‑‑‑S. 2(33)‑‑‑Supply‑‑‑Waste and scrap‑‑‑Exemption‑‑‑Wastes/scraps were not of fixed assets like machinery/automobile‑‑‑No specific exemption clause/provisions/notification on such wastes/scraps had been produced‑‑‑Appellate Tribunal confirmed the portion of order demanding sales tax, additional tax and penalty on supply of taxable wastes/scraps‑‑­Additional tax accrued for the period 1996‑97 was remitted as a special case as it was not mandatory during that period.

Messrs Nauras (Pvt.) Ltd.'s case 2001 PTD (Trib.) 2590 and 2002 PTD 976 ref.

(h) Sales Tax Act (VII of 1990)‑‑‑

‑‑‑‑Ss. 33(1) & 34‑‑‑General penalties‑‑‑Late filing of return‑‑‑Levy of additional tax and penalty for late filing of returns was confirmed by the Appellate Tribunal except the additional tax accrued up to June, 1997 was remitted as a special case being not mandatory leviable prior to that period.

(i) Sales Tax Act (VII of 1990)‑‑‑

‑‑‑‑S. 7(1)‑--Determination of tax liability‑‑‑Input tax‑‑‑Adjustment‑‑‑Input tax adjusted beyond tax period was set aside by the Appellate Tribunal on the ground that such adjustments were made prior to the 1998‑99 budget when the provisions of S.7(1) of the Sales Tax Act, 1990 were amended to incorporate the words "tax period".

S.T.A. No.748/LB of 2001 ref.

Athar Minallah, Sultan Zafar, Farhat Nawaz Lodhi and Farid Khan for Appellant.

Pir Alam Shah, D.R. and Al‑Haj Gul, D.R. for Respondents.

Dates of hearing: 30th January, 6th, 14th February, 11th, 26th March, 22nd April, 26th September, 29th October, 19th November of 2002, 14th, 15th January, 22nd February, 17th April, 24th June, 10th, 24th September, 7th, 14th October and 10th December of 2003.

2004 P T D (Trib.) 1367

[Customs, Central Excise and Sales Tax Appellate Tribunal]

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

Appeal Case No.7(306)ST/IB of 2000(PB), decided on 13th December, 2003.

(a) Sales Tax Act (VII of 1990)‑‑‑

‑‑‑‑S.2(33) Finance Ordinance (XXI of 2000), S.2‑‑‑Finance Ordinance (XXV of 2001), S.2‑‑‑"Supply"‑‑‑Lease‑‑‑Amendment‑‑‑Financial lease‑­Operating lease‑‑‑Financial lease and operating lease had been excluded from the scope of definition of `supply' through the amendments made by Finance Ordinance, 2000 and Finance Ordinance, 2001 since these amendments were "clarificatory" in nature and were to operate retrospectively‑‑‑Validity‑‑‑Section 2 of the Finance Ordinance, 2000 and Finance Ordinance, 2001 made it effective from the date of respective Ordinance and no retrospectivity had been given to such amendments of the provisions of S.2(33) of the Sales Tax Act, 1990‑‑‑Although the amendments were clarificatory in nature but these amendments showed the legislative intent to exclude financial lease and operating lease from the definition and scope of term "supply" for the purposes of levy and collection of sales tax with effect from 19‑6‑2000 and 18‑6‑2001 respectively.

2003 PTD 812 distinguished.

(b) Sales Tax Act (VII of 1990)‑‑­

‑‑‑‑S. 2(33)‑‑‑Finance Ordinance (XXI of 2000)‑‑‑Finance Ordinance (XXV of 2001) ‑"Supply"‑‑‑Lease ‑‑Amendments in the Statute‑‑‑No retrospective effect‑‑‑Amendments made in S.2(33) of the Sales Tax Act, 1990 by Finance Ordinance 2000 and 2001 did not apply, retrospectively when there was no such express or apparent legislative intent to allow any such retrospection.

(c) Sales Tax Act (VII of 1990)‑‑­

‑‑‑‑S. 2(33)‑‑‑Finance Ordinance (XXI of 2000)‑‑‑Finance Ordinance (XXV of 2001)‑‑‑"Supply"‑‑‑Lease‑‑‑Amendment‑‑‑Prospective effect-‑­Amendment in scope of term "supply" as in S.2(33) of the Sales Tax Act, 1990, as enacted through the Finance Ordinance, 2000 and 2001, shall apply prospectively with reference to the respective amendments.

2002 MLD 296 ref.

(d) Sales Tax Act (VII of 1990)‑‑‑

‑‑‑‑S. 2(33)‑‑‑"Supply"‑‑‑Construction‑‑‑Term used in definition of "supply" under S.2(33) of the Sales Tax Act, 1990 is "includes" which cannot be construed to be restrictive in nature.

(e) Sales Tax Act (VII of 1990)‑‑‑

‑‑‑‑S. 2(33)‑‑‑Finance Ordinance (XXV of 2001)‑‑‑"Supply"‑‑‑Lease‑‑­Amendment‑‑‑Operating lease‑‑‑By excluding the term "operating lease" through the Finance Ordinance, 2001 the legislative intent became very clear that the said term "lease", as used in the un-amended S.2(33) of the Sales Tax Act, 1990 (prior to 18‑6‑2001) included "operating lease".

(f) Sales Tax Act (VII of 1990)‑‑‑

‑‑‑‑S. 2(33)‑‑‑Finance Ordinance (XXI of 2000)‑‑‑Finance Ordinance (XXV of 2001)‑‑‑"Supply"‑‑‑Lease‑‑‑Lease of machinery‑‑‑Levy of sales tax on lease money ‑‑‑Assessee contended that term "lease" shall, mean only such lease where ownership or title of leased commodity was transferred‑‑‑Since "lease" of machinery was not done in furtherance of business, same will not constitute a "supply"; lease agreement was in the nature of operating lease and not a financial lease; hence lease money was not liable to sales tax‑‑‑Validity‑‑‑Operating lease including the extended lease of machinery in terms of Lease Agreement, dated 13‑7‑1994 would constitute a taxable supply up to 17‑6‑2001 i.e. Finance Ordinance, 2001‑‑‑Appellate Tribunal confirmed the levy of principal amount of sales tax on consideration received by the assessee for the lease of machinery.

2003 PTD 812 distinguished.

(g) Sales Tax Act (VII of 1990)‑‑‑

‑‑‑‑S. 34‑Additional tax‑‑‑Word "shall pay" and "shall be liable to"‑‑­Levy of additional tax represents the opportunity cost of money not paid into the exchequer by a taxpayer at. the prescribed time‑‑‑Payment of additional tax under S.34 of the Sales Tax Act, 1990, was compulsory in nature with the substitution of the word "shall pay" instead of "shall be liable to" in S.34 of the Sales Tax Act, 1990‑‑‑Appellate Tribunal directed that for the purposes of propriety, the existing rate of 2% of tax per month, as presently prescribed under S.34 of the Sales Tax Act, 1990, shall suffice for the total period of default, and the previous higher rates may not be insisted upon as there appears to be no mala fide or mens rea in non‑payment/default and the penalty imposed was remitted.

1995 PTD 91 ref.

Mahmood Mirza, Isaac Ali Qazi and Muhammad Yunus for Appellant.

Al‑Haj Gul, D.R., Hussain Muhammad and Bakht‑e‑Dauran, Sr. Auditors for Respondent.

Dates of hearing: 23rd September, 16th, 29th October of 2002, 25th June, 18th, 24, 29th September, 6th .8th and 14th October, 2003.

2004 P T D (Trib.) 1527

[Customs, Central Excise and Sales Tax Appellate Tribunal]

Before Yasmin Abbasey, Member (Judicial‑II) and Zafar Iqbal, Member (Technical‑II)

S.T. Appeal No. 353 of 2001, decided on 21st August, 2003.

(a) Sales Tax Act (VII of 1990)‑‑‑

‑‑‑‑Ss. 32, 38, 40 & 40‑A‑‑‑Criminal Procedure Code (V of 1898), S.103‑‑‑Search and seizure of record of appellant by Superintendent of Sales Tax authorised by Deputy Collector‑‑‑Validity‑‑‑Term "authorised officer" defined under S.32 of Sales Tax Act, 1990 referred to person to whom Board of Revenue or Collector delegated such power‑‑‑Board of Revenue or Collector had not issued any authority letter nor same had been placed on record by the department‑‑‑Delegatee of such powers could not further delegate the same‑‑‑Deputy Collector, if assumed to have been empowered by Collector to make such search or enquiry, could not further delegate same powers to Superintendent in view of S.32(2)(3) of Sales Tax Act, 1990‑‑‑Provision of S.103; Cr.P.C. has not been followed as required under S.40 of the Sales Tax Act, 1990‑‑‑Such act of Superintendent of visiting the site and taking documents in his custody was against law‑‑‑High Court accepted appeal with direction to department to return seized documents to appellant within seven days.

C.P. 1926 of 2000 ref.

(b) Administration of justice‑‑‑

‑‑‑‑ Act, deeds and things to be done as they are required to be done or not at all.

C.P. 1926 of 2000 fol.

Date of hearing: 21st August, 2003.

2004 P T D (Trib.) 1533

[Customs, Central Excise and Sales Tax Appellate Tribunal]

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

Sales Tax Appeal No. K‑57 of 2003, decided on 24th September, 2003.

(a) Administration of justice‑--

‑‑‑‑ Processes and procedures granting rights to citizens are to be applied as they are and nothing is to be construed, which is not intended.

(b) Sales Tax Act (VII of 1990)‑‑‑

‑‑‑‑S. 36‑‑‑Amount of tax or charge payable by a person, determination of‑‑‑Essentials‑‑‑Such person must be served with a notice within a period of three years of relevant date‑‑‑Sales Tax Officer after considering objections of such person would determine amount of Tax.

(c) Sales Tax Act (VII of 1990)‑‑‑

‑‑‑‑S. 36‑‑‑Time‑barred demand of tax‑‑‑Validity‑‑‑Such demand would not be enforceable in law as the same would itself defeat requirements of S.36 of Sales Tax Act, 1990.

(d) Speaking order‑‑‑

‑‑‑‑ Judicial order must be a speaking order manifesting by itself application of judicial mind by Court to issues and points of controversy involved in the causes‑‑‑When reasons would not be forthcoming, then Appellate Court would be deprived of the views of subordinate Court‑‑­Order, which was not a speaking order and devoid of reasons, would not be sustainable in law‑‑‑Practice of passing perfunctory orders in the causes involving valuable rights of parties was disapproved.

Adamjee Jute Mills Ltd. v. The Province of East Pakistan and others PLD 1959 SC (Pak.) .272; Gouranga Mohan Sikdar v. The Controller Import and Export and 2 others PLD 1970 SC 158; Mollah Ejahar Ali v. Government of East Pakistan and others PLD 1970 SC 173 and Muhammad Ibrahim Khan v. Secretary, Ministry of Labour and others 1984 SCMR 1014 rel.

Ataullah Khan, Consultant for Appellant.

Abdul Khaliq, D.R. for Respondent.

Date of hearing: 24th September, 2003.

2004 P T D (Trib.) 1804

[Customs, Central Excise and Sales Tax Appellate Tribunal]

Before Raj Muhammad Khan, Member (Judicial)

Appeal No. Cus.273/PB of 2003, decided on 27th February, 2004.

(a) Customs Act (IV of 1969)‑‑‑--

‑‑‑‑Ss. 168(2), 16, 2(s), 156 (2)(8)(90) & 171‑‑‑Imports and Exports (Control) Act, (XXXIX of 1950), S. 3(1)‑‑‑Seizure of things liable to confiscation‑‑‑Vehicle was seized for violation of provisions of S.2(s) and 16 of the Customs Act, 1969‑‑‑Laboratory reported and opined that the original chassis frame had been cut at the site of the chassis number and a cut piece of metal frame bearing present chassis number was replaced and welded‑‑‑Appellant contended that no notice under S.171 of the Customs Act, 1969 was given and chemical report was also dated before the seizure‑‑‑Notice under S.168(2) of the Customs Act, 1969 was issued after expiry of two months from the date of seizure of vehicle‑‑‑Validity‑‑‑Notice under S.168(2) of the Customs Act, 1969 was issued after expiry of two months of the seizure of the vehicle but in order to camouflage or conceal the actual date of seizure, the date of recovery and seizure had been fictitiously post‑dated to cover the expiry of limitation of two months‑‑‑Vehicle was brought into the country in used condition and it was not certain as to whether its chassis/frame was got repaired at the site of chassis number and a cut piece metal frame was replaced and welded before or after clearance of the vehicle from the Dry Port‑‑‑Department had failed to point out as to what benefit could accrue to the appellant or the importer in replacing the chassis number of duly imported vehicle of another alleged smuggled vehicle of the same condition and type‑‑‑No tampering with had been done to the digits of the chassis number and doubt existed in believing the seized vehicle to be smuggled one‑ ‑‑Department had not shown the whereabouts of the imaginary legally imported vehicle and their presumption regarding the seized vehicle to be smuggled one, was based on the exclusive evidence of the laboratory which was obtained behind the back of the appellant‑‑‑Show‑cause notice issued was time‑barred and vehicle was duly imported into the country and duty paid‑‑­Orders of the authorities below were set aside by the Appellate Tribunal with direction that the seized vehicle shall be returned to its rightful owner unconditionally‑‑‑Matter regarding forgery committed by the Seizing Agency by fraudulently making various documents to appear post‑dated was to be probed to take legal action against the culprits.

PTCL 2003 CL 723 rel.

(b) Customs Act (IV of 1969)‑‑‑--

‑‑‑‑S. 168(2)‑‑‑Seizure of things liable to confiscation‑‑‑Limitation‑‑‑Provisions of S.168(2) of the Customs Act, 1969 are mandatory in nature and lapse of the prescribed time cannot be construed to be an irregularity or technicality, which could be condoned‑‑‑Show‑cause notice happened to be only for adjudication proceedings and must be given in time‑‑‑Question as to which right had accrued could not be defeated by an order passed after the lapse of the prescribed period.

PTCL 2003 CL 723 rel.

Irshad Ahmad Durrani for Appellant.

Fazal‑ur‑Rehman, D.S./D.R. for Respondent.

Date of hearing: 10th February, 2004.

2004 P T D (Trib.) 1837

[Customs, Central Excise and Sales Tax Appellate Tribunal]

Before Raj Muhammad Khan Member (Judicial)

Appeal No. Cus.493/PB of 2003, decided on 30th March, 2004.

(a) Customs Act (IV of 1969)‑‑‑--

‑‑‑‑S. 2(s)(ii)‑‑S.R.O. 1374(I)/98, dated 17‑12‑1998‑‑‑S.R.O. 374(I)/2002, dated 15‑6‑2002, Heading 3401.1120‑‑‑Determination of heading of the item‑‑‑Soaps were not notified item‑‑‑Heading Perfumery, Cosmetic or toilet preparations falling under Chapter 33 of the Customs Import Tariff, were, specifically excluded from the said Chapter as was evident from Note 1(b) therein‑‑‑Soap was covered by Chapter 34, providing of soap organic surface‑active agents, etc.‑‑‑"Toilet Soap": was specifically provided for under Heading 3401.1120 in Chapter 34 of the Customs Import Tariff for which customs duty was provided as 55 % ad velorem‑‑‑Toilet soaps did not fall within the Heading "Perfumery, cosmetic or toilet preparations" under Chapter 33‑‑Nomeclature of soap was not provided in the list of articles notified under S.2(s)(ii) of the Customs Act, 1969 read with S.R.O. 1374(I)/98, dated 17‑12‑1998 (substituted by S.R.O. 374(I)/2002, dated 15‑6‑2002).

(b) Customs Act (IV of 1969)‑‑‑--

‑‑‑‑Ss. 2(s), 16, 156(1) Cl. 89 & 157‑‑‑Import & Export (Control) Act (XXXIX of 1950) S. 3(I)‑‑‑Smuggling‑‑‑Outright confiscation of foreign soaps of different types and old and used but serviceable tyres of different brands‑‑‑Validity‑‑‑Purchase of seized goods was supported by Cash memo in the shape of Bill issued by the Wholesale Dealers and the same was got verified through the Department and verification report was placed on file‑‑‑Supplier of such goods had admitted to have issued the cash memo and had further produced cash memo and bilty showing purchase and transport of toilet soap from within Pakistan alongwith copies from Customs Warehouse‑‑‑Seized goods were undoubtedly purchased locally‑‑‑Even otherwise, since the goods including non ­notified ones were seized far away from the international border and it was not denied by the Department that such goods were generally available in the local market wherefrom the buyer had claimed to have purchased the same‑‑‑Adjudication Officer was required to have had given an option under S.181 of the Customs Act, 1969, to the appellant to pay fine in lieu of confiscation of the seized soaps, being non‑notified item, and the old and used tryes on payment of duty and taxes since it had value less than Rs.50,000‑‑‑Appellate Tribunal set aside the order-­in‑original as well as order‑in‑appeal and directed that the seized goods shall be released unconditionally, if not required in any other case.

Ajoon Khan for Appellant.

Fazal‑ur‑Rehman, D.S./D.R. for Respondents.

Date of hearing: 26th March, 2004.

2004 P T D (Trib.) 1847

[Customs, Central Excise and Sales Tax Appellate Tribunal]

Before Yasin Abbasey, Member (Judicial‑III)

Customs Appeal No.338 and 339 of 2002, decided on 22nd October, 2003.

Customs Act (IV of 1969)‑‑‑

‑‑‑‑Ss. 156(1) Cls. 9 & 14‑‑‑S.R.O. 448(1)/2000, dated 1‑7‑2.000, Cl.2(d)‑‑‑Punishment for offences‑‑‑Import of ban items i.e. Zinc Dust from India‑‑‑Adjudicating proceedings were conducted by the Adjudicating Officer of Collectorate of Customs, Sales Tax and Central Excise (Adjudication)‑‑‑Validity‑‑‑Order was passed by the Deputy Collector (Adjudication), which was a clear violation of S.R.O. 448(1)/ 2000, dated 1‑7‑2000 issued by the Central Board of Revenue‑‑­Elementary principle was that if mandatory conditions for the exercise of jurisdiction by a Court, Tribunal or authority were not fulfilled, then the entire proceedings which followed became illegal and suffered for want of jurisdiction‑‑‑Any order passed in continuation of these proceedings in appeal or revision equally suffered from illegality and were without jurisdiction‑‑‑Order passed by Deputy Collector (Adjudication) was without jurisdiction‑‑‑Order was set aside by the appellate Tribunal and appeal was allowed.

Junaid Ghafar A.R. for Appellant.

Ali Akbar, A.O./D.R. for Respondent.

Date of hearing: 22nd October, 2003.

2004 P T D (Trib.) 2026

[Customs, Central Excise and Sales Tax Appellate Tribunal]

Before Zafar Iqbal, Member (Technical)

Central Excise Appeal No.K‑218 of 2000, decided on 22nd November, 2003.

(a) Central Excise Rules, 1944‑‑‑

‑‑‑‑R. 226(2)‑‑‑Conducting scrutiny of record‑‑‑Essential conditions‑‑Existence of a rule requiring maintenance of accounts and violation thereof were necessary conditions for initiating action in terms of 8.226(2) of Central Excise Rules, 1944‑‑‑Scrutiny of record would be restricted to prescribed records only‑‑‑In absence of such rule, framing of charge of fraud against a party on the basis of non‑prescribed record would be unjustified and illegal‑‑‑Central Excise Officer not below the rank of Superintendent was authorized to determine the amount of liability‑‑‑Legislature had intentionally kept such function within ambit of specified officers, who according to their wisdom were 'more competent to resolve such issue‑‑‑Action taken by an unauthorized officer in absence of any express provision in law would amount to abuse of power.

Government of Pakistan v. Shahi Bottlers 1987 SCMR 571 fol.

(b) Central Excise Rules, 1944‑‑‑

‑‑‑‑Rr. 96ZZH & 226‑‑‑Collection of excise duty on courier service‑‑­Procedure‑‑‑Every courier was horrid to issue a copy of consignment note to its customer ‑‑‑Quantum of excise duty would be worked out on the basis of consignment note‑‑‑Visiting team could not ignore to study and analyze such basic document i.e. consignment note‑‑‑If there was discrepancy in consignment note and duty paid by courier, then other piece of evidence would be relevant for drawing inference.

(c) Central Excise Rules, 1944‑‑‑

‑‑‑‑R. 226‑‑‑Qanun‑e‑Shahadat (10 of 1984), Arts. 34 & 140‑‑‑Scrutiny of record‑‑‑Statement made by a party while in custody of Customs Enforcement Staff‑‑‑Validity‑‑‑Such statement would lose its strength as a piece of evidence for having been taken under duress and threat‑‑­Admission of such statement as a piece of evidence would be illegal as same did not relate to prescribed records‑‑‑Reply made to show‑cause notice, would not remain an admission‑‑‑Reliance on such statement by Revenue, without following provisions of Art. 140 of Qanun‑e‑Shahadat, 1984 would not be warranted in law.

(d) General Clauses Act (X of 1897)‑‑‑

‑‑‑‑S. 24‑A‑‑‑Causes involving valuable rights of parties‑‑‑Passing of quasi‑judicial order in such matters‑‑‑Essentials‑‑‑Such order must be a speaking order manifesting by itself application of judicial mind by Tribunal to the issues and points of controversy involved in such causes‑‑‑When reasons would not be forthcoming, then Appellate Court would be deprived of the views of subordinate forum‑‑‑Impugned order would not be sustainable in law, if same was not a speaking order and was devoid of reasons.

Adamjee Jute Mills Ltd. v. The Province of East Pakistan and others PLD 1959 SC (Pak.) 272; Gouranga Mohan Sikdar v. The Controller Import and Export and 2 others PLD 1970 SC 158; Mollah Ejahar Ali v. Government of East Pakistan and others PLD 1970 SC 173 and Muhammad Ibrahim Khan v. Secretary, Ministry of Labour and others 1984 SCMR 1014 fol.

Muhammad Aleem Khan for Appellant.

Aftab Hussain S.‑I.O. for Respondent.

Date of hearing: 22nd November, 2003.

ORDER

2004 P T D (Trib.) 2085

[Customs, Central Excise and Sales Tax Appellate Tribunal]

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

Sales Tax Appeals Nos.H‑82/2000/6261, decided on 13th April, 2004.

Sales Tax Act (VII of 1990)‑‑‑

‑‑‑‑S.13, Sixth Sched., Entry No.4‑‑‑Exemption‑‑‑Clover seeds‑‑­Demand of sales tax on local supply of imported clover seeds which was exempt from sales tax‑‑‑Validity‑‑‑Goods enjoying exemption under S.13(1) of the Sales Tax Act, 1990 go out of the purview of Sales Tax Act, 1990, and the supply of such goods at all the stages of the market mechanism did not fall within the purview of taxable supply being the supply of goods which were exempt from payment of sales tax under S.13 of the Sales Tax Act, 1990 and consequently such goods go out of the scope of S.3(1) of the Sales Tax Act, 1990‑‑‑Demand of sales tax from the appellant in respect of goods which were out of the scope of sales tax provisions was not justified‑‑‑Order had not been passed in accordance with law and the same was set aside by the Appellate Tribunal.

Army Welfare Sugar Mills v. Federation of Pakistan 1992 SCMR 1652 and Messrs Premier Distributors v. Federation of Pakistan 2002 PTD 654 rel.

A.S. Jaffery for Appellant.

Ali Gohar Jaffery and Iftikhar Hussain Inspectors for Respondent.

Date of hearing: 13th April, 2004.

2004 P T D (Trib.) 2290

[Customs, Central Excise and Sales Tax Appellate Tribunal]

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

C. A. No.2353/LB of 2001, decided on 23rd January, 2002.

Customs Act (IV of 1969)‑‑‑--

‑‑‑‑S. 168‑‑‑Seizure of things liable to confiscation‑‑‑Remote Control Instrument‑‑‑Confiscated remote controls which were not released on the import documents produced by the appellant did net carry brand, marks and numbers of the seized Remote Controls‑‑‑Seized Remote Controls carried the brand name with specific model written thereon‑‑‑Validity confiscated Remote Controls carried brand name with specific model written on Remote Controls whereas there was no mention either of brand, marks and numbers of the Remote Controls in the bill of entry and other documents relied upon by the appellant‑‑Such documents diva not contain any such identification marks and in the absence of such details, it was difficult rather impossible to connect the goods imported vide the bill of entry and other documents relied upon by the appellant with the goods confiscated‑‑‑No infirmity was found in, the order by the Appellate Tribunal which fulfilled the legal requirements of a valid order.

Malik Muhammad Arshad for Appellant.

Imran Tariq, D.R. for Respondent.

Date of hearing: 23rd January, 2002.

2004 P T D 35

[Federal Tax Ombudsman]

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

Messrs TREET CORPORATION LIMITED

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. C-92 of 2003, decided on 16th July, 2003.

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

-----S. 9(2)(b)-----Sales Tax Act (VII of 1990), Ss.10 & 67---Jurisdiction, functions and powers of the Federal Tax Ombudsman---Department filed Appeal after receiving notice from the Office of Federal Tax Ombudsman and challenged the jurisdiction of Federal Tax Ombudsman ---Validity---Appeal was not pending at the time the complaint was filed, the bar of jurisdiction under S.9(2)(a) of the Establishment of Office of Federal Tax Ombudsman Ordinance, 2000 was not attracted---Such was a crude attempt on the part of the Collector and staff members to circumvent the provision of law with mala fide intention to deprive the complainant of his claim and was also an attempt to obstruct the proceedings before the Federal Tax Ombudsman and to forge a defence to delay and frustrate the claim---Such was nothing but abuse of process of law for which all those officers and staff members who contributed in filing such appeal should be held responsible---Serious view of such mala fide act was being taken in which attempt was made to obstruct the course of justice-­Such attitude of the officials of the Revenue Division was highly depreciated.

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

----Ss. 10 & 67---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss.2(3) & 22---Refund---Recovery of sales tax not paid on disposal of fixed assets---Deputy Collector (Adjudication) decided that amount was refundable and advised to file claim for refund-­Refusal to refund such amount of sales tax illegally recovered by filing appeal on receipt of notice from the Office of Federal Tax Ombudsman-­Validity---Allegation of maladministration for not refunding the amount of sales tax was established---Federal Tax Ombudsman recommended that Central Board of Revenue to direct the Collector to refund the amount due to the complainants within thirty days if any interim order/ stay order has not been passed by the Appellate Tribunal.

Muhammad Arif, Assistant Manager.

Sanaullah Abro, Assistant Collector (Collection and Enforcement), Hyderabad.

M.R.K. Warsi, Superintendent.

2004 P T D 57

[Federal Tax Ombudsman]

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

ABDUL KARIM through Taxman Law Associates, Karachi

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 691-K of 2003, decided .on 12th July, 2003.

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

----Ss. 56, 62, 65, 13(1)(aa), 111 & 116---Finance Ordinance (XXI of 2000)---Civil Procedure Code (V of 1908), O.V, Rr.17 & 20--­Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Notice for furnishing return of total income---Service by affixture---Addition under S.13(1)(aa) of the Income Tax Ordinance; 1979 being income front sale, purchase of vehicles---Denial of service of notice---Validity---Assessment was completed without proper service of statutory notices on the complainant--Prima facie maladministration was committed by the Assessing. Officer---Preliminary objection raised was overruled as maladmnistration was established and the Federal Tax Ombudsman had jurisdiction to investigate the matter---Federal Tax Ombudsman recommended that the Commissioner concerned be asked to remand the case under S.122 of the, Income Tax Ordinance, 2001 to the Taxation Officer for refraining the assessment for the year 1994-95 after proper service of statutory notices.

Khalid Yousuf and Hussamul Haq for the Complainant.

Ejaz Asad Rasul, I.A.C. Range-I and Syed Nizamuddin, ITO, Circle-C-21, Zone-C; Karachi for, Respondent.

2004 P T D 75

[Federal Tax Ombudsman]

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

Messrs ASKARI CEMENT LTD., RAWALPINDI

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 1117 of 2002, decided on 23rd November, 2002.

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

----S. 9(2)---Jurisdiction, functions and powers of the Federal Tax Ombudsman---Allegation of maladministration ---Preliminary objection was that appeal lay against such order to Tribunal and the jurisdiction over the complaint was barred in terms of S.9(2) of the Establishment of Office of Federal Tax Ombudsman Ordinance, 2000---Validity--­Since the maladministration was alleged for passing an order arbitrarily against the law the question of jurisdiction could be answered only after necessary investigation---Where maladministration was alleged the jurisdiction of the Federal Tax Ombudsman was attracted independent of the assessment made---Jurisdiction of the Federal Tax Ombudsman to investigate any allegation of maladministration on the part of the Revenue Division or any tax employee in respect of any decision taken, process employed, recommendation made or act done was unquestionable---Where the allegation was proved, the jurisdiction was exercised to recommend appropriate remedy possible and available under the law; compliance of recommendation was mandatory unless a valid reason was offered for not complying with the same.

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

----Ss. 7, 3, 6, 18, 22, 26, 33(2)(CC), 36 & 59---C.B.R. Letter C. No.1(111)STT/2000, dated 13-7-2002---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)--­Determination of tax liability---Exemption---Levy of tax---Adjustment of input tax paid on account of different general store items/utility bills within a period prior to levy of sales tax---Disallowance of in defiance of Tribunal's order ---Validity---Maladministration was proved in passing the Order-in-Original which was not only barred by time but invalid even otherwise on account of being in deliberate defiance of the ratio of decisions of Tribunal---Federal Tax Ombudsman recommended that Central Board of Revenue, of its own motion should call for the record of adjudication proceedings in the case, under S.45-A of the Sales Tax Act, 1990 and pass such order as it may think fit to vacate the illegal Order-in-Original.

Tahir Razzaq Khan, F.C.A. for the Complainant.

Amar Rashid, DCIT for Respondent.

2004 P T D 88

[Federal Tax Ombudsman]

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

MUHAMMAD AFZAL WARRAICH

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 658 of 2003, decided on 12th.July, 2003.

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

----Ss. 96 & 156(2)---Income Tax Rules, 1982, R.5(b)---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)-­Refund ---Complainant/assessee was an employee---Demand of – refund created--Addition under R.5(b) of the Income Tax Rules, 1982 for rent free accommodation---Manipulation of notices---Appeal finally decided in favour of assessee---Refund was issued---Complaint against mis­conduct of Assessing Officer and for payment of additional compensation---Validity---Refund admittedly, had been. made to the complainant/assessee---Complainant was entitled to additional compensation for : delayed payment---Complaint was mainly about misconduct of Assessing Officer to whom notice was not issued---Federal Tax Ombudsman refrained from passing any order against such Assessing Officer ---Maladministration had been proved---Federal Tax Ombudsman recommended that additional compensation be paid to the complainant/assessee in respect of Rs.1,375 refunded on 10-8-1999 and Central Board of Revenue to take disciplinary action against the Special Officer on the complaint filed by the complainant.

Complainant in person.

Gul Rehman, Taxation Officer.

2004 P T D 91

[Federal Tax Ombudsman]

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

Messrs ARGONAFITS (PVT.) LIMITED, KARACHI

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.C-514-K of 2003, decided on 7th July, 2003.

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

----S. 33---Light House Act (XVII of 1927), S. 19---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)-­Refund ---Light dues---Payment of light dues in respect of vessels not calling at port of Karachi but at Port Bin Qasim where, the complainant/assessee paid the said dues again---Claim of refund of such amount---Non-payment of, on the pretext that light dues not being customs levy, the Collectorate was not empowered to refund the same--­Validity---Federal Tax Ombudsman appreciated the fact that when the matter was referred to the Assistant Collector, he acted very promptly and informed the office that he had already sanctioned the refund and it would be paid to the complainant/assessee---Complainant /assessee, however., did not seem confident that the promise would be fulfilled ­Federal Tax Ombudsman recommended that Chairman, Central, Board of Revenue should direct the Collector of Customs (Appraisement) to keep a very close watch on the working of the C.A.O.

M. Ismail, Managing Director.

Sajjad Raider Jhinjhin, Assistant Collector of Customs (Appraisement).

2004 P T D 96

[Federal Tax Ombudsman]

Before Justice (Retd.) Saleem Akhtar, Federal Tax Ombudsman, Messrs COMPUNET ONLINE (PVT.) LTD., KARACHI

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaints Nos. 1110 to 1112-K of 2003, decided on 12th September 2003.

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

----S. 96---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Refund---Inordinate delay for issuance of determined refund on the pretext that credit claimed in returns for tax withheld at source was not verifiable from record and such verification was under process and as soon as credits were verified from Data Processing Centre the assessment orders would be rectified and refunds so determined would be issued---Validity--­Maladministration on account of inordinate delay in issuing refund was proved---No valid reason was given for withholding the said -refund--­Maladministration was also proved for deliberate inaction to verify the tax credit claimed on account of withholding of tax---Verification of tax credits claimed on account of taxes withheld, was lingering on despite the directions of the President of Pakistan to implement the recommendation made by the Federal Tax Ombudsman in special report submitted to the President on "Accounting of Income Tax collection"­ Federal Tax Ombudsman recommended that the Commissioner, Companies should ensure that the determined refunds are issued forthwith and the Member Income Tax, Central Board of Revenue to submit a report on implementation of recommendations made in the special report on accounting of income-tax collection.

Abdul Razak for the Complainant.

Khalid M. Lodhi Taxation Officer for Respondent.

2004 P T D 100

[Federal Tax Ombudsman]

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

Messrs ANM TRADING CO., KARACHI

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.C-401-K of 2003, decided on 7th July, 2003.

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

----S.9---Customs Act (IV of 1969), S.25(10)---Jurisdiction, functions and powers of the Federal Tax Ombudsman---Objection was that since the complaint was about assessment/valuation of an imported consignment in respect of which an order was passed after proper hearing, its cognizance was beyond the purview of Federal Tax Ombudsman in terms of S.9(2)(b) of the Establishment of Office of Federal Tax Ombudsman Ordinance, 2000---Validity---Such contention was misconceived, based on lack of understanding the problems of the importers, misconception about the unbridled powers of Customs Officials to determine the customs values at will, and a disdainful attitude towards the public complaints---Objection, held; was based on invalid grounds and was unacceptable.

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

----Ss.25(10) & 81(2)(4)---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Valuation of imported and exported goods---Import of rubber conveyer belt---Provisional assessment---Final assessment after expiry of prescribed period of one year---Value of goods was based on an inquiry made by the Commercial Counselor of Pakistan in the country of origin and had not been obtained from the manufacturers/exporters but from a local trader which could not be applied to determine the value of export goods---Validity---Collector of Customs should disregard the advice of Valuation Department and re­examine the valuation aspect on the basis of evidence of imports of identical/similar goods, from the same country of origin, of the same specifications and usage---Complainant/importer should have been afforded opportunity to furnish evidence in support of declared value and then to take an impartial decision---Assessment of goods in warehouse was not completed and bill of entry was not returned---Matter needed careful examination by the Collector of Customs and in case it was established that the assessment had been completed after two years, the importers would also be entitled to remission of penal surcharge--­Federal Tax Ombudsman recommended that Central Board of Revenue to direct the Collector of Customs to finalize the assessment of the first part of the consignment comprising four bales on the basis of the declared value; set aside the assessment order issued by the Deputy Collector of Customs and direct the Collector of Customs to re-examine the valuation aspect of the conveyer belts and decide the valuation within one month.

Muhammad Aziz, Proprietor.

Ch. Muhammad Rafiq, Consultant.

Zia-ul-Hassan for the Complainant.

Nur Muhammad, Advisor.

Ashhad Jawwad, Deputy Collector of Customs (Appraisement).

2004 P T D 113

[Federal Tax Ombudsman]

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

Messrs GOODWILL INTERNATIONAL

Versus

SECRETARY, REVENUE DIVISION, CENTRAL BOARD OF REVENUE, ISLAMABAD

Complaint NO.C-59-K of 2003, decided on 10th April, 2003.

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

----S.122---Income Tax Rules, 2002, R.68---Income Tax Ordinance (XXXI of 1979), S.62, 143-B & 80-C---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 1000), S.2(3)--­Amendment of assessment---Assessment was completed under S.62 of the Income Tax Ordinance, 1979 after due verification and. obtaining Inspector's report regarding manufacturing---Refund was created--­Application for issuance of refund---Show-cause notice for amendment of assessment under S.122 of the Income Tax Ordinance, 2001 which was replied 'in detail--Second show-cause notice on different ground that certain quantity of imported goods was sold in the market without any processing/value addition and the complainant/assessee should have filed statement under S.143-B of the Income Tax Ordinance, 1979 as the tax deducted at import stage was to be treated as full and final discharge of liability as provided in S.80-C of the Income Tax Ordinance, 1979--­Validity---Facts obtaining on record established the allegation that the roving and rambling enquiries started when the complainant/assessee pressed for issuance of determined refund--Refund was determined on completion of assessment under S.62 of the Income Tax Ordinance, 1979---Department started issuing notices under S.122 of the Income Tax Ordinance, 2001 for amending the original assessment which had resulted in the creation of refund after the complainant/assessee applied for issuance of refund---Taxation Officer could not establish the charges and did not pursue the proceedings initiated for amending the assessment order---Subsequently, power was delegated to Senior Additional Commissioner and he accordingly issued notice under S.122 of the Income Tax Ordinance, 2002 again raising absolutely different issues and discrepancies---Facts clearly established the element of maladministration ---Federal Tax Ombudsman recommended that the notice issued by the Additional Commissioner under S.122 of the Income Tax Ordinance, 2001 be withdrawn and the refund already determined be issued within 30 days.

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

----S.122---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000)---Amendment of assessment---Definite information---Section 122 of the Income Tax Ordinance, 2001 did not empower the Taxation Officer to amend the assessment order merely on the basis of change of opinion, conjecture and presumption--­Statutory condition of definite information regarding the incorrectness of the assessment must be fulfilled before initiating the proceedings.

Khawaja Manzoor Ahmed and M. D. Khan for the Complainant.

Agha Hidayatullah, Additional Commissioner Range III, Zone-C, Karachi for Respondent.

2004 P T D 119

[Federal Tax Ombudsman]

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

Messrs PRIME INTERNATIONAL, LAHORE

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.C-780 of 2003, decided on 21st July, 2003.

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

----S.25-B---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Fixation of value for imports and exports---Prices of televisions imported were fixed by the Central Board of Revenue---Complaint against for fixing over value ---Validity--­Complainant expressed disagreement with the provisional value of $ 105 for assessment 21 " TV and contended that local manufacturers were deliberately over-invoicing the imports of kits of TV sets with a view to justify their allegation that the imports of TV sets were under-invoiced--­Federal Tax Ombudsman recommended that Central Board of Revenue direct the Controller of Customs Valuation to obtain reliable export prices from the suppliers of the country of origin; elicit the evidence of values from the importers/assemblers and. the Customs Authorities; carefully examine the collected valuation data and decide the fair customs values of the TV sets of Chinese origin and advise the Customs Collectorates accordingly for assessment.

Muhammad Ahsan Sheikh, Partner.

Ashhad Jawwad, Deputy Collector of Customs (Appraisement).

2004 P T D 129

[Federal Tax Ombudsman]

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

Major (Retd.) Kh. MUHAMMAD YOUSAF

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.454 of 2003, decided on 12th July, 2003.

Establishment of Office of Federal Tax Ombudsman (XXXV of 2000)------

----S. 2(3)---Customs Act (IV of 1969)---Maladministration---Alle­gation against clearing agent and Customs Staff for taking bribe----First Appellate Authority directed that allegation of corruption against the Customs Staff and the clearing agent be investigated in depth by the Adjudicating Officer---Inquiry was, neither properly handled nor concluded---Validity---Allegations remained ` uninvestigated---Inquiry appeared to have been brushed under the carpet ---first Appellate Authority, taking notice of allegations of corruption against the clearing agent and the staff, directed that an inquiry be held to determine the truth but his order, like the inquiry itself, had suffered from inattention and red tape---Grievances of the complainant had remained unaddressed--­Such was a case of stark maladministration ---Federal Tax Ombudsman recommended that Revenue Division direct the concerned Authority to conduct an impartial inquiry into the complaint and complete the same promptly to determine the truth in the matter for taking appropriate action on the complaint filed by the complainant; identify the officers responsible for delay in conducting and completing the inquiry despite Collector Appeal's express direction to look into the allegations of corruption for appropriate action against them.

Complainant in person.

Ms. Tayyeba Kayani, A.C. Customs, Lahore for Respondents.

2004 P T D 133

[Federal Tax Ombudsman]

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

Messrs HAYAT INDUSTRIES (PVT.) LIMITED, KARACHI

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.C-786 of 2003, decided on 14th July, 2003.

Customs Act (IV of 1969)---

----S.35---Sales Tax Act (VII of 1990), S.66---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Duty drawback---Deduction from---Deduction from duty drawback by the Customs Authorities on the wrong instructions of the Sales Tax Department---Claim of such refund---No action on numerous letters of the complainant---Validity---Sales Tax Department gave wrong instructions to the Export Collectorate for deduction in respect of the dues already paid by the complainant---Sales Tax Department neither replied to the letters of the complainant nor issued refund and amounts deducted from their duty drawback claims remained with the Department---Payment had been made when the complaint was filed with the Office of Federal Tax Ombudsman---Such was a clear case of neglect, inattention, inordinate delay and ,inefficiency on the part of the Sales Tax Officials which amounted to maladministration--­Federal 'Tax Ombudsman recommended that Central Board of Revenue may institute an inquiry to identify the reasons for ordering deduction when the payment had been promptly made by the complainant; ascertain the circumstances under which no action was taken on their letters requesting and reminding for payment and take suitable action against the officials responsible for maladministration.

Sheikh Shaukat Hayat, Director.

Feroze A. Junejo, Deputy Collector of Customs (Exports).

Dr. Abdul Rehman Rind, Assistant Collector of Sales Tax (East).

2004 P T D 141

[Federal Tax Ombudsman]

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

STAND PHARM (PVT.) LTD., LAHORE

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.707-L of 2003, decided on 15th July, 2003.

Sales Tax Act (VII of 1990)---

----Sixth Sched., Item No.43---Customs Act (IV of 1969), Ss..179, 195 & 205---Drugs Act (XXXI of 1979)---S.R.O.349(I)/85 dated 15-4-1984--­S.R.O. 373(I)/2000 dated 17-6-2000---S. R. O. 552(I)2000, dated 10-8-2000---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Exemption---Concession from customs duty and sales tax ---Complainant/assessee did not mention on the bill of entry that "goods will not be used for any purpose other than the manufacture of pharmaceutical products registered as drugs" which was the condition of the relevant S.R.O.---Claim of refund of excess charged duty and taxes---Validity---After cancellation of S.R.O.349(I)/85 dated 15-4-1984, complainant was not entitled to benefit of S.R.O. 552(I)/2000 dated 10-8-2000---Complainant did not make any declaration as stipulated in Condition No.1 of the said notification at the time of clearance of goods---ADC Health's invoice could not be a substitute of the declaration stipulated in the notification-- -Both Notifications S.R.O.349(I)/85 (defunct) dated 15-4-1984 and S.R.O.552(I)/2000 dated 10-8-2000 having allowed conditional concessions the benefit would accrue under the latter notification if its conditions had been fulfilled---Complainant was neither entitled to the concession/ exemption under S.R.O. 349(I)/85 dated 15-4-1984 because it was not in the field at the time of filing of bill of entry nor it could avail the benefit of S.R.O.552(I)2000 dated 10-8-2000 for failure to fulfill the prescribed conditions of the S.R.O.---No maladministration was observed and the complaint was closed by the Federal Tax Ombudsman.

Gatron Industries Limited v: Government of Pakistan 1999 SCMR 1072 ref.

Shahzad Wazir, Consultant for the Complainant.

Ms. Ambreen Tarar, A.C., Customs and Muhammad Arshad, Superintendent Customs, Dryport, Lahore for Respondents.

2004 P T D 145

[Federal Tax Ombudsman]

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

Messrs HALIM HOSPITAL (PVT.) LTD., KARACHI

Versus

R.C.I.T., CORPORATE REGION, KARACHI and 3 others

Complaints No.C-730-K and C-731-K of 2003, decided on 9th July, 2003.

Income Tax Ordinance (XXXI of 1979)---

----Ss.61 & 62(1)---C. B. R. Circular No. 13 ITP/1951, dated 28-5-1951--­C.B.R. Circular No.10 of 1975, dated 14-7-1975---C.B.R. Letter C. No.1(3)IT-9/82(3), dated 6-4-1983---C.B.R. Circular No.4(6)IT-3/88, dated 17-2-1991---C.B.R. Circular No.7(2)DT.14/94, dated 3-7-1994---C.B.R. Circular No.7(2)DT.14/94, dated 24-1-1984---C.B.R. Letter No.SO.1/1(6)/P-2001-2002/6078, dated 29-4-2002---Income Tax Rules, 1982, Rr.28 & 29---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Issuance of notices allowing unreasonable short time for compliance---Submission of books of accounts and all details ---Non-finalization of assessments---Non-transfer of books of accounts to successor---Lame excuses---Estimation of receipts without evidence ---Validity---Maladministration on account of causing undue delay in passing assessment order was proved--­Maladministration in the decisions to estimate receipts of the complainant and disallowing the claims of expenditure as baseless and arbitrarily oppressive and excessive figures in total disregard to the established practice in complainant's own case was also proved---Federal Tax Ombudsman recommended that the Commissioner to proceed in accordance with the relevant Rules against the DCIT, who retained the books of account and did neither hand over the same to his successor while making over the charge nor to his successor's successor, who took over charge; the Commissioner proceeds in accordance with the relevant Rules against the Assessing Officer who did not take due note of the written submission that assessee's books of accounts were in the custody of Assessing Officer and took almost four months to write to his predecessor that he did not hand over assessee's books of account while making over the charge; the Commissioner to note that it was his legal obligation to take suo motu cognizance of carelessness and negligence of the concerned officers and he needs to be more vigilant in monitoring the performance of Officers working under him and the Commissioner to take suo motu cognizance of the effect of maladministration found in the decisions leading to assessments of income for assessment years 2001-2002 and 2002-2003 on the respective assessment orders in order to provide relief due to the complainant in, exercise of powers vested in him by the law.

Haider Naqi for the Complainant.

M. Azhar Ansari, DCIT, Circle-07, Cos-V for Respondents.

2004 P T D 161

[Federal Tax Ombudsman]

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

Messrs IHSAN COTTON PRODUCTS (PVT.) LIMITED

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.C-64-K of 2003, decided on 10th April, 2003.

Customs Act (IV of 1969)---

----Ss.33 & 37---Sales Tax Act (VII of 1990), S. 10---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.9(2)--S.R:O. 1045(I)/91---Refund---Export of textile products---Refund of sales tax against exports of cotton waste was allowed---Refund allowed was declared inadmissible in post sanction audit---Amount was recovered from duty drawback claims by the Department---Department filed appeal before High Court---Complaint for non-issuance of refund--­ Validity---Tribunal decided the matter twice in favour of the complainant/assessee, but the Customs Department did not refund the amount of sales tax on the plea that the matter was sub judice before the High Court---Issue in complaint and before the High Court was the same---No .interference could be made in circumstances---Particulars of appeal were not provided nor the officials of the Department seem to be aware of the status of the pending proceedings---Federal Tax Ombudsman recommended that Central Board of Revenue should issue order to the effect where the Department takes the plea that it has filed any appeal or proceeding which was pending it must give full particulars alongwith the copy of the appeal/petition and after filing appeal or petition before Tribunal, High Court or Supreme Court, the Department should serve a notice intimating the assessee about the filing of appeal/petition.

Muhammad Iqbal, Manager Import.

Feroze A. Junejo, Deputy Collector of Customs (Exports).

2004 P T D 164

[Federal Tax Ombudsman]

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

IMTIAZ TRADING COMPANY (RICE DEALERS), SHEIKHUPURA

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.881-L of 2003, decided on 18th September, 2003.

Income Tax Ordinance (XXXI of 1979)---

----S. 63---Income Tax Ordinance (XLIX of 2001), S.122A--­Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Maladministration---Rice husking business---Rate of gross profit---Arbitrary application of rate---Validity---Application of GP at 15 % was discriminatory in view of identical cases, where GP rate of 8% was applied in a case referred by the assessee --Still another case, decided by the First Appellate Authority, GP rate of 3 % was applied--­GP rate of 5 % was the history of the assessee---To remove the arbitrariness which amounted to "maladministration" Federal Tax Ombudsman recommended that Commissioner may amend the assessment by resort to S. 122A of the Income Tax Ordinance, 2001 to ensure that correct amount of tax was levied on the taxpayer's income.

Ch. Muhammad Aslam for the Complainant.

M. Anwar Sheikh, D-CIT for Respondent.

2004 P T D 171

[Federal Tax Ombudsman]

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

Messrs FAZAL SWEETS, LAHORE

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.424-L 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 15-6-2002, para. 9(a)(ii) [Self-Assessment Scheme] ---C.B.R. CircularNo.7(7)/ S.Asst/2002 dated 17-12-2002---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Self-assessment--­Setting apart---Assessment yeas 2002-2003---Setting apart of case on the ground that gross profit rate was low as compared to identical cases and turnover was not adequate from four outlets---Validity---Regional Commissioners of Income Tax were to determine whether the returns represented "revenue potential" and were further expected to be in possession of "evidence, information or reason to believe" that particulars of income had been suppressed-.--None of the criterion was followed when return was set apart---Selection was to be based on material evidence and not on frivolous grounds---Maladministration was glaring as guidelines prescribed by the Central Board of Revenue were not faithfully adhered to---Federal Tax Ombudsman recommended that order for setting apart passed by the Regional Commissioner of Income Tax be withdrawn and the return of the complainant for the assessment year 2002-2003 be accepted under Self-Assessment Scheme.

2002 PTD 1895 ref.

Muhammad Shahid Baig for the Complainant.

Ghulam Rasool (D-CIT) for Respondent.

2004 P T D 184

[Federal Tax Ombudsman]

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

IJAZ AHMAD, EX-MANAGING DIRECTOR, CROWN ENGINEERING (PVT.) LTD., LAHORE.

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 1445-L of 2002, decided on 11th June, 2003.

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

----S.10(3)---Income Tax Ordinance (XXXI of 1979), S.96---Procedure and evidence---Aggrieved person---Filing of complaint by the Ex ­Managing Director of the Company for refund---Validity---Complainant himself claimed to be an Ex-Managing Director which disentitled him to claim refund because refund was determined in the case of the "Company" and only the present management or its Managing Director could legally claim the refund and could file the complaint under S.10(3) of the Establishment of Office of Federal Tax Ombudsman Ordinance, 2000---Law specifically provided that the `person aggrieved' was entitled to file the complaint-Person aggrieved' was the Company hence only principal officer of the Company was competent to move the complaint--­Present complainant was a stranger to the proceedings and not authorized to pursue the matter---Complaint was closed by the Federal Tax Ombudsman.

Wasim Ismail (ITP) for the Complainant.

Muhammad Jamil Bhatti (D-CIT) for Respondent.

2004 P T D 185

[Federal Tax Ombudsman]

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

Ch. MUHAMMAD ASLAM CHATTHA, ADVOCATE

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 96-L of 2003, decided on 11th June, 2003.

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

----S.2(3)---Maladministration---Non-payment of fee of Advocate for attending cases for two years---Claim for payment of professional fee was fired almost two years back which was not paid---Effect---Such constituted maladministration ---Regional Commissioner of Income Tax and Authorized: Representative of Revenue admitted that complainant had not been paid professional fee so far---Letters of Department regarding furnishing of duplicate bill indicated that Commissioner of Income Tax took no action for almost two years on the request of the complainant--­Federal, Tax Ombudsman recommended that the complainant be paid his professional charges as per rules forthwith.

Nemo for the Complainant.

Amjad Iqbal, IAC-for Respondent.

2004 P T D 194

[Federal Tax Ombudsman]

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

Messrs ASGHAR BAT MAKER, MUBARAKPURA, CIRCLE-21, SIALKOT

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 183 of 2003, decided on 20th May, 2003.

(a) 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] ---C.B.R. Circular No.7(7)/S.Asst/2002, dated 17-12-2002---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Self-assessment---Setting apart--­Assessment year 2002-2003---Word "including" used in C.B.R. Circular No.7(7)/S.Asst/2002 dated 17-12-2002---Significance---Selection of a case for total audit for the reasons other than those specified in the C.B.R. Circular No.7(7)/S.Asst/2002 dated 17-12-2002---Validity--­Department had taken pains in explaining the word "including" used in C.B.R. Circular No.7(7)/S.Asst/2002 dated 17-12-2002 and had cited judgments of superior Courts to establish, their point of view---Facts of the case showed that such observations and explanations were not relevant.

(b) 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] ---C. B. R. Circular No.7(7)/S.Asst/2002, dated 17-12-2002---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Self-assessment--­Setting apart---Assessment year 2002-2003---Setting apart of a case for total audit for the reason that Gross Profit declared was less than the. other parallel cases---Validity---Department neither followed the parameters/guidelines provided by the Central Board of Revenue nor had any other authentic information or evidence to establish that the assessee had suppressed true particulars of income---Return was selected for audit arbitrarily ignoring the parameters laid down by the Central Board of Revenue or placing any other reliable evidence on record--­Maladministration seas thus established---Federal Tax Ombudsman recommended that Regional Commissioner of Income Tax, be asked to withdraw his impugned order and direct the concerned Assessing Officer to accept, the complainant's return for the year 2002-2003 ,under the Self-Assessment Scheme.

1973 P T D 19 and 1992 PTD 1285 ref.

Saeed Ahmad Shah for the Complainant.

Muhammad Arif Khan, I.A.C. and Khalid Mehmood, Special Officer, Circle-21, Sialkot for the Department.

Date of hearing: 20th May, 2003.

2004 P T D 200

[Federal Tax Ombudsman]

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

Lady Dr. SHAHZANA IMTIAZ, JHELUM

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 386 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 15-6-2002, para.9(a)(ii) [Self-Assessment Scheme]---C.B.R. Circular No.7(7)/S.Asst/2002, dated 17-12-2002-- Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Self-assessment --Setting apart--­Assessment year 2002-2003---Salary case having business income--­Setting apart for total audit---Validity---No basis existed for applying a different criterion for cases considered as salary cases in the context of para. 9 of Self-Assessment Scheme when in the Income Tax Ordinance, 1979 and also in relevant C.B.R. Circulars the criteria was, that salary cases were those in which salary income was more than 50% of the total income---Word "only" used in para. 9 of the Self-Assessment Scheme was in the context of property income and not salary income---Selection of the case for total audit was found to be contrary to the provisions of para. 9 of Self-Assessment Scheme and, therefore, invalid.

Complaint No. 1404 of 2002 ref.

(b) 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]---C.B.R. Circular No.7(7)/S.Asst/2002, dated 17-12-2002-- Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 20(10), S.2(3)---Self-assessment---Setting apart--­Assessment year 2002-2003---Setting apart of case for total audit on the. basis of previous years' assessments which were subsequently set aside by the Appellate Tribunal---Validity---No valid reason existed showing as to how such assessments which in fact, had been set aside and did not hold ground, could form a basis for selection of complainant's case for total audit when the income declared was higher than the income declared in earlier years---Selection of the case for total audit was considered invalid both on legal and factual grounds---Federal Tax Ombudsman recommended that assessee's return for the assessment year 2002-2003 be excluded from the cases selected for audit and be accepted under Self-Assessment Scheme.

Mir Ahmad Ali for Petitioner.

Raza Munawar, I.A.C. and Nasir Maqbool Hashmi, Taxation Officer, Jhelum for Respondent.

2004 P T D 224

[Federal Tax Ombudsman]

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

MUHAMMAD ZAFAR IQBAL, PROPRIETOR SHIEKH CORPORATION, KATCHERY ROAD, MULTAN

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 1468-L of 2002, decided on 2nd June, 2003.

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

----S.65---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Additional assessment---Roving and fishing enquiries---Law does not permit making roving and fishing enquiries for reopening the assessment under S.65 of the Income Tax Ordinance, 1979---Issuance of show-cause notice without prior approval of Inspecting Additional Commissioner was not legally maintainable.

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

----S.65---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)--Additional assessment---Purchase of property---Sale agreement was executed in the relevant assessment year 1994-95---Property was transferred in the name of .assessee in the assessment year 1997-98---Reopening of assessment year 1996-97 on the basis of such purchase of property---Validity---Sale agreement was executed on- 5-1-1994 which was relevant for the assessment year 1994-95---Property was transferred in the name of assessee in October, 1996 which related to assessment year 1997-98---No legal justification for reopening the assessment for the assessment year 1996-97---Facts had clearly established maladministration---Federal Tax Ombudsman recommended that notice under S.65 of the Income Tax Ordinance, 1979 issued on 1-4-2002 for the assessment year 1996-97 be withdrawn forthwith and appropriate action be taken strictly in accordance with law for the relevant year.

Inayat-ur-Rehman for the Complainant.

Aftab Alam, ALIT, Circle-15, Multan Zone, Multan.

2004 P T D 233

[Federal Tax Ombudsman]

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

Messrs FAIZ COLD STORAGE, DEFENCE ROAD, SIALKOT

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 1437-L of 2002, decided on 11th June, 2003.

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--­Assessment barred by limitation---Service of recovery notice be re completion of assessment---Validity---Failure in framing of assessment by prescribed date rendered the same barred by time---Instead of accepting declared position, some tampering seemed to have been attempted leaving discrepancies viz. (i) the date in the DCR, (ii) late issuance of notice under S.116 of the Income Tax Ordinance, 1979 and (iii) the disparity in the date of recovery notice---Such flaws occurred as cover-up was attempted by manipulating record which left some irreconcilable flaws which betrayed the manipulation---Federal Tax Ombudsman recommended that Commissioner by resort to S.122 of the Income Tax Ordinance, 2001 amend the assessment accepting the Return as no order was passed in the eye of law till 30-6-2002; a legally valid reassessment could be framed on or before 30-6-2002 as the assessment was set aside by the Commissioner of Income Tax (Appeals) on 10-5-2001; an enquiry should be conducted to identify the tax functionaries responsible for making the assessment time-barred for suitable disciplinary action against those found guilty and the said enquiry should be in addition to enquiry already in hand about, the delayed service of assessment order etc.

Nemo for the Complainant.

Abu Bakar (A-CIT) for Respondent.

2004 P T D 235

[Federal Tax Ombudsman]

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

Messrs U.S. APPARELS AND TEXTILE (PVT.) LIMITED

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.C-1269-K of 2002, decided on 14th December, 2002.

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

----S.37---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)(b)---Deductions made from the duty drawback without notice to the exporters and without intimating the reasons for deduction was arbitrary, unreasonable and unjust.

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

----S.37---Customs General Order 2 of 1999---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Drawback on goods used in the manufacture of goods which were exported---Deduction from payment of duty drawback without assigning any reasons---Validity---Such was a unique case of maladministration on the part of the Export Collectorate where the Authorities did not pay the full amount of rebate and did not disclose the reasons for the wrong deductions, the payment on the supplementary claims was inordinately delayed,, and eventually when they did sanction the supplementary claims, actual payment was not made on the illogical and flimsy pretext that the claim of refund of the deductions made in 1997 merited a low priority, after five years, in 2002---Federal Tax Ombudsman recommended that. Central Board of Revenue to admonish the Collectorate of Exports for illegally, without reasonable grounds, and arbitrarily delaying the sanction of genuine supplementary claims for two years and, in effect, for its unwillingness to make good the payment even after the lapse of almost five years; direct the Customs Authorities that when deduction from duty drawback claims is made on any account, a notice specifying reasons thereof should be issued with the cheque of the reduced amount and admissible supplementary claims should be processed, sanctioned and paid on priority basis as there is no justification for according these claims a low priority.

Mirza Muhammad Awais for the Complainant.

Feroze Alam Junejo, Deputy Collector of Customs (Exports).

2004 P T D 244

[Federal Tax Ombudsman]

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

FOOD CONCEPT (PVT.) LTD.

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 1431-L of 2002, decided on 8th July, 2003.

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

----S.126(1)---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Assessment order---Evidentiary value---Assessment order is an original document characterized as "cognizable evidence" as per provisions of S.126 (1) of the Income Tax Ordinance, 2001 so much so that "all particulars" contained in it are to be treated as correct.

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

----S.65---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Additional assessment---Definite informa­tion ---Change of opinion--- Assessment order contained the words "the balance-sheet was discussed"---Significance---Re-opening of assessment on the ground that property was trot sold out but leased out and denied the receipts of balance-sheet by the Department---Validity---Observations in assessment that "the Balance Sheet was discussed", indicated that mind was applied and conscious decision was taken with the result that any deviation now was a mere `change of opinion' especially when no definite or new evidence was secured subsequent to the framing of the assessment ----Assessee could not be blamed for the absence from Department's record of the Balance Sheet or the affidavit, which find mention in the assessment order---Facts, in circumstances, oust the legality of assumption of jurisdiction by resort to S.65 of the Income Tax Ordinance, 1979---Maladministration was occasioned by wrongful assumption of jurisdiction and the proceedings were contrary to law--­Federal Tax Ombudsman recommended that additional assessment proceedings initiated in the case of the assessee for the assessment year 1998-99 by issuing notice under S.65 of the Income Tax Ordinance, 1979 be dropped.

1997 PTD 47; 1995 PTD (Trib.) 580 and PLD 1997 SC 700 rel.

Ch. Anwar-ul-Haq for the Complainant.

Muhammad Nadeem Arif (D-CIT) for Respondent.

2004 P T D 630

[Federal Tax Ombudsman]

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

Malik ALLAHYAR KHAN

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.799 of 2003, decided on 2nd September, 2003.

Income Tax Ordinance (XXXI of 1979)---

-- First Sched., Part I---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S. 2(3)---Rebate---Assessee being above 65 years, rebate at 50% of the tax was neither allowed by the Assessing Officer nor such ground taken in appeal was considered by the First Appellate Authority---Validity---Silence of order of First Appellate Authority about the ground of appeal taken by the assessee regarding rebate amounted to maladministration ---Complainant/assessee was legally entitled to a 50% rebate as provided in Part I of the 1st Sched. to the Income Tax Ordinance, 1979---Federal Tax Ombudsman recommended that assessment orders pertaining to assessment years, 1997-98, 1998-99 and 1999-2000 be amended by the Competent Authority and allow the tax rebate after ascertaining the age of the complainant/assessee.

Nemo for the Complainant.

Raza Munawwar, I.A.C., Jhelum and Nasir Maqbool Hashmi, Taxation Officer, Islamabad for Respondent.

2004 P T D 641

[Federal Tax Ombudsman]

Before Justice (Retd.) Saleem Akhtar Federal Tax Ombudsman

Messrs AZIZ GARMENTS INDUSTRIES, KARACHI

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.C-1014/K of 2003, decided on 13th September, 2003.

Customs Act (IV of 1969)---

----S. 35---Sales Tax Act (VII of 1990), S. 22---Manufacturing Bond Rules, Rr. 13 & 24---General Customs Order 2 of 1999---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Drawback of the exported goods---Export of garments---Claim of duty drawback on use of imported goods and locally purchased fabrics---Required documents were filed---Inordinate delay ---Non­issuance of such claim as a policy where inventory register under S.22 of the Sales Tax Act, 1990 had not been maintained---Validity---Details of locally purchased fabrics duly verified by the Customs Officials was provided to 'Customs Authorities---Copies of bills/vouchers were provided---Audit report, though claimed to be contrary to law, was also provided---Department was reminded about the pending claims but the assessees had not received any reply from the Department---Department came up with the explanation that the complainants did not maintain inventory registered under S. 22 of the Sales Tax Act, 1990 and the Collector (Exports) had taken a policy decision that all such cases would be rejected---Said policy decision was not notified through a public notice---Rebate claimed was rejected without issuing any, show-cause notice, any adjudication order or any intimation of proceedings to such effect---Such position clearly showed that the Customs Authorities had kept the rebate claims pending without .any justification for the last five years---Despite supplying all the documents, no action was taken---Such conduct portrayed a very dismal picture of the working of the Export Collectorate and deserved immediate corrective action---Federal Tax Ombudsman recommended the Central Board of Revenue to direct the Collector of Customs to decide the duty drawback claims filed in 1998 for payment of rebate within thirty days and the responsibility for inordinate and unjustified delay be fixed and appropriate disciplinary action to be taken against the delinquent officials within sixty days.

Mirza Muhammad Awais for the Complainant.

Feroze A. Junejo, Deputy Collector of Customs (Exports).

2004 P T D 673

[Federal Tax Ombudsman]

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

Messrs HILAL TRAVEL SERVICES, KARACHI

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.890‑K of 2003, decided on 21st August, 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)‑‑‑C.B.R. Circular No. 7 (7)/S. Asstt./2002, dated 17‑12‑2002‑‑‑Assessment year 2002‑2003‑‑ Return selected for total audit‑‑‑Setting apart of‑‑‑Allowing commission to customers‑‑‑History‑‑‑Setting apart the case on the ground that claim of payment of discount out of commission to the tune of 83.8% of the gross receipts was not acceptable without detailed verification, that percentage of commission paid out to the extent of 83% and to retain 17% of income was unusually high and not comparable with similar cases and that the claim could not be allowed merely on the basis that it was claimed/allowed in the past as there was no estoppel in law and every assessment was an independent assessment year‑‑‑Validity‑‑‑Department ignored the history of the case by merely referring to the principles of estoppel and res judicata without placing any evidence on record to justify the rejection of history of the case‑‑‑Percentage of discount allowed to the customers was accepted in the preceding years and was confirmed in appeals‑‑‑Much lower net profit rate at 4.22% was accepted in the past whereas in the year under consideration the declared net profit was 10.59%‑‑‑Contention that Department ignored the history of the case without proper justification thus was quite convincing ‑‑‑Para­meters laid down by the Central Board of Revenue had not been followed‑‑‑No evidence, information or reason was available to believe that the true particulars of income had been suppressed‑‑‑Neither any decline in the income nor disparity in expenses on utilities vis‑a‑vis income declared was found‑‑‑Complainant/assessee did not acquire any new assets during the year or incurred liability of 50,000 or more through non‑institutional loan‑‑‑Present case was therefore that of maladministration and the allegation of the complainant that the return was selected for audit in disregard of the parameters laid down by the Central Board of Revenue stood established‑‑‑Federal Tax Ombudsman recommended the Central Board of Revenue to direct the Regional Commissioner of Income Tax to withdraw and cancel his letter bearing No.SO‑1/7(8)P.57/2002‑2003/3562, dated 22-5‑2003 and direct the concerned Taxation Officer to accept the return of the complainant/assessee for the year 2002‑2003 under the Self‑Assessment Scheme.

Mazharul Hasan for the Complainant.

Abdul Sattar, D.C.I.T. for the Department.

2004 P T D 758

[Federal Tax Ombudsman]

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

Messrs AL‑FATHE KHAN ICE FACTORY

versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaints Nos. 1400/L and 1401/L of 2003, decided on 12th November, 2003.

Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑Ss. 154, 63/132 & 65‑‑‑Income Tax Ordinance (XLIX of 2001), S.122A‑‑‑General Clauses Act (X of 1897), S. 27‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)‑‑‑Non‑service of notices of Assessing Officer and order of First Appellate Authority‑‑‑Effect‑‑‑Ex parte re‑assessment ‑‑‑Validity‑‑­Service of notice was not in accordance with the provisions of S.154 of the Income Tax Ordinance, 1979 read with S. 27 of the General Clauses Act, 1897‑‑‑Assessee despite having participated in appellate proceedings before First Appellate Authority' had been deprived of his vested right to file an appeal due to improper dispatch of appellate order‑‑‑Whole process suffered from maladministration as the order was passed without serving proper notice thus depriving the complainant/assessee of being heard and defend the action‑‑‑Order was arbitrary and abuse of exercise of discretion which proved bias‑‑‑Federal Tax Ombudsman recommended that the order passed by the First Appellate Authority .be properly served on the complainant/assessee to enable him to file an appeal before the Appellate Tribunal and the Commissioner by resort to S.122A of the Income Tax Ordinance, 2001 should cancel the reassessment order framed on 16‑3‑2003 which also was framed without service of notice, as per procedure prescribed by law.

Ch. Muhammad Aslam for the Complainant.

Muzammil Hussain, (D‑CIT) for Respondent.

2004 P T D 1041

[Federal Tax Ombudsman]

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

Messrs B.P. INDUSTRIES (PVT.) LIMITED

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.C-1350-K of 2002.

Customs Act (IV of 1969)---

----Ss.20, 30 & 104---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S. 2(3)---Central Board of Revenue's power to grant exemption from duty in exceptional circumstances---Date for determination of value and rate of import duty-Clearance of bonded goods for home-consumption---Import of milk powder---Undue delay by the Department for clearance of such goods due to sending the sample to HEJ Laboratory for test in spite of its already having been tested by the Ministry of Food and Agriculture---Importer had to pay duty Q 25% instead of-20%---Claim of refund---Validity---Required certificates from the Ministry of Food and Agriculture had been obtained and presented to the Customs Authorities---No -justification existed to refer the matter to HEJ Laboratory and then again to obtain certificate from the Ministry of Food and Agriculture---If the Customs Authorities doubted the first certificates of the Ministry of Food and Agriculture, they could have referred the matter back to the Ministry for reconfirmation without unnecessarily referring to HEJ Laboratory---Such action resulted in inordinate and avoidable delay in clearance of goods, with loss to the importers on account of higher rate of duty on the clearance of goods---.such was clear case of maladministration on the part of customs Federal Tax Ombudsman recommended that Central Board of Revenue should send for the complete record of the refund claim of the complainant, examine the, circumstances surrounding the inordinate and avoidable delay in completion of assessment and release of the goods and decide the refund claim within forty-five days.

M. Afzal Awan for the Complainants

Nawabzadi Aliya Khanji, Assistant Collector of Customs (Appraisement) for Respondent.

2004 P T D 1091

[Federal Tax Ombudsman]

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

Messrs SAID REHMAN, SANITARY STORE, CHARSADDA

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 109 of 2003, decided on 10th October, 2003.

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

----Ss. 5(1)(d) & 59(1)---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S. 2(3)---Jurisdiction of income tax authorities---Self assessment---Transfer of case by Commissioner of Income Tax ---Assessee contended that Commissioner of Income Tax had no power to assign jurisdiction over cases where returns had been filed under Self-Assessment Scheme but the same related to normal cases---Validity---Law did not distinguish between a Self-Assessment Scheme case and other case ,for the purpose of assigning jurisdiction and the Commissioner of Income Tax was competent to assign/transfer jurisdiction to any officer subordinate to him including a Special Officer.

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

----Ss. 146, 148 & 62---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S. 2(3)---C.B.R. letters, dated 11-12-1993 and 19-6-1994---Power to enter and search business premises---Power to take evidence on oath, etc.---Visit of premises by the Inspector and report ---Assessee contended that Inspector could not visit the premises unless accompanied by his Assessing Officer and under S. 146 and 148 of the Income Tax Ordinance, 1979, he was also not authorized to record the statement of assessee on oath or otherwise without the permission of Central Board of Revenue---Validity---Under 5.146 of the Income Tax Ordinance, 1979, Inspector could make enquiry if so authorized---Inspector was duly authorized by the Inspecting Addition Commissioner to conduct spot and local enquiries and recording of statement of assessee on the spot was a simple statement in. which Inspector could record the facts about capital investment, quantum of sales, stock and expenses---Such statement could not be equated with a statement on oath because the Inspector did not give a formal oath to the assessee before recording the statement and in case of no account cases the information recorded in the statement was generally on estimate basis---Tampering or manipulation of statement by adding zeros to enhance the figures of sales or stock, as alleged, was not established--­Complaint was found without merit on the point of transfer of jurisdiction and conducting of enquiry by the Inspector.

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

----S. 63---Income Tax Ordinance (XLIX of 2001), S. 122--­Establishment of Office bf Federal Tax Ombudsman Ordinance (XXXV of 2000), S. 2(3)---Best judgment assessment---Lease of tractor---Income was declared as agricultural---Separate, addition was made on account of income from tractor by the Assessing Officer---Allegation -of tampering/manipulation of statement of assessee by adding zeros to enhance the figures or sales and stock---Validity---Although allegations had not been established but assessee pointed out certain areas of maladministration and its modus operandi---To check such malpractice, it was necessary to take effective steps by the Revenue Division--­Federal Tax Ombudsman recommended that necessary verification be made and if it is proved that the assessee does not own agricultural land, the assessment order be modified by the competent authority under S.122A of the Income Tax Ordinance, 2001 so that the assessee was not charged to tax on income which he did not earn; Central Board of Revenue to issue instructions to the effect that a carbon copy of the statement recorded during inquiry by the Inspector or any authorized/competent authority should be supplied by him to the person whole statement has been recorded, immediately after recording the statement and wherever the amount is mentioned it should be written both in figures and words.

Abdul Malik Khan, I.T.P. for the Complainant.

Ashraf Ali Marwat, T.O. for Respondent.

2004 P T D 1102

[Federal Tax Ombudsman]

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

Messrs TANVEER AHMED KHAN

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.651 of 2003, decided on 10th October, 2003.

Income Tax Ordinance (XXXI of 1979)---

----Ss. 19 & 63---Wealth Tax Act (XV of 1963), Preamble--­Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S. 2(3)---Income from house property, determination of--­Estimation of rental income was adopted on the basis of rent determined for wealth tax purpose---Validity---Adopting of rent for income tax purposes on the basis of rent determined for wealth tax assessment was illegal because for the purposes of wealth tax the value of the property was determined on the basis of reasonably expected rent even if the property had remained vacant throughout the year but in case of income tax where the property was let out the rent was to be taken on receipt basis---Property was actually let out---Assessing Officer was required to take into account the rent actually received by the complainant/assessee and in case he was of the opinion that the rent declared was not true he should have conducted an enquiry to find out the correct position---Assessing officer had not given any finding that the income declared was not true and correct and adopted the wrong basis for determination of rental income contrary to the provision of S.19 of the Income Tax Ordinance, 1979---Assessment order being without legal basis was arbitrary and contrary to law ---Maladministration having been established, Federal Tax Ombudsman recommended that Competent Authority to cancel the assessment order and fresh order be made after taking into account the facts and circumstances of the case and after affording the complainant/assessee a reasonable opportunity of being heard.

Nemo for the Complainant.

Safdar Iqbal, DCIT for Respondent.

2004 P T D 1108

[Federal Tax Ombudsman]

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

Messrs AL-RIAZ (PVT.) LTD., KARACHI

Versus

MUHAMMAD ISMAIL and 3 others

Complaint No.913-K of 2003 in Suit No.539 of 2000, decided on 12th August, 2003.

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

----S. 2(3) --- Maladministration --- Definition of---'Maladministration' is inclusive and exhaustive in nature which covers irregularities, illegalities and mismanagements.

(b) Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000)-----

----Preamble---Object of the Ordinance---Interpretation---Establishment of Office of Federal Tax Ombudsman Ordinance, 2000 is a welfare legislation to diagnose, rectify and redress injustice done to a person through maladministration by functionaries administering tax laws, its provisions must be interpreted liberally and principles of purposive interpretation should be applied to advance the object of the statute and not to frustrate it.

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

----S. 93---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000) S. 2(3)---Recovery of tax by Tax Recovery Officer---Attachment of complainant's property (belonging to some one else) by treating the same of assessee in default on the basis of agreement without any verification of title/ownership of such property--­Validity---Department relied on the assessment order which was confirmed by Appellate Authority, Tribunal, High Court and Supreme Court---On the basis of such assessment order the property had been i treated to be property of the assessee---Department did not make any proper, comprehensive and legal inquiry to determine the title and ownership of the said property---Department entirely relied on the agreement produced by the assessee but it seemed to be a self-serving document which the assessee did not contest at any form---None of the income-tax authorities and the Tribunal entered into the question of title and ownership of the property as it was never contested---Action taken by the department in issuing notice under S.93 of the Income Tax Ordinance, 1979 in circumstances, was contrary to law, illegal, arbitrary, unreasonable, perverse and based on irrelevant grounds which it also demonstrated negligence, inattention, inefficiency and inaptitude in discharge of duties by the tax functionaries---Finding was forwarded to the Registrar High Court, Secretary Revenue Division and parties to the complaint.

Tufail H. Ibrahim for the Complainant.

Sajid Nazir Malik, DCIT and Misri Ladhami, ACTT for Respondents Nos. 1 & 2.

Amin Uddin Ansari for Respondent No.3,

2004 P T D 1117

[Federal Tax Ombudsman]

Before Justice (Retd) Saleem Akhtar, Federal Tax Ombudsman

Messrs TAHIR RAZZAQUE KHAN & CO.

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.980 of 2003, decided on 13th September, 2003.

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

----Ss. 36(3), proviso---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), 2(3)---Maladministration--Request for supply of relevant audit report and date relied upon by the Department in making contravention case---Issuance/supply of the report by the Department after five reminders---Validity---Examination of records confirmed the allegation that complainant received the copy of audit report and other details after issuing five reminders---Copies of letters/reminder alongwith evidence of service had been furnished by the complainant---Neither Additional Collector nor his staff ever responded to-the application of complainant whereby he made request for supply of relevant audit report and data relied upon in making contravention case-­Reminder issued by the Complainant also failed to receive any response from the office of Additional Collector---Required information was provided to the Complainant's representative when he personally visited the office---Such was a glaring example of maladministration and the competent authorities must take notice of such lapses and issue instructions to the officers in field to attend to the letters of the tax payers promptly and also ensure that their instructions in this behalf were 'strictly followed by the officers.

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

----Ss. 36(3), proviso---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), 2(3)---Maladministration--­Refusal to receive adjournment application and even to hear telephone--­Passing of order---Validity---Complainant had produced a copy of telephone bill in support of the allegation that he tried to bring the matter to the notice of Additional Collector on telephone but the calls were not transferred to him by his staff---Copy of fax sent to Members Central Board of Revenue and Secretariat of Federal Tax Ombudsman was also furnished---Fact was established that Additional Collector and his staff refused to receive the adjournment application---Refusal was absolutely unlawful and unjustified---Receipt of letters in Government offices could not be refused under any circumstances---Additional Collector could refuse adjournment for valid reasons but he could not issue the directions to staff for refusing to acknowledge the receipt of application from the complainant---Such conduct amounted to maladministration---Federal Tax Ombudsman recommended that the Collector concerned be asked to cancel the order under S.45A of the Sales Tax Act, 1990 and transfer the jurisdiction of the case to another Additional Collector of the Collectorate for deciding the case afresh after providing reasonable opportunity to the Complainant to present his case and the official concerned who refused to acknowledge the complainant's application be reprimanded to be careful in future.

Tahir Razzaque Khan and Waseem Ahmad for the Complainant.

Yousuf Haider Orakzai, Deputy Collector (Adjudication) for Respondent.

2004 P T D 1125

[Federal Tax Ombudsman]

Before Justice (Retd) Saleem Akhtar, Federal Tax Ombudsman

GULSHER

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.844 of 2003, decided on 12th September, 2003.

(a) 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--­Estimate of income---Non-service of notice upon assessee---Finalization of assessment without placing any material on record to justify the estimate of income ---Validity---Maladministration committed by the Assessing Officer was established from the facts that assessments were not made properly and estimates of income made by the Assessing Officer were excessive and harsh---Federal Tax Ombudsman recommended that the Zonal Commissioner be asked to set aside the assessments under S.122 of the Income Tax Ordinance, 2001 and direct the concerned Assessment Officer to complete the same de novo after making proper inquiries and providing reasonable opportunity of being heard to the assessee.

(b) Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000)-----

----S. 9---Jurisdiction, functions and powers of the Federal Tax Ombudsman ---Maladministration---Where maladministration is estab­lished, the Federal Tax Ombudsman had jurisdiction to investigate the allegations of the complainant.

Complaint No. 1438 of 2002 rel.

Complainant in person with his brother Muhammad Hayat.

Raza Muhammad, IAC Jhelum Range and Muhammad Aslam for Respondent.

2004 P T D 1130

[Federal Tax Ombudsman]

Before Justice (Retd) Saleem Akhtar, Federal Tax Ombudsman

Messes FAROOQ GENERAL MERCHANTS, KARACHI

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.1031-K of 2003, decided on 25th August, 2003.

Customs Act (IV of 1969)---

----S. 33---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S. 2(3)---Refund to be claimed within six months---Excess payment. of customs duty---Claim of refund---Inordinate delay in issuance of such refund---Demand of original challan by the Customs Authorities after about five years ---Validity---Maladministration on account of inordinate delay in initiating the processing of refund claim as well as on account of non-observance of legal procedures regarding service of notices and keeping documentary evidence/acknowledge­ment of service of notices was proved---Federal Tax Ombudsman recommended that the concerned Deputy Collector Customs confirms issuance of refund as promised by him within ten days and Member (Customs), Central Board of Revenue issues directions, to all Collectors concerned to ensure that processing of refund claims is taken up within seven days of the filing of claim and each claim is settled within three months from the date of the claim.

Muhammad Yousuf for Complainant.

Saeed Akram, D.C. (Customs) for Respondent.

2004 P T D 1133

[Federal Tax Ombudsman]

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

LAL KHAN

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 900 of 2003, decided on 8th October, 2003.

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

----S. 9(2)(b)---Jurisdiction, functions and powers of the Federal Tax Ombudsman---Scope---Jurisdiction of Federal Tax Ombudsman was not ousted in cases where definite maladministration on the part of tax functionaries was found.

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

----Ss. 56 & 65---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S. 2(3)---Notice for furnishing return of total income---Foreign remittances---Assessment without issuance of notice under S.56 or 65 of the Income Tax Ordinance, 1979 --- Validity---' Assessment was quite illegal because it had admittedly been made without issuing any notice under S. 56 of the Income Tax Ordinance, 1979 requiring the filing of a return---No notice under S.65 of the Income Tax Ordinance, 1979 was issued either---Federal 'Tax Ombudsman recommended that the assessment be cancelled under S. 122A of the Income Tax Ordinance, 2001.

None for the Complainant.

Freedoon A. Sheik, ACIT for Respondent.

2004 P T D 1161

[Federal Tax Ombudsman]

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

Messrs S.M. HASSAN

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. C-745 of 2003, decided 11th August, 2003.

Sales Tax Act (VII of 1990)---

----S. 11(2)---Establishment of the Office of Federal Tax. Ombudsman Ordinance (XXXV of 2000), S.2(3)---General Clauses Act (X of 1897)--­Freedom of Information Ordinance (XCVI of 2002) Preamble--­Assessment--Evasion of tax---Complainant informed the sales tax authorities regarding evasion of sales tax and central excise duty on supply of telephone directories and on services rendered by Pakistan Telecommunication Company Limited on the basis .of audited accounts but sales tax authorities did not respond---Sales tax authorities contended that telephone directories were supplied to the subscribers without any charge and question of levy of sales tax thereon did not arise---Amount of duty collected against Revenue was erroneously printed in annual audit report---Complainant was not an aggrieved party and had no locus standi to complain against PTCL for alleged short-payment of duty/sales tax---Validity---Complaint against, Pakistan Telecommunication Company Limited about evasion of duty and taxes and sales tax on supply of telephone directories and services rendered, had not been substantiated by the complainant---Decision with regard to request for providing copies of sales tax returns and audit report rested with Pakistan Telecommunication Company Limited or the Central Board of Revenue---Since no maladministration had been reported by the complainant, the complaint was not maintainable and the same was dismissed by the Federal Tax Ombudsman.

S.M. Hassan the Complainant.

Amer Rashid Sheikh, Deputy Collector of Sales Tax, Islamabad.

2004 P T D 1164

[Federal Tax Ombudsman]

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

NEW AL-QAMAR TRADER

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 829-L of 2003, decided 13th August, 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)---C.B.R. Circular No.7 (7)/S. -Asstt./2002, dated 17-12-2002---Assessment year 2002-2003---Opportunity of being heard---Case was selected for total audit on the ground that net profit rate declared was low as compared to last year and also as compared to other parallel cases- --Assessee contended that no opportunity of being heard was provided before selection of case for Total Audit--­Department pleaded that hearing was afforded by asking the complainant/assessee to file an objection, which was complied and if Regional Commissioner of Income Tax had not given an opportunity of being heard, the complainant/assessee could have made a specific request for the same---Validity---Concept of affording hearing was not that reply to objection was filed but a personal hearing was to be given so that the party may present its case before the concerned authority---Central Board of Revenue in its Circular, dated 17-12-2002 directed that "Regional Commissioner of Income Tax must confront the assessees to provide them due opportunity of being heard and must indicate the basis of their proposed selection in the notices to be communicated to them"--­Department admitted that no hearing was afforded and only opportunity to file objection was granted which was complied with---Most important point was that the principles of natural justice which ought to have been followed in the case were not satisfied and Regional Commissioner of Income Tax circumvented this provision by issuing an ambiguous notice---Notice was not in accordance with the direction of the Central Board of Revenue because only reply to notice was sought and it was necessary to fix a date of hearing---Not necessary for the complainant/ assessee to ask for a hearing ---Assessee must be afforded in normal course right of hearing and specially when Central Board of Revenue had issued a clear direction in, this regard---Principle of natural justice and the directive of Central Board of Revenue thus had been violated---Violation of principles of natural justice rendered the decision, action and proceedings taken in pursuance of such decision void, illegal and contrary to law and on this ground alone the selection could not stand the legal scrutiny, which amounted to maladministration­--Federal Tax Ombudsman recommended that Central Board of Revenue/Regional Commissioner of Income Tax to withdraw order for selection of case for Total Audit, dated 28-3-2003 and accept the return for assessment year 2002-2003 under the Self Assessment Scheme.

2002 PTD 1918 and Complaint No. 1438 of 2002 ref.

Nadeem Ahmed, ITP for the Complainant.

Muzamal Hussain Butt, D-CIT for the Revenue.

2004 P T D 1216

[Federal Tax Ombudsman]

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

SHAUKAT ALI

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Review Application No. 80 of 2003 in Complainant No. 1493-L of 2002, decided on 11th July, 2003.

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

----S. 12---Defiance of recommendations ---Review---Effect---Recommen­dation of Federal Tax Ombudsman was not implemented and review application was filed---Validity---No stay was requested nor such order had been passed---By filing review application implementation of the decision/finding was not stayed---Department was bound to implement the recommendations unless specific order of stay had been passed by the Federal Tax Ombudsman---By taking lenient view it was directed by the Federal Tax Ombudsman that recommendation be implemented within fifteen days---Review application was rejected accordingly.

(b) Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000)-----

----S.12---Review---Filing of review application could not operate as stay of implementation of the decision unless specifically a stay order had been passed by the Federal Tax Ombudsman at the request of the party.

Malik Ghulam Rasool, DCIT for Petitioner.

2004 P T D 1222

[Federal Tax Ombudsman]

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

Messrs UNIQUE INTERNATIONAL

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complainant No. 1029-K of 2003, decided on 30th August, 2003.

Customs Act (IV of 1969)---

----S. 33---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S. 2(3)---Refund to be claimed within six months---Claim of refund---Non-processing of such refund over a period of six years---Validity---In spite of objection of Department that the claims were filed with photocopies, they were barred-by time, and that notices issued were not replied by the complainant, there was no justification to keep the claims pending for over six years---Valuation was examined by the Working Committee and was based on its decision-­Refund claims in respect of 3 bills of entries were filed within less than one month of the issue of final Clean Report of Finding and less than two months in the fourth import, the period should be courted from the final Clean Report of Finding dates---Complainant was not a registered person and any refund or any adjustment from the sales tax returns could not be made---Federal Tax Ombudsman recommended that Central Board of Revenue to direct the Collector to decide the refund claims within thirty days.

M. Mubeen Ahsan, Advisor.

Muhammad Yousuf, Proprietor.

Ashhad Jawwad, Deputy Collector of Customs, (Appraisement).

2004 P T D 1231

[Federal Tax Ombudsman]

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

SAJID RAFIQ

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complainant No. 747 of 2003, decided on 11th October, 2003.

Income Tax Ordinance (XXXI of 1979)---

----Ss. 59(1) & 61---Self-Assessment---Short document notice---Service-­Benefit of doubt---Cutting of signature and date of service on the notice-­Initiation of proceedings under normal law for non compliance within the due date---Validity---Office copy of short document notice showed four cuttings of the signatures and date of service---Somebody had been trying to forge the signatures of the assessee and put the required date---Such was an act of sheer maladministration ---Cuttings were admitted by the Department in its reply---Whole affair was doubtful and benefit of doubt must go to the assessee---Federal Tax Ombudsman recommended that the return of the assessee be accepted under Self-Assessment Scheme and an enquiry be conducted to fix the responsibility of cuttings and forgeries on the short documents notice.

Muhammad Saleem Malik for the Complainant.

Iftikhar Baloch for Respondent.

2004 P T D 1236

[Federal Tax Ombudsman]

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

MUHAMMAD ISSA

Versus

SECRETARY, REVENUE DIVISION, CENTRAL BOARD OF REVENUE, ISLAMABAD

Complainant No. 951 of 2003, decided on 26th August, 2003.

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 ---Assessee was a fruit commission agent---Income of Rs.8,00,000 was assessed against declared income Rs.60,000---No inquiries were made by the Inspector before the assessment was completed---Ex parte assessment was completed on 4-6-2001 but this was entered in the Demand and Collection Register on 30-6-2002---Validity---Established practice was -that the entry in the Register was made on the same date the assessment was completed, whole assessment proceedings, therefore, were tainted with maladministration ---Assessment made was perverse, arbitrary, unreasonable and. oppressive---Regional Commissioner of Income Tax had taken cognizance of the irregularities committed by the Assessing Officer and had directed the Commissioner concerned to call for the explanation of the Assessing Officer and take necessary action against him---Appeal filed was dismissed on technical ground only as the complainant/assessee did .not deposit 15 % of tax demand as provided under S.129(2) of the Income Tax Ordinance, 19'79---Grounds of appeal were not adjudicated---Federal Tax Ombudsman recommended that the Zonal Commissioner be asked to set aside the assessment under 5.122 of the Income Tax Ordinance, 1979 and issue directions to Assessment Officer to reframe the assessment after making proper 'inquiries and disciplinary proceedings be initiated against the Assessing Officer and the Inspector.

Complainant in Person.

Dr. Tauqir Ahmed, D.C.I.T. for Respondents.

2004 P T D 1244

[Federal Tax Ombudsman]

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

ARSHAD JAVED

Versus

SECRETARY, REVENUE DIVISION, CENTRAL BOARD OF REVENUE, ISLAMABAD

Complainant No. 967 of 2003, decided on 7th October 2003.

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

----S. 122---Income Tax Ordinance (XXXI of 1979), S.62---Survey for Documentation of National Economy Ordinance (XV of 2000), S. 3(1) & First Schedule---Establishment. of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S. 2(3)---Survey of business--Signature on survey Form by the real brother of the assessee---Amendment of assessment in respect of sales on the basis of such Survey Form--­Validity---Brother was not' an assessee nor there was any evidence that he was authorized to affix his signature as an assessee or on behalf of the assessee---Department's argument was based on presumption that as he had been receiving notices he must be treated to have the authority to sign the Form---In the absence of proof of such authority and clear denial by the assessee, the Survey Form relied upon by the department had no legal validity and not binding on the assessee and it could not be pressed in service against the assessee.

Complaint No.675 of 2001 rel.

Complaint No. 582 of 2001 distinguished

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

----Ss. 122 & 239---Income Tax Ordinance (XXXI of 1979); S. 62---Survey for Documentation of National Economy Ordinance (XV of 2000), S.3(1) & First Schedule---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S. 2(3)---C.B.R. Circular No.1/69/STS/2000 dated 8-12-2000---Finance Act (I of 2003), preamble---Amendment of assessment---Change of opinion---Assessment was finalized under S.62 of the Income Tax Ordinance, 1979--­Amendment of such assessment on the basis of Survey Form ---Validity--­Under S.122(5)(a) of the Income Tax Ordinance, 2001 an assessment could be amended where the Commissioner was of the view that Income Tax Ordinance, 2001 had incorrectly been applied in making the assessment---Assessment was not made under Income Tax Ordinance, 2001 but under the Income Tax Ordinance, 1979---Commissioner could not invoke the said provision---Only provision left was S. 122(5)(b) of the Income Tax Ordinance, 2001---For applying the said provision there should be "definite information" acquired from an audit or otherwise--­No audit report existed---Department had relied upon the Survey Form---Such act being not valid could not constitute valid "definite information" ---Survey Form though was available but the Assessing Officer while making assessment did not consider the same as .relevant--­Survey Form could not be treated as "definite information" but would fall in the category of "change of opinion" by the Commissioner and on the basis of "change of opinion" assessment could not be amended--­Notice issued and proceedings initiated by the Commissioner under S.122 of the Income Tax Ordinance, 2001 were contrary to law--­Maladministration having been established, Federal Tax Ombudsman recommended that the notice under S.122 and all proceedings taken in pursuance thereof be cancelled/withdrawn.

Saghir Tirmizi and- Hasan Askari for the Complainant

Muhammad Azhar, ACIT for Respondents.

2004 P T D 1267

[Federal Tax Ombudsman]

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

M.M.T.I. PAKISTAN (PVT.) LTD.

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 951 of 2002, decided on 24th April, 2003.

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

----Ss. 32A & 32AA--Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S. 2(3)-Special Audit by Chartered Accountant or Cost Accountants---Audit of Retailer--­Importer---Audit---Assessee contended that audit conducted through the Sales Tax Staff was without jurisdiction as the special audit was to be conducted under S.32A of the Sales Tax Act, 1990 in the case of registered importer and wholesaler by a Chartered Accountant or Cost Accountant on the basis of notification in the official Gazette by the Central Board of Revenue and audit under S.32AA of the Sales Tax Act, 1990 could be conducted in the case of a retailer by an officer of the sales tax not below the rank of an Auditor or Deputy Superintendent--­Validity ---Maladministration alleged in invoking the jurisdiction to conduct the audit through Sales Tax Staff had no substance--­Discrepancies identified by the audit team had been conceded on behalf to the Complainant/assessee.

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

----S. 34---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000). S. 2(3)---Additional tax---Admittedly liability had not been fully discharged from month to month even if the adjustment on account of input tax claim was fully allowed--­Decision of Collector (Adjudication) in respect of liability of additional tax on delayed payment was upheld by the Federal Tax Ombudsman.

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

----Ss. 7, 11(2), 32-A, 36(2) & 45---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S. 2(3)---Determination of tax liability---Input tax---Tax paid on import/purchases was not inadvertently fully claimed in the returns---Department did not allow the adjustment of such input tax not claimed inadvertently---Validity---Audit was conducted to find out the correct outputs and inputs as well as to ascertain the period-wise liability of output tax after allowing due adjustments of input tax paid during 32 specified tax periods---Audit was not meant to be discriminatory; it should ascertain the correct liability or output tax as well as correctly determine the due adjustment allowable to the taxpayer---Law did not provide forfeiture of any claim of the taxpayer---Where a liability of tax stands against a taxpayer due to his inadvertent failure to claim the adjustment it was the duty of the auditors to adopt a course that helps in determining the net liability if any after allowing the due adjustment---To require the taxpayer to pay what would not be payable if due adjustment were allowed was maladministration ---Federal Tax Ombudsman recommended that the Collector Sales Tax ensures allowing due adjustments of input tax claimed in relevant periods on the basis of Bills of Entry after due verification.

(1989) 180 ITR 21 (Calcutta); (1990) 1 ITR 149, (1923) 1 KB 280; Black's Law Dictionary, 6th Edn. at p.759; Concise Oxford Dictionary 10th Edn., at p.7,15; Oxford Advance Learners Dictionary at p,.627 and Merriam Webster's Dictionary ref.

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

---Ss. 66 & 7---Establistment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S. 2(3)---Refund to be claimed within one year---Complainant/asses see could claim refund of input tax paid on imports under S.66 of the Sales Tax Act, 1990, which inadvertently remained unclaimed in the monthly returns with an application requesting condonation of delay in filing the refund claim.

Sikander Hayat Khan for the Complainant.

Amer Rasheed D.C. for Respondent.

2004 P T D 1286

[Federal Tax Ombudsman]

Before Justice (Retd.) Saleem Akhtar Federal Tax Ombudsman

PAKISTAN KARYANA STORE

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 226 of 2003, decided on 21st August, 2003.

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

----S. 2(3)---Maladministration---Illegal practice by the Staff of Income Tax Department---Selection of case for total audit ---Harassment--­Demand of illegal gratification/bribe---Complaint against staff of the Department---Investigation by Federal Tax Ombudsman ---Result--­Officers named in the complaint were serving for the past many years and had developed contacts with the assessee, offered and rendered services for preparing the return and charged money ---Assessee also sought favours willingly approached them in the hope to get benefit--­Such was a common complaint coming from everywhere that the tax employees who were mostly related to the process of assessment had remained in the same circle or zone throughout with the result that many of them thrived on corruption, bribe and blackmailing the assessee--­Maladministration was rampant and all was not well---Federal Tax Ombudsman recommended that functionaries serving in the same circle for a long time in the relevant area be transferred out of the Zone for a minimum period of three years and be kept under observation for a period of one year and half yearly report be submitted by the Commissioner to Central Board of Revenue with a copy to Secretariat of the Ombudsman.

Naeem Rao and Talat Mahmood for the Complainant.

Muhammad Asif, ACIT and Tahir Siddique Bhatti„ ACIT for Respondent.

2004 P T D 1296

[Federal Tax Ombudsman]

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

Messrs SEAGUL EXPORTS, KARACHI

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 744-K of 2003, decided on 21st August, 2003.

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

----Ss. 45B(3), 45(2a) & 45---S.R.O. 417(I)/2002, dated 20-6-2002--­Refund---Appeal--- Remand---Opportunity of hearing---Remand of case to Deputy Collector by the Collector (Appeals) instead of deciding the same himself---Validity---Section 45B(3) of the Sales Tax Act, 1990 provided that in deciding appeal, the Collector of Sales Tax (Appeals) may make such further inquiry as may be necessary provided that he shall not remand the case for de novo consideration---Collector had remanded the case for fresh decision .after giving proper opportunity of hearing to the Complainant---Such course was not permissible under law and amounted to maladministration ---Collector (Appeals) conceded the point and undertook to recall order to be passed after necessary enquiry in accordance with law---Federal Tax Ombudsman recommended that Collector Sales Tax (Appeals) to recall the impugned order and after making necessary enquiry and affording opportunity of hearing to the Complainant pass a speaking order in accordance with law.

Nadeem Ahmed Mirza, Consultant alongwith Anwar Yasir for the Complainant.

Zulfiqar Kazi; Additional Collector (Sales Tax) and Samiullah, Deputy, collector (Sales Tax) for Respondent.

2004 P T D 1360

[Federal Tax Ombudsman]

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

AMJAD ALI KHAN

Versus

SECRETARY, REVENUE DIVISION, CENTRAL BOARD OF REVENUE, ISLAMABAD

Complaint No. C‑782‑K of 2003, decided on 8th August, 2003.

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

‑‑‑S. 146‑‑-Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)‑‑‑Power to enter and search business premises‑‑‑Enquiry by Inspector‑‑‑Enquiry was entrusted to the Inspector without authorizing him under S.146 of the Income Tax Ordinance, 1979‑‑‑In the absence of such authority the Income Tax Inspector could not enter the business premises of the assessee for making enquiries.

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

‑‑‑‑S. 146‑‑Establishment of Officer of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)‑‑‑Power to enter and search business premises‑‑‑Enquiries made without following the provisions of S.146 of the Income Tax Ordinance, 1979 clearly fell under the definition of maladministration.

(c) Income‑tax‑‑‑

‑‑‑‑Evidence‑‑‑Photograph of a room in which some persons were taking meals could not be taken as evidence to establish restaurant business.

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

‑‑‑‑S. 59(3)‑‑‑C.B.R. Circular No. 7 of 2002, dated 15‑6‑2002, para. 7(iv) (Self Assessment Scheme)‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S. 2(3)‑‑‑Claim of capital nature expenses in the statement of receipts and expenditure i.e. purchase of computer, furniture and Neon signboard‑‑‑Return of income was excluded from Self‑Assessment Scheme being concealment of income‑‑‑Validity‑-‑Since department has not been able to establish concealment/suppression, of income, the inadmissible expenses of capital nature could be disallowed under S.59(3) of the Income Tax Ordinance, 1979‑‑‑Maladministration committed by the functionaries of income‑tax department was established‑‑‑Federal Tax Ombudsman recommended that Central Board of Revenue to direct the concerned Taxation Officer to accept the return of income of the Complainant for the assessment year 2002‑2003 under the Self‑Assessment Scheme after making adjustment of inadmissible expenses under the relevant provisions of Income Tax Ordinance, 1979.

Faiq Razvi for the Complainant.

Messrs Rajabuddin, IAC and Muhammad Aslam, ACIT for Respondent.

2004 P T D 1373

[Federal Tax Ombudsman]

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

Messrs BAHAWALPUR ENGINEERING LTD., ISLAMABAD

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaints Nos.353, 445 and 446 of 2003, decided on 4th October, 2003.

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

‑‑‑‑Ss. 59(1), 59(1‑A) & 62‑‑‑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. 10 (Self‑Assessment Scheme) ‑‑‑Self­-assessment‑‑‑Total audit‑‑‑Selection of case for total audit through computer ballot ‑‑‑Assessee contended that return filed under S.59 of the Income Tax Ordinance, 1979 could be selected under S.59(1‑A) of the Income Tax Ordinance, 1979 for the purposes of assessment under S.62 of the Income Tax Ordinance, 1979 and not for total audit as S. 59(1‑A) of the Income Tax Ordinance, 1979 did not permit framing of scheme for total audit but permit only to frame assessment under S.62 of the Income Tax Ordinance 1979 without total audit or detailed scrutiny‑‑‑Validity‑­Moot point was whether during such assessment the assessee's accounts and record could be subjected to audit‑‑‑Object of para. 10 of the Self­-Assessment Scheme was to scrutinize the return in detail including field audit by departmental officers or by professional auditors authorized under S.4‑A, of the Income Tax Ordinance, 1979‑‑‑Information collected from investigation and audit shall be utilized for determining income of the taxpayer and tax payable thereon‑‑‑After audit and scrutiny the material made available could be utilized by the Assessing Officer to frame assessment under. S.62 of the Income Tax Ordinance, 1979‑‑‑If audit and scrutiny did not reveal anything adverse to the assessee the Assessing Officer will frame assessment as provided by S.62 of the Income Tax Ordinance, 1979‑‑‑No maladministration having been proved the case was closed by the Federal Tax Ombudsman.

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

‑‑‑‑Ss. 59(1), 61 & 7‑‑‑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. 10 [Self‑Assessment Scheme]‑‑­Self‑assessment‑‑‑Total audit‑‑‑Selection of case for total audit through computer ballot‑‑‑Assessee contended that process of total audit as provided by para. 10 of the Self‑Assessment Scheme deprives the Assessing Officer of its independence as the investigation and assessment proceedings shall be monitored and completed under guidance of supervisory officers within the meaning of S.7 of the Income Tax Ordinance, 1979 and assessment had to be made by the Assessing Officer independently and without any interference in exercise of his powers and function in making assessment‑‑‑Validity‑‑‑Guidance, supervision or consultation had to be made in terms of S.7 of the Income Tax Ordinance, 1979‑‑‑Para. 10 of the Self‑Assessment Scheme did not travel beyond the Income Tax Ordinance, 1979‑‑‑No maladministration having been proved, the case was closed by the Federal Tax Ombudsman.

Waseem Ahmad Siddiqui, FCA for the Complainants.

Manzoor Ahmad, DCIT with Khushnoodul Hassan, ACIT for Respondent.

Qaser Iqbal, IAC, Range‑II.

2004 P T D 1400

[Federal Tax Ombudsman]

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

Messrs UNITED INSURANCE CO. OF PAKISTAN, KARACHI

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint. No.915‑K of 2000, decided on 28th July, 2003.

Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑Ss. 62‑C, 23(1)(x), 92 & Fourth Sched: R.5 Cl. (c)‑‑‑Income Tax Ordinance (XLIX of 2001), S. 124A & 221‑‑‑Insurance Act (IV of 1938), Ss. 3C(4), 11, 12, 15, 27A & 40‑C(1)‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S. 2(3)‑‑­Power of tax authorities to modify orders etc. ‑‑‑Management expenses‑‑­Premium written off‑‑‑Appellate Tribunal held that if excess management expenses had been condoned as per law within time, the same may be allowed keeping in view the relevant provisions of law and disallowance of claim on account of premium written off was deleted‑‑‑Rejection of application under S.62‑C of the Income Tax Ordinance, 1979 for compliance of Appellate Tribunal's instructions‑‑‑Validity‑‑‑Rejection of Complainant/assessee's application made under S.62‑C of the Income Tax Ordinance, 1979, requesting to follow the decision of Tribunal in assessment year 1999‑2000 and so far as it applies to the identical question arising in the assessment year 1998‑99 pending before him until the decision of the Tribunal is reversed or modified subsequently, was contrary to law‑‑‑Assessing Officer was bound to follow the decision of Appellate Tribunal in the appeal relating to assessment year 1999‑2000 as required under S.62‑C of the Income Tax Ordinance, 1979; notwithstanding pendency of any appeal under S.129 of the Income Tax Ordinance, 1979 or under S.221 of the Income Tax Ordinance, 2001 on the subject‑‑‑Decision of the Appellate Tribunal was not applicable to assessment year 2000‑2001 and the year subsequent thereto because the implication of clause (c) of R.5 of the 4th Schedule added by Finance Act, 1999 were yet to be adjudicated upon by the competent Court‑‑­Federal Tax Ombudsman recommended that Taxation Officer should proceed in accordance with the provisions of section 124A of the Income Tax Ordinance, 2001 corresponding to provision of section 62‑C of the Income Tax Ordinance, 1979 so far as the orders for assessment years 1998‑99 and 1999‑2000 were concerned.

PLD 1981 SC 293; I.T.A. No.1320/KB of 2000 and I.T.A. No.825/KB of 2000‑2001 ref.

Naeem Raza Hashmi for the Complainant.

S.A. Matee, DCIT for Respondent.

2004 P T D 1410

[Federal Tax Ombudsman]

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

Messrs JAVEDAN CEMENT LIMITED, KARACHI

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.510‑K of 2003, decided on 28th July, 2003.

(a) 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] ‑‑‑C.B.R. Letter No. C. 7(7)S asstt/2002, dated 17‑12‑2002‑‑‑C.B.R. Letter No. C. 7(7)/S. asstt/2002 dated 5‑3‑2003‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S. 2(3)‑‑‑Self assessment‑‑‑Setting apart‑‑­Cut off date‑‑‑Fact that Complainant/assessee had applied for extension of time will not operate as extension of the cut off date fixed by the Central Board of Revenue.

(b) 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] ‑‑‑C.B.R. Letter No. C. 7(7)S asstt/2002 dated 17‑12‑2002‑‑‑C.B.R. Letter No. C.7(7)/S. asstt/2002 dated 5‑3‑‑2003‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S. 2(3)‑‑‑Self‑assessment‑‑‑Setting apart‑‑­Time for reply of show‑cause notice‑ ‑‑‑Complainant was required to reply 16 queries from the department by specified date‑‑‑Validity‑‑‑Time given for reply was not judicious and was arbitrary, unreasonable and impracticable‑‑‑Circular of Central Board of Revenue had clearly stated that the selection of cases for total audit muse be carried out on judicious and transparent manner ‑‑‑Complainant/assessee was not given proper and reasonable time to reply the queries which amounted to maladministration.

(c) 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]‑‑‑C. B. R. Letter No. C. 7(7)S. asstt/2002, dated 17‑12‑2002‑‑‑C.B.R. Letter No. C.7(7)/S. asstt/2002, dated 5‑3‑2003‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S. 2(3)‑‑‑Self‑assessment‑‑‑Setting apart of case for total audit without personal hearing as the same was not requested by the Complainant/assessee‑‑‑Validity‑‑‑Not necessary for the Complainant/assessee to have asked for a personal hearing because the Central Board of Revenue by its letter had directed "that the Regional Commissioner of Income Tax must confront the assessee provide them due opportunity of being heard and must indicate the basis of their proposed selection in the notices to be communicated to them"‑‑­Said requirements were to satisfy the principles of natural justice most important of them was to provide an opportunity for hearing‑‑‑Regional Commissioner of Income Tax was bound to provide an opportunity for hearing to the assessee irrespective of the fact whether he had demanded personal hearing or not‑‑‑Such principles of natural justice is so engrained in the jurisprudence that where‑any action is taken adverse to a party or affecting his right he must be heard before taking the action Violation of principles of natural justice rendered the decision, action and proceedings, taken in pursuance of any decision void, illegal and contrary to law‑‑‑Such selection could not stand the legal scrutiny and was contrary to law.

(d) 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] ‑‑‑C.B.R Letter No. C.7(7)S. asstt/2002, dated 17-12‑2002‑‑‑C.B.R. Letter No. C.7(7)/S. asstt/2002, dated 5‑3‑2003‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S. 2(3)‑‑‑Self assessment‑‑‑Setting apart of case on the ground that Gross Profit rate had fallen from 15% in 1999‑2000 to 6.6 % income turnover ratio 0.73 % and net profit rate at 4.3 % was extremely low etc.‑‑‑Objections were explained successfully but not considered by the Regional Commissioner of Income Tax and case Was Selected for total audit‑‑‑Validity‑‑‑Objections/discrepancies confronted to Complainant/assessee were fully explained with facts and figures‑‑‑None of the perameters laid down was applicable‑‑‑Case was neither of revenue potential nor there was any evidence, information or reason to establish that the true particulars of income had been suppressed‑‑‑No evidence of decline in income or disparity in expenses on utilities vis‑a‑vis income declared was available‑‑‑Source of addition of new assets had been explained which could have been examined through audited cash flow statement filed alongwith the return of income‑‑‑In the absence of any evidence to the contrary the explanation regarding sources of investment 'in new assets should have been accepted ‑‑‑Maladministration in the process of selection of the return for audit was thus established‑‑‑Federal Tax Ombudsman recommended that the Central Board of Revenue to direct the Regional Commissioner of Income Tax to withdraw his order and issue directions to the concerned Taxation Officer to accept the return of the complainant under Self­-Assessment Scheme.

S.M. Rehan, F.C.A. and Javed Panjwani for the Complainant.

Basharat Ahmed Qureshi, IAC and Badruddin Qureshi, DCIT for Respondents.

2004 P T D 1423

[Federal Tax Ombudsman]

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

TAUSEEF AHMED

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.722 of 2003, decided on 22nd August, 2003.

Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑Ss. 13(1)(aa) & 63‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S. 2(3)‑‑‑Addition‑‑‑Gift through cross cheque‑‑‑Copy of cross cheque and gift declaration was filed‑‑‑Demand of donor's bank statement from the donee ‑‑‑Donee failed to file the same‑‑‑Addition‑‑‑Validity‑‑‑Assessing Officer had been calling different documents/information piecemeal on different dates and in the end insisted on the production of bank statement of the donor, which was not within the reach of the Complainant/assessee‑‑‑Evidence furnished in the course of assessment proceedings had not been duly considered which amounted to maladministration ‑‑‑Federal Tax Ombudsman recommended that the assessment for the year 2001‑2002 be cancelled under S.122 of the Income Tax Ordinance, 2001 and a fresh assessment be made after affording the complainant an opportunity of being heard and after giving the consideration to the evidence/documents produced by him.

Saeed Anwaar Siddiqui for the Complainant.

Jafer Nawaz, DCIT for Respondent.

2004 P T D 1429

[Federal Tax Ombudsman]

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

Messrs WASEELA PRINTERS and others

Versus

SECERETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.C‑138‑K of 2003, decided on 12th July, 2003.

Sales Tax Act (VII of 1990)‑‑‑

‑‑‑‑Ss. 25, 24 & 37‑C‑‑‑General Sales Tax Order 1 of 1999‑‑‑C. B. R. Circular No. C.5(49) ST‑Int‑Audit/2001, dated 17‑11‑2001‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S. 2(3)‑‑‑Access to record, documents, etc.‑‑‑Audit was initiated for the last five years‑‑‑Extension of audit beyond limitation as provided in General Sales Tax Order 1 of 1999 without approval of Assistant Collector‑‑‑Audit of exempt period‑‑‑Non‑issuance of audit certificate or audit report despite repeated reminders‑‑‑Validity‑‑‑No justification existed to carry on audit for months in violation of Central Board of Revenue's orders that audit should be completed within a few days and extension in time period should be obtained from the senior officers‑‑‑Contention that income‑tax records were furnished voluntarily was not acceptable‑‑‑Instructions contained in General Sales Tax Order 1 of 1999 had not been complied, the audit was not completed and the audit report had not been submitted‑‑‑If the Complainant/assessee did not clarify the variation in sales tax figures found by the auditors, it should have been reported to the Collectorate, and if necessary, a contravention case made out against the Complainant/assessee‑‑‑Audit had not been finalized which betrayed the arbitrary and unreasonable approach of the sales tax officials‑‑‑Process of audit was conducted contrary to the instructions of Central Board of Revenue and administrative excesses had been committed‑‑‑Department had not seriously examined the allegations made in the Complaint and the issue raised therein, and had not furnished comprehensive explanations and comments‑‑‑Federal Tax Ombudsman recommended that Central Board of Revenue to direct the Collector of Sales Tax and Central Excise to ask the Assistant Collector to complete the audit within fifteen days and furnish complete audit report within thirty days that the Collector to take action on the findings of the audit report submitted to him; that he should personally examine the issues raised by the Complainants with a view to determine the extent to which the process of audit deviated from the prescribed procedure and to take concrete corrective measures within one month and that Central Board of Revenue may like to take into consideration the proposals of the Counsel for improving the performance and preserving the integrity and goodwill between the assessees and the department and issue necessary guidelines.

Complaint No. 1032/K of 2002 and NTR 1991 High Court (8) ref.

Haji Yousuf Rehmatullah for the Complainant.

Muneeb Sarwar, Assistant Collector of Sales Tax (East), Karachi for Respondent.

2004 P T D 1438

[Federal Tax Ombudsman]

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

Messrs HABIB OIL MILLS (PVT.) LTD., KARACHI

Versus

TAXATION OFFICER and others

Complaint No. C‑1073 to 1075‑K of 2003, decided on 12th September, 2003.

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

‑‑‑‑Ss. 122 & 239(4)‑‑‑Income Tax Rules, 2002, R.68‑‑‑Income Tax Ordinance (XXXI of 1979), S.66‑A‑‑‑Establishment of Officer of Federal Tax Ombudsman Ordinance (XXXV of 2000), S. 2(3)‑‑‑Amendment of assessment‑‑‑Savings‑‑‑Proceedings initiated by the Inspecting Additional Commissioner under S.66‑A of the Income Tax Ordinance, 1979 on the basis of Inspection Report was dropped after considering the evidence produced and explanation offered by the assessee and a report was submitted to Additional Director Inspection‑‑‑Jurisdiction of case was transferred to Large Taxpayer Unit‑‑‑Taxation Officer issued notice under S.122 of the Income Tax Ordinance, 2001 being pending proceedings under S.66‑A of the Income Tax Ordinance, 1979 and the contents of the notices were identical to that as mentioned in the notices under S.66‑A of the Income Tax Ordinance, 1979‑‑‑Unsigned record of proceedings‑‑‑Validity‑‑‑Taxation Officer failed to prove that proceedings under S.66‑A of the Income Tax Ordinance, 1979 were pending before his predecessor on the commencement of the Income Tax Ordinance, 2001 because the authenticity of the order sheets found on the records produced by him on requisition was doubtful on the facts recorded‑‑‑Fact that his predecessor had dropped those proceedings was proved from communication of his decision to the Addition Director Inspection as well as the Commissioner under his own signature‑‑‑Copy of such report was also given to the complainant/assessee by the Inspecting Additional Commissioner‑‑‑Maladministration was proved‑‑­Federal Tax Ombudsman recommended that the then Taxation Officer and Inspecting Additional Commissioner were required to explain as to why the proceedings noted in the order sheet produced during investigation proceedings were not signed by them; that as to why the then Inspecting Additional Commissioner did not record the proceedings conducted and concluded under S.66‑A as reflected from the findings and decisions in respect thereof conveyed through his report to the Additional Director Inspection and that the proceedings initiated under S.122 of the Income Tax Ordinance, 2001 by the Taxation Officer were ab initio contrary to law, were not to be pursued by the Department.

(1999) 97 Tax (Trib.) (sic); (1992) 65 Tax 115 (H.C.) and Nos. 487 to 491‑K of 2003, dated 20‑6‑2003 ref.

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

‑‑‑‑S. 66‑A‑‑‑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‑‑‑Direction of Additional Director Inspection to Inspecting Additional Commissioner to initiate proceedings under S.66‑A of the Income Tax Ordinance, 1979 on the basis of his report on Special Inspection amounted too Maladministration‑‑‑Additional Director Inspection had no jurisdiction to issue any direction or even to suggest to Inspecting Additional Commissioner to invoke his jurisdiction under S.66‑A of the Income Tax Ordinance, 1979; he could only recommend action against the concerned Assessing Officer or officers responsible for the alleged loss of Revenue.

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

‑‑‑‑S.5‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S. 2(3)‑‑‑Maladministration‑‑‑Failure of Assessing Officer to sign the proceedings recorded on the order sheets purportedly under his name amounted to maladministration.

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

‑‑‑‑S. 66‑A‑‑‑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‑‑‑Failure to sign the observations/directions recorded on the order sheet by the Inspecting Additional Commissioner with regard to proceedings under S.66‑A of the Income Tax Ordinance, 1979 besides failing to record his decision to drop the proceedings initiated under S.66A of the Income Tax Ordinance, 1979 conveyed by him to Additional Director Inspection amounted to maladministration.

(e) Income Tax Ordinance (XLIX of 2001)‑‑‑

‑‑‑‑S. 122(5)‑‑‑Income Tax Ordinance (XXXI of 1979), S. 66‑A & 135‑‑­Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S. 2(3)‑‑‑Amendment of assessment‑‑‑"Definite information"‑‑­Audit‑‑‑Exercise of power by the Taxation Officer under S.122(5) of the income Tax Ordinance, 2001 firstly for invoking jurisdiction under the said section over assessment order issued under S. 135 and S.66‑A of the Income Tax Ordinance, 1979 which was contrary to law and secondly for treating the contents of Inspection Report of Additional Director Inspection to be the "definite information" acquired from an audit amounted to maladministration as the alleged errors pointed out in the, Inspection Report were based on presumptions and no definite conclusion could be deduced from the said report that order passed by the Assessing Officer was erroneous and prejudicial to the Revenue.

Rehan Hasan Naqvi for the Complainant.

Imtiaz Ahmed Barakzai for Respondent.

2004 P T D 1455

[Federal Tax Ombudsman]

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

Messrs PAKISTAN PETROLEUM LIMITED., KARACHI

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 891‑K of 2003, decided on 8th September, 2003.

Central Excise Rules, 1944‑‑‑

‑‑‑‑Rr. 11 & 210‑‑‑Central Excises Act (1 of 1944), S.3B‑-‑Central Excise General Order No.6 of 1987‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000) S.2(3)‑‑‑Refund‑‑‑No refund of charges erroneously levied or paid, unless claimed within one year‑‑‑Additional duty under S.3B of the Central Excises Act, 1944 and penalty under R.210 of the Central Excise Rules, 1944 was remitted by the Appellate Tribunal‑‑‑‑Application for refund of amount unlawfully adjusted towards additional duty and penalties‑‑‑Department did not take any action to refund the amount even after Tribunal's decision despite complainant's effort‑‑‑Transfer of record by the Collectorate to Large Taxpayers Units‑‑‑Refund application and other correspondence were not available on Large Taxpayers Unit record ‑‑‑Validity‑‑‑Maladministration on the part of the officers dealing with the matter in Collectorate prior to transfer of jurisdiction to Large Taxpayers Unit was proved‑‑‑Said officers not‑only did not take due action on the applications but also did not take pare of the relevant record‑‑‑Further maladministration on their part was proved for transferring incomplete record to Large Taxpayers Unit ‑‑‑Maladministration was also proved on the part of Officers dealing with the notice of Office at Large Taxpayers Unit for failure to approach the Collectorate concerned seeking the records relating to refund applications instead of requiring the complainant to .file duplicate copies of the record again‑‑‑Such was a matter of serious concern that no action was contemplated under the rules even against those officers/officials who were proved delinquent‑‑‑Federal Tax Ombudsman recommended that the Director‑General Large Taxpayers Unit ensures payment of refund to the complainant by September 30, 2003, that the member, Central Excise, Central Board of Revenue should direct the concerned Collector to identify the officers/officials responsible for the maladministration and proceed against them under the Rules.

Taha Ali Zia and Aurangzaib Amir for the Complainant.

S.M. Shoaib, Deputy Collector for Respondent.

2004 P T D 1464

[Federal Tax Ombudsman]

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

MUHAMMAD NAZIR

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 693‑K of 2003, decided on 25th August, 2003.

Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑Ss. 59(1), 13(1), 61, & 62‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S. 2(3)‑‑‑Self‑assessment‑‑­Tax Amnesty Scheme, 2000‑‑‑Dairy Farm business‑‑‑80 buffaloes‑‑­Agreement between Income Tax Authorities and Dairy Farmers Association for payment of tax per buffalo‑‑‑Tax was paid according to the agreement‑‑‑Immunity‑‑‑Initiation of proceedings for assessment under normal law in violation of the terms of agreement‑‑‑Detail scrutiny of capital investment‑‑‑Allegation for issuance of repeated frivolous notices to harass‑‑‑Circumstantial evidence‑‑‑Show cause for assessment of daily yield of 80 buffaloes @ 10 K.G. per buffalo and sale of such yield @ Rs.20 per K.G.‑‑‑Validity‑‑‑Maladministration alleged on account of unwarranted denial of immunity from scrutiny of Complainant/assessee's capital investment and that too in the proceedings for assessment year 2001‑2002 was proved‑‑‑Department's action amounted to violation of the terms of agreement ‑‑‑Maladministration on part of Taxation Officer for employing extra‑legal methods for service of notices was also proved‑‑‑Sufficient circumstantial evidence existed against the Assessing Officer in support of the allegation that he harassed the complainant through unwarranted repeated notices and employed a non‑official acquaintance to achieve his ulterior motives‑‑‑Federal Tax Ombudsman recommended that assessment for assessment year 2001‑2002 be finalized in accordance with law and terms of agreement be honoured; proceedings be conducted against Taxation Officer under Civil Servants Conduct Rules on account of the charges of misconduct and appropriate action be taken under the Rules.

Agha Faqir Muhammad for the Complainant.

Sikandar Aslam and Muhammad Ayub for Respondent.

2004 P T D 1475

[Federal Tax Ombudsman]

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

Messrs INDUS FOOD, KARACHI

Versus

SECRETARY, REVENUE DIVISION, CENTRAL BOARD OF REVENUE, ISLAMABAD

Complaint No. 778‑K of 2002, decided on 9th September, 2003.

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

‑‑‑‑Ss. 59(1) & 61‑‑‑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. 8 (Self‑Assessment Scheme)‑‑Self‑assessment‑‑­Wealth statement‑‑‑Initiation of proceedings under normal law on the ground that wealth statement was not filed alongwith the return of income, the return was invalid and not acceptable under Self‑Assessment Scheme‑‑‑Validity‑‑‑Complainant/3ssessee filed return of income within, the stipulated time alongwith statements of account, evidence of tax deduction, tax paid and statement under S. 143B of the Income Tax Ordinance, 1979 supported with evidence of tax deduction‑‑‑Views of the Department that wealth statement , was not filed alongwith such documents particularly in the presence of affidavit of the Authorized representative of the Complainant/assessee wherein he had confirmed filing of relevant wealth statement was difficult to reconcile‑‑‑Possibility of misplacing the wealth statement of the official of the department could not be ruled out‑‑‑Observation of the Department that non‑filing of wealth statement alongwith return of income made the return invalid were not well founded by the Federal Tax Ombudsman.

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

‑‑‑‑Ss. 59(1), 61, 58(1) & 55(1)‑‑‑Income Tax Rules, 1982, R. 190‑‑­C.B.R. Circular No.7 of 2002, dated 15‑6‑2002, para. 8 (Self­-Assessment Scheme)‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)‑‑‑Self‑assessment‑‑­Initiation of proceedings under normal law due to non‑filing of wealth statement treating the return as invalid ‑‑‑Assessee contended that issuance of notice under section 61 of the Income Tax Ordinance, 1979 was ab initio void as none of the conditions of para. 8 of the Self­Assessment Scheme was followed nor any letter was issued to the complainant to make up the deficiency within the stipulated period and also filed wealth statement alongwith affidavit that the sane was filed with the return of income‑‑‑Validity‑‑‑Short documents including wealth statement could be requisitioned by the Assessing Officer before accepting the return under Self‑Assessment Scheme as always provided in Central Board of Revenue Circulars on Self‑Assessment Scheme‑‑­Department's contention that Complainant/assessee's letter was not received in the office was, not substantiated by conclusive evidence‑‑­Copy of relevant order sheet filed showed that the same had been prepared in a very careless and causal manner and appeared td‑have been prepared in one sitting by one person‑‑‑Most of the entries were neither signed nor initialed by Assessing Officer‑‑‑Order sheet, which was the most important record of assessment proceedings, was not maintained properly‑‑‑No reason a existed to doubt the veracity of the contents of the affidavit‑‑‑Maladministration was committed by the functionaries of the department‑‑Federal Tax Ombudsman recommended that Central Board of Revenue direct the Taxation Officer concerned to accept the return of the Complainant for the year 2002‑2003 under the Self‑Assessment Scheme.

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

‑‑‑‑S. 9(2)‑‑‑Jurisdiction, functions 'and powers of the Federal Tax Ombudsman‑‑‑Where maladministration is established the Federal Tax Ombudsman has jurisdiction to investigate the allegation of Complainant.

Khaliqur Rehman, F.C.A. and Shabbir Hashmi, I.T.P. for the Complainant.

Sikandar Aslam, I.A.C. and Attique Rehman, T.O. for Respondent.

2004 P T D 1487

[Federal Tax Ombudsman]

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

Dr. ARJUMAND FAISEL

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 600 of 2003, decided on 30th August, 2003.

(a) 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 (Self‑Assessment Scheme), Para. 9(a)(ii)‑‑‑Self-­assessment‑‑‑Assessment year 2002‑2003‑‑‑Setting apart of case for total audit on the ground of inflation of expenses by comparison with the assessment year 2000‑2001‑‑‑Validity‑‑‑Department had no valid criterion to show that the expenses were inflated‑‑‑No justifiable reason existed to make a comparison with the year 2000‑2001‑‑‑Same was the case with salary of office assistant and office cleaner which were absolutely valid expenses and comparison with the year 2000‑2001 was quite unjustified.

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

‑‑-‑S. 59(1)‑‑‑Establishment of Office of Federal 'fax Ombudsman Ordinance (XXXV of 2000), S. 2(3)‑‑‑C.B.R. Circular No.7 of 2002, dated 45‑6‑2002 (Self‑Assessment Scheme), para. 9(a)(ii)‑‑‑Self­-assessment‑‑‑Setting apart of case for total audit on the ground of un-verifiability of declared, receipts ‑‑‑ Validity ‑‑‑ Complainant/assessee had given details of each payment together with tax deduction which was the only source of the Complainant's receipts‑‑‑Nothing had been stated in the Department's reply or during the hearing to rebut the obvious verifiability of the receipts‑‑‑Federal Tax Ombudsman recommended that the Complainant's return for assessment year 2002‑2003 be excluded from total audit and the return be accepted under the Self‑Assessment Scheme.

(c) 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 (Self‑Assessment Scheme), para. 9(a)(ii)‑‑‑Self-­assessment‑‑‑Setting apart of case for total audit on the ground that declared price of house was on lower side keeping in view the prevailing rates of residential properties‑‑‑Validity‑‑‑Such was a subjective view for which no specific reason was given‑‑‑Word "lower side" seemed to reflect the opinion that the price could have been marginally higher but did not express a definite view that the price had actually been understated‑‑‑Department had no doubt regarding the genuineness of the source of investment‑‑‑No information or valid reason existed to believe that the purchase price of the house had been suppressed‑‑‑Selection of case for total audit was not justified‑‑‑Federal Tax Ombudsman recommended that the Complainant's return for assessment year 2002‑2003 be excluded from total audit and the return be accepted under the Self‑Assessment Scheme.

Nadeem Ahmad for the Complainant.

Altaf Muhammad Khan, DCIT for Respondent.

2004 P T D 1495

[Federal Tax Ombudsman]

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

FAISAL TARIQ

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 912 of 2003, decided on 18th September, 2003.

Sales Tax Act (VII of 1990)‑‑‑

‑‑‑‑Ss.19, 3A, 11, 14, 33, 34 & Sixth Sched., Sr. No.42‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)‑‑‑Compulsory registration‑‑‑Hotel‑‑‑Notice for production of accounts for audit‑‑‑Compulsory registration without any evidence/report of turnover exceeding from threshold of Rs.2.5 millions ‑‑‑Validity‑‑­According to S.14 of the Sales Tax Act, 1990 as it stood at the time of compulsory registration a person was required to be registered if his annual turnover exceeded Rs.2.5 millions if he was a manufacturer (including a hotel) or Rs.5.0 millions if he was a retailer ‑‑‑Admittedly, department did not have any material whatsoever in the form of an enquiry report or any other evidence to show that the Complainant's receipts exceeded Rs.2.5 millions and he was liable to compulsory registration under S.19 of the Sales Tax Act, 1990‑‑‑Income‑tax assessment framed in the Complainant's case for the year 1999‑2000 clearly indicated that the Complainant's sales were far below the said threshold‑No case for the compulsory registration was made out under S. 19 of the Sales Tax Act, 1990 and subsequent, levy of penalty‑‑‑Federal Tax Ombudsman recommended that the deregistration proceedings in the complainant's case be finalized without further delay and penalty of Rs.5000 levied under Ss.33 and 34 of the Sales Tax Act, 1990 be deleted under S.45A of the Sales Tax Act, 1990.

Muhammad Tariq Khan for the Complainant.

Imtiaz Shaikh, Deputy Collector for Respondent.

2004 P T D 1506

[Federal Tax Ombudsman]

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

Messrs GENERAL LOCKERS (PVT.) LTD., KARACHI

Versus

SECRETARY, REVENUE DIVISION; ISLAMABAD and 2 others

Complaint No. 930-K of 2003, decided on 30th August, 2003.

Sales Tax Act (VII of 1990)‑‑‑

‑‑‑‑Ss. 65 & 11‑‑‑S.R.O. 503(I)/94, dated 9‑6‑1994‑‑‑S. R. O. 555(I)/94,­dated 9‑6‑1994‑‑‑Establishment of 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‑‑‑Manufacturing of "ignition switch sets of motorcycles" ‑‑‑Returns were being filed for over a period of one year claiming exemption‑‑‑No adverse order was passed by the Department under S.11, of the Sales Tax Act, 1990‑‑‑Sales tax alongwith additional tax was charged contending that expression "parts and accessories" did not apply to the ignition switches/ignition, locks for motor vehicles‑‑‑Complainant claimed exemption of tax not levied or short levied as a result of "general practice" which was not allowed‑‑­Validity‑‑‑Complainant had been submitting returns claiming exemption from sales tax but no objection was taken by the department for about one year‑‑‑Practice had developed between the Complainant and the Department of non-payment of sales tax on goods manufactured‑‑‑Case cited for establishing the practice of payment of sales tax were distinguishable‑‑‑No instance of any party manufacturing the same goods had been provided to show' that sales tax was paid by such parties on such supplies‑‑‑Federal Tax Ombudsman recommended that notification under S.65 of the Sales Tax Act, 1990 be issued exempting the Complainant from sales tax for the period from June, 1995 to June, 1996.

Mansoor‑ul‑Arefeen, Mansoor Anjum and Muhammad Mehtab Khan for the Complainant.

Mirza Mubashir Baig, Deputy Collector and Zia Ahmed Khan, Auditor for Respondents.

2004 P T D 1530

[Federal Tax Ombudsman]

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

Messrs ATTA ULLAH ZIA

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.C‑988‑K of 2003, decided on 30th August, 2003.

Customs Act (IV of 1969)‑‑‑

‑‑‑‑Ss. 14, 25, 32 & 81‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S. 2(3)‑‑‑Demurrage‑‑­Deliberate delay in assessment by Customs Authorities‑‑­Misinterpretation of provision of law‑‑‑Finally declared value was accepted‑‑‑Delay and detention certificate was issued which was not honoured by the Port Trust Authorities‑‑‑Charge of demurrage charges‑‑‑Validity‑‑‑Assessment of goods was unnecessarily delayed by the Customs Authorities without any justification‑‑‑Goods were not assessed under S.81 of the Customs Act, 1969 on the request of Complainant/importer‑‑‑Delay in finalization of assessment took place on account of processing by Customs Authorities and it had been admitted by the Assistant Collector that the Complainant/importers were entitled to delay and detention certificate for the period 27‑3‑2003 to 24‑4‑2003---Federal Tax Ombudsman recommended that Central Board of Revenue was to direct the Collector of Customs to issue a revised delay and detention certificate for the aforementioned period within fifteen days and advise Port Authorities to remit the demurrage charges and refund the same to the Complainant/importers.

Muhammad Akram Nizami for Petitioner.

Zahid Habib, Assistant Collector of Customs (Appraisement) and Abdul Qayum, Appraiser.

2004 P T D 1538

[Federal Tax Ombudsman]

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

Messrs TROUT LAND HOTEL (PVT.) LTD.

Versus

SECRETARY, REVENUE DIVISOIN, ISLAMABAD

Complaint No. 903 of 2003, decided on 22nd September, 2003.

Sales Tax Act (VII of 1990)‑‑‑

‑‑‑‑Ss. 19, 3A, 14, 26 & 33(1)‑‑‑North‑West Frontier Province Sales Tax Ordinance (III of 2000)‑‑‑C.B.R. Circular No. 4(80)STR/98, dated 12‑10‑2002‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S. 2(3)‑‑‑Compulsory registration‑­Hotel and restaurant‑‑‑Seasonal business‑‑Taxable services‑‑‑Central Excise Licensees‑‑‑Complainant/assessee was compulsorily registered on instruction of Central Board of Revenue being Central Excise 'Licensee‑‑‑Notice for audit for accounts ‑‑‑‑Complainant/assessee contended that since his turnover did not exceed Rs.2.5 million, he was not required to be registered under Sales Tax Act, 1990‑‑‑Department neither provided registration certificate nor ever explained the legality of such registration in response to Complainant/assessee's letter‑‑­Validity‑‑‑Central Board of Revenue never directed for compulsory registration of all the Central Excise Licensees‑‑‑Department failed to furnish a copy of order whereby the Complainant was compulsorily registered under S.19 of the Sales Tax Act, 1990‑‑‑Was imperative on the part of Sales Tax Officers to place evidence on record that the Complainant was liable to be registered under S.14 before registration him under S.19 of the Sales Tax Act, 1990‑‑‑Maladministration, in circumstances, was established‑‑‑Federal Tax Ombudsman recommended that the Collector was to cancel the registration under the proviso of section 19 and direct the Assistant Collector to decide the case afresh after making proper enquiries and providing opportunity to the complainant to present his case.

Messrs Bashir Ahmad and Mansoor Sattar Lodhi for the Complainant.

Imtaiz Ahmad Sheikh, D.C.S.T. for Respondents.

2004 P T D 1559

[Federal Tax Ombudsman]

Before Justice (Retd) Saleem Akhtar, Federal Tax Ombudsman

Messrs MEHTABI TOWELS MILLS. LTD.

Versus

SECRETARY, REVENUE DIVISION, CENTRAL BOARD OF REVENUE, ISLAMABAD

Complaint No. 979‑K of 2001, decided on 27th September, 2001.

(a) Customs Act, (IV of 1969)‑‑‑

‑‑‑‑Ss. 16, 32(1) & 156(1) Cls. (9) & (14)‑‑‑Export (Quality Control) Order, 1973. Cl. 3‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S. 2(3)‑‑‑Power to prohibit or restrict importation and exportation of goods‑‑‑Untrue statement, error etc. ­Misdeclaration‑‑‑Export of blended bleached patient gowns‑‑‑‑Label showed 65% cotton and 35% polyester‑‑‑Physical examination revealed 60% cotton and 40% polyester‑‑‑Penalty of Rs.1,00,000 was imposed‑‑­Appellate Tribunal reduced the same to Rs.10,000‑‑‑Complainant/ exporter contended that he had been awarded export trophy in the previous years and enjoyed unblemished record and his high profile as an exporter had suffered a set back due to nominal and technical flaw‑‑­Placing of label did not substantially or materially affect the quality of goods exported and imposition of penalty was totally unjustified and unwarranted‑‑‑Validity‑‑‑Harshness of penalty was removed by the Appellate Tribunal‑‑‑High profit of business of Complainant/exporter was evident from his repeated winning of Export Trophy for several years, but this alone did not constitute enough justification for mis­declaration‑‑‑Complainant/exporter should have been extra cautious, extra careful and extra particular in ensuring that the goods exported conformed to the prescribed standard‑‑‑Responsibility was greater in the case of Exporter of such high reputation and his vast experience should have compelled him to abide by existing practice, procedure and requirements of rules and regulations‑‑‑If such an act of omission and commission was condoned it would act as an incentive to others to indulge in such practices and may not be conducive to healthy growth of export of the country‑‑‑No case of maladministration had been made out against any tax employee‑‑‑Penalty imposed did not call for any interference and complaint was closed by the Federal Tax Ombudsman.

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

‑‑‑‑S. 2(3)‑‑‑Maladministration‑‑‑Non‑attendance of proceedings before the Federal Tax Ombudsman by the Departmental representative on the due date‑‑‑Neither request for adjournment was made nor the reasons for non‑attendance were provided‑‑‑Such conduct amounted to dereliction of duty on the part of the concerned officer‑‑‑Federal Tax Ombudsman recommended that Revenue Division should take appropriate notice on this irresponsible and unwanted conduct‑‑‑Necessary administrative action, required to be initiated against the defaulting officer.

S. A. Nasser, Dealing Officer.

2004 P T D 1567

[Federal Tax. Ombudsman]

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

PHOENIX ARMOUR (PVT.) LTD. through Amin Ansari Law Associates

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 701‑K of 2003, decided on 9th September, 2003.

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

‑‑‑‑S. 9(2)(b) & 2(3)‑‑‑Jurisdiction, functions and powers of the Federal Tax Ombudsman ‑‑‑Maladministration‑‑‑Discovery of maladministration on investigation‑‑‑Bar on jurisdiction of Federal Tax Ombudsman‑‑­Scope‑‑‑Objection by the Department as respects the bar on jurisdiction as per S.9(2) of Establishment of Office of Federal Tax Ombudsman 2000 had been so frequently and so inappropriately taken that consistent and authoritative decisions over ruling same had rendered the objection obsolete more so, because question whether "maladministra­tion" had (or had not) occurred could only be discovered on investigation.

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

‑‑‑‑S. 2(3)‑‑‑Maladministration‑‑‑Disregard of the verdict of superior Courts‑‑‑Inappropriateness‑‑‑Insistence of the Department to treat the sale of Spares and Fixed assets subject to sales tax in disregard of the verdict of superior Courts amounted to "maladministration" cognizable by Federal Tax Ombudsman.

(c) Sales Tax Act (VII of 1990)‑‑‑

‑‑‑‑Ss. 3, 26 & 45A‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)‑‑‑Complainant/ assessee's business was to provide Secured Cash Transportation Service‑‑‑Use of Seals, Bags & Lock‑‑‑Tax functionaries treated the consumption of such seals, bags and lock as transaction of sale‑‑‑Charge of tax‑‑‑Validity‑‑‑Demonstration of procedure and nature of Seals left no room for doubt that these were consumed' and not sold‑‑‑Said items did not change hands, but theseals' were destroyed after having been examined by the Receipt Casher as intact', the bags were carried back for reuse when emptied of the contents‑‑‑Insistence that these represented sales, was a conductunreasonable, unjust' and `oppressive' falling in the realm of 'maladministration' as defined in S.2(3) of Establishment of Office of Federal Tax Ombudsman Ordinance, 2000‑‑‑Federal Tax Ombudsman recommended that Central Board of Revenue to re‑open Order‑in‑Original No.019 of 2003, dated 28‑2‑2003 under section 45A of the Sales Tax Act, 1990 and cancel the same.

1999 PTD 1892 and 2000 PTD 976 rel.

Aminuddin Ansari for the Complainant.

Saeed Khan Jadoon, D.C.C.S.T. for Respondent.

2004 P T D 1585

[Federal Tax Ombudsman]

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

FARAN PROCESSING INDUSTRIES (PVT.) LTD., LAHORE

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 710‑L of 2003, decided on 16th August, 2003.

Sales Tax Act (VII of 1990)‑‑‑

‑‑‑‑Ss. 45 & 73‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S. 2(3)-‑‑Appeal‑‑‑Audit department had pointed out that input tax was claimed against purchased negative units and recommended action for recovery of tax involved and imposition of penalties‑‑‑Undertaking was given by the assessee under protest to adjust the outstanding liability from pending admissible refund claims and to make adjustment against purchase from negative units‑‑­Department proceeded to recover the amount and adjusting the liabilities against sanctioned sales tax refund with the intention to adjust the same against future refunds due without initiating any judicial proceedings/ adjudicating the matter under S.45 of the Sales Tax Act, 1990 and relying on such undertaking in spite of compliance with the provision of S.73 of the Sales Tax Act, 1990 by the Complainant/assessee‑‑‑ Validity‑‑‑Assessee appeared to have acted under pressure as revealed by both the audit report and the so‑called undertaking‑‑‑Department's actions to recover the amount in cash and adjustment of refund against so‑called liabilities were premature‑‑‑End of justice will be served if the case against assessee based on audit report was properly adjudicated after issuing a show‑cause notice giving the complainant the opportunity of being heard to determine whether or not the liabilities created by the audit were sustainable‑‑‑Federal Tax Ombudsman recommended that Central Board of Revenue to direct the Collector to confront the complainant with the charges/contraventions against it through a show‑cause notice giving it the opportunity of both written and oral defence before deciding the case on its merit through a formal Order‑in‑Original and that amount already recovered in cash and adjustment of refunds against liability created in audit report may be adjusted/refunded, as the case may be, in consequence of Order‑in­-Original.

Mumtaz Hussain Bhutta for the Complainant.

Taimoor Kamal Malik, A.C. for Respondents.

2004 P T D 1607

[Federal Tax Ombudsman]

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

Messrs SHAHZAD JEWELLERS, GUJRANWALA

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaints Nos.433 and 444 of 2003, decided on 16th July, 2003.

Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑S. 129‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S. 2(3)‑‑‑Appeal to the Appellate Additional Commissioner‑‑‑Grounds of appeal indicated by the complainant/assessee in appeal memo had not been discussed by the First Appellate Authority but appeal was disposed of on the main ground of appeal ‑‑‑Validity‑‑­First Appellate Authority did not consider the contentions of the complainant/assessee raised and pressed in appeal objectively‑‑‑Only two grounds had been dealt with‑‑‑No reasons had been given for arriving at the conclusion and had agreed with the order of the Assessing Officer‑‑­Universally acknowledged principle of justice is that the Appellate Court must state its reasons for the decision‑‑‑Was not sufficient to say that the order of the Assessing Officer or the argument of any party represents the correct view of the case‑‑‑Was necessary that reasons were given in the order for the decision arrived at‑‑‑Reasons so given will enable a party to decide whether to appeal against the order or not?‑‑‑Reasons were to be given even in cases where order was passed affirming the assessment order‑‑‑Mere reproduction of the order of the Assessing Officer without giving his own reasons or applying his mind was improper‑‑‑Object of appeal was that a higher forum may apply independent mind to the controversy and then decide by its own reasoning‑‑‑Order of First Appellate Authority was suffering from infirmity and could be termed as arbitrary ‑‑‑Maladministration was established‑‑‑Federal Tax Ombudsman recommended that Commissioner of Income Tax (Appeals) to rectify appeal order, dated 27‑12‑2002 under S.221 of the Income Tax Ordinance, 2001 and pass a speaking order after discussing the grounds of appeal.

Riaz Ahmed for the Complainant.

Moazam Bashir, D.C.I.T. for the Revenue.

2004 P T D 1618

[Federal Tax Ombudsman]

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

Messrs FARAS SIZING, FAISALABAD

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.748 of 2003, decided on 21st October, 2003.

Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑Ss. 56 & 5‑‑‑Notice for furnishing return of total income‑‑­Jurisdiction‑‑‑Assessee filed his return for the assessment year 2000‑2001 in a circle having the jurisdiction where head office of the assessee was located‑‑‑Notice under S.56 of the Income Tax Ordinance, 1979 for the assessment year 1999‑2000 was issued by the Assessing Officer having jurisdiction where factory of the assessee existed‑‑­Assessee contended that he was filing his returns in a circle of Faisalabad and was being assessed there--‑Assessing Officer assumed jurisdiction over the case and started enquiries/proceedings under the Income Tax Ordinance, 1979‑‑‑Validity‑‑‑Assessing Officer ignored the factual position that assessments for the years 2000‑2001 and 2001‑2002 had in fact been made at Faisalabad‑‑‑Even if the proper jurisdiction in the complainant's case was at Gojra no action could validly be taken by the Assessing Officer at Gojra without having the case formally transferred to his jurisdiction‑‑‑Notice under S.56 of the Income Tax Ordinance, 1979 issued by the Taxation Officer, Gojra and the enquiries conducted by the Inspector, of the circle were quite invalid although there was no reason to hold that proceedings could not otherwise be initiated by a Department on the basis of a complaint which contained definite information‑‑‑Federal Tax Ombudsman recommended that (i) the notice under section 56 of the Income Tax Ordinance, 1979 issued by the Taxation Officer, Gojra for the assessment year 1999‑2000 be withdrawn/cancelled and the enquiry report of the Inspector, Circle 20 Gojra be also treated as void (ii) No action under S.56 of the Income Tax Ordinance, 1979 or under any other provision of law be taken by the Taxation Office, Gojra unless the case was .formally transferred to his jurisdiction.

Muhammad Saleem Malik, A.R. for the Complainant.

Iftikhar Hussain Baloch, Taxation Officer for Respondent.

2004 P T D 1633

[Federal Tax Ombudsman]

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

MUHAMMAD SHARIF

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.645 of 2003, decided on 27th October, 2003.

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

‑‑‑‑S.50‑‑‑Sales Tax Act (VII of 1990)‑‑‑Deduction of tax at source‑‑­Complainant/assessee objected to the deduction of income‑tax on the amount which included sales tax and contended that as such deduction was unauthorized, illegal and unreasonable, the Directorate be directed to stop deducting of income on the amount inclusive of general sales tax‑‑‑Validity‑‑‑Withholding tax had to be deducted on payment of supply of goods and on the payment made for services rendered‑‑‑Tax was to be deducted at the rate calculated on the amount of payment mentioned in the bill‑‑‑Amount of payment included sales tax‑‑­Deduction made was correct and, according to law‑‑‑No relief was granted and complainant/assessee, case was closed by the Federal Tax Ombudsman.

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

‑‑‑‑S. 50‑‑‑Sales Tax Act (VII of 1990)‑‑‑Deduction of tax at source‑‑­Complainant/assessee's income tax was being deducted inclusive of sales tax by Controller of Military Accounts‑‑‑Complaint against‑‑‑Central Board of Revenue was asked to reply that matter of complaint did not relate to Central Board of Revenue but to Controller of Military Accounts and comments could not be offered‑‑‑Validity‑‑‑Every person deducting withholding tax was agent of the Central Board of Revenue for collecting the tax under the Income Tax Ordinance, 1979‑‑‑Ultimate responsibility was of the Central Board of Revenue to see whether the tax had rightly been deducted according to law‑‑‑Person deducting tax under S. 50 of the Income Tax Ordinance, 1979 acts under the provisions of law, instructions, directions and rules issued by Central Board of Revenue‑‑‑Relationship between Central Board of Revenue and the person deducting the withholding tax was that of a principal and agent who had been authorized to deduct withholding tax as specified‑‑‑If any objection to deduction of withholding tax was made it was the responsibility of the Central Board of Revenue to explain and reply‑‑­Stand taken by the Central Board of Revenue was completely devoid of any force amounting to negligence in performance of its duty‑‑‑How can Central Board of Revenue deny its responsibility in matters relating to federal tax particularly the act of its agents‑‑‑'this attitude of the Central Board of Revenue was regretted by the Federal Tax Ombudsman as it was expected of its officers to act in a proper and responsible manner.

Muhammad Sharif for the Complainant.

Nemo for Respondent.

2004 P T D 1640

[Federal Tax Ombudsman]

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

MUHAMMAD SHARIF

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Review No.7 of 2004 in Complaint No. 1453 of 2003, decided on 24th February, 2004.

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

‑‑‑‑S. 9‑‑‑Jurisdiction, functions and powers of the Federal Tax Ombuds­man ‑‑‑S.R.O. 861(I)/2003‑‑‑S.R.O. 707(I)/2003, dated 12‑7‑2003‑‑­Review‑‑‑Review application for issuance of direction for extension of time of filing of returns by 90 days for assessment year 2002‑2003‑‑­Validity‑‑‑Inconvenience caused to the complainant was duly recognized in the findings/decisions and certain recommendations were also made so that such a situation did not arise in future‑‑‑Review application amounted to a plea for consideration points on which a considered finding had already been given and it was outside the scope of review‑‑­Plea for extension of. 90 days in the date of filing of returns for assessment year 2002‑2003 was not realistic in the present time‑‑‑Federal Tax Ombudsman found no reason to modify the findings/decision and matter was closed.

Khawaja Riaz Hussain, A.R. for Applicant.

2004 P T D 1649

[Federal Tax Ombudsman]

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

Messrs UNIFEROZ, KARACHI

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD and 2 others

Complaint No. 1016‑K of 2003, decided on 27th October, 2003.

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

‑‑‑‑Ss 122 & 170‑‑‑Income Tax Ordinance (XXXI of 1979), Ss. 96, 62/156‑‑‑C.B.R. Circular No.12 of 1991, dated 30‑6‑1991‑‑­Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss. 2(3) & 10(4)‑‑‑Amendment of assessments ‑‑‑Refunds‑‑­Demand of‑‑‑Initiation of proceedings under S.122 of the Income Tax Ordinance, 2001 on the ground that income was not computed in accordance‑‑ with C.B.R. Circular No.12 of 1991, dated 30‑6‑1991 as expenses allowed at the time of finalizing the assessments under Ss.62/156 of the Income Tax Ordinance, 1979 were not allocated, proportionately‑‑‑Validity‑‑‑Cognizance of maladministration alleged against Taxation Officer and below had been taken by the Regional Commissioner of Income Tax‑‑‑Regional Commissioner of Income Tax had already directed the Commissioner of Income Tax to obtain explanation in the first instance of the Assessing Officer who framed erroneous assessments and created refunds not due to the assessee and, in the second instance, explanation of the Inspecting Additional Commissioner for keeping the action under S.122 of the Income Tax Ordinance, 2001 pending for a period of more than six months and to submit his recommendation after obtaining explanations of the two delinquent officers‑‑‑Federal 'fax Ombudsman recommended that (a) the Commissioner should ensure that unwarranted proceedings initiated under S.122 of the Income Tax Ordinance, 2001 were dropped and the errors apparent from record in the three assessment orders were rectified under S.221 of the Income Tax Ordinance, 2001 after giving complainant due opportunity of being heard (b) the Commissioner further ensure that vouchers already issued for undisputed amounts of refund do not bounce again and further refunds, if any determined to be due in consequence of orders to be passed under S.221 of the Income Tax Ordinance, 2001 were issued within 30 days (c) the Commissioner should submit his recommendations on the allegations of maladministra­tion to the Regional Commissioner of Income‑tax within 30 days.

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

‑‑‑‑S. 2(3)‑‑‑Maladministration‑‑‑Cheques dishonored twice on presentation proved the maladministration.

S.M. Rehan, F.C.A. for the Complainant.

Agha Hidayatullah, I.A.C. for Respondent.

2004 P T D 1659

[Federal Tax Ombudsman]

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

Messrs KAM INTERNATIONAL, KARACHI

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 1103‑K of 2003, decided on 31st October, 2003.

(a) Sales Tax Act (VII of 1990)‑‑‑

‑‑‑‑S. 10‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S. 2(3)‑‑‑C.B.R. Letter C. No. 2(7)­STP/99‑Pt, dated 1‑10‑2002‑‑‑Excess amount to be carried forward or refunded‑‑‑Suspicious unit‑‑‑Refund claim of complainant was withheld by the Department without issuance of show‑cause notice and complainant was declared as suspicious unit because only four purchases were made from the supplier, which was placed on the suspected list in spite of the fact that payment was made by crossed cheques through banking channels Validity‑‑‑If one of the suppliers was fake, the buyer should not have been placed on the suspected list unless collusion was established and there was evidence to prove that the transactions were fake‑‑‑Central Board of Revenue blocked the refund claims but no show­-cause notice in this regard had been issued‑‑‑If there was tangible evidence against the complainant, the same should have been disclosed to them, the charges framed in the form of show‑cause notice and opportunity provided to them to rebut the same and represent their case‑­Situation showed a one‑sided action on the part of Department to condemn the complainant to the "suspected" category, deny the refund without due process, and harass them‑‑‑In one of its directives, Central Board of Revenue, had issued instructions that refund claims should not be rejected for a few suspected invoices, and refund be disallowed only is to the extent of fake invoices, and the remaining amount sanctioned---This directive had been violated by the sales tax authorities ‑‑Entire process, action and proceedings suffered from maladministration as they were arbitrary, based on presumption and irrelevant grounds, unjust and oppressive‑‑‑Administrative excess was proved which involved improper motive as defined in S. 2(3)(d) of the Establishment of the Office of Federal Tax Ombudsman Ordinance, 2000‑‑‑Federal Tax Ombudsman recommended that Central Board of Revenue (i) direct the Collector concerned to (a) carry out investigation and verification on the lines mentioned in paragraph 15, re‑examine the status of this unit and, should it be established that it had been included in the list of suspected units merely on the basis of a few purchases from a supplier in 2002 whose premises was found closed in 2003 without adverse tangible evidence de‑list it from the said list (b) afford opportunity to the complainants if not already done, to rebut the objections raised in the audit observation and if necessary issue show‑cause notice only on the basis of concrete evidence (c) examine the blocked refund claims with a view to verifying the physical transportation of goods, their, entry in their records and actual shipment, as mentioned in paragraph 15, and decide the refund claims expeditiously on the basis of verified facts (ii) investigate into the allegation of maltreatment meted out to the Complainant and appropriate disciplinary action be taken against the defaulting officials.

Complaint No. 275 of 2002 and PTCL 2003 CL. 2003 ref.

(b) Sales tax‑‑‑

‑‑‑‑ Points of investigations to verify fake transactions‑‑‑Department should have carried out investigation to verify (i) the physical transfer of goods from the supplier to the purchaser on the basis of dispatch note, receipt note, the transport documents, entry in the purchaser's books of account; (ii) payment through banking channels to ascertain the genuineness of the transactions and validity of invoices inclusive of sales tax (iii) receipt of goods and export thereof from the complainant's records etc.

A. Rahim Lakhany, Chartered Accountant and Ajeet Sunder for the Complainant.

Dr. Mubashir Baig, Dy. Collector of Sales Tax and Syed Alley Jaffer Dy. Superintendent for Respondent.

2004 P T D 1693

[Federal Tax Ombudsman]

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

Messrs HINO PAK MOTORS LTD., KARACHI

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 940‑K of 2003, decided on 24th September, 2003.

Customs Act (IV of 1969)‑‑‑

‑‑‑‑Ss. 25 & 33‑‑‑Customs Rules, 2001, Chap. IX, (Rr. 107 to 125)‑‑­Valuation Rules, 2001 R. 116‑‑‑Finance Act (IV of 1999)‑‑‑S.R.O. 1375(I)/99, dated 28‑12‑1999 effective from 1‑1‑2000‑‑‑S.R.O. 1369(I)/99, dated 24‑12‑1999‑‑‑S.R.O. 450(I)/2001, dated 18‑6‑2001‑‑­General Agreement on Tariff & Trade (GATT)‑‑‑Brussels Definition of Value‑‑‑Morocco Convention‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S. 2(3)‑‑‑Value of imported and exported goods‑‑‑Transaction value acceptable in case of related parties‑‑‑Import of new brand vehicle from Japan in CKD conditions‑‑­Claim of refund of customs duty paid under mistake of law for differential amount of duty paid on the basis of value‑slip element of 2.5 % additional value as loading on FOB value‑‑‑Department contended that discount to the extent of 64 % of the listed price was being extended to the complainant/assessee by the foreign suppliers which confirms the fact that buyer/seller relationship between the two did influence the price of items imported and being related parties the declared value did not constitute the transaction value for customs purposes‑‑‑Application of value slip‑‑‑Justification‑‑‑Validity‑‑‑Crux of the matter was whether R.116 of the Valuation Rules, 2001 had been properly applied or not‑‑­First requirement of the rule, in order to deviate from the declared value conforming to the provisions of S.25 of the Customs Act, 1969 was that "the buyer and seller are related"; second requirement was the examination of circumstances surrounding the sale‑‑‑Rule also required that the transaction value shall be accepted as the customs value of imported goods provided that the relationship did not influence the price‑‑‑Where the appropriate officer had no doubts about the acceptability of the price, it might be accepted without requesting further information from the importer, for example, the appropriate officer may have previously examined the relationship, or he may already have detailed information concerning the buyer and the seller and he may already be satisfied from such examination or information that the relationship did not influence the price‑‑‑Appropriate officer having followed the considered view as envisaged in R. 116 of the Valuation Rules, 2001, the alleged maladministration was not proved‑‑­No intervention was called .for and investigation was closed by the Federal Tax Ombudsman.

1994 CLC 994; 1994 CLC 1612 and PLD 1998 SC 64 ref.

Aziz Sheikh of the Complainant.

Ashhad Jawwad, D.C. (Customs) for Respondent.

2004 P T D 1707

[Federal Tax Ombudsman]

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

Messrs PUNJAB BEVERAGE CO. (PVT.) LTD.

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 448 of 2003, decided on 16th August, 2003.

(a) 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)‑‑‑C.B.R. Letter No. C. 7(7)S. asstt/2002, dated 17‑12‑2002‑‑‑C.B.R. Letter No. C. 7(7)/S.asstt/2002, dated 5‑3‑2003‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)‑‑‑Self‑Assessment‑‑‑Setting apart‑‑­Limitation‑‑‑Intimation of selection of case for audit was received by the complainant/assessee on 19‑4‑2003 and actual order of selection, which was, dated 12‑3‑2003 was received on 19‑4‑2003‑‑‑Complainant/assessee contended that selection of the case could not be considered as having been made within due, dated i.e. by 31‑3‑2003‑‑‑Validity‑‑‑No indication was available in the guidelines or in the letter extending the date that the intimation of selection or the order of selection had to be served on the assessee by 31‑3‑2003‑‑‑Neither on facts nor in the light of the legal position was there any reason to hold that the selection of the Complainant/assessee's case or total audit was barred by limitation.

(b) 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) ‑‑‑C.B.R. Letter No. C.7(7)S. asstt/2002, dated 17‑12‑2002‑‑‑C.B.R. Letter No. C. 7(7)/S.asstt/2002, dated 5‑3‑2003‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S. 2(3)‑‑‑Self‑Assessment‑‑‑Setting apart‑‑­Selection of case was based on the grounds that net profit rate in respect of income from manufacturing had declined from 0.0169 for the year 2001‑2002 to 0.0096 in the year 2002‑2003 and also that sales had increased during the year by only 1.1% whereas expenditure had increased by 18.2%‑‑‑Working capital had also doubled from Rs.40,878,170 to Rs.80,436,099 but there was no corresponding increase in sales‑‑‑Validity‑‑‑Grounds for selection of the case communicated to the Complainant/assessee and the Complainant/ assessee's replies showed that these were issues which could be properly considered only during regular assessment proceedings‑‑‑Selection of the case for audit was found to be justified and the complaint was rejected accordingly by the Federal Tax Ombudsman.

Abdur Rehman Mir FCA/A.R. for the Complainant.

Dr. Muhammad Iqbal, IAC HQ, Muhammad Ashfaq, Staff Officer to RCIT and Ms. Iram Sarwar, ALIT for Respondent.

2004 P T D 1710

[Federal Tax Ombudsman]

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

Syed ATTA HUSSAIN BUKHARI

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 876 of 2003, decided on 23rd September, 2003.

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

‑‑‑‑Ss. 63, 56, 61 & 13‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S. 2(3)‑‑‑Best judgment assessment‑‑‑Assessment was finalized on the basis of P.T.I. Form (Provincial Excise and Taxation Department) showing wrongly property in the name of complainant without proper service of notices on, the complainant‑‑‑Validity‑‑‑Notices under Ss.56; 61 and 13 of the Income Tax Ordinance, 1979 were not properly served‑‑‑Record showed, that notices were addressed to the building's name and not to complainant‑‑‑Failure to make proper service of notices on complainant was an act of maladministration because the department proceeded to create a huge liability against the complainant without giving him the opportunity to defend himself‑‑‑Ex parte assessment made without serving notice on the complainant was not sustainable‑‑‑Federal Tax Ombudsman recommended that Central Board of Revenue direct the, Commissioner to revise under S.122 of the Income Tax Ordinance, 2001 as to cancel the assessment order in respect of the assessment years 1993‑94 to 1997‑98 for de novo reassessment proceedings and take necessary action under, the Efficiency and Disciplinary Rules, 1973.

Syed Khalid Javed Bukhari for the Complainant.

Asif Rasool, DCIT for Respondents.

2004 P T D 1716

[Federal Tax Ombudsman]

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

Messrs SHAN MARKETING SERVICES, ISLAMABAD

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.271 of 2003, decided on 3rd July. 2003.

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

‑‑‑‑Ss. 59(1) & 24 (ff)‑‑‑Income Tax Ordinance (XLIX of 2001), S. 21‑‑­C.B.R. Circular No.7 of 2002, dated 15‑6‑2002 Para. 9(a)(ii)‑‑‑C.B.R. Circular No.7(7)/S. Asstt./2002, dated 17‑12‑2002‑‑‑Establishment of the Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)‑‑‑Assessment year 2002‑2003‑‑‑Setting apart of return for total audit on the ground that the gross receipts were declared at Rs.14,263,731 against which profit and loss expenses was claimed at Rs.13,515,718; that survey team assessed the sales at Rs.240,000,000, that wealth statement was silent in respect of vehicles declared in survey form and that rent paid through cash may attract the provisions of S.21(1) of the Income Tax Ordinance, 2001‑‑‑Selection of case for total audit in spite of assessee's explanation that commission receipt against sales conducted on behalf of principals were more than sales assessed by the survey team; that vehicles were declared in the balance sheet and that rent was paid through cheques and details of cheques were furnished‑‑­Validity‑‑‑Sales effected during the year were definitely much more than estimated by the survey team ‑‑‑Complainant/assessee filed copy of rent ledger containing details of cheques through which rent was paid‑‑‑Copy of bank statement had also been filed which indicated that payments were made through crossed cheques ‑‑‑Complainant/assessee was not confronted with investment introduced towards purchase of vehicles, however no investment was made on this score during the year under consideration‑‑‑Basis adopted for selection of case for total' audit were not found valid‑‑‑Federal Tax Ombudsman recommended that the case of the complainant be excluded from the list of cases selected for total audit and return be accepted under the Self‑Assessment Scheme.

Hafiz M. Idrees for Petitioner.

Mansoor Ahmad Bajwa, A.I.C. for Respondent.

2004 P T D 1725

[Federal Tax Ombudsman]

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

Messrs MEDIA NETWORK, MULTAN

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.439 of 2003, decided on 3rd July, 2003.

Central Excise Rules, 1944‑‑‑

‑‑‑‑Rr. 174 & 176‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S. 2(3)‑‑‑Licence fee‑‑Advertising agency‑‑‑Individual status‑‑‑No opportunity of being heard‑‑‑Post of notice through UMS‑‑‑Levy of licence fee and penalty in the status of firm‑‑‑Validity‑‑‑Record showed that although the complainant denied the receipts of notices, they were sent to the complainant under UMS‑‑­Licence fee was leviable on advertising services‑‑‑Complainant had produced and put on record a certificate from the Radio Pakistan Authorities that the firm was a sole‑proprietor one‑‑‑If the complainant's claim was verified to be correct then the licence fee demanded was admittedly in excess of what would have been actually payable as prescribed under 8.176 of the Central Excise Rules, 1944‑‑‑Order would need to be reviewed for determination of the correct liability of the complainant on account of licence fee for two years, especially when the complainant had produced a certificate from the Radio Pakistan Authorities certifying that the advertising agency was a sole proprietor firm‑‑‑Contention regarding imposition of harsh penalty also needed to be considered and decided on merit‑‑‑Federal Tax Ombudsman recommended that the Central Board of Revenue or the Collector reopen the Order‑in‑Original and direct the appropriate deciding authority to pass a fresh order to determine, subject to verification of certificate of sole‑proprietorship produced by the complainant, the actual liability of the complainant on the basis of, the applicable rate of licence fee and also consider the complainant's contention regarding harshness of penalty imposed in the case after giving the opportunity of defence/hearing.

Rafaqat Ali Awan for the Complainant.

Habib Ahmad, A.C. and Dr. Adrian Arkam D.C. for Respondent.

2004 P T D 1728

[Federal Tax Ombudsman]

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

AZMAT SULTANA HAYEE BUTT

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD.

Complaint No. 714-L of 2003, decided on 25th July, 2003.

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

‑‑‑‑Ss. 102 & 96‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000) S. 2(3)‑‑‑Additional payment for delayed refunds‑‑‑Refund became due when assessment was made but without any reasonable and legal ground the payment was delayed‑‑‑Neither Commissioner and Inspecting Additional Commis­sioner replied the letters of the assessee nor provided the proper relief which had been hastily granted to the extent of refund only after service of notice on the assessee‑‑‑All these acts amounted to maladministration‑‑‑Complainant/ assessee was entitled to compensation for delayed payment‑‑‑Federal Tax Ombudsman " recommended that compensation for delayed payment be made to the Complainant/assessee.

Shahid Baig for the Complainant.

Nemo for Respondent.

2004 P T D 1750

[Federal Tax Ombudsman]

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

FATEH TEXTILE INDUSTRY (PVT.) LTD., FAISALABAD

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 763‑L of 2003, decided on 10th October, 2003.

Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑Ss. 138‑E(4)(5), 89 & 85‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S. 2(3)‑‑‑Disposal of application by the Settlement Commission ‑‑‑Maladministration‑‑‑After settlement of disputed issues by the Settlement Commission, Complainant/assessee withdrew appeal but did not pay tax on the ground that Assessing Officer did not give effect to the order of Settlement Commission and issued demand notice and challan on the basis of Income determined by the Commission and committed serious malad­ministration as Assessing Officer was duty bound to issue demand notice on the basis of order of Settlement Commission as envisaged under S.85 of the Income Tax Ordinance, 1979‑‑‑Assessing Officer on the contrary, levied additional tax under. S.89 of the Income Tax Ordinance, 1979 on the original demand on the basis of income assessed by the Assessing Officer, completely ignoring the order of Income Tax Settlement Commission‑‑‑Department contended that since the Complainant/assessee did not fulfill the necessary condition of payment of tax on the basis of income settled by the Settlement Commissioner by the date prescribed in the order of Settlement Commission the order of Settlement Commission stood automatically cancelled and that of Assessing Officer restored‑‑­Val.idity‑‑‑S.138‑E(5) of the Income Tax Ordinance, 1979 made it mandatory that‑ the order passed under S.138‑E(4) of the Income Tax Ordinance, 1979 shall provide for the terms of settlement including any demand of tax, penalty or interest, the manner in which any sum due under the settlement shall be paid and all other matters to make the settlement effective‑‑‑Commission did not state the tax to be paid by the Complainant/assessee‑‑‑Was not possible for the complainant to calculate and pay the tax on his own‑‑‑As the copy of order was sent to Assessing officer it was his duty to follow up the matter by issuing demand notice but it was not done‑‑‑Assessing Officer instead of calculating tax on the income determined by the Commission and issuing demand notice wrote to the Complainant/assessee that since it had not made payment of tax on income determined by the Commission, the order of Settlement Commission stood automatically vacated‑‑‑This communication was contrary to law‑‑‑Assessing Officer did not take any action for notifying the tax due and its recovery and thus committed serious `maladministration'‑‑‑Assessing Officer committed negligence and issued illegal order under S.59 of the Income Tax Ordinance, 1979 charging additional tax on income assessed by the Assessing Officer instead of income settled by the Commission and by refusing to give effect to the order of Settlement Commission‑‑‑Order of Assessing Officer was illegal, unjust, arbitrary and perverse which fell under mal­administration‑‑‑Federal Tax Ombudsman recommended that the Commissioner of Income Tax cancels the order under S.89 of the Income Tax Ordinance, 1979 made by the Assessing Officer on 8‑6‑2001; give effect to the order of Income Tax Settlement Commission and get the demand notice issued and challan on the basis of income determined by the Settlement Commission vide its order, dated 13‑11‑1999.

2002 PTD 1918 and Complaint No. 1438 of 2002 ref.

Ch. Manzoor Ahmad for the Complainant.

Mehmood Jaffari, D.‑C.I.T. for the Revenue.

2004 P T D 1755

[Federal Tax Ombudsman]

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

IRSHAD BEGUM

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 789 of 2003, decided on 29th September, 2003.

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

‑‑‑‑Ss. 111 & 13‑‑‑Income Tax Ordinance (XLIX of 2001), S.122‑A‑‑­Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S. 2(3)‑‑‑Penalty for concealment of income‑‑‑Penalties were imposed equal tax assessed‑‑‑Assessments were set aside by First Appellate Authority for de novo action‑‑‑Re‑assessments were then made and assessment proceedings were filed showing that Complainant/ assessee had no taxable income‑‑‑Demand of penalties on the ground that penalties under S.111 of the Income Tax Ordinance, 1979 involved proceedings which were separate from the assessment proceeding and demand was valid against which the Complainant/assessee had not filed any appeals‑‑‑Validity‑‑‑Although normally appeals had to be filed against the penalty orders in the same manner as appeals against the assessment orders but it was an admitted position that all the penalties under S. 111 of the Income Tax Ordinance, 1979 were based on additions made under S.13 of the Income Tax Ordinance, 1979 and since these additions vanished as a result of reassessment, the basis on which the penalties were levied no longer existed‑‑‑Was not reasonable to let the penalty orders stand when the very basis of the penalties was not there‑‑‑Necessary action for deletion of the penalties had to be taken in accordance with relevant provisions of law‑‑‑Federal Tax Ombudsman recommended the penalties under S.111 of the Income Tax Ordinance., 1979 relating to the assessment years 1989‑90, 1990‑91, 1991‑92 and 1994‑95 be deleted under S.122A of the Income Tax Ordinance, 2001.

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

‑‑‑‑S. 110‑‑‑Income Tax Ordinance (XLIX of 2001), S.122‑A‑‑‑Establishment of Office of Federal Tax Ombudsman (XXXV of 2000), S.2(3)‑‑‑Penalty for non compliance with notice, etc. ‑‑‑Assessment proceedings were filed during the re‑assessment meaning thereby there was no taxable income‑‑‑Demand of penalty for non compliance of notices as no separate appeal had been filed against such order‑‑­Validity ‑‑‑Penalty could be imposed which might be equal to 50 percent of the amount of tax which would have been avoided if the income as per return had been accepted‑‑Income had finally been assessed as below taxable limit‑‑‑Since there was no tax on the basis of which penalty up to 50 percent could have been imposed provisions of S.110 of the Income Tax Ordinance, 1979 were not attracted‑‑‑‑Penalties levied would require to be deleted‑‑‑Federal Tax Ombudsman recommended that the penalties under S.110 of the Income Tax Ordinance, 1979 for the assessment years 1989‑90, 1990‑91, 1991‑92 and 1994‑95 be deleted under S.122A of the Income Tax Ordinance, 2001.

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

‑‑‑‑S. 108‑‑‑Income Tax Ordinance (XLIX of 2001), S.122‑A‑‑­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‑‑‑Assessment proceedings were filed during the re‑assessment meaning thereby there was no taxable income‑‑‑Demand of penalty for non filing of returns as no separate appeal had been filed against such penalty order ‑‑‑Validity‑‑‑Assessee was not required to file returns as she had no taxable income and default was committed by her‑‑‑Penalty under S.108 of the Income Tax Ordinance, 1979 could be levied equal to one tenth of one percent of the tax payable for each day of default subject to minimum of five hundred rupees and a maximum of twenty five percent of the tax payable‑‑‑Since no demand was created against the complainant/assessee, there was no tax on the basis of which penalty could have been levied and as such the provisions of S.108 of the Income Tax Ordinance, 1979 were not attracted‑‑­Federal Tax Ombudsman recommended that the penalties under S. 108 of the Income Tax Ordinance, 1979 relating to the assessment years 1989‑90, 1990‑91, 1991‑92 and 1994‑95 be deleted under S. 122A of the Income Tax Ordinance, 2001.

Nemo for the Complainant.

Asem Iftikhar, D.C.I.T. and Nasim Ilyas, A.C.I.T. for Respondent.

2004 P T D 1763

[Federal Tax Ombudsman]

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

EVER GREEN PESTICIDES (PVT.) LTD., LAHORE

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 208‑L of 2003, decided on 17th July, 2003.

Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑S. 65‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S. 2(3)‑‑‑Additional assessment ‑‑‑Assessee was a company‑‑‑Nil income was assessed on the basis of affidavit that no business was conducted by the company‑ ‑‑Proceeding under S.65 of the Income Tax Ordinance, 1979 for additional assessment were initiated on the basis of Balance Sheet and Profit & Loss Account prepared by the Chartered Accountant and assessment was framed accordingly ‑‑‑Assessee contended that accounts obtained from a Chartered Accountant were not signed by any Director or official of the Complainant/company and these could not be called as definite information' which was mandatory to initiate additional assessment proceedings‑‑‑Validity‑‑‑Authenticity had to be attached to the information supplied by a Chartered Accountant by way of statement of accounts and the Balance Sheet‑‑‑Proceedings were initiated as far back as 1999, and till today the Complainant/assessee had not accused the Chartered Accountant of any professional misconduct before any appropriate authority like the Security and Exchange Commission or the Institute of Chartered Accountants in Pakistan‑‑­There appeared no "maladministration" because the Department was in possession ofdefinite information' in the shape of systematically prepared Statement of Accounts and the Balance Sheet which were claimed by the Author as having the support of books of accounts revealing dealing in pesticides of which the profit had been subjected to tax after fulfilling the prescribed legal requirements precedent to the initiation of proceedings and by confronting the Complainant as required by law‑‑‑Complaint being without merit was closed by the Federal Tax Ombudsman.

(1993) 68 Tax 1 ref.

M. Ajmal Khan and Amir Umar Khan for the Complainant.

Hassan Kamran, D‑CIT for Respondent.

2004 P T D 1766

[Federal Tax Ombudsman]

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

MUHAMMAD SHARIF ANSARI

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Review Application No.84 of 2003 in Complaint No. 1069‑L of 2002, decided on 9th July, 2003.

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

‑‑‑‑S. 9(2)(a)‑‑‑Jurisdiction, functions and powers of the Federal Tax Ombudsman‑‑‑Review application‑‑‑Department contended that jurisdiction of Federal Tax Ombudsman over the complaint was barred under subsection (2)(a) of the S.9 of the Establishment of Office of Federal Tax Ombudsman Ordinance, 2000 as the complainant had filed appeal against the assessment which was not disclosed either to the Department or to the Office of the Federal Tax Ombudsman ‑‑‑Validity‑‑­At the time, when complaint was received in the Office of the Federal Tax Ombudsman, the appeal had not been filed‑‑‑Section 9(2)(a) of the Establishment of Office of Federal Tax Ombudsman Ordinance, 2000 will not apply in the circumstances‑‑‑Subject to correction review application was rejected by the Federal Tax Ombudsman.

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

‑‑‑‑S. 9(2)(b)‑‑‑Jurisdiction, function and powers of the Federal Tax Ombudsman‑‑‑Considering the object of the legislation where maladministration was established the Federal Tax Ombudsman had jurisdiction to investigate.

Complaint No. 1438 of 2003 ref.

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

‑‑‑‑S. 11‑‑‑Recommendations for implementation‑‑‑Review application‑‑­Recommendations by Federal Tax Ombudsman were not implemented due to filing of review application‑‑‑Validity‑‑‑It was a misconception with the Department that on filing of review application implementation was automatically stayed‑‑‑Filing of review application did not operate as stay unless it was specially granted by Federal Tax Ombudsman at the request of the Department‑‑‑Admitted position was that no representation had been filed against the recommendation by the Department‑‑­Considering the facts and circumstances of the case the time for implementation was extended up to 30 days from receipt of the order by the Revenue Division‑‑‑Review application was rejected by the Federal Tax Ombudsman.

Zubair Bilal, DCIT.

2004 P T D 1779

[Federal Tax Ombudsman]

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

ABRAR‑UD‑DIN NASEER

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 708‑L of 2003, decided on 5th August, 2003.

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

‑‑‑‑S. 59(1)‑‑‑Self‑ Assessment‑‑‑Selection of case for Total Audit through computer random ballot with wrong secret No., where (i) a different name was mentioned than the assessee (ii) business name was left blank (iii) NIC was different from that of complainant ‑‑‑Assessee contended that it was not fair to thrust someone else's case on the Complainant/ assessee in the circumstances‑‑‑Department pleaded that PRAL was responsible for selection of cases for total audit by random balloting which had confirmed that it was the same assessee whose case had been selected for total audit‑‑‑Validity‑‑‑There were discrepancies regarding the Complainant/assessee's return picked up for Total Audit by computer ‑‑‑NIC number and name were different and the NTN, as also the business name, were missing and these discrepancies discredited authenticity of selection‑‑‑In case of doubt the benefit should go to the subject‑‑‑Federal Tax Ombudsman recommended that Complainant's return filed for the assessment year 2002‑2003 be accepted under Self ­Assessment Scheme.

Armughan Ali for the Complainant.

Anwar Jillani, D‑CIT for Respondent.

2004 P T D 1781

[Federal Tax Ombudsman]

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

Messrs ASIF CERAMICS, SHEIKHUPURA

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 206‑L of 2003, decided on 12th July, 2003.

Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑Ss. 50(5A)(7G)(7E)(7F), 53, 143‑B, 80CC, 59A &156‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S. 2(3)‑‑‑Deduction of tax at source‑‑‑Statement under S.143B of the Income Tax Ordinance, 1979 was filed‑‑‑Assessment was completed under S.59A of the Income Tax Ordinance, 1979‑‑‑Credit of tax paid under S.53, 50(713)(717) of the Income Tax Ordinance, 1979 was refused‑‑‑Department contended that claim of deduction of tax under S.50(7G)(7E) and (717) of the Income Tax Ordinance, 1979 was yet to be verified because most of the electricity, telephone and sui gas bills were not in the name of the Complainant/assessee and there was no proof of payment of advance tax‑‑‑Except for one connection all the electricity, telephone and sui gas connections were in the names of members of the association of persons, or in the name of the business concern, which required verification ‑‑‑Complainant/assessee should have provided original bills, copies of rent deeds and certificates from owners of premises to prove that the utility bills had been paid by the Complainant/ assessee and not the owner‑‑‑Validity‑‑‑Assessing Officer failed to make proper assessment on the basis of statement filed by the Complainant/ assessee under S.143B of the Income Tax Ordinance, 1979‑‑­Assessments were made under S.59A of the Income Tax Ordinance, 1979 in respect of Export sales and local supplies but the aggregate amount of tax paid was totally ignored‑‑‑Attitude of Assessing Officer towards disposal of application filed by the Complainant/assessee under S.156 of the Income Tax Ordinance, 1979 was casual and arbitrary‑‑­Assessing Officer had no requisite documents from the Complainant/ assessee for making necessary verification and allow credit of tax claimed under S.221 of the Income Tax Ordinance, 2001 and to issue the refund, if due‑‑‑There was obvious maladministration ‑‑‑Federal Tax Ombudsman recommended that the application, dated 25‑11‑2002 for rectification should be processed, credits verified and refund, if due, be issued to the Complainant under 5.170 read with S.221 of the Income Tax Ordinance, 2001 and that the Assessing Officer may be advised not to make assessments and dispose of applications for rectification in a slipshod manner.

Nemo for the Complainant.

Muzammil Hussain, WIT for Respondent.

2004 P T D 1788

[Federal Tax Ombudsman]

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

MIAN TOYS FAROSH, SARGODHA

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 588 of 2003, decided on 30th July, 2003.

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

‑‑‑‑S. 156‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S. 2(3)‑‑‑Rectification of mistakes‑‑‑Less amount of gross profit was deducted from the estimated gross profit than the actual declared gross profit‑‑‑Application for rectification of‑‑­Assessment was rectified by enhancing sales to arrive at net income as earlier assessed‑‑‑Validity‑Order under S.156 of the Income Tax Ordinance, 1979 was based on complete lack of understanding of the scope of S.156 of the Income Tax Ordinance, 1979‑‑‑Assessing Officer could not enhance the estimate of sales in the rectification order as he had to operate within the framework of the original assessment order‑‑­Sales had been estimated at Rs.700,000 and after working out gross profit @ 15% amounting to Rs.105,000 the incorrect figure of gross profit amounting to Rs.52,500 was deducted to arrive at the trading account addition instead of deducting the actual declared gross profit of Rs.97,500‑‑‑Rectification order was required to re‑compute the trading account addition to the income after deducting Rs.97,500 from the assessed gross profit of Rs.105,000 and it was not for the Assessing Officer to replace any estimate of sales for the already assessed sales‑‑­Rectification order as passed was the result of maladministration ‑‑­Return was also qualified under Self‑Assessment Scheme and had been wrongly excluded from. Self‑Assessment Scheme‑‑‑Federal Tax Ombudsman recommended that the rectification order for the assessment year 2001‑2002, dated 1‑1‑2003 be again rectified in the light of the observation in para. 6 above; that a letter of warning be issued to the Assessing Officer who passed the order under S.156 of the Income Tax Ordinance, 1979 telling him to refrain from such illegal action in future; that the complainant's return for the year 2002‑2003 be considered as qualifying for Self‑Assessment Scheme as far as the comparison with the last tax payable is concerned‑‑‑Return may thus be accepted under Self‑Assessment Scheme if other requirements of the scheme were met.

Nasir Nawaz Mufti, ITP, AR for the Complainant.

Gul Rehman, Taxation Officer for Respondent.

2004 P T D 1792

[Federal Tax Ombudsman]

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

MUNAWAR HUSSAIN

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 362‑L of 2003, decided on 9th July, 2003.

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

‑‑‑‑S. 9(2)(b)‑‑‑Jurisdiction, functions anal powers of the Federal Tax Ombudsman‑‑‑Federal Tax Ombudsman could take cognizance of cases involving maladministration even if such cases involved matters relating to assessment.

Complaint No. 779‑K of 2001 ref.

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

‑‑‑‑S. 62‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S. 2(3)‑‑‑Assessment on production of accounts, evidence etc'. ‑‑‑Business of hotel and restaurant in a joint property‑‑‑Separate returns for business of hotel and restaurant were filed by the two brothers‑‑‑Assessment was framed as an Association of Persons on the basis of Inspector's report and a statement made by the younger brother of the assessees that business was being conducted by one brother ‑‑‑Assessee contended that no assessment could be made as an Association of. Persons without first canceling the assessment made in the hands of other brother and income from two business was illegally clubbed‑‑‑Validity‑‑‑It was the duty of Complainant/assessee to have filed and produced record and documents to negate the department's claim and substantiate his contention about the running business of hotel and restaurant separately‑‑‑Even affidavit of brother of the assessee, had not been filed to controvert the averments made in the assessment order‑‑‑Assessment order, could not be said to be unjust nor did it suffer from maladministration ‑‑‑Complaint Was closed by the Federal Tax Ombudsman.

1995 PTD Trib. 19 ref.

Ch. Muhammad Aslam for the Complainant

Hussain, DCIT for Respondents

2004 P T D 1809

[Federal Tax Ombudsman]

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

Messrs CH. FABRICS PVT. LTD., HATTAR

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 205 of 2003 decided on 11th August, 2003.

Sales Tax Act (VII of 1990)‑‑‑

‑‑‑‑Ss. 3‑1(A), 3‑b(1) & 34‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S. 2(3)‑‑‑Scope of tax‑‑‑Input tax adjustment‑‑‑Sales tax was collected by WAPDA on electricity bill‑‑­Input tax adjustment was claimed‑‑‑Credit of such collected sales tax was subsequently given by WAPDA and taxpayer accordingly did not reduce the same from input tax which caused short payment‑‑‑Demand of such principal amount alongwith additional tax‑‑‑Principal amount was paid alongwith part payment of addition tax‑‑‑In respect of remaining part payment of additional tax, assessee contended that WAPDA was responsible for payment of .sales tax instead of refunding the same and thus he was not responsible to pay additional tax‑‑‑Such fractional amount of additional tax was demanded by a non‑speaking order‑‑­Validity‑‑‑Order was not a speaking order rather, it could hardly be considered as order‑‑ ‑Adjudication Officer had not given any consideration to the arguments of the complainant submitted in reply to the show‑cause notice‑‑ ‑Order‑in‑original was not a valid order and the charge of additional tax created could not be considered a legal charge‑‑­Order was arbitrary and contrary to law‑‑‑Maladministration was established‑‑‑Federal Tax Ombudsman recommended that the demand of addition of Rs.14,757 created against the complainant be deleted and the amount of Rs.14,769 additionally paid by the complainant be refunded to him.

Sajjad Ahmad Chaudhry alongwith S.K. Jodoon for Petitioner.

Ziaullah Shams, Assistant Collector, Sales Tax and Bakht Dauran, Senior Auditor, Sales Tax, Peshawar for Respondent.

2004 P T D 1822

[Federal Tax Ombudsman]

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

Messrs ENGRO CHEMICALS PAKISTAN LIMITED, KARACHI and another

Versus

Haji GHULAM FAROOQ QURESHI and 3 others

Complaint No. 1005‑K of 2003, decided 7th July, 2003.

Workers Welfare Fund Ordinance (XXXVI of 1971)‑‑‑

‑‑‑‑Ss. 3 & 4(2)‑‑‑Companies Profits (Workers' Participation) Act (XII of 1968‑‑‑Companies Profits (Workers' Participation) Rules, 1971, R.4A(d), Annexure‑III‑‑‑Income Tax Ordinance (XXXI of 1979), S.92‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S. 2(3)‑‑‑Jurisdiction‑‑‑Demand under Workers' Profit Participation Fund (WPPF) by Taxation Officer for deposit into Government treasury by 30th June‑‑‑Validity‑‑‑After receiving payment under the Companies Profits (Workers' Participation) Act, 1968 from the company the Fund could be invested but must allocate amounts due to the workers and then pay over the balance left to the .Fund under the Workers' Welfare Fund Ordinance, 1971 as late as September‑‑‑No Legal obligation existed to pay these amounts by June or any other date prior to 30th September‑‑‑Jurisdiction for receiving monies due under the Workers Welfare Fund Ordinance, 1971 was of the Large Taxpayer Unit and not the Taxation Officer as the complainant/assessee was assessed by the Large Taxpayer Unit‑‑‑Even the jurisdiction of Large Taxpayer Unit was for the purpose of the payment directly due by the Company under the Workers Welfare Fund Ordinance, 1971 and not under Companies Profits (Workers' Participation) Act, 1968‑‑‑Was patently illegal for the Taxation Officer to attempt to attach accounts of the Company as the demands besides being contrary to law were allegedly against the workers participation fund‑‑‑Taxation Officer regretted his misreading of law and had already withdrawn all the notices referred to in the complaint unconditionally‑‑‑Complainant was satisfied with the assurance and did not wish to pursue the complaint‑‑‑Complaint was closed by the Federal Tax Ombudsman.

Barrister Andalib Alavi, Chief Legal Adviser and Company Secretary alongwith Aziz Nishter for the Complainant.

Haji Farooq Qureshi, Taxation Officer for Respondent.

2004 P T D 1829

[Federal Tax Ombudsman]

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

Messrs WAH NOBEL ACETATES LTD., WAH CANTT.

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD.

Complaint No.86 of 2003, decided on 13th August, 2003.

(a) Sales Tax Act (VII of 1990)‑--

‑‑‑‑Ss. 10(1) & 67‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S. 2(3)‑‑‑Excess amount to be carried forward or refunded‑‑‑Delayed refund‑‑‑Input tax refund claim‑‑­Investigation and verification‑‑‑Time limit‑‑‑Type of investigation and verification‑‑‑Where there were reasons to believe that the input tax refund claim was not admissible the provisions regarding entitlement and time limit shall not apply till investigation and verification of deposit of tax was completed‑‑‑Investigation and verification could be of two types: One, which was made in a normal and routing manner verifying the correctness of claim and the other where there were reasons to believe that the claim was not admissible‑‑‑In such cases investigation and verification may take some time but it should not be unreasonably lengthy‑‑‑Taxpayer should be made aware of the reasons, which had led to believe that the claim was not refundable and thereafter process of investigation may start‑‑‑Such verification and investigation should be completed within a reasonable period keeping in view the intention of the Legislature as expressed in S. 10(1) of the Sales Tax Act, 1990.

(b) Sales Tax Act (VII of 1994)‑‑‑--

‑‑‑‑Ss. 67, 66 & 10(1)‑‑‑Sales Tax Refund Rules, 1996‑‑‑Sales Tax Refund Rules, 1998, R. 9‑‑Sales Tax Refund Rules, 2000, R.9(2)‑‑­ Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S. 2(3)‑‑Delayed refund‑‑‑Input tax on import of machinery‑‑­ Claimed refund was paid in three instalments‑‑‑Claim of compensation non‑issuance of refund within the stipulated time‑‑‑Unreasonable delay in verification of documents‑‑‑Validity‑‑‑No document had been produced to justify delay in verification‑‑‑Unreasonable delay had been caused in passing the order for refund which amounted to negligence and delay was caused without any valid reason ‑‑‑Mal­ administration was established as the department unreasonably delayed the processing and decision on the refund application‑‑‑One of the conditions for refund was that amongst other documents a declaration ought to be filed to the effect that production was started within two years after the import of machinery and plant‑‑‑Said document though was said to, have been filed it had not been produced by either party‑‑‑Was necessary to ascertain whether the complainant commenced taxable supplies within the time fixed by the Central Board of Revenue‑‑‑Federal Tax Ombudsman recommended that Collector to inquire whether the complainant commenced production and supply of taxable goods within a period of two years from the date of receipt of refund; that in case the findings was in positive, the Collector to ensure that additional sum due under S.67 of the Sales Tax Act, 1990 was paid that in case the finding was in the negative the Collector to proceed in accordance with law and Central Board of Revenue 'to do counseling to the Custom officials to ensure better understanding and proper appli­cation of relevant laws and rules while ,performing their duties.

Amanullah Khan, F.C.A. G.M. Finance and Tahir Razaq Khan, F.C.A. for the Complainant.

Muhammad Saleem, Deputy Collector Sales Tax and Muhammad Ishtiaq, Law Officer for the Revenue.

2004 P T D 1841

[Federal Tax Ombudsman)

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

ECONOMY PESTICIDES (PVT.) LTD., DERA GAZI KHAN

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.392 of 2003, decided on 3rd July, 2003.

(a) Sales Tax Act (VII of 1990)‑‑‑

‑‑‑‑S. 2(46)(e)‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S. 2(3)‑‑‑Value of supply‑‑‑Value addition‑­Pesticides‑‑‑Where there was sufficient reason to believe that the value of a supply had not been correctly declared in the invoice, the value determined by the Valuation Committee comprising representatives of Trade and the Sales Tax Department constituted by the Collector would be value of taxable supply‑‑‑Valuation Committee on pesticides had decided a minimum value‑addition of not less than 16% in addition to packing charges‑‑‑Value addition of 16% (minimum) as decided by the legally constituted Valuation Committee was correctly adopted by the Adjudication Officer.

(b) Sales Tax Act (VII of 1990)‑‑‑

‑‑‑‑Ss. 73 & 7‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S. 2(3)‑‑‑Certain transaction not admissible‑‑‑Cash payments in bank account of supplier‑‑‑input tax adjustment‑‑‑Validity‑‑‑Payment made into the account of the supplier by tendering cash was not in conformity with the provisions of S.73 of the Sales Tax Act, 1990‑‑‑Cash receipts, were not banking instrument within the meaning of S.73 of the Sales Tax Act, 1990 and input adjustment claim in respect of those purchases were not admissible.

(c) Sales Tax Act (VII of 1990)‑--

‑‑‑‑S. 34‑‑‑Establishrrient of Office of Federal Tax ‑ Ombudsman Ordinance (XXXV of 2000), S. 2(3)‑‑‑Additional Tax‑‑‑Additional tax could be levied if the tax due or any part thereof had not been paid‑‑­Additional Tax was to be calculated right up to the date on which it was paid.

(d) Sales Tax Act (VII of 1990)‑‑‑--

‑‑‑‑Ss. 2(46)(e), 33(2) & 45A‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S. 2(3)‑‑‑Value of supply‑‑­Value addition‑‑‑Sales of goods in bulk or in retail packing‑‑­Adjudicating Officer directed the auditor for 16% value addition in addition to the packing charges‑‑‑Twenty per cent value addition was made without making investigation whether the goods were sold in bulk or in retail packing‑‑‑Validity‑‑‑Adjudicating Officer did not give any definite findings whether the goods were sold in bulk or in retail packing‑‑‑Was just and fair that the case may be re‑examined for giving a definitive decision on merit after considering the arguments of the complainant and the relevant documents/evidence that the complainant may place before the Adjudicating Officer‑‑‑Federal Tax Ombudsman recommended that the Central Board of Revenue reopen the case under S‑45A of the Sales Tax Act, 1990 insofar as it related to inclusion of packing charges for levy of sales tax and imposition of penalty and direct the relevant authority to investigate and re‑examine whether or not the goods were sold in bulk or in retail packing and whether or not the penalty imposed in the case was legally imposed and then pass a fresh speaking order on merits after giving the complainant the opportunity of being heard.

Sheikh Ghulam Asghar for the Complainant.

2004 P T D 1850

[Federal Tax Ombudsman]

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

Messrs FRIENDS VENEER CO., PESHAWAR

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.274 of 2003, decided on 3rd July, 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)‑‑‑C.B.R. Circular No.7 (7)/S. Asstt/2002, dated 17‑12‑2002‑‑‑Assessment year 2002‑2003‑‑‑Gross profit rate‑‑­Setting apart of return for total audit on the ground that in the assessment year 1996‑97 gross profit rate was declared 23 % whereas in the current year it had been declared 18% and being a manufacturer gross profit rate of 25% was normally applied‑‑‑Validity‑‑‑Was not reasonable to pick a particular year for comparison when in all the subsequent years the declared gross profit rate had been considerably lower and the declared gross profit in the year under consideration was better than in almost all the intervening years ‑‑‑Complainant/assessee's declared sales were also higher as compared to the assessment year 1996‑97‑‑‑Selection of case for audit was not fund to be based on any valid reason‑‑‑Federal Tax Ombudsman recommended that the complainant'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.

Abdul Basit, F.C.A., A.R. for the Complainant.

Mansoor Ahmad Bajwa, I.A.C. for Respondent.

2004 P T D 1861

[Federal Tax Ombudsman]

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

Messrs ALPHA VINYL (PVT.) LTD., SAWABI

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.203 of 2003, decided on 2nd July, 2003.

Sales Tax Act (VII of 1990)‑‑‑--

‑‑‑‑S. 45A‑‑‑S.R.O. 392(1)/2001, dated 18‑6‑2001‑‑‑S.R.O. 1257(1)/97, dated 18‑12‑1997‑‑‑S.R.O. 1247(1)/97, dated 18‑12‑1997‑‑‑S.R.O. 580(1)/91, dated 27‑6‑1991‑‑‑General Order No.2 of 2001‑‑‑Simplified Sales Tax Rules, 1999‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S. 2(3)‑‑‑Powers of the Central Board of Revenue and Collector to call for records‑‑‑Fixed Sales Tax Scheme‑‑‑Exemption‑‑‑Permission for payment of fixed tax was granted by the Assistant Collector‑‑‑Additional Collector questioned the legality of Assistant Collector's such permission and demanded sales tax at the standard rate>‑‑Appeal‑‑‑During pendency of appeal before Appellate Tribunal, Complainant/taxpayer .applied for the benefit of. S.R.O. 392(1)/2001, dated 18‑6‑2001 which was not decided by the Collector matter being sub judice before the Appellate Tribunal‑‑­Complainant/assessee contended that he was fully qualified for receiving benefit of S.R.O. 392(1)/2001, dated 18‑6‑2001, the Collector may be directed to give his decision irrespective of pendency of Complainant's appeals before Appellate Tribunal because said S.R.O. provided a fresh cause and the matter could be decided by the Collector ‑‑‑Validity‑‑­S.R.O. 392(1)/2001, dated 18‑6‑2001 exempts the whole amount of sales tax in excess of that liable to ‑be paid at the rates specified under my applicable fixed Sales Tax Rules up to.30th June, 1998, the Simplified Sales Tax Rules, 1999 or under any written instruction from the Central Board of Revenue on supplies made by the manufacturer up to 30th June, 2000 subject to fulfilment of other conditions laid down therein including the condition that such manufacturer was working in accordance with any of the aforesaid rules or instructions of the Central Board of Revenue and was regularly paying tax under the schemes or instructions up to 30th June, 2000‑‑‑Complainant was entitled to the benefit of S.R.O. 392(1)/2001, dated 18‑6‑2001 because it had been paying fixed tax under S.R.O. 1257(1)/97, dated 18‑12‑1997 read with S.R.O. 1247(1)/97, dated 18‑12‑1997 as allowed by the Assistant Collector‑‑‑Assistant Collector's order extending the facilities had, however, beer‑ reopened and recalled by the Collector as being unlawful‑‑Complainant had filed an appeal against the Collector's order recalling Assistant Collector's order before the Appellate Tribunal‑‑­Since Complainant's claim to the benefit of S.R.O. 392(1)/2001, dated 18‑6‑2001 was dependent on decision whether or not it was entitled to pay fixed tax under S.R.O. 1257(1)/97, dated 18‑12‑1997, which was matter, pending decision before the Appellate Tribunal, it was appropriate that the issue was decided by the Appellate Tribunal before which the appeal filed in the case was pending‑‑‑Complaint was closed by the Federal Tax Ombudsman.

Isaac Ali Qazi for the Complainant.

Ziaullah Shams, A.C. and Bakhat Dowran, Senior Auditor/Law Officer for Respondent.

2004 P T D 1876

[Federal Tax Ombudsman]

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

Mian ISMAIL CHAUDHRY

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 1123 of 2003, decided on 27th October, 2003.

Wealth Tax Act (XV of 1963)‑‑‑--

‑‑‑--Ss. 10 & 16(2)(4)‑‑‑Establishment of, Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S. 2(3)‑‑‑Jurisdiction of wealth tax authorities‑‑‑Assessment‑‑‑Duplicate assessment‑‑‑Assessments were finalized in violation of the direction of the Appellate Authorities that the assessment record of the company be checked to find out the date on which the complainant had purchased the shares and then the assessment record of the complainant should be transferred from Islamabad to Peshawar on point of jurisdiction‑‑‑Validity‑‑‑Two sets of assessments were on record which was illegal‑‑‑Directions of appellate authorities had not been carried out by the Assessing Officer according to which the assessment record of the complainant/assessee was to be transferred from Islamabad to Peshawar before taking decision which helped the Assessing Officer to know the facts of the case but the same was not done‑‑‑Intimation regarding assessment circle in Islamabad was sent to Appellate Tribunal but the same was not available on the Department's record‑‑‑Duplicate assessments were contrary to law and amounted to maladministration ‑‑‑Federal Tax Ombudsman recommended that the assessment record of the complainant be obtained from Islamabad through correspondence at Commissioner's level and the assessments for the years 1995‑96 to 1997‑98 be revised so that the complainant was not assessed twice and was charged to tax due from him according to law after providing him an opportunity of being heard.

Waseem Ahmad Siddiqui, C.A. for the Complainant.

Sardar Ali Khawaja, DCIT for Respondent.

2004 P T D 1879

[Federal Tax Ombudsman]

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

Messrs CENTURY INDUSTRIES (PVT.) LIMITED, KARACHI

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. C‑1155‑K of 2003, decided on 27th Oct6ber, 2003

Customs Act (IV of 1969)‑‑‑--

‑‑‑‑S. 37‑‑‑ FE Circular 76 of 1992‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)‑‑‑ Drawback on goods used in the manufacture of goods which were exported‑‑‑Duty drawback was sanctioned but the payment was not made‑‑‑Payment was kept pending on account of mala fide intention and ulterior motives‑‑­Even an order for recovery of such amount was passed arbitrarily, without verifying realization of proceeds and without issuing show‑cause notices and serving the same on complainant‑ ‑‑Finally, defective cheque was issued which was encashed from the State Bank of Pakistan‑‑­Effect‑‑‑Cheque was issued when a notice from the Office of Federal Tax Ombudsman was received by the Department‑‑‑Department was not willing to rectify the difference in the cheque and the advice sent to State Bank of Pakistan‑‑‑Such was a inaptitude callousness, perverse, attitude, and downright viciousness of the functionaries determined to frustrate the efforts of small businessmen to get their due right‑‑‑Complainant was genuinely aggrieved on account of inordinate delay in payment of the dues and the apathetic attitude of the Department in solving their problem‑‑‑No provision in Customs Act, 1969 existed .for mark‑up/ compensation‑‑‑.Federal Tax Ombudsman recommended that‑a thorough inquiry be instituted and fix the responsibility; that inquiry for delay of more than two years in adjudication on remand be made; that inquiry be made for keeping the sanctioned claim pending, for one year and not issuing the cheque; that inquiry be made to probe the issuing a defective cheque (or a defective advice) which could not be encashed from the State Bank of Pakistan; that inquiries be made about insistence of the accounts officials that there was no error in the cheque and its advice; to take strict disciplinary action against the defaulting officials and direct the Collector of Customs to ensure that the objection raised by the State Bank about the cheque rectified within fifteen days.

Mirza Muhammad Awais for the Complainant.

Feroze A. Junejo, Deputy Collector of Customs for Respondent.

2004 P T D 1893

[Federal Tax Ombudsman]

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

Messrs WELFARE TRADING COMPANY, KARACHI

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.C‑485‑K of 2003, decided on 10th October, 2003.

Sales Tax Act (VII of 1990)‑‑‑--

‑‑‑‑Ss. 10, 34(4)(c), 67 & 73‑‑‑Sales Tax Refund Rules, 2002, R.8(3)‑‑­Excess amount to . be carried forward, or refunded‑‑‑Export of textile goods‑‑‑Claim of refund‑‑‑Refund was sanctioned‑‑‑Cheque was prepared but recalled and destroyed‑‑‑Department issued show‑cause notice on the ground that the status of the suppliers was suspected‑ and the amount of input claimed as refund had not been deposited/paid into the Government exchequer by the supplier in spite of the fact that all‑the payments were made by the complainant/assessee to supplier through normal banking channel and also the parties were identified from whom raw material was purchased and sales tax invoices received from them duly showed that the sales tax had indeed been charged from the complainant/assessee and paid to the registered supplier alongwith the cost of raw material purchased‑‑‑Validity‑‑‑Transaction, was genuine‑‑‑Goods had been physically transported from the suppliers to the purchasers and eventually exported‑‑‑Banking transactions showed that cost of goods including sales, tax had been duly paid by the purchasers‑‑‑No justification existed to withhold the refund claimed or issue a show‑cause notice for rejection of refund and imposition of penalty‑‑‑Responsibility for payment of sales tax lay with the suppliers and the Department should have proceeded against the suppliers and not against the purchasers‑‑‑Nothing, had been brought on record to establish the involvement‑of complainant/assessee in the alleged tax fraud or collusion between them and the suppliers‑‑‑Sales Tax Department 'had neither carried out intensive investigation and audit nor had reached any definite conclusion thus the consequent delay in disposal of tile refund claim demonstrated sheer inefficiency‑‑‑Department should either establish the fault of‑the complainant/assessee and conclude the proceedings or pay the refund‑‑‑Show‑cause notice was a defective document as no concrete grounds had been mentioned to justify the initiation of penal proceedings against the complainant/assessee‑‑‑Federal Tax Ombudsman recommen­ded that Central Board of Revenue to direct the Collector of Sales Tax to (i) withdraw the defective Show‑Cause Notice (ii),carry out investigation and audit (on the lines stated above) to determine the genuineness of the transaction and payment of sales tax to the supplier as per the invoices submitted in the supportive documents (iii) issue fresh show‑cause notice on the basis of concrete evidence of complicity/involvement of the complainant/assessee in a tax fraud and finalize the proceedings; or (iv) decide the refund claim if the genuineness of the claim is established.

2000 PTC 399 rel.

Abdul Salam, Proprietor.

Arshad Shaheryar, Consultant.

Jamshed Talpur, Assistant Collector of Sales Tax (East).

Abdul Rehman Rind, Assistant Collector of Sales Tax (East).

2004 P T D 2017

[Federal Tax Ombudsman]

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

Mian IFTIKHAR AHMAD

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.877‑L of 2003, decided on 29th September, 2003.

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

‑‑‑‑Second Sched., Cl. 118‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S. 2(3)‑‑‑Exemption‑‑‑Levy of workers welfare fund‑‑‑First Appellate Authority deleted such levy by following the decision of the Supreme Court of Pakistan that units which were exempt from Income tax were exempt from the levy of workers welfare fund‑‑‑Appeal was filed by the Department before the Appellate Tribunal against the order of First Appellate Authority ignoring the decision of Supreme Court‑‑‑Validity‑‑‑Federal Tax Ombudsman recommended that decision by First Appellate Authority, dated 18‑1‑2003 be implemented to give effect to the relief granted therein.

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

‑‑‑‑S. 9(2)‑‑‑Jurisdiction, functions and powers of the Federal Tax Ombudsman‑‑‑Objection about complaints being incompetent for admission had time and again been overruled for the reasons that without investigation "maladministration" could not be judged.

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

‑‑‑‑S. 9‑‑‑Jurisdiction, functions and powers of the Federal Tax Ombudsman‑‑‑Filing 'of appeal to the Appellate Tribunal by the Department subsequent to filing the complaint before the Federal Tax Ombudsman by the complainant/assessee was not sub judice on the date the complaint was received and Federal Tax Ombudsman thus had jurisdiction to investigate.

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

‑‑‑‑S. 2(3)‑‑‑Maladministration‑‑‑Ignoring the decision of superior Court amounts to an arbitrary conduct entailing maladministration.

Shahid Pervez Jami for the Complainant.

Nawab Khan, DCIT for Respondent.

2004 P T D 2024

[Federal Tax Ombudsman]

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

KHAIR DIN

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 1257‑L of 2003, decided on 4th October, 2003.

Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑Ss. 56, 58, 61, 62, 63 & 154‑‑‑Establishment of Office of Federal Tax Ombudsman ‑Ordinance (XXXV of 2000), S. 2(3)‑‑‑Notice for furnishing return of total income‑‑‑Notices under S.56 of the Income Tax Ordinance, 1979 followed by several statutory notices‑‑‑No return was submitted by assessee‑‑‑Assessment was finalized ex parte‑‑‑Assessments were set aside by the First Appellate Authority for improper service of notices resulting in lack of opportunity of hearing‑‑‑In second round, notices under Ss.61/58 and 62 of the Income Tax Ordinance, 1979 were issued, without first issuing notice under S.56 of the Income Tax Ordinance, 1979, which remained un complied and assessments were finalized‑‑‑Validity‑‑‑Fatal mistake apparent from record was that when Return was not filed, no notice under section 56 of the Income Tax Ordinance, 1979 calling for the return was ever issued after the set aside order by the First Appellate Authority‑‑‑Subsequent notices under Ss.56, 61 and 62 also suffered from the same deficiency‑‑‑Conclusion was irresistible that when framing the assessment the officer disregarded the law as also the rules thus committing "maladministration" Federal Tax Ombudsman recommended that the Commissioner invoke section 122A of the Income Tax Ordinance, 2001 to cancel the consolidated assessment order, dated 23‑5‑2003 for the assessment year 1996‑97 to 1998‑99 and that the Assessing Officer responsible for this neglect and arbitrary conduct be put to `Counseling' in the ACR.

Nemo for the Complainant.

Muzammil Hussain, DCIT for Respondent.

2004 P T D 2035

[Federal Tax Ombudsman]

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

USMAN GARMENTS, LAHORE

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 526 of 2003, decided on 22nd September, 2003.

Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑Ss. 63 & 59A‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S. 2(3)‑‑‑Best judgment assessment‑‑­Assessment on the basis of Inspector's report‑‑‑Inventory made by the Inspector was not made available to the assessee but only had been shown to him‑‑‑Such report was not rebutted by the assessee‑‑‑Complaint against ex parte assessment‑‑‑Validity‑‑‑Department had carried out sufficiently visible inquiries which the complainant/assessee in spite of the opportunity afforded had not rebutted and had avoided to appear‑‑‑Where any report was made by the Inspector a copy of his report should be supplied to the assessee to enable him to rebut it‑‑‑Was not sufficient to only show such report to assessee which amounted to maladministration ‑‑‑Federal Tax Ombudsman without interfering 'in assessment recommended that Central Board of Revenue to issue directive /instruction that in case, where inquiry report is prepared by an Inspector or any authorized functionary of the department copy of the same should be provided to the assessee whether he applied for it or not.

Nemo for the Complainant.

Anwar‑ul‑Haq Jillani, D‑CIT for Respondent.

2004 P T D 2040

[Federal Tax Ombudsman]

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

Dr. ABDUL WAHEED KHAN

Versus

SECRETARY, REVENUE DIVISION ISLAMABAD

Complaint No. 1105‑L of 2003, decided on 4th October, 2003.

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

‑‑‑‑Ss. 63 & 59‑‑‑Income Tax Ordinance (XLIX of 2000), S.122‑A‑‑­Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S. 2(3)‑‑‑Best judgment assessment‑‑‑Ex parte assessment was framed on a day which was not fixed for hearing and on which no default was committed to warrant ex parte order‑‑‑Validity‑‑‑Circumstances demonstrated arbitrary conduct of Assessing Officer falling in the definition of "maladministration" ‑‑‑Federal Tax Ombudsman recommen­ded that Commissioner to invoke S. 122A of the Income Tax Ordinance, 2001 to cancel the assessment framed on 30‑6‑2003 under section 63 of the repealed Income Tax Ordinance, 1979 and that the Return filed by the Complainant for the year 2000‑2001 declaring income at Rs. 275,771 be accepted under Self‑Assessment Scheme.

M.B. Qureshi's case 1975 PTD 126 and Anwar & Co. (1976) 33 Tax 219 rel.

(b) 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‑‑­Incumbent on the Assessing Officer to have carefully gone through the record especially When proceeding ex parte under S. 63 of the Income Tax Ordinance, 1979‑‑‑Assessing Officer was under legal obligation to determine the Income to the best of his judgment without being arbitrary or vindictive.

(c) 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‑‑­Inspector's report‑‑‑Undated report of inspector lends support to the assertion by the complainant/assessee that this report was introduced on the record later on and was not available when he inspected the file, after due permission.

Ahmad Shuja Khan for the Complainant.

Muhammad Nadeem Arif, DCIT for Respondent.

2004 P T D 2048

[Federal Tax Ombudsman]

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

Mian SHABBIR AHMAD FAROOQI

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.766‑L of 2003, decided on 22nd September, 2003.

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

‑‑‑Ss. 72, 63 & 56‑‑‑Income Tax Ordinance (XLIX of 2001), S.119‑‑­Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S. 2(3)‑‑‑Assessment in the case of discontinued business or, profession‑‑‑Best judgment assessment ‑‑‑Assessee discontinued his business and left the country without intimation to the Department regarding closure of his business‑‑‑Ex parte assessment was made in spite of the fact that order sheet entries showed that "enquiry had been made which revealed that assessee had left the business"‑‑‑Validity‑‑­Document on record and report of the Inspector were enough to establish that Returns were not filed because the complainant/assessee had left the country and had not carried on the business‑‑‑Subsequent enquiry was manifestly "table enquiry" having no value or worth because official did not even consult the office record leave alone visiting the place of business‑‑‑Complainant/assessee had not yet returned from aboard and there was no business activity by him‑‑‑Assessments were a typical example of high‑handed and arbitrary dispensation where net profit for each year had been determined as Income divorced from ground realities‑‑‑,Such conduct clearly fell in the realm of "maladministration"‑­Federal Tax Ombudsman recommended that Commissioner by resort to section 122A of the Income Tax Ordinance, 2001 cancel the consolidated assessment framed on 10‑6‑2002 for the assessment year 1999‑2000, 2000‑2001 and 2001‑2002 that Assessing Officer and the Inspector who conducted the enquiry on 10‑6‑2002 be warned and their performance be kept under observation for a period of one year and six monthly report of observation be sent to Secretariat of the Ombudsman.

Rana Muneer Hussain for the Complainant.

Moazzam Bashir, DCIT for Respondent.

2004 P T D 2057

[Federal Tax Ombudsman]

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

SOHAIL ZAHEER LARI

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.779‑K of 2003, decided on 28th July, 2003.

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

‑‑‑‑Ss. 59A, 62, 96; 102 & 156‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S. 2(3)‑‑‑Assessment on the basis of return‑‑‑Confirmation of assessment order by the First Appellate Authority, which was ab initio contrary to law‑‑‑Ground that order was bad in law was totally disregarded‑‑‑Finding recorded at the end of order spoke volumes about mala fide intentions‑‑‑Confirmation of fabrications of income made by the Assessing Officer‑‑‑Non‑issuance of refund‑‑­Complaint against‑‑‑Validity‑‑‑Glaring lapses of administrative control and failure of due exercise of judicious discretion were found in the actions of the First Appellate Authority and the complainant was being made to suffer for the incompetence, inefficiency and arbitrariness of the subordinate officers‑‑‑Federal Tax Ombudsman recommended that the Chairman Central Board of Revenue should impress upon the officers in BS‑20 and BS‑21 to ensure rule of law and motivate them to seize every opportunity to avoid unnecessary litigation on settled issues and mistakes apparent from record, notwithstanding any pending appeals that can always be withdrawn or dismissed as infructuous; that the Commissioner ensures that a fresh Wealth Tax assessment order for assessment year, 1997‑98 is passed in pursuance of the order of the Commissioner of Wealth Tax (Appeals) on the basis of correct fact available on record and in accordance with law; that the Taxation Officer issues copies of record required by the complainant in accordance with law; that the Taxation Officer, allows compensation admissible under S.102 of the Income Tax Ordinance, 1979 on all delayed refunds whether adjusted against any other demand or issued by cheques; that the Taxation Officer disposes of all pending notification applications and gives effect to orders in appeals and that the Taxation Officer issues refunds with compensation for delay, if any due, after due and proper compliance of the foregoing recommendations.

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

‑‑‑‑S. 59‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)‑‑‑C.B.R. Circular No.5 of 1997, dated 12‑7‑1997 [Self‑Assessment Scheme]‑‑‑Self‑Assessment‑‑‑Short document notice-‑‑Assessing Officer, admittedly, had not issued any letter as required under para. 4 of the Self‑Assessment Scheme for the assessment year, 1997‑98 which was supposed to be issued prior to the initiation of exercise for random ballot‑‑‑No finding was given that the return was not included in the list of cases sent for random ballot which means that it was a return qualifying for Self‑Assessment Scheme.

(c) Interpretation of statutes‑‑‑--

‑‑‑‑ Mandatory provisions of law, rules and regulations could not be twisted or manipulated.

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

‑‑‑‑S. 2(3)‑‑‑Income Tax Ordinance (XXXI of 1979) S. 102‑‑‑Malad ministration‑‑‑Refusing complainant/assessee to inspect the file as well as non‑issuance of photo‑copies of the order‑sheets and assessment orders to assess the refund and compensation due under S.102 of the Income Tax Ordinance, 1979 amounted to maladministration.

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

‑‑‑‑Ss. 59 & 61‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S. 2(3)‑‑‑Self‑assessment‑‑‑Assessment year, 1997‑98‑‑‑Action of Assessing Officer of informing the complainant on 9‑10‑1999 that his case for assessment year 1997‑98 did not qualify for Self‑Assessment Scheme and then issuing the notice under S.61 of the Income Tax Ordinance, 1979 in the year, 2000 was ab initio contrary to law.

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

‑‑‑‑S.2(3)(i)(ii)(iv)‑‑‑Income Tax Ordinance (XXXI of 1979), Preamble‑­Deliberate baseless fabrications in the assessment of wealth against the facts available on record and valuation of certain assets contrary to settled law amounted to maladministration.

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

‑‑‑‑S. 2(3)(i)(d) & (ii)‑‑‑Income Tax Ordinance (XXXI of 1979), S.129‑‑­Tendency to set aside/remand the orders by First Appellate Authority for re‑consideration, where clear finding can be given amounts to maladministration.

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

‑‑‑‑S. 2(3)‑‑‑Income Tax Ordinance (XXXI of 1979), Preamble‑‑‑Role of Commissioner‑‑‑Primary role of Commissioners and above as envisaged by law was to ameliorate the hardships that were likely to be caused by the assessing/collecting officers firstly due to their inexperience, secondly due to their over‑enthusiasm to perform and thirdly due to the pressure of collection targets assigned to the Assessing Officer.

(i) Income Tax Ordinance (XLIX of 2001)‑‑‑--

‑‑‑‑Ss. 120, 121, 122 & 159‑‑‑Income Tax Ordinance (XXXI of 1979), S.50‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S. 2(3)‑‑‑Assessments‑‑‑Role of Commissioners‑‑­Three roles of Commissioner under the Income Tax Law in relation to taxpayers stated.

Complainant in person.

Sultan Nazir, IAC, Basit Saleem Shah, T.O. for Respondent.

2004 P T D 2228

[Federal Tax Ombudsman]

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

Messrs AFNAN INTERNATIONAL, LAHORE

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.855‑L of 2003, decided on 27th October, 2003.

Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑Ss. 56, 80‑C & 143B‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S. 2(3)‑‑‑Notice for furnishing return of total income‑‑‑Filing of statements under S.14313.of the Income Tax Ordinance, 1979 separately by the complainant/assessee and his father ‑‑‑Assessee and his father were maintaining joint hank account‑‑­No return was filed by them nor were insisted upon‑‑‑ Assessment was framed in the name of Association of Persons which was said to be on "agreed" basis on the ground of such joint account‑‑‑Application for withdrawal of complaint‑‑‑Validity‑‑‑Proceedings were beset with illegality and betrayed flagrant disregard of, law, rules and procedure not only by the Assessing Officer alone but also by those who gave approval for "agreed." assessment‑‑‑Neither there was any 'declared version' nor any "accounts" were presented because admittedly no Returns were filed‑ ‑‑Proceedings were finalized without any legal sanction‑‑­Complainant/assessee approached the Federal Tax Ombudsman on the very next day of the "agreement", alleging that all proceedings by the Taxation Officer were contrary to law, arbitrary, based on irrelevant grounds, involving exercise of powers for improper motive which tantamounts to administrative excesses‑‑‑Letter by the complainant/ assessee (filed before the date of hearing) requesting that the complaint may be treated as with‑drawn did not appear to have been filed voluntarily and without undue pressure from the concerned tax functionaries who obviously had a clear motive to cover up the illegalities committed in the assessment process‑‑‑Federal Tax Ombudsman recommended that the Central Board of Revenue may call for and examine the record to take requisite action, including possibility of an independent Audit in the present case and that the `tax functionaries' responsible for the above noted discrepancies be asked to explain their conduct ,for suitable departmental action.

Nemo for the Complainant.

Dr. Khalid Malik, (D.‑C.I.T.) for Respondent.

2004 P T D 2246

[Federal Tax Ombudsman]

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

Messrs NOON SUGAR MILLS LTD., LAHORE

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 1082 of 2003, decided on 19th April, 2004.

Sales Tax Act (VII of 1990)‑‑‑

‑‑‑‑Ss. 3(1A), 66 & 7‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S. 2(3)‑‑‑Scope of tax‑‑­Further tax‑‑‑One percent further tax was declared ultra vires by the Supreme Court of Pakistan‑‑‑Department neither allowed the complainant to adjust such tax paid against the out put tax nor such amount was refunded on the ground that complainant did not furnish documentary evidence to prove that the incidence of tax was not passed on to the consumer‑‑‑Validity‑‑‑Judgment of Supreme Court was binding on the Department and to criticize the said judgment by the Department was uncalled for, improper and indiscreet‑‑‑Judgment of Supreme Court on point of law was binding on every one and to express such criticism may' amount to disobeying and ridiculing the ,judgment which may entails penalty Department had fully disobeyed the judgment of the' Supreme Court and the Tribunal and had intentionally‑ delayed and avoided the payment of refund‑‑‑Department's action was contrary to law, lacked bona fides And was arbitrary in nature ‑‑‑Maladministration having been established Federal Tax Ombudsman recommended that the respondents should refund Rs.4,923,113 to the complainant.

Javed Hassan for the Complainant.

Moin‑ud‑Din A. Wani, A.C. Sales Tax for Respondent.

2004 P T D (Trib.) 70

[Income-tax Appellate Tribunal Pakistan]

Before Ehsan-ur-Rehman, Judicial Member and Muhammad Sharif Chaudhary, Accountant Member

I.T.A. No. 1929/LB of 2003, decided on 24th September, 2003.

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

----Ss. 65, 59-B & 13(1)(aa)---C.B.R. Circular No. 14 of 1998, dated 14-9-1998---Additional assessment---Assessment tinder the Simplified Procedure for Assessment ---Finalization of assessment under S.59-B of the Income Tax Ordinance, 1979---No formal order for re-opening of assessment---Addition under S.13(1)(aa) of the Income Tax Ordinance, 1979---Validity---Assesrsment framed was not sustainable in the eye of law for numerous defects---Order passed by the First Appellate Authority was vacated and assessment framed was annulled by the Appellate Tribunal for the reasons; firstly that the proceedings concluded under S.59-B of the Income Tax Ordinance, 1979 were not actionable under S.65 as there was no mention of any proceedings under S.59-B in S.65 of the Income Tax Ordinance, 1979, so the proceedings in the case were beyond the scope of S.65 of the Income Tax Ordinance., 1979 which were void ab initio secondly there was no written assessment order, as the subject had the right to know the defects necessitating the re-opening his reassessment for assessment, which was not possible when there was no written order; thirdly proceedings were hit by the limitation as nowhere in the assessment order for the impugned year, it had been mentioned that same were initiated as per directions of the First Appellate Authority on the conclusion of appeals at the first round but no direction had been given for proceeding against the appellant/assessee for the impugned year; fourthly issue regarding the impugned assessment order was nor pending at the first round of appeal, therefore, any findings thereon were of no relevance and lastly that even on merits of the case the Assessing Officer had rejected the declared cost without any plausible reasons.

2002 P T D 1530; 1993 P T D (Trib.) 1336 and 2003 P T D (Trib.) 1167 rel.

Shahid Abbass for Appellant.

Bashir Ahmad Shad, D.R. for Respondent

Date of hearing: 10th September, 2003.

2004 P T D (Trib.) 106

[Income-tax Appellate Tribunal Pakistan]

Before Syed Masood-ul-Hassan Shah, Judicial Member and Mahmood Ahmad Malik, Accountant Member

I.T.As. Nos. 1194(IB), 1195(IB), 1189(B), 1190(IB) of 2000-2001, decided on 24th January, 2003.

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

----Ss. 154, 65, 56 & 13(1)(aa)---Civil Procedure Code (V of 1908), O.V, R.15---Service of notice---Additional assessment---Notices were served on the father of one of the Members of Association of Persons without making efforts for service of such notice on the assessee--­Finalization of assessment---First Appellate Authority set aside the assessment rather -than annulling the same with the direction that statutory notice should be properly served upon the assessee and fresh assessment be framed accordingly---Validity---Service could be made on a male member of assessee's family where, the assessee could not be found---Copies of notices indicated that both notices were served on the father of one of the Members of the Association of Persons---Service was effected by a bailiff and there was no certificate of process server/bailiff to the effect that any effort was made to locate and find any Member of the Association of Persons before service was effected upon an adult member of the family of Association of Persons---Basic requirement laid down in S.154 of the Income Tax Ordinance, 1979 and R.15 of O. V of Civil Procedure Code, 1908 were not met while making service of notices---Notice under Ss.65 & 56 of the Income Tax Ordinance, 1979 having not been served upon any Member of Association of Persons, assessments were liable to be annulled and not set aside ---Assessee's appeals were accepted and those of Department stood dismissed by the Appellate Tribunal.

1988 PTD (Trib.) 117 and 2003 PTD (Trib.) 625 ref.

2000 PTD (Trib.) 19 and 2001 PTD 1998 rel.

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

----S. 154---Service of notice---"Some efforts"---Concept---Assessing Officer was required to ensure that notices were served properly and in accordance with the provisions of law---No concept in law of making "some efforts" to serve notices existed---Proper service of notices is sine qua non.

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

----Ss. 65 & 56---Additional assessment---Where no assessment had been framed, instead of issuing a notice under S.65 of the Income Tax Ordinance, 1979 the Assessing Officer could have issued a notice under S.56 of the Income Tax Ordinance, 1979 to call for income-tax returns.

2001 P T D 1998 rel.

Abdul Jalil, D.R. for Appellant (in I.T.As. Nos.1194/IB and 1195/IB of 2000-2001).

Naik Muhammad Malik for Respondent (in I. T. As. Nos. 1194/IB and 1195/113 of 2000-2001.).

Naik Muhammad Malik for Appellant (in I.T.As. Nos.1189/IB and 1190/IB of 2000-2001).

Abdul Jalil, D.R. for Respondent (in I.T.As. Nos.1189/IB and 1190/IB of 2000-2001).

Date of hearing: 24th February, 2003.

2004 P T D (Trib.) 151

[Income-tax Appellate Tribunal Pakistan]

Before Khawaja Farooq Saeed, Judicial Member and Imtiaz Anjum, Accountant Member

I. T. As. Nos. 2209/LB, 2462/LB, 2257/LB of 1997, 955/LB of 1996, 4816/LB of 2001 and 3207/LB of 2002, decided on 1st August, 2003.

(a) Income-tax-----

----Rejection of accounts---Requirements---Requirement of rejection is that the accounts of the assessee should firstly be rejected on objective basis.

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

----Third Sched., R. 8(8)(e)---Computation of depreciation allowance--­Foreign Exchange fluctuation difference---Even strict interpretation of R. 8(8)(e) of Third Sched. of the Income Tax Ordinance, 1979 did not give the impression that taxpayers could be deprived of the exchange fluctuation difference in the years subsequent to the import of machinery.

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

-----Third Sched., R. 8(8)(e)---Computation of depreciation allowance--­Foreign Exchange fluctuation difference---Addition of exchange fluctuation difference in the value of imported machinery for the purpose of depreciation allowance---Validity---Appellate Tribunal allowed the addition in value of the machinery imported by assessee by way of exchange fluctuation for the purpose of determination of depreciation.

I. T. As. Nos. 1669 to 1671/LB of 1996 rel.

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

----Third Sched., R. 8(8)(e)--Computation of depreciation allowance--­Foreign Exchange fluctuation difference---Determination of value of machinery---Mercantile Accounting System ---Assessee having prepared its account on Mercantile basis was entitled to determine the value of its machinery on the valuation date on the basis of the currency rate which is the spirit of R.8(8)(e) of the Third Sched. of the Income Tax Ordinance, 1979.

(e) Income Tax Ordinance (XXXI of 1979)---

----Third Sched., R. 8(8)(e)---Computation of depreciation allowance--­Foreign Exchange fluctuation difference---Part payment of imported machinery could not, be added in the value of such machinery for depreciation purpose---Contention of the Department that a part of amount was unpaid hence was not to be added in the value was not correct---Had the assessee paid total sum, that would not have been the question of exchange fluctuation--Exchange fluctuation only affects if some outstanding foreign currency loan was obtaining in the balance­ sheet---Once the account is settled the currency rate as is obtaining on the date of settlement becomes final and further fluctuation did not come into question---Appellate Tribunal disagreed with the Department that fluctuation could not be added and their action was disapproved--­Calculation of the figure shall be done by the Assessing Officer with the help of assessee for the purpose of determining depreciation.

(f) Income Tax Ordinance (XXXI of 1979)---

----Third Sched., R.3---C.B.R. Circular No. 14 of 1979, dated 7-11-1979 (No. 14, C. 1(25) IT-1/79, dated 7-11-1979)---Extra-depreciation allowance---Provisions of R.3 of the Third Schedule of the Income Tax Ordinance, 1979 did not grant any right to anybody be that Central Board of Revenue or some other Authority to enlarge the scope of the provision which had granted exemption, through a circular.

(g) Income Tax Ordinance (XXXI of 1979)---

----Third Sched., R.3---C.B.R. Circular No. 14 of 1979, dated 7-11-1979 (No. 14, C.1 (25) IT-1/79, dated 7-11-1979)---Extra-depreciation allowance---Import of machinery ---Assessee claimed extra-shift allowance on' imported machinery being a part of the class of assets in the light of Central Board of Revenue's Circular---Validity---Provision of R.3 of the Third Sched. of the Income Tax Ordinance, 1979 did not give any impression about the allowance of depreciation as a class--­Directions of Central Board of Revenue had come as a piece of legislation to that extent which was for the reason that some difficulty in determination of the separate machinery in a class of machinery was not possible---Such direction was beyond the scope of the powers available with the Central Board of Revenue under S.14 of the Income Tax Ordinance, 1979---Extra-shift allowance had correctly been disallowed by the .Assessing Officer---Even otherwise assets were separately identifiable---Assessee's appeal on such issue was rejected by the Appellate Tribunal.

LT.A. No.460/LB of 1998 per incurium.

1999 PTD (Trib.), 1672 and 1993 SCMR 232 = 1993 PTD 766 rel.

(h) Income Tax Ordinance (XXXI of 1979)---

----S. 3(1)(a)---Income Tax Authorities---Central Board of Revenue--­Directions of the Central Board of Revenue which are in conflict with the main legislation are illegal to the extent , they deviate from the said law.

I.T.A. No.464/LB of 1998 per incurium.

(i) Interpretation of statutes---

----Fiscal law is to be construed strictly and the intendments behind the legislation should not be ignored.

(j) Income Tax Ordinance (XXXI of 1979)-----

----Third Sched., R.3---C.B.R. Circular No. 14 of 1979, dated 7-11-1979 (No. 14, C.1 (25) IT-1/79, dated 7-11-1979)---Extra-depreciation allowance---When law clearly says that the extra-shift allowance shall be calculated by adopting number of days, Central Board of Revenue could not grant further benefit beyond the legislation through a Circular.

(k) Income Tax Ordinance (XXXI of 1979)---

----S. 80CC & Eighth Sched., Part II---Tax on income of certain exporters---Export of yarn---Charge of tax @ 1 %---Validity---Assessee was a yarn manufacturer which was covered under Part II of the Eighth Sched. of the Income Tax Ordinance, 1979---Contention of the Department that yarn was not a manufactured product was quite surprising---Yarn is an end product of raw material which can be raw cotton or such other input---Charge of 1% tax was not justified and Appellate Tribunal directed that 0.75% rate be applied under S.80-CC of the Income Tax Ordinance, 1979.

I.T.A. No. 1466/LB of 1999 rel.

Javed Iqbal Khan, F.C.A. for Appellant.

Muhammad Asif, D.R. for Respondent.

Date of hearing: 1st August, 2003.

2004 P T D (Trib.) 167

[Income-tax Appellate Tribunal Pakistan]

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

Income Tax Appeal No. 2110/LB of 2002, decided on 14th February, 2003.

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

----Ss. 66-A & 59-A---Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order---Order passed under S.59A of the Income Tax Ordinance, 1979 was time-barred---Cancellation of such order by the Inspecting Additional Commissioner under S.59-A of the Income Tax Ordinance, 1979---Validity--Admittedly, assessment was finalized on 30-6-2001 and assessment framed was time-barred by almost 2 years; being a time-barred assessment, there was no assessment order in the eye of law which could not be subjected to revisional jurisdiction by the Inspecting Additional Commissioner---In case of time-barred assessment no legal assessment would be considered to be holding the field and any action taken subsequent thereto would have no legal basis---Order passed by the Inspecting Additional Commissioner under S.66-A of the Ordinance was annulled by the Appellate Tribunal.

2002 PTD (Trib.) 912 rel.

Naseem Akbar, F.C.A. for Appellant.

Mrs. Talat Altaf Khan, D.R. for Respondent.

Date of hearing: 10th January 2003.

2004 P T D (Trib.) 174

[Income-tax Appellate Tribunal Pakistan]

Before Khalid Waheed Ahmad, Judicial Member and Muhammad Sharif Chaudhry, Accountant Member

I. T. As. Nos. 2785/LB to 2787/LB of 2001, decided on 26th May, 2003.

(a) General Clauses Act (X of 1897)---

----S. 3(28)---Income Tax Ordinance (XXXI of 1979), S.80-D--- Lahore Development Authority Act (XXX of 1975)---Local Authority---Lahore Development Authority is a local authority as defined in S.3(28) of General Clauses Act, 1897.

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

----S. 80-D---Minimum tax on income of certain persons---Determination of income---Liability to pay minimum tax is conditional and could not be compared with the tax payable or paid otherwise unless it is established that assessee was engaged in any business activity during the year the income from which is first to be determined.

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

----Ss. 80-D, 2(16), 54, 56, 63 & Second Sched., Part I, Cl. (88), Part IV, Cl. (23)---C.B.R. Circular No. 10 of 1996, dated 16-10-1996--­Lahore Development Authority Act (XXX of 1975), Ss.4(2), 6, 19, 27 & 28---General Clauses Act (X of 1897), S.3(28)---Companies Ordinance (XLVII of 1984), S. 2(4)---Minimum tax on income of certain persons--­Exemption---Charge of minimum tax on sales of Lahore Development Authority estimated while framing ex parte assessment under S.63 of the Income Tax Ordinance, 1979---Validity---Department failed to specify the source of income or even the nature of business activity carried by the assessee from which the earning of income was alleged---Department without first establishing that any business was carried on by Lahore Development Authority or income was earned by it through any source and without first determining as to whether any tax was payable or paid on such, income which was less than the 0.5 % of the turnover directly proceeded to charge tax under the provisions of S.80-D of the Income Tax Ordinance, 1979 which action of the Department was not maintainable in law---Even nature of turnover adopted by the Department, had not been specified---Orders of both the Authorities below were vacated by the Appellate Tribunal.

PLD 1977 Kar. 152; 1980 PTD 329 and PLD 1965 SC 201 rel.

PLD 1975 Kar. 128; Writ Petition No.6556 of 1989 and 1998 PTD 2716 ref.

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

----Ss. 80-D & 63---Minimum tax on income of certain persons--­Minimum tax was to be charged on the basis of aggregate of declared turnover and not on the one estimated by Assessing Officer ---Validity--­In the absence of declared turnover, the provision of S.80-D of the Income Tax Ordinance, 1979 were not attracted.

Dr. Ilyas Zafar for Appellant.

Shahid Tamil Khan, Legal Adviser and Ahmed Ali, Assistant Commissioner for Respondent.

Date of hearing : 20th May, 2003.

2004 P T D (Trib.) 199

[Income-tax Appellate Tribunal Pakistan]

Before Zafar Ali Thaheem, Judicial Member and Javed Tahir Butt, Accountant Member

I. T. A. No. 2549/LB of 2002, decided on 23rd August, 2003.

Income Tax Ordinance (XXXI of 1979)---

----Ss.59(1), 62 & First Sched., Part I---Income Tax Appellate Tribunal Rules, 1981, R.20(2)---Self-assessment---Senior citizen rebate-"Return of assessee was proceeded under normal law and the tax paid was less than the tax paid for the last year---First Appellate Authority annulled the assessment on the ground that assessee was entitled to rebate of 50% being senior citizen and tax was paid after deducting the said rebate--­Validity---Order of First Appellate Authority did not suffer from any illegality ---Assessee being senior citizen was entitled to tai rebate and his return was qualified to be accepted under Self-Assessment Scheme---First Appellate Authority was justified in annulling the assessment made under S.62 of the Income Tax Ordinance, 1979--­Order of the First Appellate Authority was upheld by the Appellate Tribunal.

Ahmad Kamal, D.R. for Appellant.

Nemo for Respondent.

Date of hearing: 23rd August, 2003.

2004 P T D (Trib.) 204

[Income-tax Appellate Tribunal Pakistan]

Before Javid Iqbal, Judicial Member and Mrs. Abida Ali, Accountant Member

Tax Appeals Nos. 374, 374A(PB), 365, 112(PB) of 2002, 296(PB) 297(PB), 5, 25 and 346(PB) of 2003, decided on 21st July 2003.

(a) Interpretation of Statutes---

---Fiscal statute---Authority to impose or levy the tax cannot be deduced or interred from doubtful import of words, or where two statutes are in the field at the same time, or where an ambiguity is found, or where it is uncertain to determine the exact intention of legislation, or where the word used in statute is capable of two interpretations, one in favour of assessee and other in favour of Revenue in such condition/situation the one which is favourable to assessee be adopted.

(b) Interpretation of statutes--

----Where there are general words in a later Act which are capable of reasonable or sensible application without extending them to subject specially dealt within earlier legislation, the earlier legislation cannot be held to have been indirectly repealed, altered, or abrogated from merely by force of general words without particular intention to do so.

PLD 1985 SC 159 rel.

(c) Interpretation of statutes---

---- Not uncommon to find one statute treating a subject in general terms and another treating only a part of the same subject-matter in a more minute manner---Where such a situation exists, the two statutes should be read together and harmonized---Such principle is applicable especially where the two statutes are in pari materia---In the event of repugnancy the special statute should prevail, in the absences of a contrary legislative intent, since the specific statute more clearly evidences the legislative intent than the general statute does---Rule that statute relating to a specific subject controls a general statute which includes the special subject is not necessarily dependent on the time of the enactment of two statutes.

(d) Interpretation statutes---

----General rule, that prior statutes are held to be repealed by implication by subsequent statutes, if the two are repugnant, is not to apply if the prior enactment is special and the subsequent enactment is general.

(e) Interpretation of statutes---

---- Subsequent general legislation does not affect a prior Special Act by implication---Maxim; Generalia specialibus non derogant, i.e. general provisions will not abrogate special provisions, when the Legislature has given its attention to a separate subject and made provision for it, the presumption is that a subsequent general enactment is not intended to interfere with the special provisions unless it manifests that intention very clearly.

(f) Interpretation of Statutes---

----General later law does not abrogate an earlier special one by mere implication---Maxim: Generalia specialibus non derogant, or, in other words, where there are general words in a later Act capable of seasonable and sensible application without extending them to subjects specially dealt with by earlier legislation, it cannot be held that earlier and special legislation indirectly repealed, altered, or derogated from merely by force of such general words, without any indication of a particular intention to do so.

(g) Interpretation of statutes---

--- Special Act is neither repealed nor abrogated by a subsequent General Act.

AIR 1932 PC 26 rel.

(h) Income Tax Ordinance (XXXI of 1979)---

----S. 80-DD --C.B.R. Circular No. F.1-167/(ITI)/99, dated 20-9-2001 had no value in the eye of law.

1993 SCMR 32 rel.

(i) Income Tax Ordinance (XXXI of 1979)---

----Ss. 80-DD, 50(5) & Second Sched., Part I, Cl. (118-C)--­Protection of Economic Reforms Act (XII of 1992), S.6---C. B. R. Circular No. F. 1-167/(ITI)/99, dated 20-9-2001---Minimum tax on income of importers of edible oils, etc. ---Exemption---Assessee's income was exempt under Cl. (118-C)- of the Part I of Second Sched. of the Income Tax Ordinance, 1979---Assessing Officer levied tax -under S.80-DD of the Income Tax Ordinance, 1979 on the import of edible oil which was deleted by the First Appellate Authority---Department contended that S.80-DD of the Income Tax Ordinance, 1979 being part of general statute and subsequent in timeframe had overriding effect over Protection of Economic Reforms Act, 1992 and First Appellate Authority was not justified to delete said tax---Validity---When the Legislature had given its attention to a separate subject and made a provision for it, the presumption is that a subsequent general enactment was not intended to interfere with special provision unless it manifests that intention very clearly---In the absence of any specific provision that S. 80-DD of the Income Tax Ordinance, 1979 will prevail over the Protection of Economic Reforms Act, 1992, the later statute i.e. Protection of Economic Reforms Act, 1992 though earlier in time consequence will prevail over S.80-DD of the Income fax Ordinance, 1979 of the general statute---Appellate Tribunal upheld the deletion of such tax and all the appeals of the Department were dismissed.

2002 PTD 1023 and (1997) 76 Tax 5 (SC Pak.) ref.

PLD 1985 SC 159; PLD 19'70 Quetta 49; PLD 1972 Lah. 41; PLD 1968 Lah. 344; AIR 1941 Lah. 364; AIR 1958 SC 341; AIR 1965 SC (Ind.) 871; 1973 SCMR 1232 and 1993 SCMR 32 rel.

Raja Irshad, D.A.-G. and M. Luqman, D.R. for Appellants.

Sikandar Hayat Khan for Respondent No. 1.

Shahzad Qazi, F.C.A. for Respondents Nos. 2 and 5.

Ashfaque Ahmed, F.C.A. for Respondents Nos.3 and 4.

Date of hearing: 28th June, 2003.

2004 P T D (Trib.) 248

[Income-tax Appellate Tribunal Pakistan]

Before Muhammad Ashfaque Balouch, Judicial Member and Muhammad Akhtar Nazar Mian, Accountant Member

I.T.As. Nos. 2225/KB, 1115/KB of 1996-97, 702/KB, 703/KB of 1997-98 and 1062/KB of 2002; decided on 7th August, 2003.

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

----Ss. 2(8), 2(26)(c) Expln., 9(1A) & First Sched., Part V, Para. B--­Modaraba Companies Rules, 1981, R.2---Assessment year---Income year---Determination of first assessment year---Exemption---Application of reduced rate---Minimum subscription certificate was obtained by the Modaraba as on 11th of April, 1990 and-closed its account for the first year on 30th June, 1991---Assessee contended that since the first account; were closed on 30th June, 1991 the first assessment year involved was the assessment year 1991-92 and no tax should have been charged on the Madaraba income for the assessment year 1993-94 as provided in S.9(1A) of the Income Tax Ordinance, 1979---Validity---First assessment year was the assessment year 1990-91---Income of Modaraba was exempt under specific circumstances for the assessment years 1990-91, 991-92 and 1992-93---First Appellate Authority rightly upheld the departmental view that income of the Modaraba for the assessment year 93-94 was taxable---Reduced rate of tax for the two years next to the exemption period was applicable in the assessment years 1993-94 and 1994-95 and the Modaraba was rightly charged to tax at the normal rate of 25% in the assessment year 1995-96 as held by the First Appellate Authority.

I.T.A. No. 944/KB of 1997-98 and I.T.A. No. 970/KB of 1997-98 distinguished.

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

----S. 23(1)(x)--Deduction---Bad debts, disallowance of---Provisions for bad debts were disallowed by holding that debts involved were not yet mature to be written off---Such treatment was confirmed by the First Appellate Authority ---Assessee had not brought any evidence before the Tribunal to convince that the conditions as provided in S.23(1)(x) of the Ordinance had been satisfied---Order of the Authorities below was maintained by the Appellate Tribunal.

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

----Ss. 22 & 23---Income from business or profession ---Deduction--­Computation of income or loss---Various activities---Allowability of proportionate expenses---Procedure---Income or loss of various businesses of assessee were to be computed independently keeping in view the provisions of Ss.22 & 23 of the Income Tax Ordinance, 1979--­Leasing of assets was one of the business of the assessee, its income was also to be computed by taking the receipt of lease rentals as revenue and after providing for allowances and deductions as laid down in S.23 of the Income Tax Ordinance, 1979---All those allowances and expenses which were directly relatable to earning of the lease' rentals income -and allowable under S.23 of the Income Tax Ordinance, 1979 were to be allowed and where there were certain expenses which although allowable under S.23 of the Income Tax Ordinance, 1979 were relatable to various activities of the assessee were to be proportionately allowed against each activity of the assessee---All provisions of law applicable to an assessee in respect of each business activity were to be considered under S.22 of the Income Tax Ordinance, 1979 for the purpose of taking revenue and under S.23 of the Income Tax Ordinance, 1979 for the purpose of allowance and deductions.

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

----Ss. 23(1)(v), 34, 35 & 38---Deduction---Depreciation allowance--­Lease rentals---Loss---Set off---Procedure---In case of loss there may be two situations viz. when the loss calculated is due to deductions and allowances under S.23 of the Income Tax ordinance, 1979 other than the depreciation allowance under S.23(1)(v) of the Income Tax Ordinance, 1979, this will happen when the depreciation allowance gets fully absorbed against revenue receipts or in other words the depreciation allowance is less than the revenue receipts of these rentals---In such a situation the loss will have to be adjusted against incomes assessable under other heads of incom6 as provided in S.34 of the Income Tax Ordinance, 1979 and if it is not fully set off against the income of the year under other heads of income, it may be carried over for set off in the succeeding years in accordance with the provisions of Ss. 35 & 38 of the Income Tax Ordinance, 1979.

(e) Income Tax Ordinance (XXXI of 1979)---

---Ss. 23(1)(v), 34, 35 & 38---Deduction---Depreciation allowance--­Lease rentals-- Loss---Set-off---Procedure---Resultant loss calculated due to deductions and allowances under S.23 of the Income Tax Ordinance, 1979 including the depreciation allowance under S.23(1)(v) of the Income Tax Ordinance, 1979---Such loss will occur when the depreciation allowance permissible is not fully absorbed against the revenue receipts of these rentals---Loss excluding the loss due to depreciation, will have to be adjusted against income of the year under other heads as provided in S.34 of the Income Tax Ordinance, 1979 or will have to be carried forward in accordance with the provisions of Ss.35 & 38 of the Income Tax Ordinance, 1979---Loss pertaining to depreciation allowance will not be set-off against income under any other head or even against the business income from any other activity and will have to be carried forward for adjustment against business income of lease rentals in subsequent years and in accordance with the provisions of Ss.35 & 38 of the Income Tax Ordinance, 1979.

(f) Income Tax Ordinance (XXXI of 1979)---

----Ss. 23(1)(v), 34, 35 & 38---C.B.R. Circular No. 6 of 1994, dated 10-7-1994---Deduction---Lease rental income and other income--­Proportionate allocation of expenses---Assessing Officer allocated the admissible expenses against lease rentals and receipts other than lease rentals on proportionate basis instead of allowing all such expenses against receipts from sources other than lease rentals which was confirmed by the First Appellate Authority---Validity---Action of the First Appellate Authority was not in interference with the order of the Assessing Officer and was justified and the same was maintained by the Appellate Tribunal.

Income Tax Appeal No.66 of 1999 and 2000 PTD (Trib.) 474 ref.

1999 PTD (Trib.) 1346 rel.

(g) Income Tax Ordinance (XXXI of 1979)---

----S. 23(1)(vii)---Deduction---Financial charges---Loan was received in Foreign Currency Account---Such account was further used for obtaining loans in Pak Rupees for purpose of Modaraba business---Interest paid on foreign currency loan was disallowed because same was a charge against the interest income received from foreign currency account---Assessee contended that since the loan had been obtained for the purpose of business of Modaraba, the financial charges paid in respect of said foreign loan were allowable against business income of Modaraba--­Validity---Undisputedly the foreign currency loan had actually been utilized for earning interest income and these financial charges were nothing but the expenditure incurred or which were laid out wholly and exclusively for the purpose of earning interest income---Authorities below were justified in considering these financial charges against the income generated from the source where the said loan was actually utilized.

Asif Zia, ACA for Appellant.

Khawar Saeed, D.R. for Respondent.

Date of hearing: 7th August, 2003.

2004 P T D (Trib.) 259

[Income-tax Appellate Tribunal Pakistan]

Before Khawaja Farooq Saeed, Judicial Member and Imtiaz Anjum, Accountant Member

I.T.As. Nos. 1383/LB and 2153/LB of 2002, decided on 20th August, 2003.

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

----Ss. 13, first proviso, 65 & Second Sched., Part IV, Cl. (7)---Finance Ordinance (XXV of 1980)---Finance Act (VI of 1987)---Finance Ordinance (XXI of 2000)---C.B.R. Circular No.7(29) S. Asstt/96, dated 7-1-2002---Unexplained investment etc., deemed to be income--­Additional assessment---Assessment year 1996-97---Issuance of notice under S.65 of the Income Tax Ordinance, 1979 for 18-5-2001 with the permission of Inspecting Additional Commissioner vide Order-sheet entry, dated 17-5-2000---Assessee contended that first proviso to sub­section (1) of S.13 of the Income Tax Ordinance, 1979 was kept in abeyance vide Cl. (7) in Part IV of the 2nd Sched. and it was omitted by Finance Ordinance, 2000 thus, the same could not be applied earlier---Validity---Assessing Officer from 1-7-2000 to 30-6-2001 after which the Income Tax Ordinance, 2001 was promulgated were equipped with proviso to S.13 of the Income Tax Ordinance, 1979---Reopening under S.65 of the Income Tax Ordinance, 1979 having been made earlier to 30-6-2000 and. the addition being on 30th of June, 2001 was fully covered by the proviso of S.13 of the Income Tax Ordinance, 1979 as the law had come into operation during the period 1-7-2000 to 30-6-2001.

(b) Interpretation of statutes---

---- Law as is obtaining on the date of notice holds precedence on the laws, which come into force subsequently.

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

----Ss. 13 first proviso, 65 & Second Sched., Part IV, Cl. (7)---C.B. R. Circular No. 7(29) S. Asstt/96, dated 7-1-2002---Unexplained investment etc. deemed to be income---Additional assessment---Assessment year 1996-97---Addition---Notice under S.65 of the Income Tax Ordinance, 1979 was issued in the assessment year 2001-2002 while the addition was made in the assessment year 1996-97---Validity---Proviso to S.13 had become operative during the continuation of the proceedings, but legally it was not operative on the day the notice was served upon the assessee--­Even otherwise the language of the said proviso did not leave any room for its addition for the assessment year 1996-97 on the basis of notice issued on 18-5-2000---Proviso was alive with its full force during the proceedings but at the same time this being a charge in fact of a punitive nature, a deemed income, its application could not be extended beyond the language mentioned therein---If an act referred to in Cls. (a) to (e) of S.13(1) of the Income Tax Ordinance, 1979 was discovered after the assessment of income of the income year to .which the said act relates this income shall be included in the total income of the income year relevant to assessment year in which the said recovery was made---Value proposed by the valuer after 10 years to be as correct estimate the discovery of the investment was in the income year which was relevant to assessment year 2001-2002---Addition made under the proviso to S.13 of the Income Tax Ordinance, 1979 was illegal, in circumstances, which was deleted by the Appellate Tribunal.

1993 SCMR 1232; PLD 1997 SC 700 and 2003 PTD (Trib.) 1238 ref

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

----S. 13---Unexplained investment etc. deemed to be income­--Application of S.13---Scope---Provision deemed income needs strict application and going beyond the intendments of the Legislature is never permitted.

(e) Income Tax Ordinance (XXXI of 1979)---

----Ss. 65 & 13, first proviso---Additional assessment---Limitation---One cannot be allowed to extend his arms beyond the prescribed limitation under S.65 of the Income Tax Ordinance, 1979 by application of first proviso to S.13(1) of the Income Tax Ordinance, 1979.

(f) Income Tax Ordinance (XXXI of 1979)---

----S. 13, first proviso---Unexplained investment etc., deemed to be income---Limitation---Provision of first proviso to S.13(1) of the Income Tax Ordinance, 1979 is a very stringent legislation---Such law is the settled rules of jurisprudence and against the general spirit and of law---Limitation is provided for penalizing in respect of charge all enactment---No charge can be left for unlimited application-­proviso to S.13 has got into operation a charge which is unlimited application and the only exception is that it shall be added assessment year for which the said discovery has been made.

(g) Income Tax Ordinance (XXXI of 1979)---

----S. 13, first proviso---Unexplained investment etc., deemed to be income---Discovery in assessment year2001-2002---Addition in assessment year 1996-97---Validity-- Discovery had been made on the basis of valuer report which was dated 30-5-2001 and thus the said undisclosed amount could be assessed in the relevant assessment year 2001-2002 and not in assessment year 1996-97.

(h) Income Tax Ordinance (XXXI of 1979)---

----S. 13 (1)(a), (b), (c), (d), (e) & first proviso---Unexplained investment etc., deemed to be income--Word "found"---Connotation--­Fulfilment of requirement of S.13(1)(a) to 13(1)(e) of the Income Tax Ordinance, 1979 while taking recourse to first proviso to S.13(l) of the Income Tax Ordinance, 1979---First proviso to S.13 is part and parcel of said section of the Income Tax Ordinance, 1979 and while taking recourse to the same the Assessing Officer will have to comply with the requirements of S.13(1)(a) to 13(1)(e) of the Income Tax Ordinance, 1979 before embarking upon the provision---Provision only says that if the assessment in respect of the year for which undisclosed income has been finalized, the unexplained investment shall be added in the year of detection and does not give any power to ignore the requirements mentioned in S.13(1)(a) to 13(1)(e) of the Income Tax Ordinance, 1979---Key words for. S.13(1)(e) are "and the assessee offers no explanation about the nature and source of such sum"---Such additions except for S.13(1)(a) of the Income Tax Ordinance, 1979 require approval of Inspecting Additional Commissioner---Before charging undisclosed money, investment or expenditure in the year of discovery the earlier requirements provided in S. 13(1)(a) to 13(1)(e) of the Income Tax Ordinance, 1979 must be fulfilled and in the absence of any of the same the proviso to S.13, cannot be invoked.

(i) Income Tax Ordinance (XXXI of 1979)---

----S. 13---Unexplained investment etc., deemed to be income---Word "found"---Connotation---Report of valuer ---Ambiguous and dubious reports could not be said to be covered within the definition of word "found".

(j) Income Tax Ordinance (XXXI of 1979)---

----Ss. 65, 13, first proviso and Second Sched., Part IV, Cl. (7)--­C.B.R. Circular No.7 (29) S. Asstt/96, dated 7-1-2002---Tax Amnesty Scheme, 2000---Unexplained investment etc., deemed to be income--­Additional assessment---Addition---Filing of declaration of undisclosed income under the Tax Amnesty Scheme after issuance of notice under S.65 of the Income Tax Ordinance, 1979---Validity---Payment of additional sum after filing declaration also should not entirely be used against assessee--- Assessee by virtue of undisclosed declaration would come under the cover of contract provided to such taxpayers through legislation---On facts also the assessee needed sympathetic treatment--­Addition made under the proviso to S.13 of the Income Tax Ordinance, 1979 was declared illegal and was deleted by the Appellate Tribunal.

Mir Ahmed Ali for Appellant (in I.T.A. No. 1383/LB of 2002).

Muhammad Arif, D.R: and Sardar Jamal Ahmed Sukhera for Respondent (in I. T. A. No. 1383/LB of 2002).

Muhammad Asif, DR and Sardar Jamal Ahmad Sukhera, Legal Advisor for Appellant (in I.T.A. No.2153/LB of 2002).

Mir Ahmad Ali for Respondent (in I.T.A. No.2153/LB of 2002).

Date of hearing: 16th May, 2003.

2004 P T D (Trib.) 271

[Income-tax Appellate Tribunal Pakistan]

Before Zafar Ali Thaheem, Judicial Member and Mazhar Farooq Shirazi, Accountant Member

I.T.As. Nos. 4017/LB to 4019/LB of 2001, decided on 30th June, 2003.

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

----S.5---Jurisdiction of Income-tax Authorities---Assistant Commissioner of Income Tax at K was stopped by the Deputy Commissioner of Income fat at F not to frame the assessment of Association of Persons at K, even after the completion of such assessment by the Assistant Commissioner of Income Tax of K---Validity---Deputy Commissioner of Income Tax F had proceeded against law---Section 5 of the Income Tax Ordinance, 1979 provided that Deputy Commissioner of Income Tax at F was bound to refer the matter to higher Authorities but he did not do so and took up the case on his own behalf and violated established law in careless manner---Deputy Commissioner of Income Tax F was not justified to usurp the jurisdiction of the Assistant Commissioner of Income Tax K without referring the matter to higher Authorities---Even the jurisdiction was usurped after the assessment had been finalized--­By doing so he had exercised the appellate powers which were not vested in and such-like action on his behalf was null and void.

PLD 1982 SC 135 ; 1993 PTD (Trib.) 266 and PLD 1990 SC 1070 rel.

(b) Partnership Act (IX of 1932)---

----S. 4---"Partnership", "partner", "firm' and "firm name"--­Definitions ---Equal capital contribution not a condition---Section 4 of the Partnership Act, 1932 does not require that while entering into partnership agreement every partner must have to contribute equal share of capital or have a voice in the management of business proportionate to his capital contribution---Partnership deed executed in presence of witnesses cannot be discarded by the Assessing Officer merely on whims and surmises.

(c) Income-tax---

----Evidence---Remarks that "nowadays nobody is ready to trust upon anybody" is merely assumption and nothing else which cannot be considered as evidence.

(1962) 5 Tax 126 (Trib.) and PLD 1951 Dacca 56 rel.

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

----S. 65---Additional assessment---Reopening of assessment on the ground that assessee was doing octroi business while the assessee denied the conduct of such octori business ---Validity---Assessee was dealing in scrap commission and there was absolutely no octroid business---Action of Assessing Officer in reopening assessment under S.65 of the Income Tax Ordinance, 1979 was vacated by the, Appellate Tribunal.

(e) Income Tax Ordinance (XXXI of 1979)---

---S. 65---Additional assessment---Reopening of assessment on the basis of concealment of Bank accounts which was-duly declared in the case of association of Persons and considered/discussed in the assessment order by that Assessing Officer having the jurisdiction over the case of Association of Persons---Validity---Since the assessee had declared the two Bank accounts in the returns filed at place K against which an assessment order was also finalized under S.62 of the Income Tax Ordinance, 1979, reopening of assessment finalized under S.59(1) of the Income Tax Ordinance, 1979 by Deputy Commissioner of Income Tax at F without having lawful jurisdiction over the case, was double taxation which was not sustainable in the eye of law---Assessee by declaring Bank accounts in the returns filed at K had discharged his liability and there was no concealment on his behalf---Since the Bank accounts had been taxed twice, subsequent assessment framed under Ss.65/62 of the Income-Tax Ordinance, 1979 was double assessment which was liable to be vacated---Order passed by the Deputy Commissioner of Income Tax at F as well as First Appellate Authority was vacated by the Appellate Tribunal and that finalized under S.59(1) of the Income Tax Ordinance, 1979 was restored.

PLD 1972 SC 271; (1964) 9 Taxation 350; (1967) 16 Tax 43 (Trib.) and (1997) 35 Tax 59 ref.

Javed Iqbal and Saqib Bashir, ITP for Appellant.

Ahmad Kamal, D.R. for-Respondent.

Date of hearing: 21st June, 2003.

2004 P T D (Trib.) 288

[Income-tax Appellate Tribunal Pakistan]

Before Khalid Waheed Ahmed, Judicial, Member and Mazhar Farooq Shirazi, Accountant Member

Income-tax Appeals Nos. 975/LB, 4369/LB, 758/LB, 4370/LB, 4795/LB and 4796/LB of 2001, decided on 4th September, 2003.

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

----Ss. 66-A, 59-A & 59(1)---Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order---Assessment was finalized under Self-Assessment Scheme--Cancellation of assessment under S.66-A of the Income Tax Ordinance, 1979 in absence of any written assessment order---Validity---Assessment was finalized under S.59-A of the Income Tax Ordinance, 1979---Assessing Officer was required to pass an order in writing stating the reason for his being satisfied that the return furnished under S.55 of the Income Tax Ordinance, 1979 was correct and complete---Under the provision of both the Ss. 59(1) & 59-A of the Income Tax Ordinance, 1979, Assessing Officer was required to assess the net income by an order in writing and determine the tax payable on the basis of such assessment---No demand notice- should be issued without an order in writing---Order passed by the Inspecting Additional Commissioner under S.66-A of the Income Tax. Ordinance, 1979 was not maintainable in the absence of a valid assessment order passed by the Assessing Officer---Order passed under S.66-A of the Income Tax Ordinance, 1979 was vacated by the Appellate Tribunal.

2003 PTD (Trib.) 2276; 2003 PTD 1530; 1993 PTD-332; 2002 PTD (Trib.) 912; 2003 PTD 2097; 2000 PTD (Trib.) 1821 and 1989 PTD 1300 rel.

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

----Ss. 66-A, 50 & 53---Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order---Proceedings under. S.66-A of the Income Tax Ordinance, 1979 were invoked by the Inspecting Additional Commissioner for the reason that advance tax paid by the assessee was not shown as an asset in the balance-sheet ---Assessee explained that the same was transferred to the capital account of the partners--Validity---Appellate Tribunal remanded the case with direction that contention of the assessee that tax paid/deducted was credited to the capital account of partners be verified from the account books---Assessee be provided an opportunity to explain the discrepancy, if any, found in the reconciliation statement of tax paid/payable before proceedings under S.66-A of the Income Tax Ordinance, 1979.

Sohail Mutee Babri, ITP for Appellant (in I.T.As. Nos. 975/LB, 4369/LB, 758/LB and 4370/LB of 2001).

Umar Farooq, DR for Respondent (in I.T.As. Nos.975/LB, 4369/LB, 758/LB and 4370/LB of 2001).

Umar Farooq, D.R. for Appellant (in T.As. Nos.4795/LB and 4796/LB of 2001).

Sohail Mutee Babri, ITP for Respondent (in I.T.A Nos.4795/LB and 4796/LB of 2001).

Date of hearing: 4th September, 2003.

2004 P T D (Trib.) 297

[Income-tax Appellate Tribunal Pakistan]

Before Syed Masood ul Hassan Shah, Judicial Member and Syed Aqeel Zafar ul Hasan, Accountant Member

Nos. 10/IB to 12/IB of 2000-2001, I.T.As. Nos. 1139/IB of 255/IB, 269/IB of 1995-96, 486/IB and 1280/IB of 1998-99, decided on 31st July, 2003.

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

----S. 156(3)---Rectification of mistake---Assessee alleged that main applications for rectification of mistakes were filed on 27-7-2000 and the financial year in which these applications were filed ended on 30-6-2002 but no order under S.156 of the Income Tax Ordinance, 1979 was passed and the mistakes would be deemed to have been rectified and all the provisions of Income Tax Ordinance, 1979 shall have effect accordingly---Validity---Applications, for giving deeming, effect to the rectification of mistakes sought to be rectified under the provision of S.156(3) of the Income Tax Ordinance, 1979 was refused by the Appellate Tribunal by relying on the judgment reported as 2003 PTD (Trib.) 1708.

2003 PTD (Trib.) 1708 rel.

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

----S. 156---Rectification of mistake---Scope---Income Tax Authority' or theTribunal' could amend any order passed by it so as to rectify any mistake apparent from the record viz. an error in the order sought to be rectified must be apparent on the face of record.

1993 PTD (Trib.) 964 rel.

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

----S. 156---Rectification of mistake---Scope---Mistake should be apparent on the face of the record and may be seen floating on the surface of the record and it should be patent and obvious on the record--­Power to rectify mistakes under the income-tax law or wealth tax law could not be stretched to the extent of review of an order or to the extent of authorizing the Tribunal or the Authority passing the order to sit in judgment as an Appellate Court against its own order.

1992 SCMR 689 = 1992 PTD 570 rel.

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

---S. 156---Rectification of mistake---Review---Scope---Review' of an order/judgment has a different connotation under the administration of civil and criminal justice than that ofrectification' of an order under the tax laws.

(e) Income Tax Ordinance (XXXI of 1979)---

----S. 156---Income Tax Ordinance (XLIX of 2001), S. 221---Wealth Tax Act (XV of 1963), S.35---Civil Procedure Code (V of 1908), S.152---Scope---Rectification of mistake---Powers of rectification of mistake under S.156 of the Income Tax Ordinance, 1979 (S. 221 of the new Income Tax Ordinance, 2001) or S.35-of the Wealth Tax Act, 1963, to a certain extent could be equated with the power of amendment of judgments, decrees or orders as provided under S.152 of the Code of Civil Procedure, 1908, which basically hinged on a maxim "Actus curiae neminem gravabit" (an act of the Court shall prejudice no one)---Under the provisions of S.152 of the Code of Civil Procedure, clerical or arithmetical mistakes in judgments, decrees or orders or error arising therein from any accidental slip or omission may at any time be corrected by the Court either of its own motion or on the application of any of the parties.

(f) Income Tax Ordinance (XXXI of 1979)---

----S. 156---Wealth Tax Act (XV of 1963), S. 35---Rectification of mistake---Scope---Rectification as provided under S.156 of the Income Tax Ordinance, 1979 or S.35 of the Wealth Tax Act, 1963 has a limited scope only to the extent of rectifying any mistake in the order by the Authority itself who passed the order and the mistake sought to be rectified must be a mistake apparent from record, leaving no room for any argument on any legal issue which had already been dealt with in the main order by the forum concerned for questioning the same for its resolution in a different legal perspective suitable to the applicant--­Tribunal or the forum concerned while dealing with a rectification application could not transgress its authority or assume jurisdiction to sit in judgment on its own order.

(g) Income Tax Ordinance (XXXI of 1979)---

----S. 156---Constitution of Pakistan (1973), Arts.4, 25 & 264---C.B.R. Circular No.15 of 1980, dated 26-6-1980---C.B.R. Letter C. No.1 (48) IT-1/79, dated 17-2-1981-- Rectification of mistake ---Scope--­Application for rectification of Appellate Tribunal's order almost on the same grounds/arguments which were made at the time of hearing of main appeal---Validity---While seeing relevant parts of the Tribunal's order in the context of averments made in the rectification application, assessee in fact sought reappraisal of the factual as well as legal issues like that of time of limitation for assessment under S.66A of the Income Tax Ordinance, 1979, appointment of Special Officer under S.4 of the Income Tax Ordinance, 1979, acceptance of return under para. 4(ii) of Self-Assessment Scheme, validity of the order passed by a Special Officer etc. and a re-decision thereon through rectification application, would amount to enlarging the scope of provisions of S.156 of the Income Tax Ordinance, 1979 to the extent of sitting in judgment as an appellate forum---No mistake apparent from record liable to be rectified appearing in the case, application for rectification was rejected by the Appellate Tribunal.

PLD 1957 (SC Ind.) 448; PLD 1974 Lah. 458; PLD 1965 (W.P.) Kar. 69; 1981 SCMR 267; PLD 1982 Lah. 109; 2000 PTD 2407; 1991 PTD 217; 1993 SCMR 29 and MA(R) No.23/IB of 2000-2001 ref.

1993 PTD (Trib.) 964 and 1992 SCMR 689 = 1992 PTD 570 rel.

Mir Ahmed Ali for Applicant.

Abdul Jaleel, D.R. for Respondent.

Date of hearing: 7th June, 2003.

2004 P T D (Trib.) 320

[Income-tax Appellate Tribunal Pakistan]

Before Zafar Ali Thaheem, Judicial Member and Javed Tahir Butt, Accountant Member

I. T. As. Nos. 5890/LB to 5893/LB of 2002, decided on 30th April 2003.

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

----Ss.156(4) & 62---Rectification of mistake --- Limitation --- Assessment rectified after the expiry of four years from the date of passing order under S.62 of the Income Tax Ordinance, 1979 was annulled by the Appellate Tribunal.

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

----Ss. 156(2) & 62---C.B.R. Circular No.7 of 1992, dated 18-3-1999, para. 5---Rectification of mistake---Indenting Commission-Trading business---Separable expenses---History---Assessment made under S.62 of the Income Tax Ordinance, 1979 was rectified on the ground that expenses were not allowed on pro rata basis ---Validity---Assessee had history of separable expenses---Since Department had been assessing the expenses on import and indenting Department on actual basis separately since 1992-93, therefore, proration of the same was clear deviation from history of the case established from record---Rectification order passed under S.156(2) of the Income Tax Ordinance, 1979 being erroneous in the light of history as well as law was vacated and that of original assessment order passed under S.62 bf the Income Tax Ordinance, 1979 was restored by the Appellate Tribunal.

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

----S.156---Rectification of mistake---Change of opinion,--Debatable issues-- Rectification could not be made on mere change of opinion or debatable issues---Rectification could only be initiated where the mistakes were so clear and floating on the surface of order---Earlier opinion could not be changed with the later opinion by exercising powers conferred under S.156 of the Income Tax Ordinance, 1979---No decision could be revised on' mere change of opinion by the successor.

1992 PTD 570 rel.

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

----Ss.156(2) & 62---C.B.R. Circular No.7 of 1992, dated 18-3-1999, para. 5---Rectification of, mistake---Indenting Commission---Trading business---Separable expenses---Loss of revenue---Rectification of assessment passed under S.62 of the Income Tax Ordinance, 1979 with the observation that "expenses claimed under the various heads of profit loss accounts pertaining to indenting commission and business should have been c6nsidered on proportionate basis but the same had not been done ---In order to retrieve the loss of revenue show-cause notice under S.156(2) of the Income Tax Ordinance,, 1979 was issued"---Validity---By passing sentence "Assessing Officer should have considered on proportionate basis but the same has not been done" the Assessing Officer had considered the original assessment passed under S.62 of the Income Tax Ordinance; 1979 to be erroneous, similarly by passing sentence "in order to retrieve the loss of revenue" the Assessing Officer had considered the original assessment order to be prejudicial to the interest of Revenue---Assuming that situation was the same as had been shown by the Assessing Officer then too it was not the case of rectification under S.156(2) of the Income Tax Ordinance, 1979 but the same fell within the ambit of S.66-A of the Income Tax Ordinance, 1979---Assessing Officer by passing the order under S.156(2) of the Income Tax Ordinance, 1979 had tried to exercise the powers of Inspecting Additional Commissioner conferred under S.66-A of the Income Tax Ordinance, 1979---If an assessment involving financial matter could be revised by invoking provisions of S.156 of the Income Tax Ordinance, 1979 by the Assessing Officer then what would be the role of Inspecting Additional Commissioner in such-like matters--­Rectification could be made in such order where the mistake was so clear and obvious only by perusal of order and record---Action of Assessing Officer was declared illegal by the Appellate Tribunal.

(e) Income Tax Ordinance (XXXI of 1979)---

----S.156---Rectification of mistake---Controversy investigation--­Reassessment of evidence---Additional evidence---Interpretation of provision of law---Where Assessing Officer rectifying the original assessment enters into controversy investigates into the matter, reassesses the evidence or takes into consideration additional evidence and on that basis interprets the provision of law and forms an opinion different from the order, then it will not amount to "rectification" of the order.

Muhammad Iqbal Hashmi and Yousaf Ali Ch., I.T.P. for Appellant.

Ahmad Kamal, D.R. for Respondent.

Date of hearing: 25th April, 2003.

2004 P T D (Trib.) 355

[Income‑tax Appellate Tribunal Pakistan]

Before Inam Ellahi Sheikh, Chairman and Munsif Khan Minhas, Judicial Member

I.T.As. Nos.847/IB, 848/IB, 824/IB, 825/IB of 2000‑2001, 249/IB and 277/IB of 2003, decided on 3rd September, 2003.

(a) Income‑tax‑‑‑

‑‑‑‑Lease business‑‑‑Aspect of the transaction that "sale of certain assets subject to an agreement to repurchase the same at some future date and difference between price of sales and repurchase is the profit earned by the financer and Repo transaction is in the nature of `pawn' transaction", was not considered at the assessment stage‑‑‑Appellate Tribunal maintained the setting aside order of the First Appellate Authority.

(b) Income Tax Appellate Tribunal Rules, 1981‑‑‑

‑‑-‑R. 10‑‑‑Contents of memorandum of appeal‑‑‑Appeal was dismissed by the Appellate Tribunal on the ground that grounds vague and against the rules of Tribunal.

(c) Income‑tax‑‑‑

‑‑‑‑Profit and loss expenses‑‑‑Disallowance‑‑‑Department failed to point out the basis of fixation of disallowance at 20% by Assessing Officer which had been reduced to 15 % by the Fits t Appellate Authority‑‑‑Order of First Appellate Authority was maintained by the Appellate Tribunal.

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

‑‑‑‑S. 17‑‑‑Interest on securities‑‑‑International Accounting Standard No. IAS‑18 ‑‑‑Federal Investment Bonds‑‑‑First Appellate Authority directed that interest income on Federal Investment Bonds to be taxed on accrual basis‑‑‑Assessee contended that only interest receivable was to be taxed and there was no mention of any accrued interest in S.17 of the Income Tax Ordinance, 1979‑‑‑Validity‑‑‑Although, S.17 of the Income, Tax Ordinance, 1979 provided chargeability of tax on interest income `receivable', the same did not provide for any deduction to be allowed against such income‑‑‑If interest income on Federal Investment Bonds or other investment securities was to be taxed under S. 17 of the Income Tax Ordinance, 1979 in isolation, the assessee would not be able to claim any expenditure against that except what was provided in S.18 of the Income Tax Ordinance, 1979‑‑‑Provisions of S.18 of the Income Tax Ordinance, 1979 revealed that assessee was only to be allowed actual interest 'paid' on moneys borrowed for invest­ment in such bonds which meant that the assessee would not he entitled to deductions even in respect of the interest expense which was due for payment but not paid by the assessee‑‑‑Order of First Appellate Autho­rity was maintained by the Appellate Tribunal.

1994 PTD 1051 ref.

(e) Income-tax---

‑‑‑‑Determination of income‑‑‑Matching costs‑‑‑Matching costs should be considered before income is determined.

(f) Income Tax Ordinance (XXXI of 1979)---

‑‑‑‑S. 84‑‑‑Liability in certain transactions in securities‑‑‑Provision of S.84 of the Income Tax Ordinance, 1979 is a deeming provision, and such provision cannot be applied generally.

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

‑‑‑‑S. 80‑D(2), Expln.‑‑‑Minimum tax on income of certain persons‑‑­"Turnover"‑‑‑Definition‑‑‑Explanation to subsection (2) of S.80‑D of the Income Tax Ordinance, 1979 did not contain an absolute and exhaustive definition of the term `turnover' as this was an Explanation which had been introduced to remove the doubt and, prima facie, such doubts were there with regard to the treatment of trade discounts shown on the invoices or bills.

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

‑‑‑‑S. 80‑D‑‑‑Minimum tax on income of certain persons‑‑‑Intention of Legislature‑‑‑Provision of S.80‑D of the Income Tax Ordinance, 1979 shows the intention of the Legislature to levy a minimum tax on a company irrespective of the fact whether it has earned any profit or not.

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

‑‑‑‑S.80‑D‑‑‑Minimum tax on income of certain persons‑‑‑"Turnover"‑‑­Connotation‑‑‑Term `turnover' is a wide term and it includes the receipts and accruals from the major business trading/professional activity of the company and since the law says that the turnover from all sources must be taxed, it has to be from all sources and all activities of business of the assessee‑‑‑Such activities which are not in the ordinary course of the business of the assessee, such as the sale of fixed assets, would not form a part of the "turnover".

Principles of Income‑tax Law with International Tax Glossary by Huzaima Bukhari and Dr. Ikramul Haq ref.

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

‑‑‑‑S. 80‑D‑‑‑Minimum tax, on income of certain persons‑‑‑Leasing business ‑‑‑Chargeability of minimum tax under S.80‑ D of the Income Tax Ordinance, 1979 on an assessee deriving income from leasing business ‑‑‑Validity‑‑‑Assessee was engaged in the business of providing financial facilities to its customers and certainly this was a benefit to its customers by way of receiving loans and credits and other financing facilities ‑‑‑Assessee could not be excluded from the purview of the provisions of S.80-D of the Income Tax Ordinance, 1979.

Principles of Income‑tax Law with International Tax Glossary by Huzaima Bukhari and Dr. Ikramul Haq ref.

Naushad Ali Khan, D.R. for. Appellant (in I.T.As. Nos.847/IB, 848/IB of 2000‑2001 and 249/IB of 2003).

Kashif Aziz Jehangiri, ACA for Respondent (in I.T.As.. Nos.847/IB, 848/IB of 2000‑2001 and 249/IB of 2003).

Kashif Aziz Jehangiri, ACA for Appellant (in I.T.As. Nos.824/IB, 825/IB of 2000‑2001 and 277/IB of 2003).

Naushad Ali Khan, D.R. for Respondent (in I.T.As. Nos.824/IB; 825/IB of 2000‑2001 and 277/IB of 2003).

Date of hearing: 3rd September, 2003.

2004 P T D (Trib.) 388

[Income-tax Appellate Tribunal Pakistan]

Before Inam Ellahi Sheikh, Chairman and Ehsan-ur-Rehman, Judicial Member

W.T.As. Nos.417/LB to 419/LB and 467/LB to 470/LB of 2003, decided on 21st August, 2003. , (a) Wealth Tax Act (XV of 1963)-----

----S. 17(1)(a)---Time limit for completion of assessment and reassessment---Section 17(i)(a) of the Wealth Tax Act, 1963 had significance in the cases which at the time of introduction of this section were pending with the Assessing Officer, so that firstly these pending assessments shall be finalized till 30-6-1985 and where returns had been filed then within two years from the filing of return---In case such returns had been revised then this period of two years shall be counted from the date of the revised return.

(b) Wealth Tax Act (XV of 1963)-----

----S. 17(1)(b)---Time limit for completion of assessment and reassessment--Limitation, computation of---Section 17(1)(b) of the Wealth Tax Act, 1963 specified two categories of cases one .is of return filed where the period of two years which shall commence from the date of filing of return had been prescribed for completion of assessment, in case a revised return is furnished then this period of two years is to be reckoned from the date of submission of such revised return---Time limit prescribed as four years is relevant. to the cases where return 'has not been filed then the limitation period of four years is to be computed from the end of the assessment year in which net wealth was first assessable--­Purpose of the Legislature is that Revenue could take action for framing assessment where firstly an assessment has. been framed but in the next following four years no action has been taken, by this the Revenue has been empowered to frame assessment' without any fear of limitation for these four years, secondly it is dealing with an eventuality where no wealth tax return has been filed, so in such cases the four years from the end of the assessment year .fin which the net wealth was, first assessable the assessment order could be passed---Said two eventualities fall within the first complete sentence of Cl. (b) of S. 17(1) of the Ordinance , ending with comma "four years from the end of assessment year in which the net wealth was first assessable, "---By putting comma after the word "first assessable" a disjunctive has been established and then starting of other sentence with `or' has conveyed the purpose in crystal clear manner that it is altogether dealing with a different category, which is of a person filing wealth tax return in whose case the period of limitation is two years, such period is to be reckoned from the date of furnishing of the original return and in case revised return is furnished then from date of filing of this revised return---Words "whichever later" used in Cl. (b) of subsection (1) of S.17 of the Wealth Tax Act, 1963 refers to the date of revising of the return.

(c) Wealth Tax Act (XV of 1963)-----

----S. 17(1)(a)(b)---Time limit for completion of assessment and reassessment ---W.T.A. No.432/LB/1994, dated 26-2000---Principles--­[W.T.A. No.432/LB of 1994 dissented from].

(d) Wealth Tax Act (XV of 1963)---

----S. 17(1)(a)(b)----Time limit for completion of assessment and reassessment---Period of limitation- in case where wealth tax return was filed, shall be two years and not four years from the end of assessment, year in which the net wealth was first assessable.

W.T.A. No.432/LB of 1994 per in curium.

(e) Wealth Tax Act (XV of 1963)-----

----S. 17(1)(a)(b)---Time limit for completion of assessment and reassessment---Assessment after the expiry of two years from the filing of returns---Validity---Assessment in all the years had been framed after the expiry of two years from the date of filing of returns, as such assessment for all the three years were manifestly barred by time and were cancelled by the Appellate Tribunal being devoid ' of any legal sanction behind it---Plea of limitation was accepted with the cancellation/annulling of assessment.

W.T.As. Nos.784 t6 787/LB of 1996; 2024, 2025 of 1995-96 and 1996-97; 542/LB of 2001 and 783/LB of 1996 ref.

W.T.A. No.432/LB of 1994 per incurium.

A.D. Randhawa for Appellant (in W.T.As. Nos.417/LB, 418/LB and 419/LB of 2003).

Mrs. Sabiha Mujahid, DR for Respondent (in W.T.As. Nos.417/LB, 418/LB and 419/LB of 2003).

Mrs. Sabhia Mujahid, DR for Appellant (in W.T.As. Nos. 467/LB, 468/LB, 469/LB and 470/LB of 2003).

A.D. Randhawa for Respondent (in W.T.As. Nos.467/LB, 468/LB, 469/LB and 470/LB of 2003).

Date of hearing: 20th August 2003.

2004 P T D (Trib.) 397

[Income-tax Appellate Tribunal Pakistan]

Before Inam Ellahi Sheikh, Chairman and Khalid Waheed Ahmed, Judicial Member

I.T.As. Nos. 186-IB, 187-IB and 188-IB of 2002, decided on 16th May, 2003.

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

----Ss. 52A/86, 50(4), 59-A,, 80-C & 143-B---C.B.R. Circular No.4 of 1964, dated 11-12-1964---C.B.R. Circular No. 8 of 1986, dated 9-2-1986---Recovery from the person from whom tax was not deducted or collected---Joint venture---Execution of construction of pipeline contract---Filing of statement under S.143-B of the Income Tax Ordinance, '1979 in respect of payments received as an association of persons---Assessment was finalized under S.59-A of the Income Tax Ordinance, 1979 and also issued refund---Assessing Officer having the jurisdiction over the assessee treated the assessee as sub-lettee of his partner non-resident company as assessee was not signatory of the contract and created liability against the assessee for non-deduction of tax on the payments made by the partner nonresident company to asses see-company---Validity---Fact that payments received were deposited in Bank account maintained jointly by both the partners of the joint venture and operated with the signatures of both the parties had not been controverted by the Department which proved that payments were received jointly by both the parties---Assessing Officer failed to specify the part of work awarded by the partner non-resident company under the alleged sub contract to assessee nor the amount of payments were quantified against the work done under sub contract---Undisputed facts and documents produced by the assessee supported the contention of the assessee that the contract work was executed as a joint venture--­Contract awarding, company accepted the execution of work by non­resident company alongwith assessee as joint venture---Existence of joint venture in respect of agreement/contract was proved---Provisions of S.50(4) and consequently of S.52A of the Income Tax Ordinance, 1979 were not attracted---Order passed by the Assessing Officer to charge tax in respect of the same amount of the same transaction in the hands of assessee which had already been subjected to tax in the hands of association of persons without first taking cancellation proceedings completed assessment were not maintainable in law---Orders passed were not maintainable---Appeals were accepted and orders of both the Authorities below were vacated by the Appellate Tribunal.

1971 PTD 175 2000 PTD 2424 (Trib). rel.

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

----S: 3(1)(e)---Income Tax Authorities---Deputy Commissioner of Income Tax---Order passed by Assessing Officer could not be declared illegal by another Assessing Officer unless it was cancelled or annulled by the Competent Authority as provided under the Income Tax Ordinance, 1979.

Kashif Aziz Jehangiri, ACA for Appellant.

Naushad Ali Khan, D.R. for Respondent.

Date of hearing: 23rd April, 2003.

2004 P T D (Trib.) 408

[Income-tax Appellate Tribunal Pakistan]

Before Syed Masood-ul-Hassan Shah, Judicial Member and Syed Aqeel Zafarul Hasan, Accountant Member

I.T.As. Nos.445-IB, 446-IB and 690-IB of 2000-2001, decided on 21st May, 2003.

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

----Ss.62 & 132---Assessment on production of accounts, evidence etc.--­Financial expenses---Disallowance of such expenses after due confrontation under S.62 of the Income Tax Ordinance, 1979---Setting aside of the same by the First Appellate Authority--Validity---No justification existed with the First Appellate Authority to set aside the issue of financial expenses---Expenses were duly confronted through show-cause notices under S.62 of the Income Tax Ordinance, 1979 but the assessee did not respond---Disallowing the expenses claimed was fully justified as the assessee had been unable to justify the same---Rental income derived from the leasing of the assets being chargeable to tax under S.30 of the Income Tax Ordinance, 1979, Assessing Officer rightly disallowed the claim for lack of admissibility under S.31 of the Income Tax Ordinance, 1979---Appellate Tribunal vacated the order of the First Appellate Authority and restored that off Assessing Officer.

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

----S.30---Income from other sources---Lease income---Income from lease 'of fixed assets comprising of land building and machinery for manufacture of poultry feed---Revising of lease agreement for the reason that lessor had failed to provide the lessee with an automatic feed manufacturing plant in working condition---Reduction in rent in spite of increase in fresh investment---Assessment was finalized on the basis of rent fixed by the original lease agreement on the ground that it was not provided anywhere in the original lease agreement that the agreement was subject to any pre-conditions such as the assurance regarding working condition of the new plant---Validity---Since the initial investment was substantially increased after the commencement of lease period, there was no justification for any reduction in lease rent---First Appellate Authority failed to examine the crucial fact that the original lease deed did not contain any stipulation requiring the lessor to install automatic feed production machinery---Very justification for a revision of monthly rent did not remain in field---First Appellate Authority failed to appreciate the reasonableness of the , basis of rent estimation and the amount was held taxable in the hands of assessee---Order of First Appellate Authority was vacated by the Appellate Tribunal and restored that of the Assessing Officer in which rent originally declared was adopted.

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

----Ss.108(b)(i), 55 & Third Sched.---Income Tax Rules, 1982, R.190--­Companies Rules, 1985, Form 35-A---Penalty for failure to furnish return of total income and certain statements---Penalty for non-filing of statement of accounts and balance-sheet with the return filed under S.55 of the Income Tax Ordinance, 1979---Penalty was deleted by the First Appellate Authority with the observation that S.55 of the Income Tax balance-sheet and non-filing of such statements did not render the return invalid---Validity---Section 55 of the Income Tax Ordinance, 1979 requiring the filing of. returns of income, must be read in conjunction with 8:190 of the Income Tax Rules, 1982---Rule clearly provide that if all the documents prescribed under, the Income Tax Rules, 1982 as part of the returns were not enclosed, the. return was liable to be considered as an invalid return under the law--- In case of companies, copies of trading/manufacturing account and P & L Account, balance-sheet, depreciation chart as per Third Schedule of the Income Tax Ordinance, 1979 and audit report in Form 35-A of the Companies Rules, 1985 etc. had been specifically mentioned---Return filed by the assessee without requisite statements of accounts was thus invalid---Default on-the part of assessee stood established---Order of First Appellate Authority in deleting the penalty was not sustainable on facts and law which was vacated by the Appellate Tribunal with the direction that penalty should not exceed the maximum limit laid down in S.108(b)(i) of the Income Tax Ordinance, 1979.

Zulfiqar H. Khan, D.R. for Appellant.

Hafiz M. Idrees for Respondent.

Date of hearing: 21st May, 2003.

2004 P T D (Trib.) 420

[Income-tax Appellate Tribunal Pakistan]

Before Inam Ellahi Sheikh, Chairman and Munsif Khan Minhas, Judicial Member

LT.As. Nos.217-IB to 220-IB, 227-IB to 230-IB of 2003, decided on 3rd September, 2003.

Income Tax Ordinance (XXXI of 1979)---

----Ss.132, 52/86 & 50(4)---Decision in appeal---Setting aside of assessment in a summary manner without adjudicating all grounds of appeal ---Validity---Assessee had raised many grounds before First Appellate Authority but First Appellate Authority had preferred to pass a summary order without discussing grounds of appeals, various facts in issues and their legal implication---Such summary order was neither appreciated nor approved because recording of findings in second appeal without recording of any finding at First Appellate Forum shall deprive either of the parties from one forum of the appeal---Final assessment changes when the. finding on each and every fact in issue was recorded specifically and separately---First Appellate Authority had not recorded specific findings qua the various issues raised by the assessee - in its grounds, of appeal---Ground of limitation raised had not, been answered--­Order of First Appellate Authority was set aside by the Appellate Tribunal with the direction to pass a speaking order on each and ever issues.

Naushad Ali Khan, D. R. for Appellant (in I.T.As. NOs.217-IB to 220-IB of 2003).

Kashif Aziz Jehangiri, A.C.A. for Respondent (in I.T.As Nos.217-IB to 220-IB of 2003).

Kashif Aziz Jehangiri,. A.C.A for Appellant (in I.T.As Nos.227-IB to 230-IB of 2003).

Naushad Ali Khan, D.R. for Respondent (in I.T.As. Nos.227-111 to 230-IB of 2003).

Date of hearing: 3rd September, 2003.

2004 P T D (Trib.) 422

[Income-tax Appellate Tribunal Pakistan]

Before Khawaja Farooq Saeed, Judicial Member and Imtiaz Anjum, Accountant Member

I.T.A. No.3105-LB of 2002, decided on 21st April, 2003.

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

----S.66-A---Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order- --Error of fact---Error of law--­"Erroneous"---Connotation---Error of fact is also considered as relevant for cancellation of assessment under S.66-A of the Income Tax Ordinance, 1979---Earlier judgments on the subject had only considered an 'order as "erroneous" if it had an error of law---Word `erroneous' in almost all the legal dictionaries had been defined to mean an "error of law"--"Error" may include in its meanings all kinds of mistakes but the word ."erroneous" means basically "an error of law".

Black's Law Dictionary, 5th Edn., published by West Publishing Company in 1979 ref.

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

----S.66-A---Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order---"Erroneous"---Connotation---Word "erroneous" even if is expanded to the error of fact' it still could not be considered wide enough to consider an estimate, a gossip, a feeling, which gives reason to suspect, an apprehension or possibility of a better judgment by way of superior wisdom and experience.

1984 PTD 137; 1991 PTD (Trib.) 321 and (1969) Tax 51 (Trib.)

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

----S.66-A---Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order---"Erroneous"---Connotation--Where the Legislature was very particular in mentioning the word, "erroneous", Appellate Tribunal could not exercise jurisdiction which was ~ not provided by S.66-A of the Income Tax Ordinance, 1979.

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

----S.66-A---Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order---Review---Inspecting Additional Commissioner was not empowered with the jurisdiction to review the assessment---Power of revision was available with the Commissioner who may exercise it either suo motu or at the request of the assessee.

(e) Income Tax Ordinance (XXXI of 1979)---

----S.66-A---Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order---"Erroneous"---Connotation---"Error"--­"Mistake"---Word "erroneous" had been used purposely by the Legislature and it was not synonymous to error or mistake or such other connotations of wider implication.

(f) Words and phrases---

----- Erroneous" and "error"--Connotations---Word "erroneous" is an adjective which is parallel to blundering, counterfeit, devoid of truth, fallacious, false, faulty, groundless, spurious, unfounded, unsustainable, untrue and wrong etc. while. the word "error" is synonymous to false conception, false impression, incorrect mistake, misprint, misunderstanding etc.

(g) Income Tax Ordinance (XXXI of 1979)-----

----S.66-A---Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order---Unsure situation---Unsure situations could not be made the base of invocation of order under S.66-A of the Income Tax Ordinance, 1979.

(h) Income Tax Ordinance (XXXI of 1979)---

----S.66-A---Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order---Powers of the Inspecting Additional Commissioner are supervisory to avoid arbitrary exercise of powers by the Assessing Officer and to ensure safeguard of the Revenue.

(i) Income Tax Ordinance (XXXI of 1979)---

----S.66-A---Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order---Language of S.66-A of the Income Tax Ordinance, 1979 suggests that "the order should be erroneous by reference to definite violation or deviation from law".

(j) Income Tax Ordinance (XXXI of 1979)---

----S.66-A---Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order---Any hypothetical, vague or uncertain situation, interpretation liable to two different decisions etc. could not extend the power of the Inspecting Additional commissioner under S.66-A of the Income Tax Ordinance, 1979.

(k) Income Tax Ordinance (XXXI of 1979)---

----S.66-A---Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order---Disagreement between the two officers i.e. Assessing Officer and Inspecting Additional commissioner could not grant jurisdiction to the Inspecting Additional Commissioner under S.66-A.of the Income Tax Ordinance, 1979.

(l) Income Tax Ordinance (XXXI of 1979)---

----Ss.66-A, 27, 28, 29(3)(b), 50(4), 80C & Third Sched., R.7(2)(b)---Income Tax Rules, 1982, R.207-A---Constitution of Pakistan 1973, Fourth Sched., Part I, Federal Legislative List, Item No.50---Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order---Sale of business---Assessment---Cancellation of assessment on the ground that there was a definite value of franchising rights and on surrender of such rights it was to be essentially accounted for towards the declared profit and gain on sale of land was also. not offered for tax which was claimed as exempt---Sale of palates, empty bottles etc. was subject to charge under S.80C of the Income Tax Ordinance, 1979--­Validity---Sale of assets was well within the knowledge of Assessing officer at the time of assessment---Assessee's accounts were found to be verifiable---While going through the sales, Gross Profit etc., Assessing officer considered himself legally bound to accept the accounts--­Assessing Officer having applied full mind, Inspecting Additional Commissioner's apprehension that assessee had managed its affairs so as to take the benefit of exemption available to a class of immovable assets was not justified---Some of the purchases of assessee were considered as liable to deduction and he was found to be as assessee in default and was charged under S.52 of the Income Tax Ordinance, 1979---At subsequent stage saying that assets of assessee sold to third party were liable to deduction and S.80C of the Income Tax Ordinance, 1979 came into operation was far-fetched idea which could not be supported---Assessing Officer was very particular in mentioning that "downfall in G.P. on account of empties and shells was attributable to discontinuation of business" and no adverse inference was drawn in this regard ---In presence of such unequivocal findings the opinion of Inspecting Additional Commissioner that it was a case of "supply" and Assessing Officer had erroneously not seen the same from the said angle was a "difference of opinion" ---Observation of Inspecting Additional Commissioner was not covered within the definition of word "erroneous" ---Two opinions that sale was supply and coverable under S.50(4) of the Income Tax Ordinance, 1979 or not was not covered within the connotation of the word "erroneous" ---Order pf Inspecting Additional Commissioner speaks of the doubts, apprehensions, indefiniteness and lack of confidence in the observations---Entire language of the order of Inspecting Additional Commissioner speaks about his opinion---Sale-deed was registered with the concerned Authorities and required stamps/duties were paid---None of the concerned agencies challenged the validity of contract and Collector of Land Revenue' did not object to the value proposed for registration--­No situation thus existed for cancellation of assessment order "under S-66-A of the Income Tax Ordinance, 1979---Cancellation of assessment order in the circumstances was without jurisdiction and was disapproved by the Appellate Tribunal.

1991 PTD 488; 1981 SCMR 701; 1998 PTD (Trib.) 3395; 1999 PTD 4028; Julian Hoshang Dinshaw Trust v . ITO 1992 SCMR 250; CIT v. Forbes Campbell & Co. PLD 1978 Kar. 1047 = 1978 PTD 328; CIT v. R.K. Parasuram 2001 PTD 3410; 2002 PTD 1379 and CIT v. B.C. Srinivasa Setty 128 ITR 294 ref.

Ch. Anwarul Haq for Appellant.

Muhammad Asif, DR for Respondent.

Date of hearing: 26th November, 2002.

2004 P T D (Trib.) 441

[Income-tax Appellate Tribunal Pakistan]

Before Muhammad Ashfaque Baloch, Judicial Member and Muhammad Akhtar Nazar Mian, Accountant Member

I. T. A. No. 1813-KB of 2002, decided on 11th September, 2003.

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

----S.62, proviso---Assessment on production of accounts, evidence, etc. ---Procedure---First stage in assessment is to examine the accounts and to give a notice to the assessee of the defects in the accounts and provide an opportunity to the assessee to explain his point of view about such defects while the second occasion is to record in the assessment order such explanation of the assessee (regarding defects in the accounts about which the DCIT gives a notice) and lastly to record in the assessment order the basis of computation of total income of the assessee.

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

----S.62---Assessment on production of accounts, evidence, etc.--­Notice---Opportunity---Purpose of giving mandatory notice referred to in proviso to S.62(1) of the Income Tax Ordinance, 1979 will be served for all legal intents if the defects in accounts and preferably warning of some intended future action were communicated or brought to the knowledge of the assessee in any proper or permissible manner and reasonable opportunity to explain the defects is provided to the assessee---Once this had been done and if the assessee gives an explanation, then after recording the explanation of the assessee in the assessment order, the Assessing Officer could not forthwith estimate income but he was supposed to give the basis of computation of total income in the assessment order---Opportunity was to be given to the assessee to meet with the defects pointed out in the accounts and to explain his point of view regarding these defects---Basis of computation of income was legally to form a part of the assessment order and not that of the notice to the assessee which mandatory was required so as to confront the defects in the accounts.

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

----S.62--Assessment on production of accounts, evidence, etc.--­Confrontation of defects in accounts through order-sheet entry--­Validity---If the defects in accounts were confronted to an assessee or his authorized representative through recordings on the order-sheet, which was obviously a permissible means of communication, this would mean that the Assessing Officers had duly given a notice of the defects to the assessee.

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

----S.62---Assessment on production of accounts, evidence, etc.---Add back out of direct expenses----Confrontation of defects in accounts through order-sheet---First Appellate Authority set aside the assessment with the direction that a notice under S.62 of the Income Tax Ordinance, 1979 be confronted with specific defects in accounts and in absence of same the declared version be accepted ---Assessee contended that by setting aside the assessment, the First Appellate Authority afforded another opportunity to the Assessing Officer for making good the deficiency in assessment---Since notice under S.62 of the Income Tax Ordinance, 1979 was mandatory for rejecting the accounts and this mandatory requirement having not been fulfilled, the First Appellate Authority should have directed Assessing Officer to accept the declared version---Validity ---Order-sheet generally was not a substitute for statutory notice under S.62 of the Income Tax Ordinance, 1979, if it records only the proceedings of the day as against this, entries made in the order-sheet would tantamount to a "notice" and "giving a notice of the defects in the accounts" to assessee---Assessing Officer concluded proceedings without getting a written explanation from the assessee due to the fact that assessee had agreed to making suitable add backs out of direct expenses and Profit and Loss Account and this agreement meant nothing but the explanation on behalf of the assessee as required in the proviso to S.62(1) of the Income Tax Ordinance, 1979---Such explanation had duly been made part of the assessment order by the Assessing Officer---Mandatory requirements of the proviso to S.62(1) of the Income Tax Ordinance, 1.979 were duly met in the circumstances--­First Appellate Authority should have decided the matter at his level instead of setting aside the case---Since setting aside by the First Appellate Authority was in no way prejudicial to the interest of the assessee, Appellate Tribunal did not interfere in the order of the First Appellate Authority.

2001 PTD (Trib.) 2938; Kanga & Palkiwala, 7th Edn., pp.845 - 847 and Black's Law Dictionary ref.

(e) Income Tax Ordinance (XXXI of 1979)---

----Ss.50(4) & 51---Deduction of tax at source---Certificate of deduction of tax---Explanation---Under S.50(4) of the Income Tax Ordinance, 1979 the sums deducted or collected, or purported to have been deducted or collected under S.50 of the Income Tax Ordinance, 1979 were to be treated as payment of tax on behalf of assessee and under S.51 of the Income Tax Ordinance, 1979 every person deducting or collecting tax under S.50 of the Income Tax Ordinance, 1979 was to issue a certificate at the time of making payment of the sum from which tax had been deducted or collected and therefore, an assessee became entitled to the credit of tax when withholding agent as representative of the Federal Government withheld tax from the payments made to the payee---If the withholding agent did not, comply with the statutory requirements of namely depositing the tax into the Government exchequer, then the Department could proceed against the withholding agent with all consequences as provided under the law.

Ms. Yasmin Ajani, F.C.A. for Appellant.

Ms. Shaista Abbas, D.R. for Respondent.

Date of hearing: 9th September, 2003.

2004 P T D (Trib.) 452

[Income-tax Appellate Tribunal Pakistan]

Before Syed Masood-ul-Hasan Shah, Judicial Member and Syed Aqeel Zafar-ul-Hasan, Accountant Member

M. A. (Rectification) No. 35/11 of 2003, decided on 25th June, 2003.

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

----First Sched., Part IV, para. B(2)---Public company---" Shares"--­Connotation---Word "shares" used in para. B(2) of Part IV of the First Schedule of the Income Tax Ordinance, 1979 has been used in the plural form---Had it been used in the singular form, it could be argued to mean extent of ownership---Word "shares" held by the Government, denote any stock of share capital and not the extent of ownership.

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

----5.156 & 2(16)---Pakistan Telecommunication (Re-organization) Act (XVII of 1996)---Rectification of mistake---Scope---Determination of status---Appellate Tribunal determined the status of the assessed as private limited company---Recall. of such order through rectification application to allow the assessee a status of public limited company as 100% of its assets were owned by the Government of Pakistan--­Validity---Order of Appellate Tribunal suffered from no error, rectifiable under S.156 of the Income Tax Ordinance, 1979---Application filed being without merits and unsustainable in law, was rejected by the Appellate Tribunal.

Concise Oxford Dictionary; Black's. Law Dictionary and

Chamber's Encyclopaedic English Dictionary ref., 1996 PTD 100; 1991 PTD 758 and PLD 1991. SC 630 distinguished.

1993 PTD (Trib) 964 and 1998 SCMR 908 rel.

Khalid Majeed, FCA/AR for Applicant

Abdul Jaleel, DR for Respondent.

Date of hearing: 25th June, 2003.

2004 P T D (Trib.) 456

[Income-tax Appellate Tribunal Pakistan]

Before Inam Ellahi Sheikh, Chairmain and Munsif Khan Minhas, Judicial Member

I.T.As. Nos. 465-IB, 464-IB, 370-IB and 371-IB of 2003, decided on 6th August, 2003.

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

----S.65, 59-A & 63---General Clauses Act (X of 1897), S.24-A---CBR Circular No. 11 of 1986, dated 12-5-1986---CBR Circular No. 17 of 1988, dated 22-2-1988---Educational institution---Additional assessment--­Definite information---Escape assessment---Under assessment--­Assessments stood completed under S.59-A of the Income Tax Ordinance, 1979---Anonymous, complaint---Reopening of assessment--­Validity---Complaint did not embody any factum relating to expenses--­Law had not required from assessee to show the gross receipts or fee structure and allowing assessee to file a prescribed single page return showing income---Test of definite information meant that a material which causes a reasonable belief -of said evidence which might lead to a definite conclusion of escape or under-assessment---If information relating to number of students and fee was taken as true, even then the aspect of the expenses was missing in such anonymous complaint which could not be treated as "definite information" to reopen the finalized assessment---Anonymous complaint even if given weight qua substance/ material embodied in it, it could not be treated as exact and "definite information" ---Evidence for reopening of case under S.65 of the Income Tax Ordinance, 1979 must be self-contained in its information---In anonymous complaint evidence qua the expenses was not self-contained rather it had been assessed and differed by the First Appellate Authority---When there could be two independent opinions about a fact, it could not be termed as "definite information" ---By finalizing original assessment neither books of accounts were produced nor any enquiry was conducted for which a substance of fact could be brought on record, which subsequently proved to be false---Case had been reopened without definite information---Department could not say that income was -understated if it lacked the knowledge of expenses incurred specifically, when the case came out from the ambit of "definite information" ----Assessments made under Ss.63/65 of the Income Tax Ordinance, 1979 were annulled " and original assessments were restored by the Appellate Tribunal.

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

----S.65----Additional assessment--Jurisdiction---Change of status into a private limited company---Reopening of assessments by the Assessing Officer not holding jurisdiction over the company --- V.alidity--41f the Department had come to the knowledge of the change of status the proper course would had been adopted for initiating the action under S.65 of the Income Tax Ordinance, 1979 by the concerned authority--­Order passed, held, was without jurisdiction.

Naushad Ali Khan, D.R. (in I.T.As. Nos.465-IB and 466-IB of 2003).

Waseem Ahmed Siddiqui, F.C.A. (in I.T.As. Nos.465-IB and 466-IB of 2003).

Waseem Ahmed Siddiqui, F.C.A. (in I.T.As: Nos.370-113 and 371-IB of 2003).

Naushad Ali Khan, D.R. (in I.T.As. Nos.370-IB-and 371-IB of 2003).

Date of hearing: 6th August, 2003.

2004 P T D (Trib.) 463

[Income-tax Appellate Tribunal Pakistan]

Before Javed Masood Tahir Bhatti, Judicial Member and Agha Kafeel Barik, Accountant Member

M. A. (Stay) No. 428-KB, M. A. (A. G.) No. 429-KB, I.T.A. No.676-KB and W.T.A. No.53-KB of 2003, decided on 16th. September, 2003.

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

----Ss.65 & 13(1)(c)---Additional assessment ---Addition---Permission--­Approval---Assessment was reopened on obtaining permission from the Inspecting Additional Commissioner rather than obtaining approval--­Validity---If "permission" and not "approval" was granted, the order based upon that "permission" was not tenable in law---Due to sheer negligence and casual attitude of the departmental officers the structure of addition under S.13 of the Income Tax Ordinance, 1979 had been built on very weak foundation---Assessment order passed under Ss.62/65 of the Income Tax Ordinance, 1979 was cancelled and order of First Appellate Authority was vacated by the Appellate Tribunal.

2003 PTD (Trib.) 1238 and 1998 SCMR 2013 rel.

1993 PTD (Trib.) 1172 and 1998 PTD (Trib.) 1978 ref.

(b) Wealth Tax Act (XV of 1963)---

----Ss.17 & 16(5)---Wealth escaping assessment---Addition of suppressed value of motor vehicle ---Assessee contended that value of such motor vehicle was not liable to addition being exempt from wealth-tax, as the same was declared in agricultural wealth tax-return in exempt column--­Validity---Duplicate copy of agricultural wealth tax return was submitted by the assessee---Assessee could not produce any evidence to prove that it was filed alongwith the original wealth tax/income-tax return and it was available with the Assessing Officer when original assessment under S.16(3) of the Wealth Tax Act, 1963 was finalized--Assessee even failed to establish that such agricultural wealth tax return was on record at the time of reassessment of wealth under Ss.16(5)/17 of the Wealth Tax Act, 1963---Addition confirmed by the First Appellate Authority was upheld by the Appellate Tribunal.

Abdul Tahir Ansari, A.R. for Appellant.

Sajjad Ahmed Khan, D.R. for Respondent.

Date of hearing: 16th September, 2003.

2004 P T D (Trib.) 474

[Income-tax Appellate Tribunal Pakistan]

Before Khawaja Farooq Saeed, Judicial Member and Imtiaz Anjum, Accountant Member

Nos.264/LB, 265/LB and 266/LB of 2003, decided on 8th August 2003.

Income Tax Ordinance (XLIX of 2003)---

----Ss.133 & 190---Penalty---Application for reduction in penalty--­Jurisdiction---Reference to High Court---Question involved in the case was whether on facts and circumstances of case Income Tax Appellate Tribunal was justified to uphold order of Commissioner of Income Tax reducing penalty under S.108(b)(ii) of the Income Tax Ordinance,' 1979---Contention of the Department was that where there was no reasonable cause' for default, penalty should be calculated as per prescribed rates and that it could not be reduced by any Forum---Use of wordsreduce', modify' andremand' in Ss.129 & 132 of the Income Tax Ordinance, 1-979 could not be said to be without meanings---Power of reduction of penalty was not available with Assessing Officer specifically, but Appellate Authorities, including Commissioner of Income Tax (Appeals) or any other in the hierarchy of Income Tax Department, had full power, to reduce any tax or penalty keeping in view the circumstances of each case---Assessee was not defaulter of tax and delay in filing Return had not caused any prejudice to the Revenue--­Reference of such. question, in circumstances, being only academic was not referred to High Court.

175 ITR 317 ref.

Muhammad Asif, D.R. for Applicant

Miss Rehana Meer for Respondent.

Date of hearing: 8th August, 2003.

2004 P T D (Trib.) 476

[Income-tax Appellate Tribunal Pakistan]

Before Inam Ellahi Sheikh, Chairman and Ehsan-ur Rehman, Judicial Member

I. T. As. Nos. 3770-LB, 3771-LB and 3772-LB of 2000, decided on Lard August, 2003.

Income Tax Ordinance (XLIX of 2003)---

----Ss.53 & Second Sched., Cls. (39) & (131)---Exemption, claim for-­Assessee was Member of the Provincial Assembly and had received amount under heads; Salary; Telephone Allowance; Office Maintenance Allowance, Sumptuary Allowance; Traveling Allowance; Conveyance Allowance; Daily Allowance; Subsidy and Accommodation Allowance, but he had offered to .tax only; the salary; Telephone Allowance and Daily Allowance in Income Tax Returns and claimed exemption. in the rest of the amounts---Assessment of income of assessee for three relevant years framed at the. first round was set aside by Commissioner of Income Tax. (Appeal) and remanded case to Assessing Officer with direction to allow opportunity to assessee to. produce copies of assessment orders of other M.P.As. or any Appellate decision and that matter should be re­ appraised in the light of said evidence ---Assessee failed to comply with instructions issued by First Appellate Authority and again went to appeal and Appellate Authority rejected the contention of assessee and maintained assessment order earlier made by Assessing Officer on ground that assessee despite providing him ample opportunity to furnish required evidence with regard to his claim of exemption, had Railed to do so---Onus, in circumstances, lay upon the assessee to prove its contention with documentary' evidence, but he having failed to do so his claim regarding exemption was rightly rejected.

Muhammad Nawaz Khan, I.T.P. for Appellant.

Mrs. Sabiha Mujahid, D.R. for Respondent. .

Date of hearing: 23rd August, 2003.

2004 P T D (Trib.) 480

[Income-tax Appellate Tribunal Pakistan]

Before Ehsan-ur-Rehman, Judicial Member and Muhammad Munir Qureshi, Accountant Member

I.T.A. No.7912/LB of 1996, decided on 23rd April, 2003.

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

----Ss.129, 66-A, 62 & 59(b)---Appeal to Appellate Additional Commissioner---Jurisdiction---Order was passed under S.62 of the Income Tax Ordinance, 1979 as a result of cancellation of order passed under S.59(b) of the Income Tax Ordinance, 1979---First Appellate Authority adjudicated upon the invocation of provisions of S.66-A of the Income Tax Ordinance, 1979 and restored the original order ---Validity--­First Appellate Authority ,had no jurisdiction to take up matter pertaining to exercise of revisionary jurisdiction under S.66-A of the Income Tax Ordinance, 1979 and his action in this regard was patently illegal--­Assessee went in appeal before First Appellate Authority after order under S.62 of the Income Tax Ordinance, 1979 had been passed by the Assessing Officer consequent to cancellation of original order . under S.59(b) by the Inspecting Additional Commissioner---First Appellate Authority could only have taken up the income determined by the Assessing Officer consequent to finalization of assessment under S.62 of the Income Tax Ordinance, 1979 and First Appellate Authority could not examine the merits of the Inspecting Additional Commissioner's exercise of revisionary jurisdiction under S.66-A of the Income Tax Ordinance, 1979---Observations made in the findings recorded by the First Appellate Authority with regard to exercise of revisionary jurisdiction by the Inspecting Additional Commissioner under S.66-A were ignored by the Appellate Tribunal.

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

----Ss.134, 66-A, 62 & 59(b)---Appeal to Appellate Tribunal---Appeal against order passed under S.62 of the Income Tax Ordinance, 1979 before Appellate Tribunal---Challenge to revisionary jurisdiction of Inspecting Additional Commissioner---Validity---To contest the Inspect­ing Additional Commissioner's recourse to the provisions of S.66-A of the Income Tax Ordinance, 1979 was an attempt to contest the action under S' .66-A of the Income Tax Ordinance, 1979 without filing formal appeal against the revision made by the Inspecting Additional Commissioner ---Assessee could not argue and cite case-law against the order passed, under S.66-A of the Income Tax Ordinance, 1979 at this stage as no appeal had been filed by the assessee against such order---Appellate Tribunal ignored the arguments made and case-law cited by the assessee against the order under S-66-A of the Income Tax Ordinance, 1979 against which no appeal had been filed.

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

----Ss.62 & 66-A---Assessment---Finding/observation of Inspecting Additional Commissioner---Complaisance of---Assessing Officer was not bound under all circumstances to pass an order of assessment strictly in line with the Inspecting Additional Commissioner's findings/observations recorded in his revisionary order---If `proof positive' had, been placed before Assessing Officer, the Assessing Officer could have accepted the assessee's contention, notwithstanding the Inspecting Additional Commissioner's revision.

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

----S.62---Assessment on production of accounts, evidence etc.---Order under S.62 of the Income Tax Ordinance, 1979 though a sequel- to the Inspecting Additional Commissioner's order under S.66-A of the Income Tax Ordinance, 1979 was an independent order and was appealable before First Appellate Authority---Such order was not akin to an order "to give effect" to a decision in appeal (appeal effect) where Assessing Officer had no choice but to strictly implement the finding of the Appellate Authority.

(e) Income Tax Ordinance (XXXI of 1979)---

----Ss.22 & 27---Income from business or profession---Gain---Multiple transactions of sale/purchase of property led inescapably to the conclusion that the assessee was actively engaged in the business of purchase/sale of immovable property held as stock in trade and the gains arising therefrom constituted business profits.

(f) Income Tax Ordinance (XXXI of 1979)---

----Ss.22 & 27---Income from business or profession---Gain---Length of time---Gain would constitute business profits, especially when the property is not held for any significant length of time, but is purchased/sold at relatively short intervals---When property is held as an investment' the timeframe is invariably extended but when held as businessstock in trade' the retention period is much shorter and the `stock' is frequently rotated.

(g) Income Tax Ordinance (XXXI of 1979)---

----Ss.22 & 27---Income from business or profession---Gain---Property---Stock in trade---Where immovable property is held as stock in trade' and it is the business of assessee to buy and sell such property for profit then, in such circumstances, the (immovable) property will not constitute acapital asset'.

(h) Income Tax Ordinance (XXXI of 1979)---

----Ss.22 & 27---Income from business or profession---Gain---When immovable property is held as stock in trade, the gain realized on its sale can be brought to tax as business profits under S.22 of the Income Tax Ordinance, 1979.

(i) Income Tax Ordinance (XXXI of 1979)---

----Ss.22 & 27---Income from business or profession---Gain---All gain realized on sale of immovable property is not necessarily capital gain and can be brought to tax by the Assessing Officer as revenue gain/business profits where the situation so warrants.

(j) Income Tax Ordinance (XXXI of 1979)---

----Ss. 27 & 22---Capital gain---Income from business or profession--­Developed property---Profit realized on eventual sale of (developed) property units constitute capital gain.

(k) Income Tax Ordinance (XXXI of 1979)---

----Ss.62, 66-A, 22 & 27---Assessment on production of accounts, evidence etc.---Income from business or profession---Gain---Agricultural land---Gain arising from frequent sale of agricultural land was treated as business profit by the Assessing Officer on direction of Inspecting Additional Commissioner while the assessee claimed it as capital gain not taxable under the Income Tax Ordinance, 1979---Validity---Assessee could not have held the land for agricultural purposes as not only she had no experience in this area but also facts would show that after its purchase the assessee made no efforts to actually utilize the land for agricultural purposes---Neither assessee purchased any machinery or fertilizer nor hired any labour to cultivate such land ---Assessee purchased such land with intention of selling same at an opportune moment without making any improvements thereon---Fact that the land was sold `en bloc' also went to show that assessee was not interested in any scheme for making plots for sale on such land--­Land was rightly treated as assessee's stock in trade in the circumstances and profits 'realized on its disposition .constituted business profits and not capital gain--Order of First Appellate Authority was vacated and that of. Assessing Officer was reinstated by the Appellate Tribunal. 1990 PTD 155; 1992 PTD 1; 1984 MLD 262; 1989 PTD 460; 1975 PTD.(Trib.) 6 and 2001 PTD 1222 distinguished.

Abdul Rasheed and Bashir Ahmad Shad, D.Rs. for Appellant Muhammad Iqbal Kh. for Respondent.

Dates of hearing: 6th November, 2002 and 19th Apri1, 2003.

2004 P T D (Trib.) 491

[Income-tax Appellate Tribunal Pakistan]

Before Khalid Waheed Ahmed, Judicial Member and Imtiaz Anjum, Accountant Member

I.T.As. Nos.4713/LB, 4714/LB, 4715/LB, 4716/LB and 4717/LB of 2002, decided on 28th March, 2003.

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

----Ss. 116, 63 & 138-E(4)---Imposition of penalty after notice of hearing, etc. ---Penalties could not be imposed in consequence of penalty proceedings initiated on the basis of assessment framed under S.63 of the Income Tax Ordinance, 1979 which stood modified by virtue of order under S.138-E(4) of the Income Tax Ordinance, 1979---Validity--­Assessment orders framed under S.63 of the Income Tax Ordinance, 1979 remained in force because those were neither vacated nor set aside by the Income Tax Settlement Commission---Only figures of property income adopted by the Assessing Officer were modified--­Assessing Officer rightly proceeded to finalize the penalty proceedings for the default, cognizance of which was taken during the course of assessment proceedings, and which remained in force for all purposes.

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

----Ss. 116, 63 & 138-E(4)---Imposition of penalty after notice of hearing, etc. ---Assessment framed under S.63 of the Income Tax Ordinance, 1979 was modified by virtue of order under 5.138-E(4) of the Income Tax Ordinance, 1979---Initiation. of penalty proceedings--­ Assessee contended that there was an agreed assessment and penalties could not be imposed in case of agreed assessment---Validity---Penalty proceedings had been initiated before any agreement was reached and those were pending at the time of order passed by the Income Tax Settlement Commission---Had there been any agreement in respect of penalty proceedings. that should have been mentioned in the Income Tax Settlement Commission's order---Since there was no direction by the Income Tax Settlement Commission with regard to penalty proceedings already initiated and pending at the time of the order passed under S.138-E(4) of the Income Tax Ordinance, 1979, it could not be presumed that those had been dropped in consequence of settlement of her of the Income Tax Settlement Commission.

1992 PTD 155; 2001 PTD 1206 and 2001 PTD 2416

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

----Ss.116 & 111---Imposition of penalty after notice of hearing, etc.--Limitation---Since penalty orders were not passed within two years from. the date of service of notices issued under S. I 16 of the Income Tax Ordinance, 1979, same had become barred by limitation of time--­ Validity---Assessing Officer was directed to drop the penalty proceedings in case the show-cause notices issued under 5.116 of the Income Tax Ordinance, 1979 were served upon the assessee on 30-6-1999--­However, if the notices were served after 30-6-1999, the penalty order passed under Ss.116 & III of the Income Tax Ordinance, 1979 shall, remain in force.

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

----Ss.27(2)(a) & 62---Capital gain--Receipt under an agreement for non-competition in business ---Chargeability to tax ---Assessee claimed it as capital receipt ---Validity---Assessee received such amount under an agreement as fee under non-competition agreement ---Assessee himself was not doing such business---Investment made in companies doing such business in which assessee was a Director had separately been sold and assessee had received his share as per his capital investment which amount was not under consideration---Assessing Officer rightly charged the amount of tax ---Assessee's case was not covered under S.27(2)(a) of the Income Tax Ordinance, 1979 and such receipts were not exempt from tax.

PLD 1978 Kar. 1047 = 1978 PTD 329; 1964 ITR 283; 1983 ITR 159 and PLD 1978 Kar. 1047 = 1978 PTD 328 ref.

PLD 1978 Kar. .1047 = 1978 PTD 329; (1991) 82 ITR 464 (SC); 53 ITR 283 (SC); (1959) 36 ITR 175 (SC); (1971) 82 ITR 804 and 1992 SCMR 250 distinguished.

2002 PTD (Trib.) 257 and 2002 PTD (Trib.) 983 rel.

(e) Income Tax Ordinance (XXXI of 1979)---

----Ss.65, 27(2)(a), & 63---Additional assessment---Change of opinion--­Concealment of income---Re-opening of assessment ---Assessee contended that re-opening under S.65 of the Income Tax Ordinance, 1979 was not justified being change of opinion as no concealment was made and amount received as fee for non-competition in business was shown in Recortcilu3tion Statement filed alongwith the Statement of assets and liabilities--Such information was available with the Assessment Officer at the time of framing of assessment under S.63 of the Income Tax Ordinance, 1979---Validity---Objection was not maintainable as assessee had neither offered this amount for tax nor declared the same in the return as exempt income---Perusal of Reconciliation Statement filed alongwith Statement of Assets and Liabilities did not provide the details and sources of such receipt.

1993 SCMR 96; (1951) 20 ITR 208; (1982) 137 ITR 54 and PLD 1990 SC 399 rel:

(f) Income Tax Ordinance (XXXI of 1979)-----

----S.65---Additional assessment---If the income of the assessee was chargeable to tax under the provisions of law, it could not escape from such levy simply for the reason that the said income had not been taxed in the hands of another assessee.

Shafqat M. Chohan, A.R. for Appellant. Mrs. Sameera Yasin, D.R. for Respondent.

Date of hearing: 22nd February, 2003.

2004 P T D (Trib.) 513

[Income-tax Appellate Tribunal Pakistan]

Before Khawaja Farooq Saeed, Judicial Member and Muhammad Sharif Chaudhry, Accountant Member

W.T.As. Nos. 32/LB to 34/LB of 2002, decided on 12th May, 2003.

(a) Wealth tax---

----Nature of activity---Finding of facts in income-tax assessment proceedings-- Applicability of such, findings in wealth tax assessment proceedings---If the Assessing Officer had given a finding of fact about the assessee's nature of activity during the income-tax assessment proceedings, even then it will not be applicable to wealth tax assessment proceedings-Both Income Tax Act and Wealth Tax Act were independent enactments or statutes and although both the statutes were administered by one tax machinery but both have got different temperaments and different modes of operation---Finding of fact under one statute did not bind the Tax Administering Authority to apply it to the other statute also.

2001 PTD (Trib.) 275 and 1998 PTD (Trib.) 363 rel.

(b) Wealth Tax Act (XV of 1963)---

----S.2(1)(5)(ii)---Income Tax Ordinance (XXXI of 1979), Ss. 19, 22 & 30---Assets---"Letting out" or "business of letting out"---Wealth Tax Act, 1963 in its S.2(1)(5)(ii) used the words "letting out" or "business of letting out" for making an immovable property chargeable in the hands of a company---Income from letting out of property under the Income Tax Ordinance, 1979 can be charged to tax under any of the heads of income namely; as property income under S.19, as business income' under S.22 or as income from other sources under S.30 of the Income Tax Ordinance, 1979.

(c) Wealth Tax Act (XV of 1963)---

----Ss.2(1)(5)(ii) & 3---Income Tax Ordinance (XXXI of 1979), S.22--­Assets ---Nature of activity---" Letting out" or "business of letting out"--­Assessee, a company---income from property was assessed as "business income---Subsequently, wealth tax was levied being property held by the assessee/company for the purpose of letting out ---Validity--Irrespective of assessment of income under any of the sections of Income Tax Ordinance, 1979, the letting out of immovable property would be subjected to wealth tax in the hands of assessee/company in terms of S.2(1)(5)(ii) of the Wealth Tax Act, 1963---Assessment of income as business income under S.22 of the Income Tax Ordinance, 1979 would not help the assessee-company if the nature of its activity remains letting out or business of letting out of immovable property.

(d) Wealth Tax Act (XV of 1963)---

----Ss.2(1)(5)(ii) & 3---Assets---"Lease" and "licence" ---Distinction: In case of lease the lessee is granted the exclusive right of possession of the demised premises and the right created is assignable and heritable and constitutes property while in case of licence exclusive right of possession of the demised premises is not given and there is absence of transfer of interest in the immovable property---Such is purely a permissive right and is neither assignable nor heritable.

PLD 1962 Kar. 663; PLD 1957 (W.P.) Kar. 892; PLD 1963 (W.P.) Lah. 418 and NLR 1981 Civil 379 rel.

(e) Wealth Tax Act (XV of 1963)---

----Ss. 2(1)(5)(ii) & 3---Assets---"Rent", "lease" or "licence'---­Distinction---Effect on Wealth Tax Law---Difference between rent or lease or licence is very material so far as the suits for ejectment of the tenant or licensee of property in civil law are concerned but the difference between rent of lease or licensing is immaterial and irrelevant so far as Wealth Tax Law is concerned.

(f) Wealth Tax Act (XV of 1963)---

----Ss.2(1)(5)(ii) & 3---Assets---"Letting out" or "business of letting out"---"Licence"-- Meanings---Word "letting out" has not been defined in the Wealth Tax Act, 1963---Letting out can assume the form of lease or, rent or licence---Activity of assessee/company may fall in the term `licence' and it may help the assessee in getting its licensee ejected from possession in civil suits but it certainly did not help the assessee against the charge of wealth tax---Licensing is also included in the letting out or the business of letting out.

(g) Wealth Tax Act (XV of 1963)---

----S.2(1)(5)(ii)---Income Tax Ordinance (XXXI of 1979), Ss. 19, 22 & 30---West Pakistan Urban Rent Restriction Ordinance (VI of 1959), S.2(8)---Transfer of Property Act (IV of 1882), S.105---Easements Act (V of 1882), Ss.52 & 62---Assets---"Letting out" or "business of letting out"---"Licensing"---Department found that assessee-company had let out its immovable property and its assets, therefore; was chargeable to tax in terms of S.2(1)(5)(ii) of the Wealth Tax Act, 1963---Assessee contended that Company was doing business of "licensing" and therefore was not liable to charge of wealth tax in respect of its immovable property---Validity---Activities undertaken by the assessee-company like control and management etc. were actually ancillary or subordinate to the main activity of letting out of the space in the building to the various shopkeepers and the stall holders---Fixation of period, allocation of specified space, payment of fixed minimum charges or certain percentage of sales, point to the activity of letting out of property in question--­Shopkeepers or stall holders were in 'possession of space allocated to them and so far as their business activity was concerned they had exclusive right of possession as long as they were occupying the said space---Goods were sold on prices fixed by themselves through their salesmen and were responsible for the payment of their taxes concerning their business like Income-tax etc. ---Assessee-company did not share the loss or profit of business of the said shopkeepers and stall holders and to call assessee's activity as licensing business was simply absurd in the circumstances ---Assessee-company though was not receiving the amount of fixed rent as is usual practice but it was receiving either minimum fixed charges or certain specified percentage of sale---Minimum fixed charges or licence fee or specified percentage of sales was nothing else than the compensation received for the space provided to the stall holders and shopkeepers for their use---Such was in fact rental in the form of licence fee or minimum charges or percentage of sales which was being received by the assessee-company for letting out of its property---Jargons and terms used by the assessee were a cover or smoke screen to camouflage the real nature of its activity ---Assessee was not doing any type of licensing business rather it was engaged in letting out of its immovable property---Assessing Officer had rightly treated the said property as chargeable in terms of S.2(1)(5)(ii) read with S.3 of the Wealth Tax Act, 1963---Order of First Appellate Authority was vacated and that of Assessing Officer was restored by the Appellate Tribunal.

PLD 1962 Kar. 663; PLD 1957 (W. P.) Kar. 892; PLD.1963 (W.P.) Lah. 418; NLR 1981 Civil 379 and Civil Appeal No.K-140 of 1981 rel.

2002 PTD 798; AIR 1966 SC 882; AIR 1958 Cal. 423; 2003 SCMR 50; PLD 1964 SC 106; (1996) 74 Tax 83; PLD 1962 (W.P.) Kar. 662; Black's Law Dictionary; I.T.A. No.424/LB of 1999; I.T.As. Nos., 2842 to 2845/LB of 1998 and (2002) 86 Tax 338 ref.

(h) Words and phrases---

------ Lease" and "licence"---Distinction.

(i) Words and phrases---

------ Rent", "lease" or "licence --Distinction.

Muhammad Asif, D.R. and Shahid Jamil Khan, L.A. for Appellant.

Mahmood A. Shaikh for Respondent.

Date of hearing: 26th April, 2003.

2004 P T D (Trib.) 550

[Income-tax Appellate Tribunal Pakistan]

Before Muhammad Ashfaq Balouch, Judicial Member and Muhammad Akhtar Nazar Mian, Accountant Member

I.T.As. Nos. 1884/KB of 2002, decided on 22nd September, 2003.

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

----Ss. 28, 29 & 132(l)(a)(ii)---Capital gain, computation of---Cost of acquisition and consideration for transfer---Determination of--­Enhancement in assessment without giving opportunity of hearing---Sale of Stock Exchange Card---First Appellate Authority directed the Assessing Officer to assess capital gain without deduction of cost of acquisition of Card as the same had neither been incurred/claimed by the assessee nor the Assessing. Officer showed his intention to allow the same in any of his notices issued to the assessee---Validity---Direction of First Appellate Authority were patently illegal, because cost of Stock Exchange Card was disallowed without issuing any notice to the assessee, notwithstanding that directions would tantamount to enhancement in assessment---Held, for purpose of computation of capital gain provisions of Ss. 28 & 29 of the Income Tax Ordinance, 1979 had to be followed.

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

----Ss. 29(b) & 28---Capital gains, computation of ---Cost of acquisition and consideration for transfer---Determination--Inheritance or devolution---Sale of Stock Exchange Card---First Appellate Authority directed the Assessing Officer to assess capital gain without deduction of cost of acquisition of the Card as the same had not been incurred/claimed by the assessee ---Validity---First Appellate Authority ignored the provision of S.29 of the Income Tax Ordinance, 1979, while directing the Assessing Officer to assess the capital gain on account of sale of Stock Exchange Card without any deduction of cost of acquisition--­ Order of First Appellate Authority was cancelled by the Appellate Tribunal and that of Assessing Officer was confirmed allowing the cost of acquisition of card.

Abdul Majeed for Appellant.

Mrs. Shaista Abbas, D.R. for Respondent.

Date, of hearing: 11th September, 2003.

2004 P T D (Trib.) 583

[Income-tax Appellate Tribunal Pakistan]

Before Jawaid Masood Tahir Bhatti, S. Hasan Imam, Judicial Members and Shaheen Iqbal, Accountant Member

I.T.As. Nos. 410/KB to 448/KB, 457/KB to 470/KB, 536/KB and 537/KB of 2003, decided on 30th August, 2003.

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

----First Sched., Part I, para. (A), proviso (f) & Part IV, para. 2(13)--­Rebate ---Exemption---Para. (2B) of Part, I of First Sched. of the Income tax Ordinance, 1979 exempted payment of super-tax by ,a registered firm of professionals---Exemption implied that although .the levy of super-tax in the hands of registered firm of professionals was chargeable but the same was not payable---Although super-tax may not be actually paid by the registered firm but it would be taken into account for the purposes of proviso (f) of para. A of Part I, the First Sched, of the Income Tax Ordinance, 1979---Fact that under para. (2B), Part IV of the First Sched. of the- Income Tax Ordinance, 1979 super ­tax was "payable" and not "chargeable" could be appreciated from the fact that said para. used the term "payable" and not "chargeable".

(b) Income-tax---

----"Chargeability is a component completely different from "payability" ' or "collectibility" in a taxing statute.

Kohinoor -Textile v. Federation of Pakistan 2002 PTD 121 rel.

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

----First Sched., Part IV, para. (2B)---Super-talc---Super tax in the hands of a firm of professionals was "chargeable" but not "payable" in view of para. (2B) of Part IV of the First Schcd. of the Income Tax Ordinance, 1979.

Al-Samrez v. Federation of Pakistan 1986 SCIVIR 1917 and Ittefaq Foundry v. Federation of Pakistan PLD 1990 Lah. 121 rel.

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

----First Sched., Part IV, para. (2B) & Part I, para. (A), proviso (f)--­Super tax on registered firm of professionals---Proper construction of para. (2B) of Part IV of First Schedule of income Tax Ordinance, 1979 would be that super tax although "chargeable" but the same was not "payable" in the case of registered firms of professionals.

A.V. Fernandez v. State of Kerala AIR 1957 SC 657 = (1957) 8 STC 561 (SC) and Ahmed Khan v. CTO (1986) 63 STC 104 (Cal.) rel.

(e) Income Tax Ordinance (XXXI of 1979)-----

----First Sched., Part 1, para. A, proviso (f), Part II, para. (C), Part IV, para. (2B) & S. 66-A---Benefit of proviso (f) of para. A of Part I of the First Sched. to the Income Tax Ordinance, 1979 was disallowed by the Inspecting Additional Commissioner on the ground that since under para. (2B) of Part IV of the First Sched. of the Income 7 ax Ordinance, 1979, no super-tax was paid by the registered firm being professional firm in which assessees were partner, no rebate could have been taken. by their partners and proviso (f) to para. A of Part I of First Sched. of the Income Tax Ordinance, 1979 only, applied where super-tax was actually paid by the firm---Validity---Proviso (f) of para. A of Part I of the First Sched. of the Income Tax Ordinance, 1979 had two parts---One prescribed the basic qualification for rebate and the other was the yardstick for calculation thereof ---Assessee met both the requirements as both the parts of proviso (f) made para. (c) as the criteria which was fully complied with by the assessee so as to qualify for the rebate--Proviso (f) was applicable where individuals were partners in a firm to which para. (c) applied ---Para. (c) in turn, prescribes various rates of super-tax, in the case of registered firms only---When para. (c) applied to the firms then the criteria prescribed in proviso (1) was fulfilled and assessee would be entitled to the rebate contained therein---Only qualification prescribed in proviso (f) was the applicability of para- (c), which requirement was sufficiently met by the assessee---Such fact could be appreciated from the words used in proviso (1) i.e. "where the total income includes any income from the share of the income, profits and gains of a firm to which para. (c) of Part II applies... "---Remaining portion of proviso (f) made super-tax as yardstick for calculation of the rebate, which had nothing to do with the criterion for qualifying for the rebate, since in a taxing statute the, yardstick for calculation of tax is a component different from "payability"/ "chargeability".

(f) Income Tax Ordinance '(XXXI of 1979)---

----First Sched., Part 1, para. A, proviso (f), Part II, para. (C) & Part IV, para. (2B)---Criteria for calculation of rebate of partners of registered firm of professionals- --Proviso (f) of para. A of Part I of the First Sched.' of the Income Tax Ordinance, 1979 prescribed the criteria for calculation of rebate i.e. " such portion of the super-tax payable under para. C of Part IV of the First Sched. of the Income Tax Ordinance, 1979 as bears to the total amount of such super-tax..."--­Words "payable under the said paragraph" and "such super-tax" were of absolute importance---Paragraph referred to in proviso (f) in para. (c) and not para. (2B) and for rebate under proviso (f), para. (c) and not, para. (2B) was the criteria while under para. (c) super-tax was calculable---Had the Legislature employed para. (2B) as the criteria for calculation of rebate in proviso (f), then there could have been some strength in the Department's stand since no super-tax was calculable under para. (2B) of Part IV of the First Sched. of the Income Tax Ordinance, 1979.

(g) Income Tax Ordinance (XXXI of 1979)---

----Ss.66-A, 9 & 69(4), First Sched. Part 1, para.A, proviso (fj, Part II, para. (C) & Part IV, para. (2B)---Finance Supplementary) (Amendment;. Act (IV of 1997), Preamble ---C.B.R Circular No. 13 of 1982, dated 23-­8-1982---C.B.R. Circular No.3(67)IT-172, dated 7-5-1973----Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order ---Assessee was a partner of registered firm of professionals---No super-tax was. paid by the registered firm being professional firm, under para. (2B) of Part IV of, the First Sched. of the Income Tax Ordinance, 1979-Assessee claimed benefit of rebate under proviso (f) to para. A of Part I of First Sched. of the Income Tax Ordinance, 1979 and the same was allowed by the Assessing Officer---Inspecting Additional Commissioner revised the assessment under S.66-A of the Income Tax Ordinance, 1979 on the ground that since under para. (2B) of Part IV of the First Sched. of the Income Tax Ordinance, 1979 no super-tax was paid by the registered firm being professional firm in which assessees were partner, no rebate could have been taken by their partners and proviso (f) to para. A of Part I to First Sched. of the Income Tax Ordinance, 1979 only applied where super-tax was actually paid by the firm---Validity---On plain construction of proviso (f) to para.A of Part I to First Schedule of the Income Tax Ordinance, 1979, the calculation of the rebate was to be made with reference to super tax calculable under para- (c) of Part II of the First Sched. of 'the Income Tax Ordinance, 1979, which could well be calculated---For purpose of proviso (f) to para. A of Part I to First Schedule of the Income Tax Ordinance, 1979 no reference was to be made to para. (2B), Part IV to First Sched: of the Income Tax Ordinance, 1979, as proviso (f) to para. A of Part I to First Sched. of the: Income Tax Ordinance, 1979 expressly made the super-tax payable under para. (c) of Part II of First Sched. of the Income Tax Ordinance, 1979 as the criteria, while making no mention of para. (2B) of Part IV of First Sched. of the Income Tax Ordinance, 1979---Criteria under proviso (f) to para. A of Part I to First Sched. of the Income tax Ordinance, 1979 was not actual payment of super-tax but an amount which would be payable under para. (c). of Part II to First Sched. of the Income Tax Ordinance, 1979---Super-tax was payable under pare. _ (c) of Part II to First Sched. of the Income Tax Ordinance, 1979 but the same was exempt due to operation of para. (2B) of Part IV of First Sched. of the Income Tax Ordinance, 1979--­Orders under S:66-A of the Income Tax Ordinance, 1979 were not sustainable being unlawful and without jurisdiction ---Assessee had correctly taken the benefit of proviso (f) to para. A of Part I to First Sched. of the Income Tax Ordinance, 1979---Orders of Inspecting. Additional Commissioner under S.66-A of the Income Tax Ordinance, 1979 were annulled and appeals were allowed by the Appellate Tribunal.

Robertson v. Day App. Cas. 62; Gibson and Howes Ltd. v. Lennon 24 CLR 140; 26 CLR 285, Bourne v. Norwich Crematorium (1967) 2 Ail ER 567; Kesavananda Bhartia v. State of Kerala AIR 1973 SC 1461; Bisvil v. Superintendent, Central Excise PLD 1988 SC 370; Khurram Industries v. CIT.2001 PTD 781; Ch. Muhammad Yousuf v. Azad Government PLD 2001 Azad J&K 60; CIT v. Naveed Ahmed Sheikh 1992 PTD 25 and Bindra's Interpretation of Statutes by Justice K. Shanmukham, 8th Edn., 1997 rel.

1983 PTD 201; PLD 1985 Pesh. 17; PLD 1988 Lah. 501; Golden Graphics v. Director of Vigilance 1993 SCMR 1635; 1994 CLC 1406; 75 Tax 70; CIT, East Karachi v. Younus Brothers 1983 PTD 389; 1984 PTD 137; Aslam Industries v. Pakistan Edible Corporation 1993 SCMR 683; Government of Pakistan v. Akhlaque Hussain PLD 1965 SC 527; Al-Samrez v. Federation of Pakistan 1986 SCMR 1917; Pakistan .Tobacco Co. Ltd. v. Pakistan Tobacco Co. Employees' Union PLD 1961 SC 403; Muhammad Wasi Saigal v. Sheikh Rasheed Ahmed 1994 CLC 1406; CIT v. Philips PLD 1968 Kar. 95; Pramatha Nath v. Kamir PLD 1965 SC 434; Messrs Mehran Associates v. CIT 1993 SCMR 274; 1997 PTD (Trib.) 902; Feroz Shah v. CIT PLD 1970 Pesh. 83; Kohinoor Textile v. Federation of Pakistan 2002 PTD 121; Ittefaq Foundry v. Federation of Pakistan PLD 1990 Lah. 121; Aijaz Akhtar v. Secretary, Punjab Public Service Commission 1990 MLD 1475; .Messrs East and West Steam Shipping Co. v. Queen Lard Insurance PLD 1963 SC 663; Muhammad Zaman v. Collector PLD 1954 Pesh. 47; LA. Sherwani v. Federation of Pakistan 1991 SCMR. 10'11; Pakistan Textile Mills Owners' Association v. Administrator of Karachi PLD 1963 SC 137; Messrs Mondi's Refreshment Rooms and Bar v. Islamic Republic of Pakistan PLD 1983 Kar. 214 and Messrs Anoud Power Generation Limited v. Federation of Pakistan PLD 2001 SC 340 ref.

(h) Income-tax—

----"Payable" was completely different from "paid".

(i) Income-tax----

----Vested right---Departmental practice, whether right or wrong, had given rise to vested right to the assessee, which could not be taken away.

Messrs Radaka Corporation v.. Collector of Customs 1989 SCMR 353 rel.

Fatehali W. Vellani and Mrs. Khushnum Munchrji and Dr. Farogh Naseem, Barrister-at-Law for Appellant.

Raja M. Irshad, Legal Advisor, C.B.R./D.A.-G. of Pakistan alongwith` Zafar Iqbal, Inayatullah Kashani, D.R., M. Sharif Awan, D.R./I.A.C., Sheikh M. Hanif (Author of the order), Abdul Salam, I.A.C. for Respondent.

Javed- Zakaria (on Court's call).

Date of hearing: 24th May, 2003.

2004 P T D (Trib.) 618

[Income-tax Appellate Tribunal Pakistan]

Before S. Hasan Imam, Judicial Member and Agha Kafeel Barik, Accountant Member

I. T. A. No. 1916/KB of 2002, decided on 13th October, 2003.

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

----S. 59-D---Tax on undisclosed income---Assessee's declaration of Tax Amnesty Scheme, 2000 under S. 59-D of the income Tax Ordinance, 1979 filed on 30-6-2000 had declared cash for the period from assessment years 1996-97 to 1999-2000---Any investment made after 30-6-1999 would not be covered by the said declaration.

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

----Ss. 65 & 13---Additional assessment ---Approval---Permission--­Where "approval" was mandatory, only "permission" by the Inspecting Additional Commissioner was not enough for addition under S.13 of the Income Tax Ordinance, 1979---Law in this respect favoured the assessee---Assessing Officer and Inspecting Additional Commissioner had, because of their inapt and careless attitude, caused loss to the Revenue---Departmental appeal was dismissed by the Appellate Tribunal.

1998 SCMR 2013; 2003 PTD (Trib.) 1238 and I.T.A. No.676 of 2003 rel.

Faiz Ellahi Memon, D.R. for Appellant.

Abdul Tahir, ITP for Respondent.

Date of hearing: 1st October, 2003.

2004 P T D (Trib.) 627

[Income-Tax Appellate Tribunal Pakistan]

Before Muhammad Ashfaque Balouch, Judicial Member and Muhammad Akhtar Nazar Mian, Accountant Member

R. As. Nos. 705/KB and 706/KB of 2002, decided on 29th September, 2003.

Income Tax Ordinance (XXXI of 1979)---

----S. 136---Reference to High Court---Question whether Appellate Tribunal was justified in law in holding that by giving effect to order of First Appellate Authority under, S.132 of the Income Tax Ordinance, 1979, the departmental appeals before the Appellate. Tribunal had become infructuous and thus liable to be dismissed, was referred to the High Court by the Appellate Tribunal being question of law.

Wishno Raja Qavi, D.R. for Appellant.

Nemo for Respondent.

Date of hearing: 9th August, 2003.

2004 P T D (Trib.) 687

[Income‑tax Appellate Tribunal Pakistan]

Before Muhammad Tauqir Afzal Malik, Judicial Member and Javed Tahir Butt, Accountant Member

I.T.A. No.274/LB of 2003, decided on 8th October, 2003.

Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑S. 132‑‑‑Decision in appeal‑‑‑Cancellation of assessment by the First Appellate Authority in spite of observation that books of accounts were maintained by the assessee‑‑‑Validity‑‑‑First Appellate Authority on the one hand, had observed that books of accounts were maintained and on the other hand, it had cancelled the assessment‑‑‑When the Appellate Authority had observed that the books were maintained, it should have remanded the case to the Assessing Officer for its onward de novo consideration but the assessment was cancelled which was not warranted under law‑‑‑Orders of both the Authorities below were vacated by the Appellate Tribunal and case was remitted back to the Assessing Officer for its de novo consideration strictly on merits.

Tauqir Akbar, D.R. for Appellant.

Ch. Abdul Ghafoor, ITP for Respondent.

Date of hearing: 8th October, 2003.

2004 P T D (Trib.) 689

[Income‑tax Appellate Tribunal Pakistan]

Before S. Hasan Imam, Judicial Member and Shaheen Iqbal, Accountant Member

M. As. (Rect.) Nos.226/KB to 228/KB of 2003 in I.T.As. Nos.511/KB to 513/KB of 2002, decided on 28th August; 2003.

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

‑‑‑‑Ss. 135(4)(c), 135(5), 23(1) & 66‑A‑‑‑Income Tax Ordinance (XLIX of 2001), S. 221(1)‑‑‑Disposal of appeal by Appellate Tribunal‑‑­Rectification of mistake‑‑‑Setting aside of order of Inspecting Additional Commissioner by the Appellate Tribunal ‑‑‑Assessee contended that setting aside order was silent about the directions to Assessing Officer which was mistake apparent on record in view of subsections (3) & (4) of S. 135 of the Income Tax Ordinance, 1979 which provided that if the Appellate Tribunal, while disposing of appeal, is satisfied that the assessment which is subject‑matter of appeal ought to be set aside, it shall set aside the assessment, directing Assessing Officer to make such assessment and as such order setting aside the matter for fresh adjudication by the Inspecting Additional Commissioner would apparently be vitiated being illegal and would amount to exercise of jurisdiction in excess of the vested powers‑‑‑Validity‑‑‑Subsection (5) of S. 135 of the Income Tax Ordinance, 1979 was an independent provision and had nothing to do with the powers envisaged under S.135(4)(a), (b) & (c) of the Income Tax Ordinance, 1979‑‑‑Said provision of law read with S.134 of the Income Tax Ordinance, 1979 would enable Appellate Tribunal to meet the situation by ‑remanding the matter back to the Inspecting Additional Commissioner, as the provisions of subsection (5) of S. 135 of the Income Tax Ordinance, 1979 were sufficient, clear, unambiguous‑‑‑Case was remanded back to the Inspecting Additional Commissioner where the order was varied by the Appellate Tribunal.

Chamber's and Concise Oxford Dictionaries ref.

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

‑‑‑‑Ss. 66‑A, 62 & 135(4)(c)‑‑‑Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order ‑‑‑Assessment‑‑­Setting aside of‑‑‑Powers‑‑‑Order under S.66‑A of the Income Tax Ordinance, 1979 had the character of an assessment i.e. determined the income and tax liability itself wherein either the order under S.62 of the Income Tax Ordinance, 1979 was cancelled for fresh orders were to be passed or directions were to be issued to follow a particular course of action‑‑‑Judicious course would be to remand the case to the official who invoked S. 66‑A of the Income Tax Ordinance, 1979 instead of setting aside the same directing the Assessing Officer as in the case of order under S.62 of the Income Tax Ordinance, 1979.

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

‑‑‑‑S.135‑‑‑Disposal of appeal by Appellate Tribunal‑‑‑Inherent powers‑‑­Procedural lacuna/omission or irregularity could be corrected by invoking the inherent powers of the Appellate Tribunal‑‑‑Inherent powers were normally exercised where there was no express provision of law applicable to the case.

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

‑‑‑‑Ss. 135(4)(c), 135(5), 23(1) & 66‑A‑‑‑Income Tax Ordinance (XLIX of 2001), S. 221(1)‑‑‑Disposal of appeal by Appellate Tribunal‑‑­Rectification of mistake‑‑‑Setting aside of order ought to be to Assessing Officer rather than to Inspecting Additional Commissioner‑‑‑Validity‑‑­While providing appeals from the order under S.66‑A of the Income Tax Ordinance, 1979 through amendment, no change in consequence thereof, had been brought up in subsections (3) & (4) of S. 135 of the Income Tax Ordinance, 1979 providing powers for disposing of an appeal‑‑‑In order to meet the situation arising from legal technicalities, it would be judicious, legally suitable and justified to exercise inherent powers referring to subsection (5) of S. 135 of the Income Tax Ordinance, 1979 to secure the ends, of justice and to prevent abuse of process of law.

PLD 1975 Kar. 858; 19 All. 155 (PC); PLD 1978 Pesh. 19 and PLD 1977 Kar. 2000 (sic) rel.

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

‑‑‑‑S. 135‑‑‑Disposal of appeal by the Appellate Tribunal ‑‑‑Jurisdiction‑‑­Where the manner of doing something is not prescribed, the Appellate Tribunal is at liberty to infer that the statute by implication empowers that detail to be carried out, and where law confers jurisdiction, it impliedly also grant power of doing all such acts or employing such means as are necessary for just adjudication.

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

‑‑‑‑S. 135(4)(c)‑‑‑Disposal of appeal by Appellate Tribunal‑‑‑Setting aside remand‑‑‑Bar to remand the matter to Inspecting Additional Commissioner‑‑‑Validity‑‑‑Inherent powers were possessed by the Court or Appellate Tribunal by virtue of its duty to do justice between the parties before it‑‑‑Where Appellate Tribunal was satisfied that an order which was the subject‑matter of appeal, ought to be varied, then there will be no bar to remand the matter to Inspecting Additional Commissioner and to issue consequential direction to Inspecting Additional Commissioner as the case may require, in order to enable him to pass a fresh order‑‑‑Where the matter was being set aside by the Inspecting Additional Commissioner, there would be no other judicious course except to direct the Assessing Officer to conclude the assessment afresh vide S. 135(4)(c) of the Income Tax Ordinance, 1979.

PLD 1975 Kar 858; 19 All. 155 (PC); PLD 1978 Pesh. 19 and PLJ 1977 Kar. 2000 (sic) rel.

Rehan Hasan Naqvi for Appellant:

Shaikh M. Hanif, D.R. for Respondent.

Date of hearing: 15th August, 2003.

2004 P T D (Trib.) 708

[Income‑tax Appellate Tribunal Pakistan]

Before Khawaja Farooq Saeed, Judicial Member and Imtiaz Anjum, Accountant Member

M. As. Nos.528/LB to 531/LB of 2003, decided on 23rd September, 2003.

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

‑‑‑‑S. 56, proviso‑‑‑Finance Ordinance (XXV of 2001)‑‑‑Notice for furnishing return of total income‑‑‑Proviso to S.56 of the Ordinance has come as a remedy for the taxpayers and such limitation is an embargo on the Assessing Officer which has provided solace to the long hanging disadvantage to the assessee‑‑‑Such act has come as a remedy and has cured a fault‑‑‑Such amendments in law are known as curative and remedial legislation‑‑‑All the provisions that come to cure a mistake have always been considered as retrospective in operation.

1993 SCMR 73 and 1999 PTD (Trib.) 8 rel.

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

‑‑‑‑S. 56, proviso‑‑‑Finance Ordinance (XXV of 2001), Preamble‑‑­Notice for furnishing return of total income‑‑‑Proviso to S.56, Income Tax Ordinance, 1979 is retrospective in action‑‑‑Application in pending proceedings in appeal‑‑Said amendment being retrospective was applicable on all pending proceedings at any stage of the appeal.

Javed Aziz, D.R. for Applicant.

Nemo for Respondent.

Date of hearing: 16th September, 2003.

2004 P T D (Trib.) 724

[Income‑tax Appellate Tribunal Pakistan]

Before Khawaja Farooq Saeed, Judicial Member and Raja Sikandar Khan, Accountant Member

W . T. A. No.2081 /LB` of 2001, decided on 12th December, 2003

Wealth Tax Act (XV of 1963)‑‑‑

‑‑‑‑.Second Sched., Part 1, Cl. (7(ii))‑‑‑Exemption‑‑‑Assets were created from foreign remittance‑‑‑Claim of exemption by the legal heirs on the death of the owner of such assets‑‑‑Validity‑‑‑Exemption was not an inherent right and law very clearly provides for exemption to the person who himself had "created:" the asset from foreign remittance‑‑­Exemption cl. 7(ii) of Part‑I of the Second Sched. of the Wealth Tax Act, 1963 had laid emphasis on the word "created" and assessee had not created the asset but inherited tire same ‑‑‑Property was not exempt in circumstances.

Muhammad Asif, D.R., for Appellant.

Ahmed Nauman Shaikh, ITP for Respondent.

Date of hearing: 10th December; 2003.

2004 P T D (Trib.) 726

[Income‑tax Appellate Tribunal Pakistan]

Before Muhammad Ashfaq Balouch, Judicial Member and Agha Kafeel Barik, Accountant Member

I.T.A. No.675/KB of 2003, decided on 5th December, 2003.

Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑Ss. 13(1)(d), 65 & 80‑C‑‑‑Addition‑‑‑Additional assessment‑‑­Estimation of value of vehicles‑‑‑Purchase of vehicles from Bank in Prime Minister Taxi Scheme on instalments and auction from Customs Department‑‑‑Addition by estimating higher value than the price paid for such vehicles‑‑‑Validity‑‑‑Assessing Officer had riot given any base for proper valuation of both the vehicles‑‑‑Both the vehicles were purchased from the Government‑governed institution and documents were produced before the Assessing Officer who after verifying the evidence completed the assessment‑‑‑No new information was brought on record or received by the Taxing Authority to reopen the case‑‑‑When all the facts and evidence was available on` record, action of reopening the assessment under S.65 of the Income Tax Ordinance, 1979 was not proper specifically when the Inspecting Additional Commissioner had accorded permission only .but had not given approval‑‑‑Addition made under S.13(a)(d) of the Income Tax Ordinance, 1979 was not tenable in the eye of law‑‑‑Appeal of assessee was allowed and both the orders of the officers below were cancelled by the Appellate Tribunal‑‑‑Addition made under S. 13(1)(d) of the Income Tax Ordinance, 1979 was deleted.

2000 PTD (Trib.) 2193; 2002 PTD (Trib.) 337; 1997 PTD (Trib.) 1143 and 2003 PTD (Trib.) 1978 ref.

I. T. A. No. 1961/KB of 2001 rel.

Abdul Tahir Ansari, I.T.P. for Appellant.

Ghulam Shabir Memon, D.R. for Respondent.

Date of hearing: 2nd December, 2003.

2004 P T D (Trib.) 730

[Income‑tax Appellate Tribunal Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member and Agha Kafeel Barik, Accountant Member

M. As. (Rect.) Nos.401/KB to 404/KB of 2003, decided on 29th October, 2003.

(a) Wealth Tax Act (XV of 1963)‑‑‑

‑‑‑‑S. 35‑‑‑Income Tax Ordinance (XXXI of 1979), S. 156(1)‑‑‑Income Tax Ordinance (XLIX of 2001), S.221‑‑‑Rectification of mistake‑‑­Miscellaneous application for rectification by the Department ‑‑‑Assessee contended that under the provisions of S.35 of the Wealth Tax Act, 1963, the rectification of mistake could be made suo motu by the Authority passing the order or on the motion of the assessee bringing to the notice of the Authority passing the order and the Department had no legal right in this regard‑‑‑Validity‑‑‑Under S.35 of the Wealth Tax Act, 1963, the mistake could be rectified suo motu on his own motion by the Authority passing, the order or the assessee might bring to the notice of the Authority passing the order ‑‑‑Assessee or the Department, in the income‑tax matter under the Income Tax Ordinance, ,1979 as well as under the Income Tax Ordinance, 2001 the both were authorized to bring to the notice of the Tribunal for the rectification of mistake‑‑­Applications moved under S.35 of the Wealth Tax Act, 1963 by the Department were not maintainable.

(b) Wealth Tax Act (XV of 1963)‑‑‑

‑‑‑‑S. 35‑‑‑Rectification of mistake‑‑‑Evidence in grounds of rectification‑‑Appellate Tribunal had dealt with the issue of jurisdiction in appeals filed by the Department as well as in the decision by the First Appellate Authority and on behalf of the Department ‑notification regarding jurisdiction had never been referred‑‑‑No justification was available to accept the evidence in this regard at belated stage in the grounds of rectification.

(c) Wealth Tax Act (XV of 1963)‑‑‑

‑‑‑‑S. 35‑‑‑Rectification of mistake‑‑‑Legal issue‑‑‑Evidence‑‑‑Legal issue may be raised at any stage of continuity of the proceeding up to the Supreme Court but the evidence in this regard had to be the subject­matter at the initial stage.

Ghulam Shabbir Memon, D.R. for Applicant.

Athar Saeed for Respondent.

Date of hearing: 29th October, 2003.

2004 P T D (Trib.) 745

[Income‑tax Appellate Tribunal Pakistan]

Before Khawaja Farooq Saeed, Judicial Member and Imtiaz Anjum, Accountant Member

M.A. No.591/LB of 2000, decided on 23rd October, 2003.

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

‑‑‑‑S. 156 & Second Sched., Cl. (126‑D)‑‑‑Protection of Economic Reforms Act (XII of 1992), preamble‑‑‑Rectification of mistake‑‑‑While determining the issues, Appellate Tribunal by mistake considered that Cl; (126‑D) of the Second Sched. of the Income Tax Ordinance, 1979 under which the assessee was claiming exemption, did form part of the Sched. of the Protection of Economic Reforms Act,. 1992‑‑‑Such mistake was rectifiable under S.156 of the Income Tax Ordinance, 1979.

1997 PTD (Trib.) 879 rel.

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

‑‑‑‑S. 156‑‑‑Rectification of mistake‑‑Mistake in determining the‑ facts was apparent from the record‑‑‑Appellate Tribunal recalled its‑order for reconsideration of the issue on the basis of facts‑‑‑Ignorance of binding judgments amounted to "definite information" and was a mistake apparent from record which could be rectified.

2001 PTD 303 and 2001 PTD (Trib.) 865 ref.

1998 PTD (Trib.) 2896; 1992 PTD 570; 1997 PTD Note 123 at p.201 and 1997 PTD Note 62 at p:106 rel.

Abdul Rasheed Ch., D.R. for Appellant.

Shahbaz Butt for Respondent.

Date of hearing: 16th October, 2003.

2004 P T D (Trib.) 752

[Income‑tax Appellate Tribunal Pakistan]

Before Khawaja Farooq Saeed, Judicial Member and Imtiaz Anjum, Accountant Member

I.T.A. No. 138/LB of 2001, decided on 3rd September, 2003.

(a) Words and phrases‑‑‑

‑‑‑‑"Order"‑‑‑Definition‑‑‑Order has been defined to be as decree, a judgment, a decision, mandate, a command or direction and is something different from request or a motion and is an authoritative document, which can be used, as and when required.

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

‑‑‑‑Ss. 66‑A & 59(1)‑‑‑Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order‑‑‑Self‑assessment‑‑‑Assessment year 1999‑2000‑‑‑ Acknowledgement slip was not an order but a deemed order and could not be cancelled under S.66‑A of the Income Tax Ordinance, 1979‑‑‑Validity‑‑‑Acknowledgement slip when filed comprises of two papers and it bears in unequivocal terms the language, which declares it to be an assessment order‑‑‑Legislature had not only declared the acknowledgement as an order but a formally prescribed language for the same‑‑‑ Prescribed words of such acknowledgement slip/ return include name, address, NTN, NIC number, declared income-tax paid and receipt of payment of tax from Bank etc. as an integral part‑‑‑Such was normally mentioned in an assessment order dictated by an Assessing Officer‑‑‑No reason existed, to say that such acknowledgement slip/return was not a complete order‑‑‑Order passed in the present case, had been passed where no detailed application of mind was required‑‑‑Assessing Officer's only job was to determine that the requirements of the Self‑Assessment Scheme were completed‑‑‑Cancellation of such order was fully justified.

2002 PTD (Trib.) 710 and 2002 PTD (Trib.) 580 distinguished.

1998 PTD (Trib.) 3718 rel.

(c) Income-tax‑‑‑

‑‑‑‑Per incurium judgment‑‑‑Deviation from earlier findings without reference to the same also makes a judgment per incurium.

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

‑‑‑‑Ss. 66‑A & 59(1)‑‑‑Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order‑‑‑ Self‑assessment‑‑‑ Assessment year 1999‑2000‑‑‑ Acknowledgement slip /return was neither an. "order" nor being on record of the department, could not be cancelled under S. 66‑A of the Income Tax Ordinance, 1979‑‑‑Validity‑‑‑Return form was in triplicate, the first copy of which was kept by the Bank' and the duplicate one was returned to the taxpayer after due seal and signatures of the Income Tax Authority while the third copy which was also duly filled in and stamped by the Bank was retained' in the assessment record which also bore the same language as was used in the other copies‑‑­Same was subsequently entered in demand and Collection Register and all other departmental formalities were completed except dictating an order by the designated departmental officer, which requirement had completed in the prescribed pro forma by the Legislature‑‑‑Second 'part of the said return deal with total income and payment of tax etc. and words used were "Total income and tax assessed", which meant that pro forma had been prescribed ultimately to make the same more as an order than an income tax return‑‑‑No concept of a deemed order existed anywhere‑‑‑ Legislature had declared a properly prescribed piece of paper as an order, which had to be treated as such‑‑‑Cancellation of order was fully justified in circumstances.

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

‑‑‑‑Ss. 59(1), 65 & 66‑A‑‑‑Self‑assessment‑‑‑Assessment order---Cancellation‑‑‑When the Legislature had declared some document to be an assessment order the same could be cancelled under S.65 of the Income Tax Ordinance, 1979 but when it was not held to be an order it could not have been cancelled.

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

‑‑‑‑S. 66‑A‑‑‑Powers of inspecting Additional. Commissioner to revise Deputy Commissioner's order‑‑‑Term "erroneous"‑‑‑Connotation‑‑‑Bad quality of assessment could not be covered with the definition of term "erroneous".

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

‑‑‑‑Ss. 66‑A & 59(1)‑‑‑Powers of Inspecting Additional Commissioner to revise, Deputy Commissioner's order‑‑Self‑assessment‑‑‑Prejudice caused to the interest of. Revenue‑‑‑Deviation from the requirements of Self‑Assessment Scheme‑‑‑Cancellation of‑‑‑Validity‑‑‑Income accepted and order passed under Self‑Assessment Scheme in deviation to the requirements prescribed therein, causes prejudice to the interest of Revenue being, without jurisdiction‑‑‑Erroneousness and prejudice to the interest of Revenue fully existing, cancellation was justified in circumstances.

Muhammad Iqbal Hashmi and Qadeer Ahmed, ITP for appellant.

Muhammad Akram Tahir, D.R. for Respondent.

Date of hearing: 3rd September, 2003.

2004 P T D (Trib.) 762

[Income‑tax Appellate Tribunal Pakistan]

Before Khawaja Farooq Saeed, Judicial Member and Imtiaz Anjum, Accountant Member

LT.As. Nos. 1920/LB,1934/LB, 1913/LB, 2183/LB to 2191/LB of 2001, decided on 30th October, 2003.

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

‑‑‑‑S. 16‑‑‑Salary‑‑‑Golden Hand Shake Scheme‑‑‑Approved funds Surrender of service‑‑‑Figures which were not compensation in lieu of surrender of service and were in fact deposits of the assessee in various approved funds required a separate treatment.

2003 PTD (Trib.) 909 rel.

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

‑‑‑‑‑S. 16‑‑‑C.B.R. Circular No.15 of 1997, dated 6‑11‑1997‑‑‑Salary‑‑­Golden ' Hand Shake Scheme‑‑‑Termination of service‑‑‑Leave encashment‑‑‑Treatment‑‑‑While calculating leave encashment the amount could not be presumed. to have covered as various allowances in terms of house rent allowance, conveyance allowance etc ' ‑‑‑Leave encashment was entirely a separate payment which was compensation against leave not availed by the assessee during the service he had done‑‑‑Leave encashment was a separate compensation which had got nothing to do with the termination of the service.

Writ Petition No. 14026 of 2000 and 2002 PTD 562 ref.

2003 PTD (Trib:) 909 rel.

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

‑‑‑‑S. 16‑‑‑Salary‑‑‑Leave encashment‑‑‑Allowances‑‑‑Concept of allowance etc. etc. would not exist in case of leave encashment‑‑‑Such amount shall either be treated as chargeable to tax or not chargeable to tax as a whole.

Muhammad Asif, D.R. for Appellant (in I.T.A. No.1920/LB, 1934/LB, 1913/LB, and 2183 to 2191/LB of 2001).

Abdul Qaddus Mughal for Respondent (in I. T. A. No. 1920/LB of 2001).

Ch. Mubarik Ali, F.C.A. . for Respondent (in I.T.As. Nos. 1934/LB and 1913/LB of 2001)

Muhammad Arif (Assesse) in person (in I.T.A. No.2190/LB of 2001).

Date of hearing: 30th October, 2003.

2004 P T D (Trib.) 769

[Income‑tax Appellate Tribunal Pakistan]

Before S. Hasan Imam, Judicial Member and Shaheen Iqbal, Accountant Member

I.T.As. Nos.1331/KB,1332/KB and 1820/KB of 2002, decided on 30th August, 2003.

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

‑‑‑‑S. 5‑‑‑Jurisdiction‑‑‑Scope‑‑‑Court or Tribunal is always clothed with certain jurisdiction, which is defined as power of Court to hear and determine a cause to adjudicate or exercise power in relation to it which includes power to hear and determine issues of law and fact in accordance with settled provision of law‑‑‑Once the Court or Tribunal has jurisdiction, it possesses inherent power to decide the question of their own jurisdiction and its adjudication, right or wrong, is binding upon the parties and the remedy against incorrect or wrong decision is provided by way of appeal, revision and review and in case remedies are not exhausted, the order, even if erroneous, will attain finality, and shall be binding upon the parties‑‑‑If the term `jurisdiction' refers to be legal authority to administer justice in accordance with the means provided by law subject to the limitation imposed by law and subject to certain terms, such terms must be complied with in its real spirit while recording order and in case mandatory conditions for the rightful exercise of jurisdiction are not fulfilled, the order would riot be treated as void but voidable and in such circumstances, the proceedings cannot be termed as illegal and without jurisdiction‑‑‑Absence to inherent jurisdiction, is distinct from exercise of jurisdiction ignoring law of procedure, the former would render the judgment a nullity and the latter would be an irregularity and if not objected to in time would be accepted as a legal order.

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

‑‑‑‑S. 5(1)(cc), third proviso & Chaps. IV, VII & IX‑‑‑Income Tax Rules, 19824 Part IIIA, Rr. 35C, 35D, 35E(2) & 35F(1), (2), (3), (4), (5)‑‑‑Jurisdiction of Income‑tax Authorities‑‑‑Existence of jurisdiction‑‑­Exercise of jurisdiction‑‑‑Income Tax Panel‑‑‑Proceedings were carried out by the Assessing Officer in his individual capacity‑‑‑Assessment was finalized by the income‑tax panel‑‑‑First Appellate Authority set aside the assessment order‑‑‑Assessee contended that First Appellate Authority was not justified to set aside the assessment after holding that assessment proceedings and the order subsequently passed had become illegal and void in view of third proviso to S.5(l)(cc) of the Income Tax‑Ordinance, 1979‑‑‑Because of jurisdictional defects, there was no other course except to cancel the assessment order instead of providing opportunity to panel to fill in lacunas and to remove fatal jurisdictional defects‑‑­Validity‑‑‑Jurisdiction was vested with the .panel but panel had improperly exercised its jurisdiction and while making distinction between the existence of jurisdiction and the exercise of jurisdiction in an irregular manner, the laws shall not permit to declare the proceedings to be impugned at the behest of the person who invoked it in an irregular manner‑‑‑Once an authority had jurisdiction, an irregularity in the exercise of it will not vitiate the decision‑‑‑Such was a procedural lacuna which was curable by all means ‑‑‑Assessee's appeal was dismissed with the observation that there was gross negligence on the part of the Chairman and Members of the panel being senior officials of the Income Tax Department, their act required attention of the superiors.

1998 PTD (Trib.) 1878; 2001 PTD (Trib.) 1059; 1990 PTD 62; 1971. SCMR 681; 1990 PTD 889; 1990 PTD 389; 2001 SCMR 838 and 1996 PTD (Trib.) 18 ref.

PLD 1979 SC (AJ&K) 109 rel.

(c) Income‑tax ‑‑‑

‑‑‑‑Setting aside of an order‑‑‑Jurisdiction‑‑‑Principles‑‑‑Term void' is distinguishable with voidable ‑‑‑Order which is void is nullity i.e. an order made by the Court possessingno jurisdiction, whereas a voidable order is an order made by an authority which possesses jurisdiction but passed the order in illegal or irregular manner, such order could be set aside on sufficient cause being shown‑‑‑Deviation from the procedure or causing procedural lapse is mere irregularity in exercise of jurisdiction which may be rectified or corrected by affording another opportunity of hearing to the parties.

Messrs Hashwani Hotels Ltd.'s case I.T.A. No.1791/KB of 2001 rel

(d) Income‑tax‑‑‑

‑‑‑‑Proceedings‑‑‑Void ab initio‑‑Effect‑‑‑Limitation‑‑‑Where the proceedings are found to be void ab initio, an Appellate Authority cannot set aside the same for a fresh round if in the meanwhile the prescribed limitation for the action, had expired.

1996 PTD 18 rel.

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

‑‑‑‑S. 5(l)(cc), third proviso‑‑‑Jurisdiction of Income Tax Authorities‑‑­Income Tax Panel‑‑‑Proceedings were carried out by the Assessing Officer in his individual capacity‑‑‑Assessment was finalized by the Income Tax Panel;.‑‑Procedural‑ irregularities‑‑‑Limitation bar‑‑­Validity‑‑‑No limitation bar existed as the order had been finally passed by the panel although notable procedural irregularities had been committed during the proceedings.

(f) Income‑tax‑‑‑

‑‑‑‑Appeal‑‑‑Limitation‑‑‑ Assessment‑‑‑ Reassessment‑‑‑ Principles‑‑­Appeals are continuation of assessment and reassessment, as assessment includes reassessment and additional assessment and if any appeal is preferred from the assessment order, the limitation shall not run against the Department to reassess the matter in follow up of the appellate order‑‑‑De novo fresh assessment would not be barred by law of limitation.

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

‑‑‑‑S. 23‑‑‑Deductions‑‑‑Food and beverage cost‑‑‑Addition in cost of sales was made by reducing the cost of food and beverage to 35% of revenue‑‑‑Setting aside of addition by First Appellate Authority‑‑­Validity‑‑‑First Appellate Authority was‑justified to set aside the issue instead of deleting the addition and cancelling the assessment with direction to ‑re‑assess the' matter keeping in view the history of assessee‑‑‑Setting aside order was confirmed by the First Appellate Authority.

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

‑‑‑‑Ss. 24(c) & 50(7B)‑‑‑Deductions not admissible‑‑‑Rent, rates and taxes‑‑‑Claim was disallowed on account of assessee's failure to furnish complete details and evidence of tax deduction under S.50(7B) of the Income Tax Ordinance, 1979‑‑‑Order was set aside by the First Appellate Authority on the ground that order was silent in respect of instances where deduction under S. 50(7B) of the Income Tax Ordinance, 1979 was attracted and was not made, was confirmed by the Appellate Tribunal.

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

‑‑‑‑S. 24(i)‑‑‑C.B.R. Circular No.16 of 1990, dated 4‑12‑1990‑‑­Deductions not admissible‑‑‑Excess perquisites on account of free meal‑­Deletion of addition on account of free meal by the First Appellate Authority was confirmed by the Appellate Tribunal.

I.T.A. No.89/KB of 2002 rel.

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

‑‑‑‑S. 24(i)‑‑‑Deductions not admissible‑‑‑Legal and professional charges‑‑‑Opportunity of hearing‑‑‑Issue set aside by the First Appellate Authority on the ground that assessee had not been given opportunity of hearing was confirmed by the Appellate Tribunal.

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

‑‑‑‑S. 24(i)‑‑‑Deductions not admissible‑‑‑Addition in repairs and maintenance expenses out of capitalized amount‑‑‑Ten per cent. disallowance of on account of unverifiability‑‑‑Validity‑‑‑No case was made out that expenditures were capital in. nature‑‑‑Since 10% disallowance had been made on account of unverifiability, Appellate Tribunal maintained the order of the First Appellate Authority.

I.T.A. No.2294/KB of 1997 rel.

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

‑‑‑‑Ss. 24(c) & 50(1)‑‑‑Deductions not admissible‑‑‑Accrued expenses‑‑­Disallowances were made on the ground that expenses were accrued expenses but deduction under S.50(1) of the Income Tax Ordinance, 1979 was not deposited within the income year and secondly these were merely provisions‑‑‑First Appellate Authority maintained the. order in respect of provision for vacation pay and ex gratia provision for the reason that they were merely provision and not actual expenditure within the income year and, shall be allowable in the year of their actual payment‑‑‑Addition in respect of bonus and salary wages was deleted‑‑­'Such findings were not interfered by the Appellate Tribunal.

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

‑‑‑‑S. 19‑‑‑Income from house property‑‑‑Shop licence fee‑‑‑Shop licence fee was claimed as business income‑ Department treated the same as income from house property assessable under S.19 of the Income Tax Ordinance, 1979 and liable to deduction under S.20 of the Income Tax Ordinance, 1979 only‑‑‑Such order of Department was upheld by the First Appellate Authority and the same was confirmed by the Appellate Tribunal.

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

‑‑‑‑Third Sched., R.1‑‑‑Depreciation allowance, computation of‑‑‑Hotel building .and furniture‑‑‑Normal, initial and triple shift depreciations were claimed on building and furniture being plant of hotel was disallowed by the Assessing Officer‑‑‑First Appellate Authority found that building had been separately classified as class of assets as per table annexed to R.2 of Third Sched. of the Income Tax Ordinance, 1979 and Assessing Officer had rightly allowed 5% depreciation on building as normal depreciation admissible under R.1 of the Third Sched: of the Income Tax Ordinance, 1979‑‑‑Order of First Appellate Authority was maintained by the Appellate Tribunal.

(1995) 21 ITR 145 ref.

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

‑‑‑S. 23‑‑‑Deductions‑‑‑Exempt income‑‑‑Allocation of expenses by the Department to exempt income from WADPA Bonds, DSCs and foreign exchange administrative and selling and general expenses were deleted by the First Appellate Authority and the same was upheld by the Appellate Tribunal.

1992 PTD (Trib.) 1141 rel.

Shahid Pervaiz Jami for Appellant (in I.T.As. Nos. 1331/KB and 1332/KB of 2002).

Ali Husnain, D. R. for Respondent (in I. T. As. Nos. 1331/KB and 1332/KB of 2002)

Ali Husnain, D.R. for Appellant (in I.T.A. No.1820/KB of 2002).

Shahid Pervaiz Jami for Respondent (in I.T.A. No.1820/KB of

Date of hearing: 7th August; 2003.

2004 P T D (Trib.) 826

[Income‑tax Appellate Tribunal Pakistan]

Before Rasheed Ahmad Sheikh, Judicial Member and Amjad Ali Ranjha, Accountant Member

I.T.As. Nos. 3353/LB to 3355/LB of 1999, decided on 30th May, 2003.

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

‑‑‑‑S. 66‑A‑‑‑Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order‑‑‑Limitation‑‑‑Limitation for invocation of S.66‑A of the Income Tax Ordinance, 1979 would run from the date of passing the order by the Assessing Officer and not from the date of issuance of show‑cause notice by the Inspecting Additional Commissioner.

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

‑‑‑‑S. 66‑A‑‑‑Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order‑‑‑Limitation‑‑‑Inspecting Additional Commissioner found that limitation for invoking S.66‑A of the Income Tax Ordinance, 1979 would run from the date of issuance of first show­-cause notice under S.66‑A of the Income Tax Ordinance, 1979‑‑­Validity‑‑‑Assessment under S.62 of the Income Tax Ordinance, 1979 was formulated on 24‑11‑1995‑‑‑Limitation for invoking the provisions of S.66‑A of the Income Tax Ordinance, 1979 would be counted from the said date‑‑‑Order passed under S.66‑A of the Income Tax Ordinance, 1979 cancelling the assessment was made on 12‑5‑1999‑‑‑Order had been passed by the Inspecting Additional Commissioner after lapse of four years' three months and 18 days whereas that should have been made within four years from the date of passing the order under S.62 of the Income Tax Ordinance, 1979 which date fell on 24‑1‑1999 and not on 12‑5‑1999‑‑‑Action of the Inspecting Additional Commissioner under S.66‑A of the Income Tax Ordinance, 1979 was grossly hit by laches‑‑­Inspecting Additional Commissioner had jostled the assessee into a chain of litigation having no fault on his part‑‑‑Order passed under S.66‑A of the Income Tax Ordinance, 1979 was without lawful authority and the same was declared to be of no legal effect by the Appellate Tribunal.

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

‑‑‑‑S. 66‑A‑‑‑Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order‑‑‑Modification‑‑‑Directions‑‑‑Assessment was cancelled‑‑ Assessment was neither modified by the Inspecting Additional Commissioner nor direction was given to Assessing Officer to make a fresh assessment‑‑‑Validity‑‑‑Once any order or the assessment order passed by the Assessing Officer was cancelled by the Inspecting Additional Commissioner, he shall either modify the order himself or shall direct the Assessing Officer to make a fresh assessment‑‑‑Inspecting Additional Commissioner, after adhering to all the formalities cancelled the assessment order but could neither resort to modify the assessment order by himself nor he directed the Assessing Officer to make a fresh assessment‑‑‑Order of the Inspecting Additional Commissioner had been made in contravention to S.66‑A of the Income Tax Ordinance, 1979 in the circumstances‑‑‑Since the order was void, the same had no sanctions behind the law and as such was bound to be quashed/cancelled.

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

‑‑‑‑S. 66‑A‑‑‑Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order‑‑‑Gross profit rate‑‑‑Departure from history‑‑‑Cancellation of assessment‑‑‑Validity‑‑‑Departure from history of the case was not a good ground for invoking the provisions of S.66‑A of the Income Tax Ordinance, 1979 because this deficiency in no way suffered from any error of law which would render the assessment erroneous insofar as it was prejudicial to the interest of Revenue so as to empower the Inspecting Additional Commissioner to exercise the powers conferred upon him under S.66‑A of the Income Tax Ordinance, 1979.

1991 PTD (Trib.) 321 and 1997 PTD (Trib.) 831 rel.

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

‑‑‑‑S. 66‑A‑‑‑Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order‑‑‑Books of accounts/details‑‑‑Cancellation of assessment on the ground that the same was made by the Assessing Officer without obtaining any details or books of accounts or statement of affairs‑‑‑Validity‑‑‑Observation made by the Inspecting Additional Commissioner that assessment had been made by the Assessing Officer without obtaining any details or books of accounts or statement of affairs by no stretch of imagination would fall within the condition precedent for invocation of S.66‑A of the Income Tax Ordinance, 1979‑‑‑Such act of Inspecting Additional Commissioner would amount to checking the quality of assessment order which view was deprecated by the Appellate Authorities‑‑ ‑Such observation was objective in its character and negated the very purport of the provisions of S.66‑A of the Income Tax Ordinance, 1979.

1991 PTD (Trib.) 321 and 1997 PTD (Trib.) 831 rel.

M.M. Akram for Appellant.

Nemo for Respondent.

Date of hearing: 3rd May, 2003.

2004 P T D (Trib.) 832

[Income‑tax Appellate Tribunal Pakistan]

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

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

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

‑‑‑‑Ss. 66‑A & 62/132‑‑‑Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order‑‑‑Decision in appeal‑‑­Invocation of S.66‑A of the Income Tax Ordinance, 1979 against such order‑‑‑Validity‑‑‑Original assessments were framed under S.6 of the Income Tax Ordinance, 1979‑‑‑Assessee filed appeal against such orders‑‑‑Appeals were decided by the First Appellate Authority which resulted in merger of original assessment order into appellate order‑‑­Invocation of revisional jurisdiction under S.66‑A of the Income Tax Ordinance, 1979 was null and void for the reason that original assessment order was not in existence‑‑‑Since there did not exist any assessment order framed under S.62 of the Income Tax Ordinance, 1979, the Inspecting .Additional Commissioner could not exercise powers vesting in him under S.66‑A of the Income Tax Ordinance, 1979 with regard to assessment order which had already emerged into appellate order‑‑‑Order passed by the Inspecting Additional Commissioner was vacated by the Appellate Tribunal.

1992 PTD (Trib.) 1610 and 1984 PTD 234 rel.

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

‑‑‑‑Ss.66‑A & 62/65‑‑‑Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order‑‑‑Assessment framed under S.62 of the Income Tax Ordinance, 1979 was re‑opened with the prior approval of Inspecting Additional Commissioner and same were finalized under Ss.62/65 of the Income Tax Ordinance, 1979 and appeal against such order was still pending before First Appellate Authority‑‑‑Invocation of provision of S.66‑A by the Inspecting Additional Commissioner against such order‑‑‑Validity‑‑‑Assessing Officer re‑opened the case with the approval of Inspecting Additional Commissioner and finalized the additional assessment under Ss.62/65 of the Income Tax Ordinance, 1979‑‑‑Inspecting Additional Commissioner himself was involved and had supervised the proceedings conducted under Ss.62/65 of the Income Tax Ordinance, 1979‑‑‑After completion of assessment under Ss.62/65 of the Income Tax Ordinance, 1979 the original assessment framed under S.62 of the Income Tax Ordinance, 1979 had lost its legal existence‑‑­Order passed by the Inspecting Additional Commissioner was vacated by the Appellate Tribunal in circumstances.

1992 PTD (Trib.) 1610 and 1984 PTD 234 rel.

Maqsood Ahmed, I.T.P. and Shakeel ur Rehman for Appellant.

Bashir Ahmad Shad, D.R. for Respondent.

Date of hearing: 6th May, 2003.

2004 P T D (Trib.) 838

[Income‑tax Appellate Tribunal Pakistan]

Before Rasheed Ahmad Sheikh, Judicial Member

I.T.A. No. 5077/LB of 2001, decided on 10th May, 2001.

(a) Income‑tax‑‑‑

‑‑‑‑Jurisdiction‑‑‑Order passed in excess of jurisdiction without jurisdiction‑‑ Effect‑‑‑Where any order has been passed by an authority in excess of its jurisdiction or without jurisdiction, no finality can be attached to such order and that should be ignored for all practical purposes.

(b) Income‑tax‑‑‑

‑‑‑‑Limitation‑‑‑Order without jurisdiction‑‑‑Appeal‑‑‑Limitation to file appeal against the order which has been passed without lawful jurisdiction would cease to run meaning thereby appeal against such order can be instituted at any time.

(c) Income‑tax‑‑‑

‑‑‑‑Proceedings without lawful authority‑‑‑Effect‑‑‑Superstructure built on proceedings conducted without lawful authority must fall down.

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

‑‑‑‑Ss. 59(1) & 55‑‑‑C.B.R. Circular No.21 of 2000, dated 11‑9‑2000, Para. 6(a) (Self‑Assessment Scheme)‑‑‑C.B.R. Circular No.26 of 2000, dated 14‑10‑2000‑‑‑‑Self‑assessment‑‑‑Selection through computer ballot‑‑‑Agreed assessment‑‑‑High Court subsequently declared such selection illegal being parametric selection‑‑‑Challenge of selection of case for total audit through computer balloting in appeal after completion of assessment on agreed basis‑‑‑ Validity‑‑‑Since selection of case through computer balloting had been held by the High Court to be without lawful authority, the order passed by the Assessing Officer was also without lawful jurisdiction and was nullity in the eye of law‑‑­Purported consent of the assessee did not confer jurisdiction to Assessing Officer to make an illegal assessment‑‑‑Assessing Officer had no jurisdiction to process the assessee's case under normal law and the order passed thereunder being without lawful jurisdiction was nullity in the eye of law‑‑‑ Appeal of the Department was rejected by the Appellate Tribunal.

2001 PTD 3121 ref.

Javed Sheryar, DCIT for Appellant.

Kh. Riaz Hussain for Respondent.

Date of hearing: 10th May, 2002.

2004 P T D (Trib.) 842

[Income‑tax Appellate Tribunal Pakistan]

Before Nasim Sikandar, Judicial Member and Inam Ellahi Sheikh, Accountant Member

W. T. A. No. 170/LB of 1998, decided on 8th October, 1998.

Wealth Tax Act (XV of 1963)--‑‑

‑‑‑‑S. 16‑‑‑Assessment‑‑‑No value of plot acquired by the Government was declared‑‑‑Compensation was to be paid by the Government‑‑­Addition of value of such plot in net wealth by Assessing Officer‑‑­Reduction in value by First Appellate Authority subject to action under S.35 of the Wealth Tax Act, 1963 as and when compensation was paid by the Government‑‑‑Validity‑‑‑Value of plot determined by the First Appellate Authority was still favourable to Revenue‑‑‑Assessee was no more owner of property in question and it was her right to receive compensation which should be valued‑‑‑Said right could not be more than the sum determined by the Land Acquisition Collector ‑‑‑Assessee had not received amount deposited in Tehsil Office‑‑‑Amount determined by the Collector was the only value determined till a higher valuation for the property in question was ascertained by relevant forums‑‑‑Assessee ought to have disclosed this amount as receivable instead of showing ownership of the said plot which did not belong to her any more‑‑­Approval of action by the First Appellate Authority in estimating the value of land was unjustified‑‑‑Appeal of the Department was rejected by the Appellate Tribunal.

Nemo for Appellant.

Saadat Ali Khan for Respondent.

Date of hearing: 24th July, 1998.

2004 P T D (Trib.) 844

[Income‑tax Appellate Tribunal Pakistan]

Before Khawaja Farooq Saeed, Judicial Member and Nazeer Ahmed Saleemi, Accountant Member

I.T.As. Nos. 8074/LB to 8076/LB of 1996, decided on 29th June, 1999.

Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑Ss. 65, 63, 108(b) & 111‑‑‑Additional assessment‑‑‑Grant of loan‑‑­Wealth statement‑‑‑Initiation of proceedings on the basis of wealth statement available on record at the time of original assessment‑-­Validity‑‑‑Proceedings under S. 65 of the Income Tax Ordinance, 1979 were uncalled for not only because the entries pertained to a year subsequent to the year assessed but no new facts had been brought on record to justify action under S.65 of the Income Tax Ordinance, 1979‑‑­Order passed under Ss. 65/63 of the Income Tax Ordinance, 1979 was cancelled by the Appellate Tribunal alongwith other two orders under Ss. 111 & 108(b) of the Income Tax Ordinance, 1979.

1998 PTD (Trib.) 123; 1993 PTD (Trib.) 689; 1995 PTD (Trib.) 318; ITA No. 1514/LB of 1987‑88 and Edulji Dinshaw Ltd. v. Income Tax Officer 1990 PTD 155 rel.

Siraj‑ud‑Din Khalid for Appellant.

Noor‑ul‑Amin Hotyana, D.R. for Respondent.

Date of hearing: 22nd May, 1999.

2004 P T D (Trib.) 848

[Income‑tax Appellate Tribunal Pakistan]

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

I.T.As. Nos.3372/LB of 2003 and 3682/LB of 2002, decided on 7th May, 2003.

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

‑‑‑‑S. 23‑‑‑Deductions‑‑‑Charity and donation‑‑‑Donation of biscuits to Army during war ‑‑‑Disallowances of‑‑‑Validity‑‑‑Admittedly assessee had provided biscuits to the Army during War which was duly certified by the Army Authorities‑‑‑No more charitable purpose could be than to contribute towards the well‑being of Armed Forces and that too when they were engaged in defence of the country against the enemy‑‑­Recommendation letter issued by the concerned Authorities leaves no doubt about the pious object for which the assessee made the contribution as well as the quantum of donation‑‑‑Assessing Officer was directed to allow the claim in circumstances.

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

‑‑‑‑S. 47(c) & Second Sched., Cl. 91(xxxvii)‑‑‑Allowance for donation for charitable purposes‑‑‑Exemption‑‑‑Donation of biscuits to Army during war‑‑‑Disallowance for the reason that no notification was issued by the Central Board of Revenue in that regard‑‑‑Validity‑‑‑Section 47 of the Income Tax Ordinance, 1979 provides two situations i.e. "sponsored" or "approved" by the Government‑‑‑Law makers envisaged two entirely different situations at the time of enactment‑‑‑In case of sponsorship, the Government itself has to initiate and announce the campaign to arrange relief fund but the use of word "or approved" clearly manifests that any such act may be accorded approval subsequently, though not sponsored initially by the Government i.e. in case of peculiar nature of events i.e. breaking out of sudden war‑‑‑Army Authorities granted requisite approval by issuing the letter of appreciation‑‑‑Assessee's case was fully covered by S.41, read with sub-clause (xxxvii) of Cl. (91) of the Second Schedule of the Income Tax Ordinance, 1979‑‑‑Order of First. Appellate Authority vas vacated by the Appellate Tribunal and Assessing Officer was directed to allow the claimed expenses.

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

‑‑‑‑S. 13(1)(d)‑‑‑Deemed income‑‑‑Registered sale‑deed‑‑‑Industrial property‑‑‑Addition was made by discarding the value declared according to the registered sale‑deed for the reason that, property was industrial property‑‑‑Validity‑‑‑Assessee purchased property in question through a registered sale‑deed duly authenticated by the Registration Authority‑‑­Assessing Officer did not have any evidence with him to discard, the value mentioned in the sale‑deed‑‑‑While making addition, no parallel case or any other material contrary to assessee's declared value was cited‑‑‑Value quoted by the Assessing Officer was merely figment of imagination having no basis whatsoever‑‑‑Addition deleted by the First Appellate Authority was confirmed by the Appellate Tribunal and departmental appeal was rejected.

Nemo for Appellant.

Bute Khan for Respondent.

Date of hearing: 2nd May, 2003.

2004 P T D (Trib.) 852

[Income‑tax Appellate Tribunal Pakistan]

Before Ehsan ur Rehman, Judicial Member and Muhammad Munir Qureshi, Accountant Member

W.T. As. Nos. 662/LB to 666/LB of 2001, decided on 27th June, 2003.

(a) Wealth Tax Act (XV of 1963)‑‑‑

‑‑‑‑Ss. 2(1)(5)(ii) & 16(3)‑‑‑Assets‑-‑Property held for purpose of business of construction and sale or letting out‑‑‑Commercial open plots‑‑‑Shares in such plots were assessed in the hands of individual‑‑­First Appellate Authority deleted addition and directed that said plots be appraised for wealth tax purposes collectively in the hands of Association of Persons‑‑‑Validity‑‑‑Plots and land were as bare as they were in the year of purchase i.e. 1993‑-‑Assessing Officer could not close his eyes to this hard ground reality and even if co‑owners did eventually construct a commercial building on plots they would in all likelihood be carrying on their own individual business therein‑‑‑Even if, any vacant space was sold or let out by the individual co‑owners, that too was likely to be in their individual capacity‑‑‑On the valuation date, the individual share holdings of the co‑owners, had to be assessed in their individual hands for purposes of levy of wealth tax and could not be considered for assessment purposes in, the hands of an imaginary Association of Persons that had no actual/real existence‑‑‑Property held by the assessee through her minor son was also liable to be assessed in her personal hands and was not the property of any imaginary Association of Persons‑‑‑Order of First Appellate Authority was vacated by the Appellate Tribunal and Assessing Officer would finalize assessments in case of co‑owners as their having shareholding in properties.

PLD 1975 SC 331; PLD 1974 SC 106; PLD 1965 SC 269; PLD 1973 SC 236; 1996 PTD (Trib.) 114; 1996 S6MR 470 and 1999 PTD 3817 ref.

(b) Wealth Tax Rules, 1963‑‑‑

‑‑‑‑R. 8(3), first proviso & Explanation‑‑‑Valuation of land and building‑‑‑Rule 8(3), first proviso and Explanation of Wealth Tax Rules, 1963 shall apply strictly for valuation of immovable properties held by the co‑owners‑‑‑No question would arise of separate valuation of land and superstructure and Central Board of. Revenue's Circular/Instructions issued in this regard were to be ignored.

Anwar Ali Shah, D.R. and Amjad Zubair Tawana, DCIT for Appellant.

Muhammad Ali Asghar Qazi, ITP for Respondent.

Date of hearing: 11th June, 2003.

2004 P T D (Trib.) 861

[Income‑tax Appellate Tribunal Pakistan]

Before Rasheed Ahmad Sheikh, Khawaja Farooq Saeed, Judicial Members and Muhammad Sharif Chaudhry, Accountant Member

M.As. Nos. 322/LB to 327/LB of 2002, decided on 15th April, 2003.

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

‑‑‑‑Ss. 156 & 135(2)‑‑Rectification of mistake‑‑‑Difference of opinion between two members of Appellate Tribunal‑‑‑Matter was referred to the third member‑‑‑Miscellaneous application for rectification of such order‑‑‑Validity‑‑ Miscellaneous application could only be filed if final order had been passed by the Bench and there arose a mistake, which was apparent from the record, and that mistake was being brought to its notice either by assessee or by Department‑‑‑‑Such was the only occasion upon which the provisions of S.156 of the Income Tax Ordinance, 1979 could be invoked and not otherwise‑‑‑Even S.135(2) of the Income Tax Ordinance, 1979 would not come at the assessee's rescue particularly when the final order was in pipeline‑‑‑Subsection (2) of S.135 of the Ordinance only refers to affording an opportunity of being heard to each one of the parties who were in appeal before the Appellate Tribunal and nothing else‑‑‑Assessee should have waited till the receipt of the final order by the Appellate Tribunal and if he had found that any mistake had arisen therein, only then he could file the miscellaneous application against the order in terms of S. 156 of the Income Tax Ordinance, 1979‑‑‑Miscellaneous application filed was premature and was not maintainable.

(1936) 4 ITR 157; (1972) 86 ITR 11; (1985) 155 ITR 310 and 2002 PTD 2570 ref.

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

‑‑‑‑S. 133(7)‑‑‑Appellate Tribunal‑‑‑Difference of opinion between two members‑‑‑Question proposed by dissenting members was modified by the third member‑‑‑Validity‑‑‑If there arises a difference of opinion in ­between the members, they shall state point or points on which they differ and the case shall be referred by the Chairman for hearing on such point or points by one or more of the other members of the Appellate Tribunal and such point or points shall be decided according to the opinion of the majority of the members of the Appellate Tribunal who had heard the case including those who had first heard it‑‑‑Third member was not competent to modify, the questions proposed by the dissenting members.

(1936) 4 ITR 157; (1972) 86 ITR 11; (1985) 155 ITR 310 and 2002 PTD 2570 ref.

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

‑‑‑‑S. 133(7)‑‑‑Appellate Tribunal‑‑‑Difference of opinion between two members‑‑‑Proposal of questions by dissenting members‑Jurisdiction of third member‑‑‑Restriction‑‑‑Language of proposed questions in any manner did not restrict the jurisdiction of third member ‑‑‑ Appellate Tribunal was fully competent to adjudicate upon the point or points stated by the dissenting members after having taken regard to the real controversy of the case, otherwise questions proposed by the dissenting members did cover the real controversy set out by the assessee in its re­framed questions.

(1936) 4 ITR 157; (1972) 86 ITR 11; (1985) 155 ITR 310 and 2002 PTD 2570 ref.

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

‑‑‑‑Ss. 135(2) & 156‑‑‑Disposal of appeal by the Appellate Tribunal‑‑­Difference of opinion between two members‑‑‑Reframing of question‑‑­Questions proposed by the dissenting members could be refrained‑‑‑Since each member of Division Bench had passed a separate order and had been signed by each one of them which meant that two separate orders were in the field, therefore, the questions proposed by the dissenting members could be refrained at the behest of assessee/applicant‑‑‑Validity‑‑No final order was in existence‑‑‑Formulation of points by dissenting members were in the nature of issue(s) framed on which the Members differed'‑‑‑Once this had been done and the third member(s) had heard the parties and expressed his/their opinion, the point of the points were to be decided in accordance with the opinion of the majority‑‑‑Final result or decision in accordance with the opinion of the majority was to be recorded and signed by all the members who had heard the case‑‑‑Since the opinion of the dissenting members had yet to attain finality meaning thereby no final order was in the field therefore, provisions of S.135(2) read with S.156 of the Income Tax Ordinance, 1979 would not come into play.

(1936) 4 ITR 157; (1972) 86 ITR 11; (1985) 155 ITR 310 ‑and 2002 PTD 2570 ref.

Siraj ud Din Khalid for Appellants.

Shahbaz Butt: Amicus curiae.

Muhammad Asif D.R. for Respondent.

Date of hearing: 12th April, 2003.

2004 P T D (Trib.) 880

[Income‑tax Appellate Tribunal Pakistan]

Before Khawaja Farooq Saeed, Judicial Member and Imtiaz Anjum, Accountant Member

I. T. A. No. 1545/LB of 2003, decided on 2nd November, 2003.

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

‑‑‑‑S. 13(1)(aa)‑‑‑Addition‑‑‑Identification of source‑‑‑Identification of source is an important condition for coming to the conclusion with regard to its addition in respect of provisions of S.13(1)(aa) of the Income Tax Ordinance, 1979.

2003 PTD 1040 rel.

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

‑‑‑‑S. 13(1)(aa)‑‑‑Addition‑‑‑Where Directors of company come forward and say that they had made the investment it should not be added in the hands of the company.

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

‑‑‑‑S. 13(1)(aa)‑‑‑Addition‑‑‑Principle‑‑‑Addition could only be made after determining the source from which such funds emanated.

2003 PTD 1040 rel.

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

‑‑‑‑S. 13(1)(aa)‑‑‑Addition‑‑‑Company‑‑‑Share deposit money‑‑‑Foreign remittances‑‑ Certificate of foreign remittance was found to be fake‑‑‑No business of company‑‑‑Addition in the hands of company without identification of source of company‑‑‑Validity‑‑‑Identification of source factually and logically routes through the Directors who had floated such company through proper documentation and had introduced investment‑‑‑Fact that their documents were found not satisfactory, did create a reasonable doubt about their source, but not against the company, a legal person, which had started business after incorporation and had not done any trading or manufacturing and such source could not be identified as from some transaction done by the company.

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

‑‑‑‑S. 13(1)(aa)‑‑‑Sale of Goods Act (III of 1930), S. 2(7)‑‑‑Addition‑‑­Share deposit money‑‑‑Stocks‑‑‑Responsibility for explaining the source of such money was on the Directors‑‑‑Share deposit money was payment against purchase of shares, which was a sale transaction‑‑­Such transaction was covered under the definition of goods‑‑‑Shares undoubtedly were stocks of the Company and payment made by the Directors for their purchase was a sale transaction‑‑‑Directors of the Company had deposited the requisite amount for purchase of shares of the Company‑‑‑Same was a proper share capital and not mere deposit or advance‑‑‑Money having come to the coffers of the Company the formalities of the contract from the side of Directors under S.5 of the Sale of Goods Act, 1930 stood completed‑‑‑Section 2(7) of the Sale of Goods Act, 1930 includes shares' in the definition ofgoods'‑‑‑When it was a case of transaction between a buyer and seller of sales of goods then the responsibility would shift to the vendor to show as to wherefrom he had got the funds for purchase of such, goods‑‑‑Directors had deposited share deposit money for purchase of stocks (shares) of company and were responsible for explaining the source.

(f) Sale of Goods Act (III of 1930)‑‑‑

‑‑‑‑S: 4‑‑‑"Sales" and "agreement to sell"‑‑‑Where the seller transfers or agrees to transfer the property to the buyer for a fixed price, the contract is complete.

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

‑‑‑‑S. 13(1)(aa)‑‑‑Addition‑‑‑Company‑‑‑Share deposit money‑‑‑Foreign remittances‑‑ Certificate of foreign remittance was found to be fake‑‑­Addition in the hands of company‑‑‑Validity‑‑‑Amount could not be added in the hands of assessee‑company even if the amount so claimed to be share deposit money was not supported by valid source‑‑­Identification of the amount to the extent of contribution by Directors stood evidenced and its addition in the head of company was disapproved‑‑‑Case was set aside by the Appellate Tribunal for review of various documents produced before it earlier and further explanation by the assessee.

1985 PTD 433; 1997 PTD (Trib.) 195; 1997 PTD (Trib.) 1184; 2003 PTD 1040 and 1973 PTD 375 rel.

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

‑‑‑‑Ss. 52‑A & 86‑‑‑Recovery from the person from whom tax was not deducted or collected ‑‑‑Assessee in default‑‑‑Parameters‑‑‑Appellate Tribunal had determined certain parameters for holding the assessee as "assessee, in default"‑‑‑Identification of suppliers, payment of taxes by recipient of the amount, purchase less than the threshold and such other factors had to be highlighted before holding the assessee in default.

2002 PTD (Trib.) 2210 rel.

Shafqat Mehmood Chohan and Abdul Quddus for Applicant.

Muhammad Asif, D.R. and Shahid Jamil Khan L.A. for Respondent.

Date of hearing: 6th August, 2003.

2004 P T D (Trib.) 892

[Income‑tax Appellate Tribunal Pakistan]

Before Ehsan‑ur‑Rehman, Judicial Member and Muhammad Sharif Chaudhry, Accountant Member

R.As. Nos. 463/LB to 465/LB of 2003, decided on 4th November, 2003.

Income Tax Ordinance (XLIX of 2001)‑‑‑

‑‑‑‑S. 133(1)‑‑‑Income Tax Ordinance (XXXI of 1979), Ss. 136(1), 80D, 2(16) & Second Sched., Cl. (88)‑‑‑Reference to High Court‑‑‑Question of law‑‑‑Status of Lahore Development Authority was held as local authority by the Appellate Tribunal and income of the same was treated as exempt, under, Cl. (88) of the Second Sched. of the Income Tax Ordinance, 1979‑‑‑Application for reference to High Court‑‑‑Validity‑‑­Question of law had arisen‑‑‑Questions framed by the Revenue however were contused, overlapping and repetitive‑‑‑Questions framed by the Appellate Tribunal referred to High Court were that whether on the facts and in the circumstances of the case the Appellate Tribunal was justified to hold that Lahore Development Authority was a local authority and exempt from tax under cl. (88) of the Second Sched. to the Income Tax Ordinance, 1979 that whether on the facts and in the circumstances of the case the Appellate Tribunal was justified to hold that demand of minimum tax raised by the Assessing Officer under S.80D was illegal and that whether on the facts and in the circumstances of the case the Appellate Tribunal was justified to hold that demand of minimum tax under S.80D of the Income Tax Ordinance, 1979 could be created only when income/loss was determined and tax payable or paid was less than 0.5 % of the total turnover of the assessee?

Sheraz Mirza, D.R. for Applicants.

Dr. Ilyas Zafar for Respondents.

Date of hearing: 1st November, 2003.

2004 P T D (Trib.) 896

[Income‑tax Appellate Tribunal Pakistan]

Before Muhammad Tauqir Afzal Malik, Judicial Member and Muhammad Munir Qureshi, Accountant Member

M.A. No.662/LB of 2003, decided on 14th November, 2003.

(a) Wealth Tax Act (XV of 1963)‑‑‑

‑‑‑‑S. 2(1)(16)‑‑‑Net wealth‑‑‑Owner‑‑‑When the assessee has himself asserted "ownership" of a plot of land in the Return of net wealth filed by him and when the law protects the rights of the assessee who holds such property without fear of challenge from the seller or anyone acting under him, there cannot be any doubt as to the assessee being "owner" of such property "under wealth tax law".

(b) Wealth Tax Act (XV of 1963)‑‑‑

‑‑‑‑Ss. 35 & 2(1)(16)‑‑‑Rectification of mistake‑‑‑Net wealth‑‑‑Owner‑‑­Purchase of plot‑‑‑Execution of agreement to sell‑‑‑Full payment was made‑‑‑No mutation of such plot in the name of assessee‑‑‑Assessee declared such plot in his wealth tax return‑‑‑Appellate Tribunal found that assessee was "owner" of such plot and value of such plot shall be included in the net wealth of the assessee according to rate schedule notified by the District Collector‑‑‑Miscellaneous application for rectification‑‑ Validity‑Plot of land was specifically declared by the assessee in his Wealth Tax Return as his asset‑‑‑Specific value had been attached to the said assets by the assessee in the return and the asset had been included in the assessee's net wealth‑‑‑Assessee was admittedly in possession of plot and had made full payment to the seller and formal agreement to sell had been executed and registered, the assessee was indeed the "owner" of the plot "under wealth tax law" as the term "owner" had a' broader connotation than that ordinarily attached‑‑­Application was found to be devoid of any merit and was rejected by the Appellate Tribunal.

PLD 1964'SC 456; 1 ITC 140 and W.T.A. No. 1123/LB of 2000 rel.

Shafqat Mehmood Chohan for Applicant.

Dr. Abdul Sattar Abbasi, D.R. for Respondent.

Date of hearing; 11th November, 2003.

2004 P T D (Trib.) 983

[Income‑tax Appellate Tribunal Pakistan]

Before Rasheed Ahmad Sheikh, Judicial Member and Javed Tahir Butt, Accountant Member

I.T.A. No.4363/LB of 2001, decided on 15th June, 2002.

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

-----S. 65‑‑‑Additional assessment‑‑‑Definite information‑‑‑Difference of opinion in respect of valuation of an asset‑‑‑Reopening of assessment on the ground that value of plot was not in accordance with the rate fixed by the District Collector‑‑‑Validity‑‑‑Information available with the Assessing Officer for invocation of S.65 of the Income Tax Ordinance, 1979 did not fall within the parameter of "definite information" because such information had to be put to further trial‑‑‑Element of probabilities could not be ruled out from such information‑‑‑Such information was based on conjecture, surmises and whims‑‑‑Whimsical inference drawn from such information could not take place of a "definite information"‑‑­Debatable information could not be held to be a "definite information".

1990 PTD 338; 2000 PTD (Trib.) 2949 and 1997 PTD (Trib.) 239 rel.

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

‑‑‑‑Ss. 65 3(1)(d), 80‑CC & 143‑B‑‑‑Additional assessment ‑‑‑Addition‑‑‑Plot on lease‑‑‑Declaration of value to the tune of premium amount and incidental charges deposited in Government account‑‑‑Reopening of assessment on the ground that difference of amount between the value determined according the District Collector rate and value declared would be paid to the previous lessees‑‑‑Addition‑‑‑Validity‑‑‑Not an iota of evidence was available with the Department to indicate, that assessee had made payment over and above the premium actually paid to the Cantonment Board‑‑‑Assessing Officer had no evidence whatsoever that the money had changed hands‑‑‑Assessing Officer was under legal obligation to bring on record irrefutable evidence prior to reopening of completed assessment which could be said to be definite in its character as was contemplated in S.65 of the Income Tax Ordinance, 1979‑‑­Proceedings conducted prior and subsequent to notice issued under S.65 of the Income Tax Ordinance, 1979 were in fact in furtherance of a pre‑conceived belief that the plot was purchased by making much higher payment to previous lessee‑‑‑Proceedings were initiated in absence of "definite information"‑‑‑Information in possession of Department in no way could be considered as "definite information" to which provisions of S.65 of the Income Tax Ordinance, 1979 were attracted‑‑‑Order under Ss. 62/65 of the Income Tax Ordinance, 1979 having been passed by the Appellate Tribunal in flagrant violation of law while reopening the assessment framed under S.80‑CC of the Income Tax Ordinance, 1979 was cancelled.

1997 PTD (Trib.) 2381; 1998 PTD 781 (Trib.); 1993 PTD (Trib.) 1681; 1997 PTD (Trib.) 1994; 2000 PTD (Trib.) 2531; Writ Petition No. 867 of 1999; 2000 PTD (Trib.) 2193; PLD 1997 SC 582 = 1997 PTD 1555; 1999 PTD (Trib.) 2875; 1997 PTD (Trib.) 1094; 2001 PTD 1386; NTR 1995 (Trib.) 11; 1997 PTD (Trib.) 1097; 1997 PTD (Trib.) 2091; 1997 PTD (Trib.) 2197 and 1993 PTD (Trib.) 1172 ref.

Tipu Sultan, ITP for Applicant.

Mian Yousaf Umar for Respondent.

Date of hearing: 5th April, 2002.

2004 P T D (Trib.) 1004

[Income‑tax Appellate Tribunal Pakistan]

Before Munsif Khan Minhas, Judicial Member and Mazhar Farooq Shirazi, Accountant Member

I. T. A. No. 3487/LB of 2001, decided on 22nd November, 2003.

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

‑‑‑‑S. 66‑A‑‑‑Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order‑‑‑Discount on sales‑‑‑Claim of, in Profit and Loss Account‑‑‑Re‑opening of assessment on the ground that Assessing Officer had wrongly allowed expenses on account of discount on sales which were not an expense on Profit and Loss Account rather it was an entry of trading account ‑‑‑Validity‑‑‑Assessee took sales on gross basis and discount was claimed as selling expenses‑‑‑Such methodology related to adoption of account‑‑‑If gross sales were taken and selling expenses were claimed in Profit and Loss Account, same would not affect the net result‑‑‑Disagreement between two officers could not constitute a valid basis for re‑opening of the case.

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

‑‑‑‑S. 66‑A‑‑‑Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order‑‑‑Basic ingredient for reopening of case under S.66‑A of the Income Tax Ordinance, 1979 was the exact finding on an issue of fact‑‑‑Arguable and controversial findings could not be made basis for reopening of the case under S.66‑A of the Income Tax Ordinance, 1979.

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

‑‑‑‑S. 66‑A‑‑‑Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order‑‑‑Estimation of sales‑‑‑Consumption of electricity units‑‑‑Re‑opening of assessment on the ground that estimation of sales was not made on the basis of criterion of consumption of electricity units‑‑‑Validity‑‑‑Assessing Officer had the discretion to justify his estimation particularly when the assessee contended that consumption of electricity mainly related to the production and not with sales‑‑‑Item of higher, value may consume less electricity in its manufacturing and an item of less value may consume higher electricity in its manufacturing process as their production was controlled by the market demand‑‑‑For purposes of exact analysis, Assessing Officer had to make detailed scrutiny‑‑‑Same was a disagreement on an issue of fact which could not constitute a valid basis for reopening of the case.

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

‑‑‑‑S. 66‑A‑‑‑Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order‑‑‑Mark‑up‑‑‑Re‑opening of assessment on the ground that mark‑‑up was erroneously allowed as all the over drafts were in cash and utilized in purchase of property‑‑‑Validity‑‑‑Finding of Inspecting Additional Commissioner was vague and without authenticated evidence that the loan was used for purchase of any property since he was not supposed to record such finding particularly when the loan was obtained for business activity.

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

‑‑‑S. 66‑A‑‑‑Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order‑‑‑Re‑opening of assessment on the ground that claim of telephone bills installed at place other than the place of business was allowed‑‑ Validity‑‑‑Undoubtedly, loss of revenue may arise but it was not understandable how assessment order was erroneous on legal side‑‑‑Order passed under S.66‑A of the Income Tax Ordinance, 1979 had no legs to stand upon‑‑‑Appellate Tribunal cancelled the order of Inspecting Additional Commissioner and restored that of Assessing Officer.

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

‑‑‑‑S. 66‑A‑‑‑Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order‑‑‑Profit and loss expenses‑‑‑Quantum of disallowance in Profit and Loss Account could never be considered as ground for invoking the revisional jurisdiction under S.66‑A of the Income Tax Ordinance, 1979.

Suhail Mutee Babri, ITR/AR for Appellant.

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

Date of hearing: 24th October, 2003.

2004 P T D (Trib.) 1010

[Income‑tax Appellate Tribunal Pakistan]

Before Zafar Ali Thaheem, Judicial Member and Javed Tahir Butt, Accountant Member

I.T.A. No.5402/LB of 1997, decided on 4th June, 2003.

Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑Ss. 65, 13(1)(aa). 13(1)(d) & 59(1)‑‑‑Additional assessment‑‑‑Change of opinion‑‑‑Assessment completed under S.59(1) of the Income Tax Ordinance, 1979 was reopened on the basis that assets declared in wealth statement were not commensurate with the income declared‑‑‑Validity‑‑­Return was accepted under Self‑Assessment Scheme and there would be a presumption in law that Assessing Officer had examined the material produced with the return of income to arrive at the conclusion that there was no concealment on the part of assessee and only then return was accepted under Self‑Assessment Scheme‑‑‑If the Assessing Officer arrived at some other conclusion subsequently, on examination of the same record and same material, it would be a case of `change of opinion' rendering the reopening of assessment as illegal‑‑‑First Appellate Authority had rightly annulled the assessment made tinder S.65 of the Income Tax Ordinance, 1979.

1991 PTD (Trib.) 294 and 2000 PTD (Trib.) 329 rel.

Ahmed Kamal D.R. for Appellant.

Mian Ashiq Hussain for Respondent.

Date of hearing: 11th March, 2003.

2004 P T D (Trib.) 1014

[Income‑tax Appellate Tribunal Pakistan]

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

I.T.As. Nos. 1667/LB to 1674/LB of 2002, decided on 3rd June, 2003.

(a) Wealth Tax Act (XV of 1963)‑‑‑

‑‑‑‑S. 17A(i)(b)‑‑‑Time limit for completion of assessment and re­assessment‑‑‑Section 17A(i) (b) of the Wealth Tax Act, 1963 specifically provides that the time limit for completion of assessment is two years where a return has been filed‑‑‑General limitation of four years is not applicable in a case where a return has been filed and is only applicable if the return has not been filed.

(b) Wealth Tax Act (XV of 1963)‑‑‑

‑‑‑‑S. 5(1)(i) & Second Sched., Cl. 22‑‑‑Exemption in respect of certain assets‑‑‑Property held for public purpose‑‑‑Stock Exchange‑‑­Construction of building by Stock Exchange to accommodate Banks in order to run the clearing house and members of Stock Exchange‑‑‑Claim of exemption‑‑‑Validity‑‑‑Appellate Tribunal allowed exemption under S.5(1)(i)/Cl. 22 of the Second Sched. to the Wealth Tax Act, 1963 to such building.

I.T.A. No. 251/LB/252/LB of .1996‑97 and CIT v. Hyderabad Stock Exchange Ltd., A.P. (1967) ITO 195 rel.

CIT, Madras v. Andhra Chambers of Commerce (1965) 55 ITO 772; 85 Tax 27; (2001) 84 Tax 181 and 113 ITR 22 ref.

Imran Afzal, FCA for Appellant.

Bashir Ahmad Shad, D.R. for Respondent.

Date of hearing: 8th May, 2003.

2004 P T D (Trib.) 1029

[Income-tax Appellate Tribunal Pakistan]

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

I.T.As. Nos.2668/LB to 2672/LB of 2002, decided on 14th February, 2003.

(a) Interpretation of statutes---

---- Definition clause---When a term is used in a statute then the same necessarily is to be defined in the definition clause of that law in order to avoid any ambiguity, complication or difficulty which may likely to arise while it is being interpreted and applied to a situation in the context of its literal and ordinary dictionary meanings in order to construe the same for arriving at a logical conclusion.

(b) Interpretation of statutes---

---- Definition clause---If no definition is given in the main law then, any such terms or phrase or word used in the provisions of law may be given a possible harmonious meaning conveying a sense to the said provisions of law while seeing to its plain, literal and ordinary dictionary meanings.

(c) Interpretation of statutes-----

----Definition---Function---Main function of the definition or a term is to remove vagueness and to provide a degree of definiteness to the said term of phrase or word so defined.

(d) Interpretation of statutes---

---- Definition clause---Word "include"---Connotation---Word "include" whenever is given' in-any definition is often used in interpretation clause in order to enlarge the meaning of that word or phrase occurring in the provisions of the statute/law and when it is so used then that word and phrase must be construed as comprehending not only such things it signifies according to its nature and import but also things which the interpretation clause declares that it shall include meaning thereby that the definition of a word or phrase when it says 'includes' then it would amount to include alongwith what has been so given in its plain, literal and ordinary dictionary meaning---Word used in an inclusive definition implies extension of that term and phrase and they cannot be treated as restrictive in nature.

(e) Income Tax Ordinance (XXXI of 1979)-----

----Ss. 80-C, 50(4), 59(A) & 66-A---C.B.R. Circular No.11 of 1991, dated 30-6-1991---C.B.R. Circular No.8 of 1999, dated 27-7-1999--­Finance Act (IV of 1999), Preamble---Tax on income of certain contractors and importers---Term "services" ---Connotation---Contract--­Rendering services under execution of contract---Assessment under Self­ Assessment Scheme---Creation of refund---Cancellation of assessment by the Inspecting Additional Commissioner on the' ground that nature of receipts of contract were assessable under presumptive tax regime arid tax deducted was full and final discharge of tax liability ---Validity--­Services rendered whether through contract or otherwise were trot covered by the presumptive tax-regime as laid down in S.80-C of the Income Tax Ordinance, 1979---Restricted meaning could not be given to the expression 'services'---Assessments were rightly framed under normal law and provisions of S.80-C of the Income Tax Ordinance, 1979 were not applicable at all---Cancellation of assessments was not sustainable in law---Order of Inspecting Additional Commissioner was vacated and that of the Assessing Officer was restored by the Appellate Tribunal.

2002 PTD (Trib.) 228 and I.T.A. No.672/IB of 1998-99 rel.

Asim Zulfiqar Ali, F.C.A. for Appellant.

Ashraf Ahmad Ali, D.R. for Respondent.

Date of hearing: 25th January, 2003.

2004 P T D (Trib.) 1038

[Income-tax Appellate Tribunal Pakistan.]

Before Munsif Khan Mihas, Judicial Member and Muhammad Sharif Chaudhary, Accountant Member

I.T.A. No. 788/LB of 2002, decided on 11th March, 2003.

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

----S. 59(1)---C.B.R. Circular Letter No. 7(31)S/Asstt/93, dated 16-9-1998---Self-assessment---Explanation of a provision of Self- Assessment Scheme which had been formulated under S.59(1) of the Income Tax. Ordinance, 1979, by the Central Board of Revenue in its Circular Letter No.7(31)S Asst/93, dated 16-9-1998 was not a judicial explanation and had no authority against the Self-Assessment Scheme.

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

----Ss. 59(1), 50(4) & 80-C---C.B.R. Circular No.9 of 1998, dated 21-7-1998, para. 8(d)(i)---C.B.R. -Circular No. 14 of 1998, dated 9-10-1998---C.B.R. Circular Letter No. 7(31).S/ Asst/93,dated 16-9-1998---Self-assessment---Assessment year 1998-99---Inclusion .of presumptive income and claim of tax credit deducted under S.50(4) of the Income Tax Ordinance, 1979 for the purpose of comparison with the tax paid for the previous year---Validity---Since the Self-Assessment Scheme clearly provided for the inclusion of deemed income for the purpose of comparison, said provision could not be withdrawn by Central Board of Revenue by issuing a clarificatory circular letter--- Assessee had rightly taken into account his deemed income under S.80-C of the Income Tax Ordinance, 1979 for the purpose of comparison and case was qualified under Self-Assessment Scheme--­ Orders of the Authorities below were vacated by the Appellate Tribunal with direction to accept assessee's return under Self-Assessment Scheme.

1993 SCMR 1232 = 1993 PTD 766 and (1999) 80 Tax 51 rel.

Farid Adil for Appellant. Muhammad Zulfiquar Ali, D.R. for Respondent.

Date of hearing: 11th March, 2003.

2004 P T D (Trib.) 1052

[Income-tax Appellate Tribunal Pakistan]

Before Rasheed Ahmad Sheikh and Khawaja Farooq Saeed, Judicial Members and Muhammad Sharif Chaudhry, Accountant Member

I.T.A. No.2433/LB of 2000, decided on 15th June, 2002.

Per Rasheed Ahmad Shaikh, Judicial Member:

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

----Ss. 65 & 59(1)---Additional assessment---Definite information--­Issuance of exemption certificate from payment of Capital Value Tax for purchase of property---assessment under Self-Assessment Scheme--­Reopening of assessment on such information regarding purchase of property---Validity---Department was already in possession of information with regard to purchase of property prior to framing of assessment under S.59(1) of the Income Tax Ordinance, 1979 as well as invocation of provision of S.65 of the Income Tax Ordinance, 1979--­Such factum was evident from the first show-cause notice which clearly spelt out that the information regarding purchase of property was already in possession of the department when the assessee's return of income was subjected to scrutiny for acceptance under the Self ­Assessment in terms of passing the order under S.59(1) of the Income Tax Ordinance, 1979---No new information had come into possession of the Department to which the provision of S.65 of the Income Tax Ordinance, 1979 could be attracted---Provisions of S.65 of the Income Tax Ordinance, 1979 had been invoked on whimsical inferences, drawn from a set of facts which did not have characteristic of its being definite

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

----S. 65---Additional assessment---" Definite information" ---Purchase of property---Re-opening of assessment requiring assessee to explain source of investment on the ground that income declared/assessed was quite nominal which was not even sufficient to meet day to day expenses--­Validity---Such information, in no way, could be held to be definite in its character because possibility of fluctuation and adjustment therein could not be ruled out---Such information did not acquire the standard. of `definite information" ---Department was merely in possession of an information the truth of which had yet to be established---Department had resorted to fishing enquiry -for reopening of case---Reopening of assessment could not be declared to have been validly made in the circumstances.

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

----S. 65(1)---Additional assessment-- -Classification of subsection (1) of S.65 of the Income Tax Ordinance, 1979---Object---Legislature had purposely categorized three clauses (a), (b) and (c) in subsection (1) of S.65 of the -Income Tax Ordinance, 1979 in order to exercise powers by the Assessing Officer under the said section otherwise only a single sentence could have been taken by the legislature to cover up all the eventualities referred to in the said clauses---Purport and tenor behind classifying such categories was that the Assessing Authority should be mindful and decisive about the case which if was going to reopen as to whether this was a case of under assessed or escaped assessment or assessed at too low a rate or had been the subject of excessive relief or refund or the total income or the tax payable by the assessee had been assessed or determined under S.59(1) or S.59A of the Income Tax Ordinance, 1979 , have deemed to or been so assessed or determined under S. 50(1) or S. 59A of the Income Tax Ordinance, 1979.

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

----S. 65---Additional assessment---Issuance of notice under S.65 of the Income Tax Ordinance, 1979---Non-ticking of relevant clause---Effect--­Non-ticking of relevant clause renders the notice to be nullity in law and superstructure built thereon was apt to fall down.

1997 PTD 47; 1997 PTD (Trib.) 1994 and 2000 PTD (Trib) 2531 rel.

(e) Income Tax Ordinance (XXXI of 1979)---

----S. 65---Additional assessment---Initiation of proceedings without lawful jurisdiction---Setting aside of assessment by First Appellate Authority---Validity---Proceedings under S.65 of the Income Tax Ordinance, 1979 had been initiated in absence of any lawful jurisdiction on the part of Assessing Officer---First Appellate Authority had erroneously set aside the assessment for de novo consideration--­Appropriate course available with the First Appellate Authority was to strike down the impugned assessment instead of setting aside the same--­Order passed by the First Appellate Authority was vacated and that made under Ss. 62/65 of the Income Tax Ordinance, 1979 was declared to have been illegality passed which was cancelled/annulled by the Appellate Tribunal.

Per Khawaja Farooq Saeed, Judicial Member:

(f) Income-tax-----

----Jurisdiction---Principles---Basic jurisdiction of a Court while deciding an issue is restricted up to the matters decided in the impugned order--­Exception to such rule is that if the issue is a question of law and it goes to the very root of the order, the Courts can and must decide such issue.

(g) Income Tax Ordinance (XXXI of 1979)---

----S. 65---Additional assessment---Legality of reopening of an assessment under S.65 of the Income Tax Ordinance, 1979 could be challenged at any stage of the proceedings as it relates to the acquiring of jurisdiction.

(h) Income-tax-----

----Legal question---No finding by the First Appellate Authority--­Finding by Appellate Tribunal on such issue---Validity---If there was no finding by First Appellate Authority and the matter related to a legal question specially that of jurisdiction it could be raised and decided by the Courts hearing appeal.

1953 XXIII ITR 15; (1985) 155 ITR 306; (1962) 45 ITR 454 and (1963) 48 ITR 427 ref.

(i) Income-tax-----

----Cancellation or annulment of assessment---Where it was established that requirements of law were not fulfilled the decision always was cancellation or annulment of the assessment.

Miss Uzma Butt for Appellant.

Javed ur Rehman, D.R.O. for Respondent.

Date of hearing: 21st March, 2002.

2004 P T D (Trib.) 1062

[Income-tax Appellate Tribunal Pakistan]

Before S. Hasan Imam, Judicial Member and Muhammad Akhtar Nazar Mian, Accountant Member

I.T.A. No. 1526/KB of 2002, decided on 30th June, 2003.

Income Tax Ordinance (XXXI of 1979)---

----S. 12 (9A), Second Sched., Part IV, Cls. 59 & 66-A---Income deemed to accrue or arise in Pakistan--Exemption from specific provisions ---C.B.R: Letter No. F. 12(9A)ITP, 99, dated 8-6-2001--­C.B.R. Letter No.F. 12(9A)IT/99, dated 16-6-2001---Reserves--­Imposition of tax under S.12(9A) of the Income Tax Ordinance, 1979 a 10 % on amount of reserves exceeding 50 % of paid-up capital worked out on the basis of assessed profit rather than assessee's declared profit--­Validity---For purpose of S.12(9A) of the Income Tax Ordinance, 1979, 40% of "after-tax profits" were to be computed on the basis of assessee's after tax profit as declared in its final accounts and not on the basis of its assessed profits as the term "after tax' profits" refers to profits computed in accordance with the generally accepted and understood accounting audit principles and standards of Income Tax Ordinance, 1979---Inspecting Additional Commissioner had jurisdiction to examine and verify the genuineness of assessment order to arrive at "after tax profits" of assessee---Order under S.66-A of the Income Tax Ordinance, 1979 imposing tax under S.12(9A) of the Income Tax Ordinance, 1979 on the basis of assessment order was unjustified--­Inspecting Additional Commissioner was directed to compute the after tax profits in accordance with the generally accepted and understood accounting, and audit principles and standards of Income Tax Ordinance, 1979, after verifying the genuineness of the various deductions claimed by the assessee to arrive at its "after tax profits".

I.T.As. Nos. 2256 & 223/KB rel.

Shahid Pervez. Jami for Appellant.

Javed Iqbal Rana D.R. for Respondent.

Date of hearing: 26th June, 2003.

2004 P T D (Trib.) 1071

[Income-tax Appellate Tribunal Pakistan]

Before Rasheed Ahmed Sheikh, Judicial Member and Amjad-Ali Ranjha, Accountant Member

W.T.As. Nos. 2127/LB of 2000 and 1351/LB of 2001, decided on 14th June, 2003.

(a) Wealth Tax---

---- Res judicata, principles of---Application---Principles of res judicata would not apply to the income tax/wealth tax proceedings because each year was a separate assessable entity.

(b) Wealth Tax---

---- Natural justice, principles of---Natural justice and fair play demand that none should be burdened with tax if the facts of the case are proved to be otherwise.

(c) Administration of justice---

---- Cause of justice---Advancement of---Judgment of Court is to be designed to advance cause of justice and not to be a source of perpetual injustice.

(d) Wealth Tax Act (XV of 1963)---

----S. 16---Assessment---Land---Determination of status---Agricultural or residential---Evidence of payment of land revenue, water tax and Fard Malkiat Khasra Girdwari was furnished wherein land was shown to be under cultivation---Land was assigned non-agricultural status by the Department on the basis of paper work prepared for housing scheme on such land and intended to sell---Validity---Assessing Officer misdirected himself not to take cognizance of the assessee's submissions---In wealth tax proceedings, it was that status of land on the valuation date which was to be taken into consideration for purposes of determining value of immovable assets---Order of Assessing Officer was set aside with the directions to ascertain factual position of the land---If the Assessing Officer came to a conclusion that status of the land on the valuation date was agricultural, the assessee's claim of land to be agricultural in its character be accepted otherwise the Assessing Officer shall proceed in accordance with law and facts which shall be brought on record while re­ determining the status of land ---Assessee shall be at liberty to adduce any documentary evidence in support of his contention during the course of assessment proceedings---Order of First Appellate Authority was vacated by Appellate Tribunal.

12 ITR 9; 30 ITR 618; 56 ITR 608 and 108 ITR 917 ref.

Javed ur Rehman, D.R. for Appellant.

Sajid Ijaz Hotiana for Respondent.

Date of hearing: 24th May, 2003.

2004 P T D (Trib.) 1084

[Income-tax Appellate Tribunal Pakistan]

Before Muhammad Tauqir Afzal Malik, Judicial Member and Muhammad Munir Qureshi, Accountant Member

W. T. As. Nos. 1271/LB and 1272/LB of 2002, decided on 15th August, 2003.

Wealth Tax Act (XV of 1963)----

----Ss. 2(16), 16(3) & 17B---Wealth Tax Rules, 1963, R. 8(3)---Transfer of Property Act (IV of 1882), S. 53-A---Net wealth---" Belonging"--­"Ownership"---"Possession"---Value of plot was declared in accordance with the "agreement of sale" registered with the Sub-Registrar--­Assessing Officer assessed the same in accordance with the District Collector rates ---Assessee contended that no sale-deed for plot had been executed and title had not yet passed to him and he was not liable to be treated as "owner" of the plot---Amount paid for the purchase of the plot was liable to be assessed as "advance"---Validity---Seller of the plot of land having received full payment and having handed over the possession to the purchaser in the presence of a formal document viz. agreement to sell, registered---Neither the seller could curtail in any manner, the rights of the purchaser in the said property nor anyone claiming title to the said plot under the seller could alter the rights of the purchaser of his disadvantage ---Assessee was "owners" of the said plot of land for all practical purposes and for purposes of levy of wealth tax under the Wealth Tax Act, 1963---Assessee had admittedly made full payment and there was no advance payment involved at all---Plot in question had been declared by the assessee as part of his immovable property assessee, therefore, could not approbate and reprobate in the same breath ---Assessee had made full payment to the seller pursuant to agreement of sale and was in full possession of such plot on the valuation date ---Assessee was required to be treated as "owner of plot" in circumstances---First Appellate Authority was misconceived in its view that assessee was not the rightful "owner" of the plot---Order of First Appellate Authority was vacated by the Appellate Tribunal and that of Assessing Officer was restored.

W.T.As. Nos. 124 - 126/LB of 2002 per incurium.

PLD 1964 SC 456; Burma Railway Co. v. Secretary of State 1 ITC 140 (Burma); W.T.As. Nos. 662-666/LB of 2001; W.T.A. No. 1123/LB of 2000; W.T.As. Nos. 136 to 140/LB of 2003 and Inayat Ullah and others v. Shah Muhammad and others PLD 1961 (W.P) Lah. 372 rel.

Abdul Rasheed, D.R. for Appellant.

Shafqat Mehmood Chohan for Respondent.

Date of hearing: 13-8-2003.

2004 P T D (Trib.) 1096

[Income-tax Appellate Tribunal Pakistan]

Before Inam Ellahi Sheikh, Chairman and Khalid Waheed Ahmed, Judicial Member

I.T.As. Nos. 100(IB) to 104(IB) of 2001-2002, decided on 11th June, 2003.

Income Tax Ordinance (XXXI of 1979)---

----Ss. 52, 86, 50(4), 80-C & 143-B---S. R. O. 586(1)/91, dated 30-6-1991---S.R.O. 828(1)/91, dated 24-8-1991---S.R.O. 368(1)/94, dated 7-5-1994---C. G. R. Letter No. 3(7)SS(WHT)98-99, dated 10-6-1999---Liability of persons failing to deduct or pay tax ---Assessee in default---Execution of construction contracts---Statement under S.143-B of the Income Tax Ordinance, 1979 was filed ---Assessee was treated as "assessee in default" for non deduction of tax on purchases worked out by excluding the 15 % of the amount on account of profit and 15 % on account of direct labour cost from contractual receipts--­Validity---Assessing Officer failed to point out or specify the payments made by assessee company being a payer to person being a recipient which were liable to deduction of tax under S.50(4) of Income Tax Ordinance, 1979---Assessing Officer charged tax under S.52 of the Income Tax Ordinance, 1979 on the amount of purchases worked out on the basis of assumptions and guess work---Provision of S.52 of the Income Tax Ordinance, 1979 were different from the provisions of S.62 of the Income Tax Ordinance, 1979 under which the Assessing Officer was required to determine the income and to charge tax thereon--­Assessee being a payer' had been made liable under S.52 of the Ordinance for deduction tax on behalf of the department not being his liability ---Assessee was required to perform the function of department as a withholding agent for which he was not rewarded or compensated in any manner ---Assessee as apayer' had to perform extra work for (deduction of tax which was to be deposited in the treasury following with the submission of monthly as well as annual statements---Tax was to he deducted by a withholding agent at the time of making any payment on account of supply of goods, service rendered to or execution of contracts---Assessing Officer failed to point out any such payment liable to deduction of tax under S.50(4) of the Income Tax Ordinance, 1979--­Demand deleted by the First Appellate Authority was maintained and appeal of the department was rejected by the Appellate Tribunal.

I.T.A. No. 445 to 449/KB of 1998-99; 2001 PTD 1480; I.T.A. No. 1129/KB of 1996-97; I.T.A: No-671 to 673/KB of 1998-99; I.T.A. No. 643/KB of 1999-2000 and 2002 PTD (Trib.) 523 ref.

Muhammad Tahir Khan D.R. for Appellant.

Hafiz M. Idris and Aurangzaib for Respondent.

Date of hearing: 11th June, 2003.

2004 P T D (Trib.) 1104

[Income-tax Appellate Tribunal Pakistan]

Before Khawaja Farooq Saeed, Judicial Member and Imtiaz Anjum, Accountant Member

R.A: Nos. 327/LB and 360/LB of 2003, decided on 27th August, 2003.

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

----S. 12(9A) & Second Sched.; Part IV, Cl. (59)---Companies Ordinance (XLVII of 1984), S. 245---Income deemed to accrue or arise in Pakistan---Companies Ordinance, 1984 is separate with its own implication and S. 12(9A) of the Income Tax Ordinance, 1979 read with Cl. 59 of Part IV of Second Sched. of the Income Tax Ordinance, 1979 was entirely different and independent---Purpose of the two enactments may be similar, however, application and implication of their default were also not interlinked---Default of the Income Tax Ordinance, 1979 had to be dealt with under its own provisions.

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

----Ss.136, 12(9A) & Second Sched., Part IV, Cl. (59)---Companies Ordinance (XLVII of 1984), S.245---Reference to High Court---Deemed income---Over rule of time limit for distribution of dividends---No overriding effect of provisions of Companies Ordinance, 1984 over the Income Tax Ordinance, 1979---Question referred without substance--­Validity---When it is said that remedial provision in terms of Cl. (59) in Part IV of the Second Sched. of the Income Tax Ordinance, 1979 had come to reduce the rigours of S.12(9A) of the Income Tax Ordinance, 1979 and for this purpose it is commented that this may perhaps was by keeping in view S.245 of the Companies Ordinance, 1984 it did not mean that it had considered the provisions of Companies Ordinance, 1984 as applicable in the income-tax proceedings because it was only a comment to say that in the presence of the governing clause under S.245 of the Companies Ordinance, 1984 the introduction of S.12(9A) of the Income Tax Ordinance, 1979 was not justified, this however, did not mean that after its introduction its application could be corrupted by taking queue from the language of the provisions of the Companies Ordinance, 1984---While defining a provision in an enactment, help from other laws was never safe---Reference applications were rejected by the Appellate Tribunal on the ground that questions were not properly drafted and were also without substance.

(c) Interpretation of statutes---

----While defining a provision in an enactment, help from other laws was never safe.

M. Akram Tahir, D.R. for Applicant (in R.A. No.327/LB of 2003).

Naveed A. Andrabi for Respondent (in R.A. No.327/LB of 2003).

Naveed A. Andrabi for Applicant (in R.A. No. 360/LB of 2003).

M. Akram Tahir, D.R. for Respondent (in R.A. No.360/LB of 2003).

Date of hearing: 27th August, 2003.

2004 P T D (Trib.) 1115

[Income-tax Appellate Tribunal Pakistan]

Before Muhammad Ashfaque Balouch, Judicial Member and Muhammad Akhtar Nazar Mian, Accountant Member

I.T.As. Nos. 1766/KB and 1767/KB of 2002, decided on 27th August, 2003.

Income Tax Ordinance (XXXI of 1979)---

----S. 66-A---Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order ---Limitation---Assessee had contended that assessment orders were made on 4-5-1994 and 29-6-1996 respectively and notice under S.66-A of the Income Tax Ordinance, 1979 was issued on 20-6-2002 and orders passed' thereafter were barred by limitation as no action under S.66-A of the Income Tax Ordinance, 1979 could be taken in respect of an order made more than four years prior to its proposed revision---Department pleaded that original assessment orders were subject-matter of appeal and appeal effected the orders of First Appellate Authority even on 30-6-1998 and therefore, Inspecting Additional Commissioner's order were not hit by limitation ---Validity--­Mistake allegedly made by the Assessing Officer was never a subject ­matter of appeal before First Appellate Authority and limitation, in circumstances, had to start from the date of original assessment under S.62 of the Income Tax Ordinance, 1979---Original assessment orders to which the issues involved were the subject-matter of mistake, if any, having been made on 4-5-1994 and 29-6-1996 could not be revised beyond four years from these dates as had been done by the Inspecting Additional Commissioner vide his undated orders passed consequent upon his notice, dated 20-6-2003---Orders having been made beyond limitation were not maintainable in the eye of law and were cancelled by the Appellate Tribunal---Original assessments flamed under S.62 of the Income Tax Ordinance, 1979 and modified in appeals stood restored.

(1999) 79 Tax 273 (Trib.); (2000) 78 Tax 230 (Trib.); I.T.As. Nos. 78 and 79/KB of 1998-99; 2002 PTD 570 and 2000 PTD 207 ref.

Muhammad Amin, ACA for Appellant.

Jawed Iqbal Rana, D.R. for Respondent.

Date of hearing: 27th August, 2003.

2004 P T D (Trib.) 1135

[Income-tax Appellate Tribunal Pakistan]

Before Khawaja Farooq Saeed, Khalid Waheed Ahmed, Judicial Members and Muhammad Munir Qureshi, Accountant Member

I.T.As. Nos. 4302/LB to 4304/LB of 2001, decided on 10th July, 2003.

Per Khawaja Farooq Saeed, Judicial Member and Muhammad Munir Qureshi, Accountant Member---

(a) Income-tax---

----Profit & Loss account ---Add back---History---Addition was made in deviation from history the history of the case---Validity--Claimed expenses remained more or less the same as was in the previous year--­Add backs in a different proportion to the earlier years was not justified.

(b) Income-tax---

----Profit & Loss expenses--History---Acceptance of accounts---Add back through remarks that "parts of expenses were not open to verification"---Validity---Such remarks could not be supported especially in such cases where the accounts had a history of acceptances and that each and every penny was expended after due approval and was subject to proper administrative and audit control---Company manage­ment and staff all were qualified and skillful people---Question of unverifiability in such cases ordinarily would not arise---Requirement of such addition was proper identification of the unvouched and unverifiable expenses---Addition made was deleted by the Appellate Tribunal.

(c) Income Tax Rules, 1982---

----R. 216(3)(a)---Computation of export profits and tax attributable. to export sales ---C.B.R. Circular No.2 of 2000, dated 8-2-2000---FOB value---Commission paid outside Pakistan---Exclusion of commission from sale---Validity---FOB sales were the amount mentioned on the bill of entry as FOB value of the assessee---No question of excluding the commission from the export sales for determining FOB value of the assessee would arise---Claim of exclusion of commission from determination of the FOB value was rejected by the Appellate Tribunal.

(d) Income-tax---

----International Accounting Standard---" Pertaining to accounts"---Connotation---For determination of the word `pertaining to accounts' the definition of the International Accounting Standards would be relevant--­Pattern suggested by the International Accounting Standards could not be made binding for determination of income for assessment purposes under the Income Tax Law---Law of Income Tax was independent and the purpose of the said law was entirely different.

(e) Interpretation of statutes-----

----Terms--Definitions---Where a term is not defined by an enactment, the ordinary dictionary meanings is the best alternative.

(f) Income-tax---

----International Accounting Standard---Terms used in International Accounting Standard has some times been considered as more relevant as the same were based upon normal dictionary meaning.

(g) Income Tax Ordinance (XXXI of 1979)-----

----S. 12(9A)---Income deemed to accrue or arise in Pakistan ---Profit--­Connotation of 'profit', as used in S.12(9A) of the Income Tax Ordinance, 1979 was to be understood keeping in view the Income Tax Law itself.

I.T.A. No.51/LB of 2002 ref.

(h) Income-tax---

----Calculation of profit---Actual transaction---Scheme of Income Tax Law, did not permit calculation of profit or income without actual transaction.

(i) Income-tax---

----Profit---Sale---Profit is the difference between purchases and sale and hypothetical value be that based on market rate or some other formula could not be considered as a substitute of sale.

(i) Income-tax---

----Stocks---Valuation--Loss---Stocks in normal accountancy had always been shown at cost---Not only that in the case of shares but also in the other closing stocks the cost could diminish and decrease in value of such stocks could not be allowed as loss.

(k) Income Tax Ordinance (XXXI of 1979)-----

----S. 62---Assessment on production of accounts, evidence etc.---Loss--­Devaluation of stocks---When income of an organization was calculated it was always based upon trading/manufacturing and profit and loss account of the same---Stocks which had not been transacted did not form part of the trading or manufacturing account of an assessee.--Stocks only come into picture while preparing the balance-sheet and nobody reduces or increases its profits while preparing final statement of its liabilities and assets---Stock was an asset of the company and remains as such on the opening as well as the closing date unless sold out as a part of business transaction.

(I) Income Tax Ordinance (XXXI of 1979)---

----S. 12(9A)---Income deemed to accrue or arise in Pakistan ---Profit--­Definition---Profit is profit for the year and it was not the accumulated profit of earlier years---Section 12(9A) of the Income Tax Ordinance, 1979 had come as charge and a charge was never retrospective.

(m) Income Tax Ordinance (XXXI of 1979)---

----S. 12(9A) & Second Sched., Part IV, Cl. 59---Income deemed to accrue or arise in Pakistan---Retrospective effect---Section 12(9A) of the Income Tax Ordinance, 1979 had been added as a charge and creation of charge could not be permitted retrospectively especially in case of a deemed provision without any clear or unambiguous intention.

(n) Income Tax Ordinance (XXXI of 1979)---

---S. 12(9A)---Income deemed to accrue or, arise in Pakistan---Double taxation---Legislature had come up with provision of S.12(9A) of the Income Tax Ordinance, 1979 with a clear mandate and with full intention to create a charge in special circumstances---Legislature could not be deprived of its inherent jurisdiction of charging tax twice, if it was so intended in unequivocal terms---Such an intention was clear and there was no doubt about language to that extent and it had created a charge on the amount, which had been kept as reserve from the profit of the year, and if the company did not fulfil the requirement this charge came into force.

(o) Income Tax Ordinance (XXXI of 1979)---

----S. 12(9A)---Income deemed to accrue or arise in Pakistan---After tax profit---Connotation---After tax profit connotes "profit for the year" and' the reserves shall be the one created from the date of the insertion of the provision of S.12(9A) of the Income Tax Ordinance, 1979.

(p) Income Tax Ordinance (XXXI of 1979)---

----S. 12(9A)---Companies Ordinance (XLVII of 1984), S. 234 & Sched., 4, Part III-1(C) IIIV---C.B.R. Circular No. F. 12(9A)ITP/99, dated 8-6-2001---Income deemed to accrue or arise in Pakistan---Profit--­Calculation of---Stock---Diminution in value---Scope---Diminution in value of stocks was not to be allowed as a reduction for calculating profit.

(q) Income Tax Ordinance (XXXI of 1979)-----

----S. 12(94) & Second Sched., Part IV, Cl. 59---Income deemed to accrue or arise in Pakistan---Reserves---Previous years reserve--­Taxation of, by adding it in current year's reserve---Validity---Company which in actuality had distributed more dividend than the legal requirement, penalizing it under the garb of a wrong calculation was not appropriate.

Per Khalid Waheed Ahmad, Judicial Member---

(r) Income Tax Ordinance (XXXI of 1979)---

----S.12(9A)---Income deemed to accrue or arise in Pakistan ---Reserve--­Reserves for the purpose of subsection (9A),of S.12 of the Income Tax Ordinance, 1979 were to be taken as the excess of undivided profit earned during ' a year'.

(s) Income Tax Ordinance (XXXI of 1979)---

----S. 12(94)---Income deemed to accrue or arise in Pakistan--­"Reserve"---Connotation---Word 'reserve' used in subsection (9A) of S.12 of the Income Tax Ordinance, 1979 means the excess of the amount remaining undivided out of the profit earned during a particular year which did not mean to include the reserves of earlier years also.

(t) Income Tax Ordinance (XXXI of 1979)-----

----S. 12(94)---Income deemed to accrue or arise in Pakistan--­Application---Section 12(94) of the Income Tax Ordinance, 1979 is applicable in cases where the profit is derived by a public company for any income year; cash dividends are not distributed within seven months of the end of the said income year of the undivided profit for that year is in excess bf 50% of its, paid up capital; the 'reserves' of the company are in excess of 50 % of its paid up capital; and the profit to be considered for the purpose of subsection (9-A) is the profit for the year tinder consideration only.

(u) Income Tax Ordinance, (XXXI of 1979)---

----S.12(9A)--Income deemed to accrue Or arise in Pakistan---Reserve---Meaning---Reserve means the amount being the undivided profit of the relevant year only and does not include the brought forward .'reserves' of the previous years.

(v) Interpretation of statutes---

---- Where more than one interpretation of a provision is possible then one favouring the assessee is to be followed.

(w) Income Tax Ordinance (XXXI of 1979)----

----S. 12(9A)---Income deemed to accrue or arise in Pakistan ---Reserve--­Previous years' reserve was clubbed with the current year reserve for the purpose of taxation under S. 12(94) of the Income Tax Ordinance, 1979---Validity---'Reserve' for the purpose of S.12(9A) of the Income Tax Ordinance, 1979 was the amount of undivided profit of the relevant year only and it did not include the brought, forward reserves of the previous years.

Elahi Cotton Mills Ltd.'s case 76 Tax 5/91; Writ Petition No.9665 of 2001 and 1992 PTD 576 ref.

2003 PTD (Trib.) 2499 distinguished

Iqbal Naeem Pasha, Muhammad Iqbal Khawaja and Faisal Iqbal Khawaja for Appellant.

Muhammad Asif, D.R. for Respondent.

Date of hearing: 5th March, 2003.

2004 P T D (Trib.) 1218

[Income-tax Appellate Tribunal Pakistan]

Before Syed Nadeem Saqlain, Judicial Member and Javed Tahir Butt, Accountant Member

W.T.A. No.271/LB of 2003, decided on 29th September, 2003.

(a) Finance Act (XII of 1991)---

----S. 12(2) & (12)---Wealth Tax Act (XV of 1963), S.2(10)---Corporate Assets Tax---Non-filing of return ---Assessment---Jurisdiction--­Assessment was finalized by the Panel rather than Deputy Commissioner---Validity---Section 12(12) of the Finance Act, 1991 caters for definition of different words including the words `Deputy Commissioner' which provides "Deputy Commissioner has the same meaning as in the Wealth Tax Act, 1963" which brings to the definition provided in Wealth Tax Act, 1963---Section 2(10) of the Wealth Tax Act, 1963 states that Deputy Commissioner means a person appointed to act as a Deputy Commissioner of Wealth Tax, a Wealth Tax Officer, a Special Officer and a Tax Recovery Officer---Definition of Deputy Commissioner does not include or even refers to the word Panel--­Jurisdiction assigned to the Income Tax Panel was with regard to income tax cases---Assessment framed by the Panel was without jurisdiction and void ab initio.

(b) Finance Act (XII of 1991)---

----S. 12(2)---Wealth Tax Act (XV of 1963), S. 17-A---Income Tax Ordinance (XXXI of 1979), S.156---Corporate Assets Tax ---Limitation-­Assessment---Last date for filing of return was 30-6-1992 while the department issued show-cause notice directing the assessee to file return on 24-11-2001---Validity---Mistake committed by the department could be rectified under S. 156 of the Income Tax Ordinance, 1979 within four years---Assessment framed being time-barred was cancelled by the Appellate Tribunal being without jurisdiction as well as time-barred.

I.T.A. No. 1872/LB of 1997 rel.

I.T.A. No. 1338/LB of 2000 and W.T.A. No.2175/LB of 2000 ref

Ch. Anwar-ul-Haq for Appellant.

Abdul Rasheed D.R. for Respondent.

Date of hearing: 18th September, 2003

2004 P T D (Trib.) 1225

[Income-tax Appellate Tribunal Pakistan]

Before Rasheed Ahmed Sheikh, Judicial Member and Amjad Ali Ranjha, Accountant Member

I.T.A. No. 1330/LB of 1997, decided on 13th September, 2003.

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

----S. 111---Penalty for concealment of income etc.---Specific findings--­Penalty proceedings could not be initiated against the party unless specific findings on the point of concealment of income or furnishing of inaccurate particulars of income with the mens rea for evading the tax were not contained in the assessment order forming basis for initiating penalty proceedings.

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

----S. 111---Penalty for concealment of income etc.---Burden of proof--­"Assessment proceedings" and "penalty proceedings" ---Distinction--­Assessment proceedings and penalty proceedings stand on two different footings; in former situation onus lies on the assessee's shoulders to prove that income returned by him was his true income while in latter situation burden squarely shifts on the department to establish that the assessee had concealed his income because penalty proceedings are criminal in its nature and the standard of proof which is required in a criminal case is also required to sustain the order imposing penalty.

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

----S. 111---Penalty for concealment of income etc.---Definite finding--­For initiating penalty a definite finding either by the Assessing Officer, or by the Appellate Authority on the point of concealment of income or furnishing of inaccurate particulars of income is sine qua non--­Whenever penalty proceedings are sought to be initiated by an Assessing Officer, there should be a findings to this effect in the assessment order indicating the intention of initiating penalty proceedings.

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

----Ss. 111 & 116---Penalty for concealment of income etc.---Notice issued under S.116 of the Income Tax Ordinance, 1979 should contain the alleged act of concealment of income or furnishing of inaccurate particulars of income in clear and unambiguous terms as well as the necessary particulars indicating the charge to be proved against an assessee.

(e) Income Tax Ordinance (XXXI of 1979)---

----S. 111---Penalty for concealment of income etc.---Where version of taxpayers is not accepted the penalty proceedings shall not be attracted ipso facto although the rejection of taxpayer version may justify the addition to be made in total income and in no way a reasonable difference of opinion on the point of law or principle of accountancy shall attract imposition of penalty.

2003 PTD (Trib.) 1085 rel.

(f) Income Tax Ordinance (XXXI of 1979)----

----Ss. 111 & 13(1)--Penalty for concealment of income etc. ---Imposition of penalty for concealment of income being addition made was confirmed by Appellate Tribunal---Validity---Imposition of penalty on account of addition made under S.13(1)(aa) of the Income Tax Ordinance, 1979 was absolutely unjustified unless guilt was proved against the assessee that he had deliberately and intentionally concealed the income---Assessing Officer had based his entire structure of penalty proceedings merely on the ground that Appellate Tribunal had upheld the addition made under S.13(1)(aa) of the Income Tax Ordinance, 1979 and any documentary evidence submitted explaining sources of investment for the purchase of shop, during the course of penalty proceedings, could not be entertained at appellate stage reason being that evidence was never provided while formulating the original- assessment as well as before the Appellate Authorities---Default of unexplained investment was established consequent upon which penalty was imposed---Such findings had no locus standi in the eye of law while initiating penalty proceedings under S.111 of the Income Tax Ordinance, 1979.

(g) Income Tax Ordinance (XXXI of 1979)---

----S. 111---Penalty for concealment of income etc. ---Initiation of ex parte penalty proceedings for concealment of income being addition ­made was confirmed by Appellate Tribunal ---Validity---Assessee could not be debarred to substantiate his investment during the course of penalty proceedings as the penalty proceedings were independent Proceedings and Assessing Officer who, while initiating the penalty proceedings had to look into the explanation given by the assessee in order to fasten blame of concealment of income or furnishing of inaccurate particular of income at the assessee's door---Foremost duty of the Assessing Officer was to prove mens rea and deliberate suppression on the part of assessee which was missing in the order passed under S.111 of the Income Tax Ordinance, 1979---Assessee had purchased a shop after obtaining gift from his real sister who was also an existing assessee---By furnishing copy of gift-deed and balance-sheet of assessee's sister, onus had shifted upon the Assessing Officer's shoulders to verify factum of gifted amount from that Circle---No exercise was made by the Assessing Officer to ascertain as to whether the assessee's sister had sufficient funds to gift the said amount to her brother or not---Penalty imposed was not sustainable which was deleted by the Appellate Tribunal.

CIT v. Abdul Jabbar 2001 PTD 1348; (2003) 87 Tax 359 (Trib.); 2003 PTD (Trib.) 1085; (1992) 63 Tax 265 and 1994 PTD (Trib.) 688 rel.

Muhammad Saeed Chaudhry for Appellant.

Nemo for Respondent.

Date of hearing: 13th September, 2003.

2004 P T D (Trib.) 1233

[Income-tax Appellate Tribunal Pakistan]

Before Syed Nadeem Saqlain, Judicial Member and Javed Tahir Butt, Accountant Member

I.T.A. No.4475/LB of 2000, decided on 5th September, 2003.

Income Tax Ordinance (XXXI of 1979)---

----S. 62---Assessment on production of accounts, evidence etc.--­Assessee, a public limited company---Declaration of loss---Income was assessed without issuance of notice under S.62 of the Income Tax Ordinance, 1979 and pointing out any defects in the books of accounts-­Validity---Proceedings conducted in absence of notice under S.62 of the Income Tax Ordinance, 1979 would be nullity in the eye of law and not sustainable---Appeal of department was dismissed by the Appellate Tribunal being devoid of merits.

1999 PTD (Trib.) 3892 and 2002 PTD (Trib.) 1583 rel.

Nemo for Appellant.

Tipu Sultan, I.T.P. for Respondent.

Date of hearing: 15th August, 2003.

2004 P T D (Trib.) 1240

[Income-tax Appellate Tribunal Pakistan]

Before S. Hasan Imam, Judicial Member and Agha Kafeel Barik, Accountant Member

I.T.A. No.760/KB of 2002, decided on 2nd November, 2003.

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

----Ss. 52-A & 86---Recovery from the person from whom tax was not deducted or collected---Additional tax---Section 52-A of the Income Tax Ordinance, 1979 had nothing to do with S.86 of the Income Tax Ordinance, 1979---Law did not empower the department to impose additional tax under S.86 of the Income Tax Ordinance, 1979 in the case of deductee/payee who had been already charged under S.52-A of the Income Tax Ordinance, 1979---Section 86 of the Income Tax Ordinance, 1979 was an independent section, action wherein was possible alongwith action under S.52 of the Income Tax Ordinance, 1979 end not under S.52-A of the Income Tax Ordinance, 1979.

2000 PTD (Trib. 484 rel.

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

----Ss. 156, 86 & 52-A---Rectification of mistake---Charge of additional tax under S.86 of the Income Tax Ordinance, 1979 by treating the assessee in default under S.52-A of the Income Tax Ordinance, 1979--­Application for adjustment/refund of such additional tax wrongly charged/paid by way of rectification of such order under S.1 .56 of the Income Tax Ordinance 1979 without moving first for cancellation of order passed under S.86 of the Income Tax Ordinance, 1979 by way of appeal or rectification ---Validity---Assessee had moved rectification application in assessment proceedings and had requested for refund adjusting the amount relating to S.86 of the Income Tax Ordinance, 1979 which was not legally possible for the reason that adjustment of amount related to S.86 of the Income Tax Ordinance, 1979 and refund thereof would be legally possible in case the order under S.86 of the Income Tax Ordinance, 1979 was cancelled by way of appeal or rectification in the original order under S.86 of the Income Tax Ordinance, 1979---Order under S.86 of the Income Tax Ordinance, 1979 was separately passed to create -an independent charge which was still in field ---Assessee had moved rectification application in the assessment proceedings without seeking any relief against the order under S.86 of the Income Tax Ordinance, 1979 which still was in the field ---Assessee suffered because of invoking wrong jurisdiction for adjustment or credit of tax charged as additional tax, under S.86 of the Income Tax Ordinance, 1979 treating the assessee in default under S.52-A of the Income Tax Ordinance, 1979--­As long as the order under S.86 of the Income Tax Ordinance, 1979 was in field rectification application for refund of such additional tax would not be legally possible ---Assessee ought to have moved application for cancellation of the order under S.86 of the Income Tax Ordinance, 1979 by way of rectification and then to move for refund but due to failure to strike off the order under S.86 of 'the Income Tax Ordinance, 1979 there remained no question of allowing the rectification application containing request for adjustment credit of additional tax under S.86 of the Income Tax Ordinance, 1979 earlier levied in pursuance of order under S:52-A of the Income Tax Ordinance, 1979---Appeal was dismissed by the Appellate Tribunal in the circumstances'.

Abdul Tahir A.R. for Appellant

Faiz Elahi D.R. for Respondent.

Date of hearing: 29th September, 2003.

2004 P T D (Trib.) 1251

[Income-tax Appellate Tribunal Pakistan]

Before Muhammad Ashfaq Baluch, Judicial Member and Agha Kafeel Barik, Accountant Member

R. A. No.411/KB of 2003 in ref: M.A. Rec. No. 17/KB, decided on 8th November, 2003.

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

----S. 80-C(2)(ii)---Tax on income of certain contractors and importers--­Machinery and equipment, import of---Final discharge of tax liability--­Principles---Section 80-C (2)(ii) of the Income Tax Ordinance, 1979 though did not provide any exception from this provision to a commercial importer, yet the entire Scheme of Presumptive Tax Regime is focused on taxing the deemed income which is in the nature of turnover or sales of such goods, which were subsequently sold and generated profits---Machinery and equipments imported and installed by an assessee in his industrial undertaking was a fixed asset and did not generate profit in terms of sales or supplies like any other goods.

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

----S.80-C (2)(ii)---Tax on income of certain contractors and importers--­Goods---Connotation---Word "goods" connotes to a "merchandize" i.e. something which is stock-in-trade or is available for sale by a merchant or a trader.

Black's Law Dictionary ref.

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

----Ss. 80-C(2)(ii) & 50(5)---S.R.O. 593(I)/91, dated 30-6-1991---C. B. R. Circular No. 12 of 1991; dated 30-6-1991---Tax on income of certain contractors and importers---Withholding tax ---Exemption---Principles--­Commissioner of Income Tax though cannot allow exemption to an assessee from the applicability of S.80-C (2)(ii) of the Income Tax Ordinance, 1979 under his powers to grant exemption from withholding tax under S.50(5) of the Income Tax Ordinance, 1979 under various clauses of S.R.O. 593(I)/91, dated 30-6-1991, yet there is a nexus between the two provisions of law---Provisions of S.80-C of the Income Tax Ordinance, 1979 applies only to those cases of importers which are subjected to withholding tax under S.50(5) of the Income Tax Ordinance, 1979---Although classes of persons as 'Provincial Government' and `Local Authority' are exempt from withholding tax under S.50(5) of the Income Tax Ordinance, 1979 vide clauses (i) and (ii) of S.R.O. 593(I)/91, dated 30-6-1991 there is no exception otherwise available to them under S.80-C of the Income Tax Ordinance, 1979.

(1999) 80 Tax 262 ref.

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

----Ss. 80-C (2)(ii) & 50(5)---Tax on income of certain contractors and importers---Application---Principles---While S.80C(1) of the Income Tax Ordinance, 1979 applies to certain classes of persons specified in subsection (2) of S.80-C 7of the Income Tax Ordinance, 1979, it is not applicable to cases where S.50(5) of the Income Tax Ordinance, 1979 was not applicable.

(e) Income Tax Ordinance (XXXI of 1979)---

----Ss. 80-C (2)(ii) & 50(5)---Tax on income of certain contractors and importers---Import of machinery and equipment for installation in industrial undertaking---Deduction of tax at source---Non-production of certificate of Commissioner of Income Tax---Adjustment of tax deducted at source against other tax liability ---Validity---Commissioner of Income Tax had to certify in respect of the physical installation of the machinery, which was a stage next to the import---Commissioner of Income Tax had also to certify about the ownership of the industrial undertaking by the person importing plant and machinery etc.--If such certificate was not produced, and deduction of tax under S.50(5) of the Income Tax Ordinance, 1979 had been made by the Collector of Customs at import stage it did not imply that provision of S.80-C of the Income Tax Ordinance, 1979 would apply in such cases automatically ---Non­ production of a certificate from Commissioner of Income Tax could be an irregularity which could be removed even after import of such machinery etc. and the assessee would suffer withholding tax at import stage under S.50(5) of the Income Tax Ordinance, 1979 for clearance of the machinery, he would not be subjected to the application of S. 80-C of the Income Tax Ordinance, 1979---Assessee, in such an event would get the credit of tax deducted under S.50(5) of the Income Tax Ordinance, 1979 at import stage which would be adjusted against his other tax liability for the relevant year.

(f) Income Tax Ordinance (XXXI of 1979)---

----Ss. 136(1) & 80-C---Reference to High Court---Question was whether Appellate Tribunal was justified to hold that plant and machinery imported by the assessee-company for its own use would not be liable to presumptive taxation, whereas the law restricted the concession to import of plant and machinery by `industrial undertakings' only---Held, question framed by the Department had not arisen out of the order of Appellate Tribunal as the Appellate Tribunal had nowhere given any decision on the ownership of an industrial undertaking by the assessee, which fact had not been otherwise disputed by the Department---Question was on a point of fact, which was ascertainable from the record of the assessee as well as the physical verification about the existence of industrial undertaking owned by the assessee-company as well as installation of imported machinery and equipment therein---Appellate Tribunal in circumstances set aside the order of Inspecting Additional Commissioner passed under S.66-A of the Income Tax Ordinance, 1979---Reference application was dismissed by the Appellate Tribunal being devoid of merits.

(g) Income Tax Ordinance (XXXI of 1979)---

----Ss. 136(1), 50(5) & 80-C---Reference to High Court---Question whether Appellate Tribunal was justified in directing that tax deducted under S.50(5) of the Income Tax Ordinance, 1979 may be adjusted against the tax liability of subsequent years whereas subsection (3) of section 80-C of the Income Tax Ordinance, 1979 did not authorize any allowance, deduction, or refund against the presumptive income---Held, question about adjustment of tax at source against subsequent years liability of the assessee was not the issue before Appellate Tribunal in departmental rectification application---Such point would arise if the Appellate Tribunal had held that the import of machinery fell under Presumptive Tax Regime---Reference application was dismissed by the Appellate Tribunal being devoid of merits.

(h) Income Tax Ordinance (XXXI of 1979)-----

----S. 136(1)---Reference to High Court---Filing of reference application after 90 days from the date of order---Validity---Reference application filed by the Department was barred by time, besides being devoid of merits the same was dismissed by the Appellate Tribunal.

(i) Words and phrases---

--------"Goods"---Connotation.

Black's Law Dictionary ref.

Sajjad Ahmed, D.R. for Applicant.

Saifuddin Adeeb, A.R. for Respondent.

Date of hearing: 8th November, 2003.

2004 P T D (Trib.) 1282

[Income-tax Appellate Tribunal Pakistan]

Before Khalid Waheed Ahmed Judicial Member and Imtiaz Anjum, Accountant Member

W.T.As. Nos. 1922/LB to 1926/LB of 2002, decided on 28th February, 2003.

(a) Wealth Tax Act (XV of 1963)-----

----S. 2(5)---Assets---Status---Association of Persons---Assessment year 1996-97---No assessment in the status of Association of Persons could legally be made because of the amendment brought in section 2(5) of the Wealth Tax Act, 1963 by virtue of Finance Act; 1996---Assessment framed in the status of Association of Persons for the assessment year 1996-97 was cancelled by the Appellate Tribunal.

(b) Wealth Tax Act (XV of 1963)---

----S. 2(5)(ii)---Assets---Property inherited by the co-owners was let out--Taxation ---Assessee contended that inherited property was let out only after the death of principal owner because the family was forced to let it out since they had no, other source of income and property was not held for purpose of letting out and intention of the assessee was manifested from the fact that property was not acquired or constructed for purposes of letting out and the share in the property of co-owners were definite and each co-owner was liable to be taxed in respect of his share---Validity---Status of the assessee and of the property as on the valuation date were material for the purpose of wealth tax assessment for a particular year and it was always not necessary that for what purpose the property was acquired---Property purchased for the purpose of construction, sale or letting out may not be held for the same purpose during the subsequent years vis-a-vis a property not acquired for the purpose of construction, sale or letting out may be held for these purposes during a subsequent year---Undisputed facts had proved that the co-owners ventured to earn income by jointly letting out property during the years under consideration---Intention of all the co-owners to hold the property for purpose of letting out on the relevant valuation dates in terms of provisions of S.2(5)(ii) of the Wealth Tax Act, 1963 was established---Appeals were rejected by- the Appellate Tribunal.

(1984) PTD (Trib.) 157 and (1967) PTD (Trib.) 160 irrelevant.

Shabbir Ahmed, FCA/AR for Appellant.

Mrs. Sameera Yasin, D.R. for Respondent.

Date of hearing: 26th February, 2003.

2004 P T D (Trib.) 1293

[Income-tax Appellate Tribunal Pakistan]

Before Inam Ellahi Sheikh, Chairman and Munsif Khan Minhas, Judicial Member

I.T.As. Nos. 821/IB to 823/IB of 2002, decided on 4th September, 2003.

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

----Ss. 52 & 86---Liability of persons failing to deduct or pay tax---Tax levied in respect of purchases, which were considered to be taxable under S. 52 of the Income Tax Ordinance, 1979, ignoring that such purchases were less than Rs. 25,000 from each party was deleted by the First Appellate Authority---Department pleaded that assessee had not filed the details or were not verifiable---Validity---Department was unable to point out any such provision of law under which the Assessing Officer could demand such information from the assessee---Assessing Officer had not pointed out any single instance where the payment to one party had been made in excess of Rs.25,000---Assessing Officer thus proceeded on presumptions and surmises---Provision of S.50 read with S.52 and other related sections such as 139, 140 and 142 etc. of the Income Tax Ordinance, 1979 were harsh and extraordinary burden on taxpayers or on any person who was not earning income on which the tax was being charged under these provisions:--Various specified persons had been entrusted with task to deduct tax at the time of making payment and then deposit the same into the Government treasury alongwith specific information and then file specified statements with the Revenue Officers---No benefit accrued to person collecting the tax, he was burdened with various liabilities---If he failed to deduct tax or if tax was not deposited, he himself became liable to pay such tax and also suffer additional tax and penalties for non-deduction or non deposit of tax or non-filing of various statements---Department had to proceed strictly in accordance with law before levying burden on the person who may or who may not have been required to deduct or who may or who may not have defaulted in such duties---Department could not proceed on surmises and presumptions to levy -such taxes or penalties---Clear provisions were to be .made to empower an officer as to how he was to know whether somebody had male any such payment which attracts the provisions of S.50 or S.52 of the Income Tax Ordinance, 1979--­Department could use the information obtained by it from the assessee in the shape of details of supplies -and sales made to various parties and claim of tax deduction therein---Departmental appeal was dismissed by the Appellate Tribunal being without any force.

Naushad Ali Khan D.R. for Appellant.

Mr. Shahid Farid, ACA for Respondent.

Date of hearing: 4th September, 2003.

2004 P T D (Trib.) 1301

[Income-tax Appellate Tribunal Pakistan]

Before Inam Ellahi Sheikh, Chairman and Muhammad Jahandar, Judicial Member

W.T.As. Nos. 316/IB to 318/IB of 2002, decided on 15th August, 2003.

(a) Wealth Tax Rules, 1963---

----R. 8(2)(c)(ii)---Valuation of shares---Break-up value ---Assessee reduced the losses of retention money and income tax refund which were not refundable from total value of equity of company while calculating break-up value of shares---Assessing Officer rejected such contention and computed the break-up value of shares as per balance-sheet---First Appellate, Authority considering the history of the case and other parallel case directed the Assessing Officer to adopt the value of shares at cost value declared by the assessee---Validity---Shares of a private company were to be valued at break-up value, as shown by the balance-sheet, or at the face value whichever was higher---Total worth of the Company should not be reduced by some amounts which had not been recovered or were not considered recoverable as the Company itself had not recognized such amount as charges in its balance-sheet---If such claim of the assessee was accepted then the balance-sheet of the company had to be rejected as false and that would attract actions under the Company law against the assessee and also "the management as well as the Auditors of the Company---Value assessed by the Assessing Officer was restored by the-Appellate Tribunal.

(b) Wealth Tax---

----Addition in liabilities---Disallowance of---Assessing Officer disallowed the addition in liabilities as there was no addition in the assets as compared to the earlier years and thus no new asset was acquired--­First Appellate Authority allowed such liabilities---Validity---Appellate Tribunal held that in such situation the liabilities were to be allowed--­Only such liabilities were to be disallowed which were secured against, or, which were incurred for the acquisition of assets which were not taxable.

2001 PTD 1496 rel.

Naushad Ali Khan, D.R. for Appellant.

Akhtar Hussain for Respondent.

Date of hearing: 13th August, 2003.

2004 P T D (Trib.) 1348

[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. 414/LB to 418/IB of 2002, 1/IB to 6/IB of 2003, decided on 12th November, 2003.

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

‑‑‑‑S. 83‑A‑‑‑Income of a minor child‑‑‑Parent‑‑‑Determination‑‑‑Result of words minor child of the assessee and the assessee shall be the parent determined by the Deputy Commissioner of Income Tax' would be that a parent would be either father or mother of the minor child and none else‑‑‑Use of wordminor child' is not without any significance and the minor child would mean minor child of the assessee and undoubtedly a child would not' be taken to be a child of the grandfather or grandmother or a child of someone else than his own parents‑‑‑Opening provision of S.83‑A bf the Income Tax Ordinance, 1979 signified the relationship of minor with the assessee that the minor should be a minor child of the assessee‑‑‑Minor child could not be other than offspring of parent/ assessee who may be either his mother or father.

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

‑‑‑‑S. 83‑A‑‑‑Income of a minor child‑‑‑Explanation‑‑‑Parent‑‑‑Grand­father‑‑ Explanation of S.83‑A of the Income Tax Ordinance, 1979 did not take away the very natural relationship of a minor child with the assessee and it only empowers the Assessing Officer to determine as to whether the father or the mother should be taken to be the parent of minor child for clubbing the income of minor child with the income of assessee/father or assessee/mother as the case may be‑‑‑Explanation could not be stretched too far to bring the grandfather of a minor to be determined as parent of minor child.

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

‑‑‑‑S. 83‑A‑‑‑Income of a minor child‑‑‑Parent‑‑‑Parent could be either father or mother of the minor child, and none else in the category of relationships for the purpose of S.83‑A of the Income Tax Ordinance 1979 and the Assessing Officer is only to determine as to who amongst the father or the mother if both are assessees would be the parent for the minor child for clubbing the income of minor child.

P.R. Aiyar's Concise Law Dictionary (1997 Edn.); Chambers Dictionary; Law Lexicon and Black's Law Dictionary; 5th Edn. ref.

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

‑‑‑‑S. 83‑A‑‑‑Income of a minor child‑‑‑Parent‑‑‑Grandfather‑‑‑Income of minor child was clubbed with the income of grandfather of the minor treating the grandfather as parent of minor‑‑‑Validity‑‑‑Clubbing of income of the minor with the income of the grandfather of the minor was improper and illegal and as such the action taken by the Inspecting Additional Commissioner under S.66‑A of the Income Tax Ordinance, 1979 was unsustainable in the eye of law and liable to be struck down‑‑­Order of Inspecting Additional Commissioner was cancelled by Appellate Tribunal and restored that of Assessing Officer finalized under S.59(1) of the Income Tax Ordinance, 1979.

AIR 1963 SC 677; (1954) 26 ITR 775; (1966) 62 ITR 526; (2002) 85 Tax 239; AIR 1963 SC 1279; (1966) 59 ITR 12 and 1995 PTD (Trib.) 289 not relevant.

Mansoor Ahmed Bajwa D.R. for Appellant.

Sardar Sikandar Hayat Khan for Respondent.

Date of hearing: 7th November, 2003.

2004 P T D (Trib.) 1377

[Income‑tax Appellate Tribunal Pakistan]

Before Rasheed Ahmed Sheikh, Judicial Member and Javed Tahir Butt, Accountant Member

I.T.A. No.2429/LB of 2000, decided on 23rd September, 2002.

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

‑‑‑‑S.12(18)‑‑‑Income deemed to accrue or arise in Pakistan‑‑‑Company‑­Director‑‑‑Lean‑‑‑Amount paid by the directors from their personal bank account on .behalf of company/assessee in order to clear its tax liability, to third parties from whom new buses had to be purchased and cash loan received from sister companies by recording transfer entries was shown as loan received from directors in the books of account of the company) assessee‑‑‑Such amount was added in the total income under S.12(18) of the Income Tax Ordinance, 1979 on the ground that the payments should have been routed through the company's bank account rather making direct payment by the director to the third parties‑‑‑Validity‑‑‑Specific purpose of S.12(18) of the Income Tax Ordinance, 1979 was to check ­fictitious loan and to preclude back dated introduction of credit in the books of account‑‑‑Where genuine loans shown to have been received from identifiable persons either cash or through the banking channel should not be treated as deemed income of the assessee merely on the ground that the amount of loan had not been received through crossed cheque‑‑‑Where nature and sources of money was not satisfactorily explained, addition to the income of the assessee could still be made under S.13 of the Income Tax Ordinance, 1979, notwithstanding the claim that any loan was received through crossed cheque etc.‑‑­Withdrawal of amount by the director of the company from his personal bank account and clearance of company's tax liability had never been disputed by the Department, likewise, payment made on behalf of company/assessee by another director by way of crossed cheque to the manufacturer of buses which were intended to be purchased by the company/assessee, was never subject of objection by the Assessing Officer‑‑‑Addition made under S.12(18) of the Income Tax Ordinance, 1979 was not legally made and Assessing Officer had not lawfully exercised his powers‑‑‑Action of Assessing Officer treating the sum as assessee's deemed income under S:12(18) of the Income Tax Ordinance, 1979 did suffer from legal infirmity‑‑‑Order of First Appellate Authority was vacated and addition made by the Assessing Officer was deleted by the Appellate Tribunal.

2002 PTD 63; I.T.As. Nos.331 and 331‑A/PB of 1997‑98 and 2002 PTD (Trib.) 2133 rel.

Ramkola Sugar Mills (Pvt.) Ltd. v. CIT, Punjab and N.‑W. F. P. Lahore 1955 SCC (Federal Court) distinguished.

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

‑‑‑‑Ss. 63 & 62‑‑‑Best judgment assessment‑‑‑Ex parte assessment for non-production of books of account at the time of assessment ‑‑‑Validity‑‑Framing of ex parte assessment could not be held good because the assessee had all along been replying to the notices issued on various dates coupled with it the auditors appointed by the department had in their report acknowledged production of books and other allied documents and details‑‑‑Had the assessee not produced any books of accounts during the course of assessment proceedings that would only entail penalty proceedings rather resorting to ex parte assessment‑‑‑Ex parte order passed under S.63 of the Income Tax Ordinance, 1979 was converted into under S. 62 of the Income Tax Ordinance, 1979.

Ahmed Nauman Sheikh, ITP and Iqbal Hashmi for Appellant.

Mian Ashiq Hussain, LA for Respondent.

Date of hearing: 6th April, 2002.

2004 P T D (Trib.) 1391

[Income‑tax Appellate Tribunal Pakistan]

Before Inam Ellahi Sheikh, Chairman and Syed Masoodul Hassan Shah, Judicial Member

I.T.A. No. 369/IB of 2003, decided on 11th December, 2003.

Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑Ss. 154, 59(1) & 13(1)(aa)‑‑‑Service of notice ‑‑‑Self‑assessment‑‑­Notice for short document was served on servant/employee ‑‑‑ Initiation of proceedings under normal law for non‑compliance of short document notice‑‑‑Addition‑‑‑First Appellate Authority set aside the order with the direction that either Assessing Officer will prove beyond doubt that `Short Document Notice' was duly and timely and validly served upon the assessee or will have to accept the declared income under S.59A of the Income Tax Ordinance, 1979‑‑‑Validity‑‑‑Service of notice on servant of an assessee could not be regarded as a proper or valid service because other than service by post the service could be made firstly on the assessee in person or upon his agent empowered/authorized to accept service and in their absence then upon an adult male member of the family of the assessee‑‑‑Servant/employee of a person could not be taken to be an authorized or empowered person to accept service on behalf of his master except when he had been specifically empowered or authorized to accept the service‑-‑Proceedings carried out in consequence of service of notice on employee of assessee by presuming the service to have been effected upon the assessee, would stand vitiated because mandatory requirement of law for a proper and valid service of notice to be made upon the assessee, had not been complied with by the department‑‑‑Case was in fact a case of annulment/cancellation of assessment rather than setting aside the assessment‑‑‑Order of setting aside the assessment by the First Appellate Authority was modified with that of the cancellation of assessment by Appellate Tribunal and consequently declared version was accepted.

(1967) 15 Tax 103 and (1961) 3 Tax 68 rel.

Mansoor Ali Malik for Appellant.

Noshad Ali Khan, D.R. for Respondent.

Date of hearing: 4th December, 2003.

2004 P T D (Trib.) 1396

[Income‑tax Appellate Tribunal Pakistan]

Before Ehsan‑ur‑Rehman, Judicial Member and Muhammad, Sharif Chaudhary, Accountant Member

I.T.As. Nos. 3139/LB and 3267/LB of 2000, decided on 14th January, 2004.

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

‑‑‑‑Ss. 13(2) & 13(1)(d)‑‑‑Unexplained investment etc., deemed to be income‑‑‑Double approval‑‑‑By mentioning separately Ss. 13(2) & 13(1) of the Income Tax Ordinance, 1979 in the order sheet in respect of approvals from Inspecting Additional Commissioner, Assessing Officer acknowledged the legal issue of simultaneous two approvals which had supported the objection raised by the assessee that approvals at two steps were required‑‑‑Only one consolidated approval had been obtained and said consolidated approval in place of two separate approvals was not approved.

2000 PTD 439 and 2001 PTD 781 rel.

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

‑‑‑‑Ss. 13(1)(d) & 65‑‑‑Income Tax Rules, 1982, R. 207‑A‑‑‑Addition‑‑­Parallel case‑‑‑Addition by valuing property on the basis of parallel case‑‑‑Validity‑‑‑Addition was made on the basis of parallel case‑‑­Except suspicion there was nothing on record to prove that any consideration which was over and above what had been recorded in the registered deed had ever passed on to the seller from the buyer the appellant/assessee‑‑‑Valuation adopted by the Assessing Officer and its partial decrease at first appeal stage were not maintainable‑‑‑Addition made under S.13(1)(d) was devoid of any legal sanction and was a nullity in the eye of law and the same was deleted by the Appellate Tribunal.

2002 PTD 71; 2003 PTD (Trib.) 714 and 2002 PTD 2418 rel.

Muhammad Shahid Abbass for Appellant (in I.T.A. No.3139/LB of 2000).

Sheraz Mirza, D.R. for Respondent (in I.T.A. No.3139/LB of 2000).

Sheraz Mirza, D.R. for Appellant (in I.T.A. No.3267/LB of 2000).

Muhammad Shahid Abbass for Respondent (in I.T.A No.3267/LB of 2000).

Date of hearing: 13th January, 2004.

2004 P T D (Trib.) 1407

[Income‑tax Appellate Tribunal Pakistan]

Before Munsif Khan Minhas, Judicial Member and Mazhar Farooq Shirazi, Accountant Member

I.T.As. Nos. 4294/LB, 4976/LB of 2003 and 4550/LB of 2002, decided on 10th January, 2004.

Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑S. 62‑‑‑Assessment on production of accounts, evidence etc.‑‑­Accounts case‑‑‑Estimation of sales without pointing out any defects in accounts‑‑‑Validity‑‑‑Appellate Tribunal directed the Assessing Officer to accept the declared version of the assessee since no instance of defective nature in accounts had been quoted in the assessment order.

1974 PTD 45 and 1999 PTD (Trib.) 3892 ref.

Muhammad Shahid Abbas for Appellant (in I.T.A. No.4294/LB of 2003).

M. Akram Tahir, D.R. for Respondent (in I.T.A. No.4294/LB of 2003).

M. Akram Tahir, D.R. for Appellant (in I.T.As. Nos.4976/LB of 2003 and 4550/LB of 2002).

Muhammad Shahid Abbas for Respondent (in I.T.As. Nos.4976/LB of 2003 and 4550/LB of 2002).

Date of hearing: 10th January, 2004.

2004 P T D (Trib.) 1419

[Income‑tax Appellate Tribunal Pakistan]

Before Ehsan‑ur‑Rehman, Judicial Member and Muhammad Sharif Chaudhary; Accountant Member

W.T.A. No.429/LB of 2003, decided on 22nd September, 2003.

(a) Wealth Tax Act (XV of 1963)‑‑‑

‑‑‑‑S. 16(5)‑‑‑Assessment Order‑‑‑Assessment Order was passed without mentioning the name of circle, designation of officer passing the Order and also without issuance of notices under Ss. 16(4) and 16(3) of the Wealth Tax Act, 1963‑‑‑Validity‑‑‑Assessment order was not on a prescribed format and Assessing Officer had failed to mention the factor while necessitated him not to pass order on the prescribed format‑‑­Assessing Officer had passed an order by only mentioning as "under S.16(5)" on the right side of the upper portion without stating the factors which compelled him for passing such ex parte order and' also there was no mention of the issuance of any statutory notice prior to the framing of assessment‑‑‑Hand written order was even silent as to the closing para. of the order specifying the framing of assessment, issuance of copy of order with notice of demand‑‑‑Assessment order had not given the circle of assessment‑‑‑Appellate Tribunal vacated the order passed by the First Appellate Authority and cancelled the tax demand as there was no legally passed assessment order against the appellant/assessee in the circumstances.

1989 PTD 1302; 1989 PTD 1305; 1987 PTD (Trib.) 129 and 2003 PTD (Trib.) 2749 ref.

(b) Wealth Tax Act (XV of 1963)‑‑‑

‑‑‑‑S. 16‑‑‑Assessment order‑‑‑Essential ingredients of assessment order‑‑‑Assessment order has to be on a format as specified by the department itself, thus ensuring the presence of ingredients so set out; order should expressly mention the section under which it has been passed and not merely marking "section 16(5) (3);" issuance with the service of such statutory notices should be stated the reasons for assumption of jurisdiction by the Assessing Officer in a clear and categorical manner; factors necessitating for resorting to ex parte order under section 16(5)(3); concluding part after creation of tax demand validating the assessment made with the directions on issuance of copy of the assessment order with notice of demand shall be integral part of the assessment order and only the cumulative presence of the said pre-requisites could give a shape to any assessment order.

Saeed Ahmed Chaudhary for Appellant.

Bashir Ahmed Shad, D.R. for Respondent.

Date of hearing: 11th September; 2003.

2004 P T D (Trib.) 1424

[Income‑tax Appellate Tribunal Pakistan]

Before Ehsan‑ur‑Rehman, Judicial Member and Muhammad Sharif Chaudhary, Accountant Member

I.T.A. No.4680/LB of 2003, decided on 30th December, 2003.

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

‑‑‑‑Ss. 59(1) & 50(7E)‑‑‑C.B.R. Circular No.11, of 1997‑‑‑Self-­assessment‑‑‑Under construction building was purchased with its 29 electricity connection meters‑‑‑During the period of demolishing of old structure and the construction of new building these 29 electricity connections were maintained in the premises by making payments of monthly bills and claimed the credit for tax deduction alongwith the paid monthly bills‑‑‑Assessing Officer excluded the return from Self­-Assessment Scheme on the ground that electricity bills alongwith tax deduction under S.50(7E) of the Income Tax Ordinance, 1979 had illegally been claimed as these payments were fictitious and return did not qualify for acceptance under broad‑based Self‑Assessment Scheme due to short payment of tax‑‑‑First Appellate Authority upheld the action of Assessing Officer by stating that no documentary evidence in respect of electricity meters were available with the assessee‑‑‑Validity‑‑‑Short payment of tax arose when the assessee had been denied the benefit of tax deduction under S.50(7E) of the Income Tax Ordinance, 1979 without any reason‑‑‑By exercising authority judiciously it was incumbent upon the concerned Assessing Officer to obtain the entire information from the electricity department prior to refusing the credit for the tax deduction‑‑‑First Appellate Authority totally failed to discharge its duty in a judicious manner as it had failed to comment even on the action of the Assessing Officer on denying the benefit of tax deduction and as to how the claiming of credit for tax deduction under S.50(7E) of the Income Tax Ordinance, 1979 could be held as illegal and factually incorrect by Assessing Officer‑‑‑First Appellate Authority failed to take cognizance of the fact that contention of assessee could be cross checked from the relevant electricity authorities who were sitting at the same station‑‑‑Assessment framed was nullity in the eye of law and the same was cancelled by the Appellate Tribunal.

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

‑‑‑‑S. 59(4)‑‑‑Self‑Assessment‑‑‑Limitation‑‑‑Assessment year 1997‑98‑‑­Rejection of claim of Self‑Assessment Scheme after the expiry of financial year next following the assessment year i.e. 30‑6‑1998‑‑­Validity‑‑Act of Assessing Officer was a clear cut violation of expressed provisions oaf S.59(4) of the Income Tax Ordinance, 1979 thus was outside the scope of law which was ab initio void thus was not sustainable‑‑‑Whatever the Assessing Officer was to do should have been done within the scope of law‑‑‑Limitation prescribed in S.59(4) of the Income Tax Ordinance, 1979 should have been strictly followed the Assessing Officer‑‑‑Limitation for acceptance or rejection of claim for Self‑Assessment Scheme expired on 30‑6‑1998‑‑‑Failure of Assessing Officer to proceed till 30‑6‑1998 had debarred the passing of any order‑‑‑Passing of order after 30‑6‑1998 was ultra vires which was nullity in the eye of law.

Shahid, Abbass for Appellant.

Muhammad Zulfiquar Ali, D.R. for Respondent.

Date of hearing: 18th December, 2003.

2004 P T D (Trib.) 1470

[Income Tax Appellate Tribunal (Pakistan)]

Before Hasan Imam Judicial Member and Agha Kafeel Barik Accountant Member

I.T.A. No. 345/KB of 2003, decided on 31st October, 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) Cl. 1.1(e) & 1.2, "Note"‑‑‑Declared total income included salary income more than 50% of total income‑‑‑Return was set apart for normal assessment on the ground that income shown was far below from the last assessed income and it should have been at least 20% more than the last assessed income (tax paid was less than 20 % from the tax paid from the last year)‑‑‑Assessee contended that return was fully qualified to be processed under Self‑Assessment Scheme as salary of the assessee was much more than 50% of the total income declared and condition to pay tax by more than 20% of the tax last assessed would not be applicable in the case of assessee for the purpose of qualifying the Self‑Assessment Scheme‑‑‑Validity‑‑‑Cl. 1.1(e) of the Self‑Assessment Scheme provided that all returns filed by the Tax Payers shall be eligible in case of persons not being companies, where tax payable on income declared was higher by 20% or more of the tax payable on the income last declared or assessed which was higher‑‑‑Situation will be changed due to application of "Note" 'appended to clause 1.1 which clarified the condition regarding percentage increase in tax shall not be applicable if income consisted of or included salary and such income constituted more than 50% of the total income declared for the year‑‑­Assessing Officer failed to appreciate that percentage of salary income constituted more than 50 % of total income and as such condition of tax to be higher by 20% was not applicable in case of assessee by virtue of "Note" appended to Cl. 1.1.(e) and 1.2 of the said Self‑Assessment Scheme‑‑‑Apart from this, clause (7) of the Self­ Assessment Scheme provided the details of cases where returns would be illegal for the purpose of accepting the claim under Self­ Assessment Scheme, whereas the assessee's case did not fall within any of the sub‑clause of clause (7), hence not only return was eligible for all the purpose but also fit for acceptance under the Self‑Assessment Scheme‑‑‑Process of return under normal law and order of First Appellate Authority approving the treatment given by the Assessing Officer warranted interference being illegal, unjustified and contrary to law as well as to provisions of Self‑Assessment Scheme for the assessment year 2001‑2002‑‑‑Orders of the two authorities below were annulled by the Appellate Tribunal and directed to accept the claim of assessee under Self‑Assessment Scheme.

Udha Ram Rajput for Appellant.

Dr. Faiz Ellahi Memon, D.R. for Respondent

Date of hearing: 1st October, 2003.

2004 P T D (Trib.) 1492

[Income‑tax Appellate Tribunal Pakistan]

Before Khawaja Farooq Saeed, Judicial Member, Amjad Ali Ranjha and Mazhar Farooq Shirazi, Accountant Members

I.T.As. Nos.4061/LB and 4062/LB of 1997, decided on 18th November, 2003.

Per Khawaja Farooq Saeed, Judicial Member and Mazhar Farooq Shirazi, Accountant Member‑‑‑

Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑S. 13(1)(d)‑‑‑Income Tax Rules, 1982, R.207A‑‑‑Addition made on the basis of parallel case in violation of R.207‑A of the Income Tax Rules, 1982, was cancelled by the First Appellate Authority‑‑‑Validity‑‑­No addition could be made beyond the document registered on the basis of District Collector notification by the Assessing Officer unless some specific proof came to the knowledge of the department‑‑‑Action of the Government of prescribing a procedure for addition under S.13 of the 1979 was a welcome step and it had controlled a situation which was bringing a bad name and was more of adverse effect than of positive tax recovery‑‑‑Without going into the nicety of amendment and or other such factors Appellate Tribunal held that R.207‑A of the Income Tax Rules, 1982 was applicable even on the pending proceedings‑‑‑Parallel case which factually was not on all fours on the facts and circumstances of the case could also not be of any help in disregarding instructions of the Legislature in terms of R.207‑A of the Income Tax Rules, 1982‑‑‑Appeal of the, department was dismissed by the Appellate Tribunal.

Messrs Siemen A.G.'s case 1991 PTD 488 rel.

Minority view

Per Mr. Amjad Ali Ranjha, Accountant Member.

Muhammad Asif, D.R. for Appellant.

Muhammad Iqbal Hashmi for Respondent.

Date of hearing: 18th November, 2003.

2004 P T D (Trib.) 1499

[Income‑tax Appellate Tribunal Pakistan]

Before Khalid Waheed Ahmed, Judicial Member and Mahmood Ahmad Malik, Accountant Member

I.T.As. Nos. 523(IB) and 526(IB) of 2003, decided on 8th January 2004.

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

‑‑‑‑S. 62‑‑‑Income Tax Rules, 1982, R.34‑‑‑Assessment‑‑‑Estimation of sales‑‑‑Sales were estimated on the ground that the same were not open to verification because invoices produced were devoid of complete particulars of the clients and the sales were mostly on cash basis and complete addresses of the customers had not been given on the cash memos‑‑‑Assessee contended that no defects were pointed out to the assessee and that the cash memos issued contained the details as required under R.34 of the Income Tax Rules, 1982 and that detailed addresses were not required as per the said rule‑‑‑Sales were reduced by the First Appellate Authority ‑‑‑Validity‑‑‑Assessee had not contested rejection of the declared version‑‑‑Assessee's concern was that adequate relief in estimate of sales had not been given‑‑‑On one hand it was pleaded that addresses of the customers were given on cash memos but on the other hand it was contended that R.34 of the Income Tax Ordinance, 1982 did not require that the assessee should give full particulars of the customers and the declared sales could not be rejected on that ground‑‑‑Assessing Officer had also not evolved any basis for estimate of sales‑‑‑Assessee was not confronted with instances of particular sales which were not verifiable‑‑‑Case was of a private limited company where account books were maintained‑‑‑Appellate Tribunal agreed that relief allowed by the Appellate Tribunal was not adequate and further reduced the estimation of sales.

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

‑‑‑‑Third Sched., R. 5A Category‑E & R.5‑‑‑Depreciation allowance‑‑­First year allowance‑‑‑Assessee was an Internet Service Provider ‑‑­Assessee's claim of First Year Allowance under R.5A of the Third Schedule of the Income Tax Ordinance, 1979 was rejected by the Assessing Officer on the ground that assessee was not an industrial undertaking as provided in Explanation to R.5 of the Third Schedule of the Income Tax Ordinance, 1979 which was confirmed by the First Appellate Authority‑‑‑Validity‑‑‑Under R.5A of the Third Schedule of the Income Tax Ordinance, 1979, First Year Allowance was available apart from manufacturers to other industries including service, infrastructure, social and agricultural sector etc.,‑‑Definition of "industrial undertaking" given in the First Schedule of the Income Tax Ordinance, 1979 was confined to the manufactures etc. Only the First Year Allowance was available both to manufacturers and other industries which includes services industries‑‑‑Definition given in Explanation to R.5 of the Third Schedule of the Income Tax Ordinance, 1979 or given in the First Schedule to the clause "industrial undertaking" will not apply in case of assessee which provided services‑‑‑Conditions laid down in R.5A of the Third Schedule of the Income Tax Ordinance, 1979 would apply in case of assessee‑‑‑Assessee was entitled to the allowance‑‑­Appellate Tribunal held that the assessee be allowed allowance @ 40 % as provided in R.5A of the Third Schedule of the Income Tax Ordinance, 1979.

2002 PTD 470; 1999 PTD (Trib.) 4 and Oxford Advanced Learner's Dictionary ref.

Saeed Anwar Kazmi, ITP for Appellant.

Abdul Shakoor, DR for Respondent.

Date of hearing: 20th December, 2003.

2004 P T D (Trib.) 1514

[Income‑tax Appellate Tribunal Pakistan]

Before Muhammad Ashfaq Baloch, Judicial Member and Agha Kafeel Barik, Accountant Member

R. A. No.449/KB of 2003 in Re: I.T.A. No.61/KB of 2002, decided on 5th November, 2003.

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

‑‑‑‑S. 136 (1)‑‑‑Reference to High Court ‑‑‑Condonation of delay‑‑‑Notice for hearing of application for condonation ‑‑‑Main appeal was disposed of with the application of condonation ‑‑‑Validity‑‑‑If the main appeal was disposed of on the same date after disposing of the condonation application, no irregularity was caused‑‑‑Reference application was dismissed by the Appellate Tribunal.

(2000) 81 Tax 240 (H. C. Kar.) and PLD 1992 SC 369 ref.

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

‑‑‑‑S. 136(1)‑‑‑Reference to High Court‑‑‑Passing of order after 8 months from the date of hearing without rehearing‑‑‑Validity‑‑‑No embargo existed on the Appellate Tribunal not to pass an order after a certain time period ‑‑‑Assessee failed to cite any law that in such a case there should have been rehearing of the appeal‑‑‑Reference was dismissed by the Appellate Tribunal.

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

‑‑‑‑S. 136(1)‑‑‑Reference to High Court‑‑‑Setting aside of order‑‑­Reference‑‑‑Validity‑‑‑No Reference could be admitted by the High Court, where an assessment order had not been set aside by the lower appellate authority.

1988 PTD 111 rel.

Agha Zafar, A.R. for Applicant.

Sajjad Ahmed, D.R. for Respondent.

Date of hearing: 5th November, 2003.

2004 P T D (Trib.) 1517

[Income‑tax Appellate Tribunal Pakistan]

Before Khawaja Farooq Saeed, Judicial Member and Raja Sikandar Khan, Accountant Member

W.T.As. Nos. 1132/LB, 1133/LB of 1995, 443/LB and 444/LB of 2000, decided on 13th January, 2004.

(a) Wealth Tax Act (XV of 1963)‑‑‑

‑‑‑‑S. 2 (5)(ii)‑‑‑Expression "body of individuals"‑‑‑Explanation‑‑‑Body of individuals did not include a Provincial Government a body created through a Statute by the Provincial Government or other such Government and semi‑Government department.

PLD 1965 SC 201; Daccan Wine v. CIT (1977) 106 ITR 111; (1979) 120 ITAR 564; (1983) 48 Tax 100 (H.C. Ind); (1997) 224 ITR 635 and (1979) 120 ITR 564 Page 569 (P & H) rel.

(b) Wealth Tax Act (XV of 1963)‑‑‑

‑‑‑‑S. 23(2)‑‑‑Limitation against order when not maintainable in the eye of law‑‑‑Order of Assessing Officer being not maintainable on the face of it, there was no question of any limitation against such order.

(c) Wealth Tax Act (XV of 1963)‑‑‑

‑‑‑‑S. 24(3)‑‑‑Appeal to Appellate Tribunal‑‑‑Limitation‑‑‑Condonation of delay‑‑‑Issue in case must, as far as possible, be decided on merits ignoring the technical flaws and delay in filing various petitions should be condoned dispassionately.

(d) Wealth Tax Act (XV of 1963)‑‑‑

‑‑‑‑Ss. 23(2) & 2(5)(ii)‑‑‑Cantonment Act (II of 1924)‑‑‑Appeal to the Appellate Additional Commissioner from orders of Deputy Commissioner ‑‑‑Condonation of delay‑‑‑Assets‑‑‑Body of individuals‑‑­Local authority‑‑‑‑Cantonment Board was assessed under the Wealth Tax Act, being body of individuals for the reason that they constructed plaza for the purpose of sale and letting out‑‑‑First Appellate Authority, by condoning delay in filing of appeal, cancelled such assessment on the ground that Cantonment Board was not body of individuals‑‑‑Department contended that First Appellate Authority was not justified in condoning delay for filing of appeal and also that assessee was a body of individuals hence‑taxable under the provisions of Wealth Tax Act, 1963‑‑‑Validity‑‑­Condonation of delay had not caused any prejudice to the department as collection of revenue from the limbs of Government ignoring potent corners from where a sea of revenue could be generated was obviously unfortunate‑‑‑If an assessee was not liable to a charge under a specific Act, any order passed against him was void and challengeable as and when the assessee became conscious and came up with his grievance‑‑­Appeals having no merits were dismissed.

Muhammad Asif, D.R. for Appellant.

Muhammad Azhar Siddique for Respondent.

Date of hearing: 13th January, 2004.

2004 P T D (Trib.) 1523

[Income‑tax Appellate Tribunal Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member and Muhammad Akhtar Nazar Mian, Accountant Member

W.T.A. No.206/KB of 1996‑97, decided on 16th May, 2003.

(a) Transfer of Property Act (IV of 1882)‑‑‑

‑‑‑‑Ss.123 & 129‑‑‑Wealth Tax Act (XV of 1963), Preamble‑‑‑Oral gift‑‑‑Transfer of property how effected‑‑‑Contention of the Department was that oral gift had not created any title in the name of the donees on account of non‑registration of instrument of gift under S.123 of the Transfer of Property Act, 1882‑‑‑Validity‑‑‑Under the provisions of S.129 of Transfer of Property Act, 1882 the gift of immovable property made under Islamic Law was expressly excluded from registration.

(b) Transfer of Property Act (IV of 1882)‑‑‑

‑‑‑‑Ss.123 & 129‑‑‑Wealth Tax Act (XV of 1963), Preamble‑‑‑Oral gift‑‑‑Transfer of property how effected‑‑‑Registration‑‑‑Registration of documents/written instrument in any case would not create a gift but was merely an evidence of gift and as such would not require registration as under. Islamic Law, it is essential to the validity of a gift that there should be a declaration of gift by the donor; an acceptance of the gift, express or implied, by or on behalf of the donee, and delivery of possession of the subject of the gift by the donor to the donee either actually or constructively‑‑‑If said conditions were complied with the gift was complete.

(c) Wealth Tax Act (XV of 1963)‑‑‑

‑‑‑‑S.16‑‑‑Assessment‑‑‑Oral gift‑‑‑Registration‑‑‑Property transferred by oral gift was added in the wealth of assessee‑‑‑First Appellate Authority rejected the appeal of the assessee on the ground that the oral gift did not create any title in the donees in the absence of gift's registration as the gifted shares in the property could not be alienated by the donees‑‑ ­Validity‑‑‑Donees had admittedly declared the income generated acquired through their share of subject property in their income‑tax returns and therefore, property for the purpose of wealth tax could not be taxed in the hands of the appellant/assessee‑‑‑Appellate Tribunal disagreed with the view that gift did not create any legal right in the property without registration‑‑‑Registration did not create the title but was only mode of confirmation of the title‑‑‑Title of the property had been transferred through oral gift which was acceptable under the law‑‑‑Appellant/assessee was to establish that the transferor of title had executed the declaration in confirmation of oral gift and the donees had accepted the gift and had confirmed having taken away the physical possession of the property and had also declared the income from that property in their income‑tax returns‑‑‑Order of First Appellate Authority was vacated and Assessing Officer was directed by the Appellate Tribunal to assess only the share owned by the assessee and exclude the share gifted to her daughter.

1987 SCMR 1403 and 1990 CLC 2027 rel.

A.K. Shamim for Applicant.

Inayatullah Kashani D.R. for Respondent, Date of hearing: 16th May, 2002.

2004 P T D (Trib.) 1543

[Income‑tax Appellate Tribunal Pakistan]

Before Javed Iqbal, Judicial Member and Muhammad Mahboob Alam, Accountant Member

I.T.A. No.61/KB and M.A. (Cond.) No.22/KB of 2002, decided on 19th April, 2003.

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

‑‑‑‑S. 134(4)‑‑Appeal to Appellate Tribunal‑‑‑Limitation‑‑‑Condonation of delay‑‑‑Principles‑‑‑Provision of limitation should only be invoked if the decision of the First Appellate Authority is found to be based on fair and reasonable grounds‑‑‑Technicalities of limitation clause should not be invoked in the aid of any damage to the cause of Revenue.

2000 PTD 344 and PLD 1992 SC 369 rel.

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

‑‑‑‑Ss. 59(1) & 13(1)(aa)‑‑‑C.B.R. Circular No. 9 of 1998, dated 21‑7‑1998 (Self‑Assessment Scheme 1998‑99), Para. 2(h)‑‑‑Exclusion of return from the purview of Self‑Assessment Scheme on the ground of excess stock determined during the raid to what was declared‑‑­Assessment was cancelled by the First Appellate Authority on the ground that determination of excess stock on the basis of raid conducted by the department did not constitute a positive and definite evidence for taking the case out of purview of Self‑Assessment Scheme and no show‑cause notice was issued to give an opportunity to the assessee to rebut the allegation and accordingly assessment officer was directed to accept the return of income under S.59(1) of the Income Tax Ordinance, 1979‑‑­Validity‑‑‑Raiding party found stock on the basis of physical inventory of goods available at the business premises made within a short period of few hours only‑‑‑Difference between the stock discovered by the Department and the capital declared was from unexplained sources liable to be added under S.13(1)(aa) of the Income Tax Ordinance, 1979 to the total income of the assessee‑‑‑Allowance was given for availing the tax Amnesty Scheme in determining the final taxable income as such it was not clear as to why such under‑statement of stock should not be taken as positive evidence for concealment‑‑‑First Appellate Authority had not dilated on this issue and had summarily expressed the opinion that the determination of stock by the raiding party was a simple information and not an evidence for concealment‑‑‑Finding in respect of show‑cause notice was not found correct as the proper show‑cause notice regarding processing of case under normal law had been conveyed‑‑­Order was cancelled on the ground of incorrect appreciation of law and facts relating to acceptability of return filed under Self‑Assessment Scheme and no finding were given on merit of the assessment made by the Assessing Officer‑‑‑Exclusion of case from the purview of Self‑Assessment Scheme was upheld by the Appellate Tribunal and case was remanded to First Appellate Authority for order on merit.

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

‑‑‑‑Ss. 134(3) & 59(1)‑‑‑Appeal to Appellate Tribunal‑‑‑Limitation‑‑­Order by First Appellate Authority causing great injustice to Revenue‑‑­Appeal barred by limitation‑‑‑Canons of limitation could not be put in aid of injustice‑‑‑Condonation of delay‑‑‑Requirement of law and facts relating to determination of concealment of income by the assessee and exclusion of case from the purview of Self‑Assessment Scheme were found to have been overlooked by the First Appellate Authority in cancelling the order of Assessing Officer causing great justice, to the department and the canons of limitation could not be put to aid of such injustice‑‑‑Appellate Tribunal allowed miscellaneous application for condonation of delay and departmental appeal was taken up for regular hearing on merits.

PLD 1987 SC 436 = 1988 PTD 394; 2000 PTD 344; PLD 1992 SC 369 Muhammad Saleem v. Superintendent of Police Sialkot and 2002 PTD 1035 ref.

2000 SCJ 586; 2000 SCMR 706 and 1999 CLC 45 distinguished.

2000 PTD 344 and PLD 1992 SC 369 rel.

Ahmed Saeed Siddiqui, I.A.C. for Appellant.

Agha Faqir Mohammad for Respondent.

Date of hearing: 10th August, 2002.

2004 P T D (Trib.) 1562

[Income‑tax Appellate Tribunal Pakistan]

Before Inam Ellahi Sheikh, Chairman and Muhammad Jahandar, Judicial Member

I.T.As. Nos.372(IB) and 580(IB) of 2003, decided on 9th February, 2004.

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

‑‑‑‑Ss. 59(1) & 80D‑‑‑Self‑Assessment‑‑‑Assessment year 1999‑2000‑‑­Income‑‑‑Total income‑‑‑Loss was declared by carrying forward of losses of previous years‑‑‑Return was claimed to be qualified under Universal Self‑Assessment Scheme on the ground that assessee had paid minimum tax under S. 80D of the income Tax Ordinance, 1979 more than 30% of the last tax paid‑‑‑Para.2(b) of the Self‑Assessment Scheme for the year 1999‑2000 required the declaration of income and not total income which the assessee did‑‑‑Validity‑‑‑After adjusting the income for the year from the business loss, being brought forward from the preceding year, the resultant income declared worked out to be a loss‑‑­Bar of scheme that cases where loss had been shown were not entitled to be processed under Self‑Assessment Scheme was applicable and the assessee's claim of his case for being processed under Universal Self-­Assessment Scheme was not tenable.

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

‑‑‑‑Ss. 55 & 59(1)‑‑‑Return of total income‑‑‑Self‑Assessment Scheme‑‑­Total income‑‑‑Income of a year‑‑‑Chapter‑VII of the Income Tax Ordinance, 1979 regulates the assessment required under S.55 to file a return of the total income which implied the computation of income in accordance with the different provisions of the Income Tax Ordinance, 1979‑‑‑Section 55 of the Income Tax Ordinance, 1979 provided that the return was to be filed of total income and not that of income of a year.

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

‑‑‑‑S. 59(1)‑‑‑Self‑assessment‑‑‑Universal Self‑Assessment Scheme for the assessment year 1999‑2000‑‑‑Held, Scheme as framed by Central Board of Revenue in exercise of powers under S.59(1) of the Income Tax Ordinance, 1979 could not be deemed that by using the word income it had overridden the provisions of the Income Tax Ordinance, 1979 where filing of return of total income was the requirement and not that of income of that year regardless of the necessary deductions of expenses and adjustment of losses.

Noushad Ali Khan, D.R. for Appellant.

Abdul Basit, F.C.A. for Respondent.

Date of hearing: 11th December, 2003.

2004 P T D (Trib.) 1572

[Income‑tax Appellate Tribunal Pakistan]

Before Khawaja Farooq Saeed, Judicial Member and Raja Sikandar Khan, Accountant Member

I. T. As. Nos. 1853/LB, 2694/LB of 2001, 276/LB, 277/LB, 707/LB and 708/LB of 2003, decided on 28th January, 2004.

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

‑‑‑‑S. 62‑‑‑Assessment on production of accounts, evidence etc.‑‑­Rejection of trading accounts on general nature of objections ‑‑‑Validity‑-Large number of purchases pertained to import‑‑‑Sales were effected through broker, agents and distributors‑‑‑Department only laid hand to the quantum of production, variation in rates, utilization of certain material more in quantity than the earlier years‑‑‑All these reasons were of general nature and not a single instance to doubt the purchases or sales was given‑‑‑Department was right in saying that history did not have any bearing but at the same time Appellate Tribunal did not favour the department just for the reason that they claimed to have found variation in rates of the product on the same date and that the production in weight was lower‑‑‑Appellate Tribunal held that there was no proper reason for rejection of accounts and directed for its acceptance.

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

‑‑‑‑S. 12(18)‑‑‑Income deemed to accrue or arise in Pakistan ‑‑‑Loan‑--Claim‑‑‑Unless the assessee claimed the amount to be loan, same could n be treated as such and the provision of S.12(18) of the Income Tax Ordinance, 1979 would not come into force.

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

‑‑‑‑Ss. 12(18) & 13‑‑‑Income deemed to accrue or arise in Pakistan‑‑­Purpose and background‑‑‑Provision of S.12(18) of the Income Tax Ordinance, 1974 was introduced to tax the fictitious loans shown by certain taxpayers to avoid the incidence of taxation ‑‑‑Legislation was obviously not against verifiable amounts, since S.13 of the Income Tax Ordinance, 1979 had proved to be insufficient, the provision was so drafted to cure the lacunas apparently seen in the said deemed income provision‑‑‑Section 12(18) of the Income Tax Ordinance, 1979 came out with another deemed income changed with the language.

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

‑‑‑‑S. 12(18)‑‑‑Income deemed to accrue or arise in Pakistan ‑‑‑Loan‑‑Establishment of loan by arguments‑‑‑Validity‑‑‑Emphasis in language of S.12(18) of the Income Tax Ordinance, 1979 was on sum claimed, sum shown and received as loan which established that assessee himself with full clarity shows an amount as loan‑‑‑No other person came into picture so as to declare an amount which had not been posted as loan to establish by arguments that it was a loan‑‑‑Accounting standard did have a clear system for debit and credit in respect of liability and assets‑‑‑Since the introduction of the provision of S.12(18) of the Income Tax Ordinance, 1979, the fact remained that the assessee should claim that he obtained a sum as cash and that the same was a loan and the Department or any other authority did not figure anywhere.

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

‑‑‑‑S. 12(18)‑‑‑Income deemed to accrue or arise in Pakistan‑‑‑Sister concern‑‑‑Business transaction being payments by one company on behalf of the other sister concern‑‑‑Addition‑‑‑Validity‑‑‑Such was a payment of oneself on behalf of himself though for the accountancy purposes it was so indicated in the accounts of the two different legal persons i.e. separate limited companies‑‑‑Practically this was a payment unto himself‑‑‑Even enlargement of the scope of S.12(18) by way of addition of words "advance or gift" did not affect the part of provision i.e. "where any sum claimed or shown, to have been received as loan" for the two reason, firstly, the same were applicable for 1998‑99 besides they just came in addition to the words "loan" and had no effect on the words "claimed or shown".

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

‑‑‑‑S. 12(18)‑‑‑Income deemed to accrue or arise in Pakistan‑‑‑Loan‑‑­Claim or shown‑‑‑Department had right to look into the actual nature but for determining the same, the declaration of the assessee was not to be ignored‑‑‑Language of S.12(18) of the Income Tax Ordinance, 1979 starts from the words "claimed or shown" which even if were seen from the angle of the department, could not be ignored under any method of interpretation of the language of law.

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

‑‑‑‑S. 12(18)‑‑‑Income deemed to accrue or arise in Pakistan‑‑­Interpretation‑‑‑Purposive approach‑‑‑Purposive approach did not find any place in the rules of interpretation and even under International Accounting Standards no one could change the nature of the entry under the garb of such an approach.

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

‑‑‑‑S. 12(18)‑‑‑Income deemed to accrue or arise in Pakistan‑‑‑Loan‑‑‑Sister concern‑‑‑Amount paid by sister concern on behalf of assessee was definitely a liability but could not be covered within the term "loan".

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

‑‑‑‑S. 12(18)‑‑‑Income deemed to accrue or arise in Pakistan‑‑‑Loan‑‑­Sister concern‑‑‑Trading transactions between the two sister concerns was not covered within the definition of `loan'.

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

‑‑‑‑S. 12(18)‑‑‑Income deemed to accrue or arise in Pakistan‑‑‑Nature of provision‑-‑Tendency of indiscriminate use of the deemed income provisions, which in fact were not meant for generation of Revenue on regular basis‑‑‑Provision of S. 12(18) of the Income Tax Ordinance, 1979 are punitive in character and penal in nature‑‑‑Purpose of the same was more regularization hence should not be considered as a substitute of main charge and regular assessment‑‑‑Such provision could neither be liberally interpreted against the assessee nor the language therein could be ignored by applying it against the intendments which was curling the fictitious loans.

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

‑‑‑‑S. 12(18)‑‑‑Income deemed to accrue or arise in Pakistan ‑‑‑Loan‑‑­Assessee and its sister concern had made some inter related entries in their books wherein payments had been made by one company on behalf of the other and the adjustment entries were accordingly made in the books‑‑‑Addition‑‑‑Validity‑‑‑Fact that if the language so permitted the deemed income provision could not be left inapplicable but where under a clear direction the law says that no one could proceed unless, the condition of `shown and claimed' firstly stands fulfilled, one could not just apply the balance part of the provision of law‑‑‑Addition made could not stand on the test and the same was deleted by the Appellate Tribunal.

(l) Income‑tax‑‑‑

‑‑‑‑Profit & Loss account‑‑‑Add back‑‑‑Principles‑‑‑Department, for add backs in profit & loss account, should not just leap in the dark by making estimates and subjective determinations‑‑‑Facts finding should properly be made by determining the unverifiable element on the basis of documents produced and other allied details in terms of quantity of business, quality required, extent of turnover etc. etc.

(m) Income‑tax‑‑‑

‑‑‑‑Profit & Loss account‑‑‑Add back ‑‑‑ Commission ‑‑‑ Payment of Commission against sale was neither found excessive nor unverifiable if viewed in comparison to the turnover as well as the documents respectively‑‑ ‑Add backs in various heads specially in vehicle running and sale commission was not maintainable in any sense.

(n) Income‑tax‑‑‑

‑‑‑‑Profit & Loss account‑‑‑Add back‑‑‑Commission‑‑‑Addition just for the reason that claim was excessive than the earlier year ‑‑‑Validity‑‑­Factors which should have been brought into discussion, were as to whether the same was fake or bogus and in. this regard the documents submitted should have been brought under discussion‑‑‑Mere objection that they were unverifiable was not enough‑‑‑Reduction by way of estimation was also not to be approved‑‑‑Disallowance made was deleted as a whole by the Appellate Tribunal.

(o) Income‑‑tax‑‑‑

‑‑‑‑Profit & Loss account‑‑‑Add back‑‑‑Vehicle‑‑‑Personal use‑‑‑Element of personal use of the vehicle and the history did warrant additions, which were confirmed by the Appellate Tribunal.

Shabbaz Butt for Appellant (I.T.As. Nos.1853/LB of 2001, 276/LB and 277/LB of 2003).

Muhammad Asif, D.R. for Respondent (I.T.As. Nos.1853/LB of 2001, 276/LB and 277/LB of 2003).

Muhammad Asif, D.R. for Appellant (I.T.As. Nos.2694/LB of 2001, 707/LB and 708/LB of 2003).

Shahbaz Butt for Respondent (I.T.As. Nos.2694/LB of 2001, 707/LB and 708/LB of 2003).

Date of hearing: 19th December, 2003.

2004 P T D (Trib.) 1589

[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.81/IB and 113/IB of 2003, decided on 20th January, 2004.

(a) Wealth Tax Act (XV of 1963)‑‑‑

‑‑‑‑S. 16(4)‑‑‑Wealth Tax Rules, 1963, R.8(3)‑‑‑Assessment‑‑‑Valuation of land and building‑‑‑Property was residential property in the year under consideration which was commercialized during the next assessment year and assessee paid commercialization fee‑‑‑Assessing Officer valued the property for wealth tax purpose by applying commercial rates fixed for stamp duty for the year under consideration‑‑­Validity ‑‑‑Property when purchased was an old constructed house/residential property which was later on converted into commercial property and the commercialization fee was paid by the assessee‑‑­Property was residential property at the time of purchase and also during the assessment year under consideration, the same could not be valued on the basis of commercial rates fixed by the District Collector‑‑­Direction of the First Appellate Authority to apply residential rates was maintained by the Appellate Tribunal.

(b) Wealth Tax Act (XV of 1963)‑‑

‑‑‑S. 16‑‑‑Assessment‑‑‑Liabilities‑‑‑Disallowance of liabilities for want of verification ‑‑‑Assessee claimed than 'the same were verifiable‑‑‑Matter was set aside by the Appellate Tribunal with the direction to Assessing Officer to reconsider the said claim of liability and if the same was verified by proper evidence then it should he allowed after providing an opportunity of hearing to the assessee.

Hafiz Muhammad Idrees for Appellant (W.T.A. No.81/IB of 2003).

Zar Khalil, D.R. for Respondent (W.T.A. No.81/IB of 2003).

Zar Khalil, D.R. for Appellant (W. T. A No. 113/IB of 2003).

Hafiz Muhammad Idrees for Respondent (W.T.A. No. 113/IB of 2003).

Date of hearing: 7th January, 2004.

2004 P T D (Trib.) 1593

[Income‑tax Appellate Tribunal Pakistan]

Before Inam Ellahi Sheikh, Chairman and Syed Hasan Imam, Judicial Member

I. T. A. No. 1988/KB of 2000‑2001, decided on 27th January, 2004.

(a) Income‑tax‑‑‑

‑‑‑‑Nature of land‑‑‑Whether agricultural or residential‑‑‑Piece of land purchased was part of a residential scheme and there was no claim of being agricultural activity done‑‑‑Claim of assessee that such piece of land was agricultural piece of land was rejected by the Appellate Tribunal in circumstances.

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

‑‑‑‑S. 13(1)(d)‑‑‑Addition‑‑‑Valuation of property‑‑‑Collector's rate‑‑­Land having deep ditches‑‑‑Application of Collector's rate‑‑‑Validity‑‑­Assessee's contention that normal rate as per Collector's rates could not be applied as it was not a level piece of land and the department had accepted and allowed expenses against such development appeared to be correct, however, this did not automatically establish that the declared value was correct.

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

‑‑‑S. 13(1)(d)-‑‑Addition ‑‑‑Sale of lease hold right‑‑‑Valuation of property‑‑‑Application of Collector's rate‑‑‑Validity‑‑‑Contention of assessee with regard to valuation of the property that the same was only a sale of lease hold rights in the said piece of land which was held by the seller as a free hold land and the rates of Collector could not be applied was not approved by the Appellate Tribunal.

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

‑‑‑‑Ss. 12(12) & 13(1)(d)‑‑‑Deemed income‑‑‑Addition‑‑‑Land‑‑‑Stock in trade‑‑‑Interpretation of provisions of S.12(12) and S.13 of the Income Tax Ordinance, 1979‑‑‑Contention of the assessee that "provisions of S.12(12) of the Income Tax Ordinance, 1979 came in. way of department in evaluating the piece of land as stock‑in‑trade" was not approved by the Appellate Tribunal‑‑‑Section 12 of the Income Tax Ordinance, 1975 was a peculiar section and made certain transaction as part of income although there may or may ,not be any such income‑‑‑Purpose of S.12(12) of the Income Tax Ordinance, 1979 was to tax any benefit given to an employee or a Director of a company by way of concessional sale of its assets such as motor vehicles.

I.T.A. No.421/KB of 1991 ref.

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

‑‑‑‑S. 13(1)(d)‑‑‑Addition‑‑‑Land‑‑‑Enhancement of cost of sales in view of the enhancement of purchase consideration of land under S.13(1)(d) of the Income Tax Ordinance, 1979 would come into play if a gross profit rate is not applied by the Assessing Officer.

2003 PTD 1361 distinguished.

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

‑‑‑‑S. 65‑‑‑Additional assessment‑‑‑Issuance of notice under S.65 of the Income Tax Ordinance, 1979 for the assessment, year for which no return had been filed previously nor any assessment made‑‑‑Validity‑‑‑Action under S.65 of the Income Tax Ordinance, 1979 could not be initiated as the assessee had not filed any return for the income year pertaining to assessment year under consideration nor any assessment had been made for such assessment year prior to the issuance of notice under S.65 of the Income Tax Ordinance, 1979.

2002 PTD 998 and 2001 PTD 1998 rel.

PLD 2002 Kar. 60 and Muhammad Idrees v. Collector Custom 2001 SCMR 838 ref.

1998 PTD 1387 distinguished.

Muhammad Athar Saeed for Appellant.

Sartaj Yousuf D.R. for Respondent.

Date of hearing: 17th December, 2003.

2004 P T D (Trib.) 1602

[Income‑tax Appellate Tribunal Pakistan]

Before S. Hasan Imam, Judicial Member and S. A. Minam Jafri, Accountant Member

I.T.As. Nos.124/KB and 198/KB of 2003, decided on 24th February, 2004.

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

‑‑‑‑Fourth Sched., R. 5(a) & 6‑A‑‑‑General insurance‑‑‑Exemption of capital gains from sale of shares‑‑‑Provisions for taxation and tax deducted at source from interest and dividend charged to profit and loss account was disallowed being inadmissible deduction under R.6‑A as well as 5(a) of the Fourth Schedule of the Income Tax Ordinance, 1979‑‑‑Such addition in the head provision for taxation and provision for tax in respect of interest and dividend income confirmed by the First Appellate Authority was also confirmed by the Appellate Tribunal.

(1998) 77 Tax 35 rel.

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

‑‑‑‑Fourth Sched., R.5(a)‑‑‑General insurance‑‑‑Provision for diminution in the value of investments‑‑‑Disallowance of by the Assessing Officer was upheld by the First Appellate Authority‑‑‑Validity‑‑‑R. 5(a) of the Fourth Schedule of the Income Tax Ordinance, 1979 provides exclusion of an expenditure or allowance or any reserve or provision for any expenditure‑‑‑Whereas R.5(b) of the Fourth Schedule of the Income Tax Ordinance, 1979 had nothing to do with the provision‑‑‑It simply referred to amount either written off or taken to reserve to meet depreciation ‑‑‑Assessee had made provision for diminution in the value of investment and since it was a provision for expenditure, it was inadmissible under R.5(a) of the Fourth Schedule to the Income Tax Ordinance, 1979‑‑‑Order confirming the treatment was not interfered by the Appellate Tribunal.

(1992) 66 Tax 33 rel.

(c) Income‑tax‑‑‑

‑‑‑‑Capital gain on sale of share‑‑‑Concessional rate of tax‑‑‑Direction of First Appellate Authority to Assessing Officer to apply concessional tax rate of 25% on capital gain on sale of shares was confirmed by the Appellate Tribunal.

(1998) 77 Tax 66 (Trib.) and Civil Appeals Nos.933 to 940 of 1995 rel.

Sajjad Ahmed D.R. for Appellant (in I.T.A. No.124/KB of 2003).

Asif Kasbati, F.C.A. for Respondent (in I.T.A. No.124/KB of 2003).

Asif Kasbati, F.C.A. for Appellant (in I.T.A. No.198/KB of 2003).

Sajjad Ahmed D.R. for Respondent (in I.T.A. No.198/KB of 2003).

Date of hearing: 29th January, 2004.

2004 P T D (Trib.) 1636

[Income‑tax Appellate Tribunal Pakistan]

Before Muhammad Ashfaq Baloch, Judicial Member and Muhammad Akhtar Nazar Mian, Accountant Member

M.A. (Rect) No.488/KB of 2003 in R.A. No. 180/KB of 2003, decided on 28th October, 2003.

Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑Ss. 156 & 134‑‑-Rectification of mistakes‑‑‑Reference to the Appellate Tribunal‑‑‑Reference application of Department was dismissed being barred by time as Department failed to file condonation application alongwith reference application‑‑‑Department contended that in memo of appeal respondent was Commissioner of Income Tax (Appeals) Cos. III but Appellate Tribunal erroneously delivered copy of order in the Office of Commissioner of Income‑tax Cos. IV wherefrom copy of order was received by the Commissioner of Income Tax Cos. III and period of limitation started from the date on which order was received by the Commission of Income Tax Cos. III and not from the date on which order was served upon the Commissioner of Income Tax Cos. IV which was mistake apparent from record liable to be rectified‑‑­Validity‑‑‑Admitted position that copy of the order was not properly served by the Appellate Tribunal on the respondent/department therefore the limitation would start from the date when the copy of order was received by the respondent‑‑‑Order was recalled by the Appellate Tribunal and re‑fixed the reference application for re‑hearing.

CIT v. Maqsood A. Razzak 2000 PTD 344 rel.

Javed Iqbal Rana, D.R. for Applicant.

Yasmeen Anjani, F.C.A. for Respondent.

Date of hearing: 28th October, 2003.

2004 P T D (Trib.) 1638

[Income‑tax Appellate Tribunal Pakistan]

Before Inam Ellahi Sheikh, Chairman and Muhammad Jahandar, Judicial Member

I.T.A. Nos.407/IB of 2003, decided on 13th December, 2003.

Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑Ss. 143‑B, 80‑C, 59A, 59(1), 62, 63, 65 & 156‑‑‑Statement regarding certain assessee‑‑‑Income from security guard services‑‑‑Deduction at source‑‑‑Filing of statement under S.143‑B of the Income Tax Ordinance, 1979‑‑‑Tax demand was created under S.80‑C of the Income Tax Ordinance, 1979‑‑‑Assessee contended that the business conducted did not attract the provisions of S.80‑C of the Income Tax Ordinance, 1979 and the normal assessment should be made‑‑‑Validity‑‑‑Admittedly, assessee only filed a statement under S. 143‑B of the Income Tax Ordinance, 1979 and no return was filed for the year‑‑‑In order to make a regular assessment, i.e. under Ss.59A, 59(1), 62, 63, or 65 of the Income Tax Ordinance, 1979, a return was required from the assessee or a notice should had been served upon the assessee to file a return‑‑‑Such condition having not been fulfilled there could be no question of making an assessment in the absence of a return or a notice requiring the assessee to file the return.

Kh. Muhammad Waqar for Appellant.

Naushad Ali Khan D.R. for Respondent.

Date of hearing: 12th December, 2003.

2004 P T D (Trib.) 1642

[Income‑tax Appellate Tribunal Pakistan]

Before Rasheed Ahmed Sheikh, Judicial Member, Amjad Ali Ranjha and Mazhar Farooq Shirazi, Accountant Members

I.T.As. Nos.441/LB and 896/LB of 2001, decided on 30th September, 2003.

Per Rasheed Ahmad Sheikh, Judicial Member and Mazhar Farooq Shirazi, Accountant Member‑‑agreed.

(a) Income‑tax‑‑‑

‑‑‑‑Sales‑‑‑Estimation of sales on the basis of income Tax Inspector's report‑‑‑Inquiry report, general in nature ----Legality‑‑‑Remarks of Appellate Tribunal regarding such report.

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

‑‑‑‑Ss. 62 & 13‑‑‑Assessment on production of accounts, evidence etc.‑‑­Sales‑‑‑Estimation of sales by drawing, adverse inference regarding incurring of more personal expenditure bye member of un‑registered firm and such claimed expenses were understated‑‑‑Validity‑‑‑In no way this factor could be made basis for estimating sales in the case of a firm because the firm and the members of firm were two separate and independent assessable entities‑‑‑If on assessment of the firm it was found that any member of the firm had understated the expenses then the suppression so worked out shall be added in terms of S.13 of the Income Tax Ordinance, 1979 in his individual hands rather drawing adverse inference in the case of firm.

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

‑‑‑‑S. 62‑‑‑Assessment on production of accounts evidence etc.‑‑­Confrontation with proposed treatment before formulating the assessment‑‑‑Notice issued under S.62 of the Income Tax Ordinance, 1979 was nothing except requiring the assessee to furnish break‑up of party‑wise names and addresses to whom the sales were made, details of profit & loss expenses, holding of agency of branded names, if any etc.‑­Such notice could not be equated with the notice to be issued confronting the assessee with the proposed treatment‑‑‑Merely mentioning S.62 on top of the notice without adhering to the principle of audi alterum partem would not absolve the Assessing Officer from his responsibility to confront the assessee with the basis of computation .of income to be adopted‑‑‑In absence thereof, assessment was suffering from legal infirmity because it was obligatory on the part of the Assessing Officer to confront the assessee with the treatment to be accorded, once he disagreed with the declared results‑‑‑Failure to take such steps was the violation of principle of natural justice.

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

‑‑‑‑S. 62‑‑‑Assessment on production of accounts, evidence etc.‑‑­Estimation of sales on the basis of wild guesswork that the shop was well stocked ignoring history of the case in respect of declared sales‑‑­Validity‑Since Assessing Officer had estimated the sales on the whimsical inference drawn from certain set of facts and a wild guess as well as of a fanciful estimate therefore, such estimation of sales could not be held good and made basis for adoption sales‑‑‑As a natural sequel the sales should be adopted considering history of the case and having taken regard to the encouraging results declared by the assessee from year after year‑‑‑Appellate Tribunal directed the Assessing Officer to adopt the sales at Rs. 28,00,000 for the year under consideration.

(1984) 50 Tax 44 (Trib.) and 1997 PTD (Trib.) 2197 rel.

Per Amjad Ali Ranjha, Accountant Member‑‑Minority view.

None for Appellant.

Iqbal Anwar Mehdi, I.T.P, for Respondent.

Date of hearing: 11th September, 2003.

2004 P T D (Trib.) 1653

[Income‑tax Appellate Tribunal Pakistan]

Before Syed Nadeem Saqlain, Judicial Member

I. T. A. No. 982/LB of 2002, decided on 21st October, 2002.

Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑Ss. 156 & 118‑E‑‑‑Rectification of mistakes‑‑‑Income of trial production was assessed at normal rate of tax by rectification of assessment order‑‑‑Validity‑‑‑Income/loss earned during trial production was to be considered part of capital and was not taxable under normal rate‑‑‑Order passed under S.156 of the Income Tax Ordinance, 1979 was vacated and Appellate Tribunal restored original order.

1992 SCMR 687 = 1992 PTD 570 1976 PTD 109 and (1971) 23 Tax 4 (Trib.) rel.

Fakhar Majeed, F.C.A. and Mirza Anwar Baig for Appellant.

Talat Altaf Khan, D.R. for Respondent.

Date of hearing: 2nd October, 2002.

2004 P T D (Trib.) 1655

[Income‑tax Appellate Tribunal Pakistan]

Before Khawaja Farooq Saeed, Judicial Member and Inam Ellahi Sheikh, Accountant Member

I. T. A. Nos. 1974/LB of 1992‑93, decided on 20th May, 1997.

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

‑‑‑‑Third Sched., Cl.7(c)‑‑‑Finance Act (XII of 1991)‑‑‑Assessment year 1991‑92‑‑‑Disposal of assets and treatment of resultant gains or losses‑‑­Capital gain arose out of single asset, i.e. sale of car prior to 30‑6‑1991 which was taxed by applying amendment made in Cl. 7(c) of the Third Schedule of the Income Tax Ordinance, 1979 by Finance Act, 1991‑‑Validity‑‑‑Transaction completed prior to amendment could not be charged to tax‑‑‑Argument of Department that Finance Act relevant to the accounting year ended prior to the same was of no help‑‑‑Provision created a charge which was not there when the transaction was completed and thus could not be applied retrospectively‑‑‑Addition made for the assessment year 1991‑92 was deleted by the Appellate Tribunal.

(1983) 47 Tax 5 (Trib.); Maxwell on Interpretation of Statute 12th Edn., at p.216 and PLD 1969 SC 599 ref.

(b) Interpretation of statutes‑‑‑

‑‑‑‑ Charging provisions are always prospective unless otherwise provided.

(c) Interpretation of statutes‑‑‑

‑‑‑‑ Legislature is fully competent to legislate a provision with retrospective, operation‑‑‑Unless a charging provision has not been made retrospective, the same should always be treated as prospective.

(d) Interpretation of statutes‑‑‑

‑‑‑‑ Retrospectivity in respect of a statute cannot be presumed.

(e) Interpretation of statutes‑‑‑

‑‑‑‑Retrospectivity even in a procedural law is to be avoided if it affects an existing right or otherwise causes inconvenience or injustice to any one.

Mirza Anwar Baig for Appellant.

Mrs. Sabiha Mujhaid, D.R. for Respondent.

Date of hearing: 24th April, 1997.

2004 P T D (Trib.) 1666

[Income‑tax Appellate Tribunal Pakistan]

Before Inam Ellahi Sheikh, Chairman, S. Hasan Imam, Judicial Member and Agha Kafeel Barik, Accountant Member

I.T.As. Nos.2804/KB and 2830/KB of 1993‑94, decided on 31st December, 2003.

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

‑‑‑‑Second Sched., Cls. 126 & 128--‑Exemption‑‑‑‑Purpose‑‑‑Basic purpose of allowing exemptions from tax on income was to promote the purpose of export and in return to earn foreign exchange for Pakistan.

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

‑‑‑‑Second Sched., Cls. 126 & 128‑‑‑Export Processing Zones Authority Ordinance (IV of 1980), S. 26‑‑‑Export Processing Zones Authority Rules, 1981‑‑ Exemption‑‑‑Industrial undertaking‑‑‑Supportive organiza­tion ‑‑‑‑In no manner the Export Processing Zones Authority Ordinance 1980 and Export Processing Zones Authority Rules, 1981 could extend any tax concession to a support organization, such as a bank or an insurance company which was only admissible to an industrial undertaking under clauses 126 and 128 of the Second Schedule of the Income Tax Ordinance, 1979, for the simple reason that it was the domain of the legislature to levy tax on certain classes of income and to exempt certain classes of income from tax under the Income Tax Law.

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

‑‑‑‑S. 14(2), First Sched., Part IV & Second Sched., Cls. 126 & 128‑‑‑Export Processing Zones Authority Ordinance (IV of 1980)‑‑­Exemption‑‑‑Industrial undertaking‑‑ Definition‑‑‑Extension of‑‑‑If the definition of an industrial undertaking was extended to include any supporting enterprise/organization, such as bank or insurance company, it should have been made by the Federal Government by a notification under S.14(2) of the Income Tax Ordinance, 1979 and not by any other law.

(d) Interpretation of statutes‑‑‑

‑‑‑‑Definition‑‑‑If no definition of a particular term is available in its particular place, its definition in the same enactment or in some other enactment may be adopted‑‑‑And if it is not available even in any enactment then its general meaning should be adopted.

(e) Export Processing Zones Authority Ordinance (IV of 1980)‑‑‑

‑‑‑‑Ss. 26 & 2(e)‑‑‑Export Processing Zone Authority Rules, 1981, Rr.5(3), 10 & 15(4)‑‑‑Industrial undertaking‑‑‑Supporting enterprises‑‑­S.2(e) of the Export Processing Zones Authority Ordinance, 1980 required that an industrial undertaking shall be further specified in this behalf by the Federal Government and that Export Processing Zones Authority Rules, 1981 were made under the said notification and that the rules had further specified supporting enterprises under Rr. 5(3) & 10 and to be more specific under R.15(4) of the Export Processing Zones Authority Rules, 1981‑‑‑Validity‑‑‑Export Processing Zones Authority Rules, 1981 had been made in exercise of powers conferred by S.26 of Export Processing Zones Authority Ordinance, 1980, and not under S.2(e) of Export Processing Zones Authority Ordinance, 1980‑‑‑S.26 of the Export Processing Zones Authority Ordinance, 1980 simply provided that the "Federal Government may, by notification in Official Gazette make rules for carrying out the purpose of the Ordinance".

(f) Export Processing Zones Authority Rules, 1981‑‑‑

‑‑‑‑Rr. 5(3) & 15(4)‑‑‑Income Tax Ordinance, (XXXI of 1979), Second Sched. Cl. 126 & 128‑‑‑Industrial undertaking‑‑‑Bank‑‑‑Under R.5(3) of the Export Processing Zones Authority Rules, 1981 there was mention of supporting enterprises to provide essential services and in R.15(4) of the Export Processing Zones Authority Rules, 1981 such supporting enterprises had been mentioned as "facilities" including banking, insurance and such service as may be specified by the Federal Government‑‑‑However, no notification had been issued by the Federal Government even under R.15(4) of the Export Processing Zones Authority Rules, 1981 to specify such service.

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

‑‑‑‑Second Sched., Cls. 126 & 128, S. 14(2) & First Sched., Part IV‑‑­C.B.R. Notification No. III/29/86, dated 21‑4‑1991‑‑‑Export Processing Zones Authority Ordinance (IV of 1980), Ss. 2(e), 2(f) & 26‑‑­Export Processing Zones Authority Rules, 1981, Rr.5 (3), 10 & 15(4)‑‑­S.R.O. 1287(I)/82, dated 26‑12‑1982‑‑‑Exemption‑‑‑Industrial under­taking‑‑‑Supportive organization ‑‑‑Bank‑‑‑Assessee set up his bank branch in Karachi Export Processing Zone and income of that bank branch was claimed exempt on the ground that bank was support enterprise to provide essential services to industrial undertaking in the Zone and it qualified as an industrial undertaking under the Income Tax Ordinance, 1979‑‑‑Validity‑‑‑No exemption from its income was available to the Offshore Branch of Bank established in Karachi Export Processing Zone under clauses (126) and (128) of the 2nd Schedule of the Income Tax Ordinance, 1979‑‑‑Appeal of the assessee was dismissed by the Appellate Tribunal.

I.T.A. No.4082/KB of 1987‑88 approved.

(2000) 81 Tax 139 disapproved.

Shabbir Hussain Vejlani, A.C.A. and Muhammad Irshad Ansari, I.T.P. for Appellant.

Ali Hasnain, D.R., Muhammad Farid and Khalique‑ur‑Rehman, F.C.A. for Respondent.

Date of hearing: 24th December, 2003.

2004 P T D (Trib.) 1682

[Income‑tax Appellate Tribunal Pakistan]

Before Syed Masood ul Hassan Shah, Judicial Member and Syed Aqeel Zafar ul Hasan, Accountant Member

I.T.A. Nos.549/IB of 2003, decided on 20th January, 2004.

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

‑‑‑‑S. 13(1)(d)‑‑‑Wealth Tax Act (XV of 1963), Preamble ‑‑‑Addition‑‑­Valuation of properties‑‑‑Although, the making of valuation on the wealth tax side and determination of value of property on income tax side were made in separate perspective but yet the very scale of evaluation of property for both the purposes may likely to remain common for arriving at a final value of the property.

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

‑‑‑‑S. 13(1)(d)‑‑‑Income Tax Rules, 1982, R. 207‑A‑‑‑Addition‑‑­Property was purchased with status of residential property through a registered sale‑deed‑‑‑Such property was converted into commercial property by paying commercialization fee by the purchaser/assessee himself‑‑‑Addition was made by evaluating such property by applying District Collector's rate of commercial property on the ground that value of registered sale‑deed was understated‑‑‑Validity‑‑‑According to CI. (ii) of R.207‑A of the Income Tax Rules, 1982, the value of immovable properties for the purposes of S.13 of the Income Tax Ordinance, 1979 had to be taken according to the value determined by the District Collector for the purposes of stamp duty and no departure could be made from the value of the property which had been accepted by the Registration Officer for stamp duty purposes as per District Collector's rates of residential property‑‑‑When there was no evidence to disprove the sale price mentioned in the registered sale‑deed which being a public document had presumption of truth, same could not be rejected on mere assumptions or conjectures and surmises‑‑‑Registered sale‑deed outright could not be rejected with regard to the sale price entered therein except when rebutted by a cogent evidence by establishing that the assessee expended more amount than the sale price shown in the registered deed‑‑‑No such evidence existed to make addition under S. 13(1)(d) of the Income Tax Ordinance, 1979‑‑‑Deletion of addition by the First Appellate Authority was maintained by the Appellate Tribunal.

(1983) 48 Tax 73 (Trib.) ref.

1996 PTD (Trib.) 1088; NTR 1995 Trib. 11; NTR 1995 Trib. 109 and 1993 PTD (Trib.) 952 rel.

Altaf Mahmood Khan, DCIT/DR for Appellant.

Hafiz Muhammad Idress for Respondent.

Date of hearing: 16th January 2004.

2004 P T D (Trib.) 1688

[Income‑tax Appellate Tribunal Pakistan]

Before Rasheed Ahmed Sheikh, Judicial Member

I.T.As. Nos.2319/LB to 2324/LB of 2003, decided on 14th November, 2003.

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

‑‑‑‑S. 61‑‑‑Notice for production of books of account, etc.‑‑‑Purpose‑‑­Section 61 of the Income Tax Ordinance, 1979 manifestly spells out that merely the assessee's presence is required by the Assessing Officer at his office on a date specified in the notice issued thereunder to produce or cause to be produced any evidence in support of the income disclosed in the tax return, if any, filed by the assessee.

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

‑‑‑‑S. 61‑‑‑Notice for production of books of account, etc. ‑‑‑Procedure‑‑­Adjective law‑‑‑Substantive law‑‑‑Section 61 of the Income Tax Ordinance, 1979 speaks about adherence of a certain procedure to be followed prior to formulation of the assessment‑‑‑Issuance of a notice is nothing but a mode in which successive steps in litigation are taken‑‑­Such law relating to procedure is called adjective law" while the law defining principle or constituting substantive juristic principles is called substantive law".

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

‑‑‑S. 61‑‑‑Notie or production of books of accounts etc. ‑‑‑Procedural deficiency‑‑ Wherever uncertainty or deficiency is found to exist in the service of a statutory notice issued under S.58 or 61 of the Income Tax Ordinance, 1979, either on behalf of the Revenue or owing to the assessee's conduct who had withheld the evidence that amounts to be a procedural deficiency.

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

‑‑‑‑Ss. 110, 61 & 58‑‑‑Penalty for non‑compliance with notice, etc.‑‑­Legislature had only enshrouded the act of non‑observance of the statutory notices, issued under S.58 or 61 of the Income Tax Ordinance, 1979, at the instance of the assessee with penalty proceedings in terms of S.110 of the Income Tax Ordinance, 1979.

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

‑‑‑‑Ss.61, 13 & 65‑‑‑Notice for production of books of account, etc.‑‑­Procedure‑‑‑Order ab inito illegal‑‑‑Where the legislature has prescribed to be followed certain procedure consequent upon which a tax liability would be created, in such circumstances non‑compliance thereof certainly renders the order to have been made ab initio illegal and void because such eventuality falls within the para meters of substantive law for example non‑confrontation of the assessee under S.13(2) of the Income Tax Ordinance, 1979 while making the addition under S.13 of the Income Tax Ordinance, 1979 or improper service of a statutory notice issued under S.65 of the Income Tax Ordinance, 1979 to have been made without any lawful authority‑‑‑Reason being issuance of notice under S.13 of the Income Tax Ordinance, 1979 or proper service of statutory notice under S.65 of the Income Tax Ordinance, 1979 is the mandatory requirement of law and non‑observance thereof would be fatal.

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

‑‑‑‑S.61‑‑‑Notice for production of books of account, etc. ‑‑‑Assessment‑­Section 61 of the Income Tax Ordinance, 1979 did not vest any jurisdiction upon the Assessing Officer to pass an assessment order.

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

‑‑‑Ss. 62, 63 & 61‑‑‑Assessment on production of books of account, evidence etc.‑‑‑Purpose‑‑‑Ss. 62 and 63 of the Income Tax Ordinance 1979 are the provisions which authorize the Assessing Officer to assess the assessee's total income by an order in writing and determine the tax payable by him on the basis of such assessment where in a case any evidence is produced by the assessee in compliance to the notice issued under S.61 of the Income Tax Ordinance, 1979 or where he has failed to comply with any of the terms of notice issued S.61 of the Income Tax Ordinance, 1979.

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

‑‑‑‑Ss. 132(1)(a)(ii), 61 & 63‑‑‑Decision in appeal‑‑ ‑Annulment of assessment‑‑‑First Appellate Authority annulled the assessment on the ground that assessment had been completed without service of notice under S.61 of the Income Tax Ordinance, 1979 the ex parte assessment being illegal could not be sustained‑‑‑Validity‑‑‑Non‑observance of the terms of notice issued under S.61 of the Income Tax Ordinance, 1979 did not entitle the appellate authorities to annul/cancel the assessment made under S.63 of the Income Tax Ordinance, 1979 but to proceed to set aside the ex parte assessment.

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

‑‑‑‑S. 132(1)(a)(ii), 61 & 63‑‑‑Decision in appeal‑‑‑Annulment of assessment‑‑‑First Appellate Authority annulled the assessment on account of non‑compliance of the terms of notice, issued under S.61 of the Income Tax Ordinance, 1979‑‑‑Validity‑‑‑Statutory notices issued under S.61 of the Income Tax Ordinance, 1979 remained un‑complied with on the part of assessee, though properly served, but in such circumstances it could not be held that the best assessment formulated by the Assessing Officer was without any lawful jurisdiction‑‑‑Ex parte assessment was certainly made by the Assessing Officer having lawful jurisdiction‑‑‑Non‑compliance of the terms of notice, issued under S.61 of the Income Tax Ordinance, 1979, by the assessee was a procedure deficiency, which could be cured by issuing a fresh notice thereunder‑‑­First Appellate Authority acted in flagrant violation of law in annulling the ex parte assessment or, account of non‑compliance of statutory notice issued under S.61 of the Income Tax Ordinance, 1979‑‑‑Order of First Appellate Authority was vacated by the Appellate Tribunal and that of Assessing Officer was set aside for de novo assessment in accordance with law.

Nemo for Appellant.

Nemo for Respondent.

Date of hearing: 14th November, 2003.

2004 P T D (Trib.) 1699

[Income‑tax Appellate Tribunal Pakistan]

Before Muhammad Ashfaq Baloch, Judicial Member and Agha Kafeel Barik, Accountant Member

W.T.As. Nos. 72/KB and 73/KB of 2003, decided on 4th December, 2003.

(a) Wealth Tax Act (XV of 1963)‑‑‑

‑‑‑‑Ss. 31‑B & 14-A‑‑‑Income Tax Ordinance (XXXI of 1979), Ss. 88 & 54‑‑‑Additional wealth tax‑‑‑Comparison of S.31‑B of Wealth Tax Act, 1963 and S.88 of Income Tax Ordinance, 1979 shows that S.88 of the Income Tax Ordinance, 1979 provides for charge of additional tax only where no tax had been paid under S.54 of the Income Tax Ordinance, 1979 or tax paid is short of tax payable under S.54 of the Income Tax Ordinance, 1979‑‑‑Section 31‑B of Wealth Tax Act, 1963 provides that if the tax paid under S. 14‑A is less than 80 per cent of the tax payable as a result of assessment under S.16 of the Wealth Tax Act, 1963, additional tax at the rate of 15 % shall be charged from the due date on which tax was payable under S.14‑A of the Wealth Tax Act, 1963, that was the date on which it was payable on the basis of wealth tax return, to the date of completion of assessment under S.16 of the Wealth Tax Act, 1963‑‑‑Section 31‑B of the Wealth Tax Act, 1963 has wider scope.

2002 PTD 388 distinguished.

(b) Wealth Tax Act (XV of 1963)‑‑‑

‑‑‑‑S. 31‑B‑‑‑Income Tax Ordinance (XXXI of 1979), S. 88‑‑‑Additional wealth tax‑‑‑Distinction between provisions of S.31‑B of Wealth Tax Act, 1963'and provisions of S.88 of the Income Tax Ordinance, 1979‑‑­Provisions of S.31‑B of Wealth Tax Act, 1963 were not exactly the same as those of S.88 of the Income Tax Ordinance, 1979‑‑‑Section 31‑B of the Wealth Tax Act, 1963 had wider scope and there was no provision of charge of additional tax under S.88 of the Income Tax Ordinance, 1979 on the basis of assessed income‑‑‑Section 31‑B(1)(b) of the Wealth Tax Act, 1963 clearly provided that if tax paid on the basis of return filed by the assessee was short by 80% of the tax assessed under S.16 of the Wealth Tax Act, 1963, the assessee would liable to additional wealth tax at the rate of 15% per annum for the number of days of default.

(c) Wealth Tax Act (XV of 1963)‑‑‑

‑‑‑‑S. 31‑B (1)(b)(ii)‑‑‑Additional wealth tax‑‑Enhancement of value of jewellry‑‑‑Charge of additional tax on the amount of tax payable on assessed wealth ‑‑‑Assessee contended that additional tax be levied on the amount not paid on the basis of return but in no way additional tax under S.31‑B of the Wealth Tax Act, 1963 could be charged on the basis of assessed wealth‑‑‑Validity‑‑‑Order of Assessing Officer in charging additional tax under S.31‑B (1)(b)(ii) of Wealth Tax Act, 1963 was legal‑‑‑First Appellate Authority having set aside the issue of valuation of jewellry, it was in the interest of justice if at the time' of computation of taxable wealth and tax payable thereon as a result of assessment under S.16 of the Wealth Tax Act, 1963, for the purpose of charge of additional tax under S.31‑B(1)(b)(ii) of Wealth Tax Act, 1963, the value of jewellry was excluded‑‑‑Assessing Officer was directed to re‑compute additional tax charged by him under S.31‑B(1)(b)(ii) of Wealth Tax Act, 1963 by excluding the value of jewellry from the total wealth assessed under S.23/16(2) of the Wealth Tax Act, 1963‑‑‑Order of First Appellate Authority was modified accordingly by the Appellate Tribunal.

2000 PTD (Trib.) 1169; 1998 PTD 3900; (2002) 85 Tax (SC Pak.) and 2002 PTD (Trib.) 2355 ref.

Rehan Hasan Naqvi, A.R. and Ms. Lubna Pervez, A.R. for Appellant.

Ghulam Shabbir Memon, D.R. for Respondent.

Date of hearing: 4th December, 2003.

2004 P T D (Trib.) 1784

[Income‑tax Appellate Tribunal Pakistan]

Before Rasheed Ahmed Sheikh, Judicial Member

I.T.A. No.2764/LB of 2003, decided on 18th February, 2004.

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

‑‑‑‑S.154‑‑‑Civil Procedure Code (V of 1908), O.V, R.10‑A & 15‑‑­Service of notice‑‑‑Mode of service of notice‑‑‑Service by registered post/acknowledgment due‑‑‑Section 154 of the Income Tax Ordinance, 1979 had provided two modes of service of the notice: First one was that a notice, order or requisition issued under the Income Tax Ordinance, 1979 might by served on the person therein named by post and the other one was to follow the procedure prescribed for service of a summon issued by a Court under the Code of Civil Procedure, 1908‑‑‑Cumulative reading of both said provisions clearly spelled out that service of the notice shall be made on the person named in the notice or his Authorized Agent or adult male member of the family residing with the person named in the notice in the case of an individual‑‑‑1n Income Tax Ordinance, 1979 only the word "post" had been used while in the Code of Civil Procedure the words "Registered post acknowledgement due" had been used for the purpose of substituted service of the notice‑‑­Where mode of substituted service of notice, order or requisition was to be adopted, i.e. through post then acknowledgement due receipt must be annexed with the envelope in which the notice had been sent‑‑‑Object behind annexing acknowledgement due alongwith the envelope was to ensure proper service of the notice, order or requisition.

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

‑‑‑‑Ss. 154 & 65‑‑‑Service of notice‑‑‑Where the statute required that notice shall precede a certain action, the notice to be issued under S.65 of the Income Tax Ordinance, 1979 became a jurisdictional fact and the authority wanting to proceed against such persons had no jurisdiction to do so unless it was proved that the notice which was a pre‑condition had in fact been issued and served upon the assessee.

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

‑‑‑‑Ss.65 & 154‑‑‑Additional assessment‑‑‑Service of notice‑‑‑Service by registered post/acknowledgement due‑‑‑Additional assessment rests upon proper service of notice under S.65 of the Income Tax Ordinance, 1979‑‑‑Non‑annexing acknowledgement receipts alongwith the registered letter certainly would create doubt regarding proper service of the statutory notice issued under S.65 of the Income Tax Ordinance, 1979‑‑­In such‑like situation it was not possible to ascertain upon whom and on which date the envelope containing the notice was received‑‑‑If, statutory notice had been sent through post alongwith acknowledgment receipts and in case the acknowledgement receipt had been received back by the Assessing Officer showing receipt of the notice by assessee, it would have to be held to be a valid service.

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

‑‑‑‑Ss. 65 & 154‑‑‑Additional assessment‑‑‑Service of notice‑‑‑Service by registered post‑‑‑Where service of statutory notice issued under S.65 of the Income Tax Ordinance, 1979 upon the assessee was not established it means the said notice was never served upon the assessee.

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

‑‑‑‑Ss. 65 & 154‑‑‑Additional assessment‑‑‑Service of notice‑‑‑For purpose of application of provisions of the Income Tax Ordinance, 1979, issuance of notice under S.65 and service thereof was a sine qua non and no further proceedings could be taken against the assessee.

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

‑‑‑‑S. 61‑‑‑Notice for production of books of accounts, etc.‑‑‑Issuance of notice‑‑‑Where neither the return was filed nor any notice was served on assessee to furnish the, return, notice under S.61 of the Income Tax Ordinance, 1979 could not be issued to the assessee in circumstance.

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

‑‑‑‑Ss. 65, 63 & 154‑‑‑Additional assessment‑‑‑Service of notice‑‑‑Notice under S.65 of the Income Tax Ordinance, 1979 was sent by registered post without acknowledgement due‑‑‑Non‑attendance‑‑‑Ex parte assessment‑‑‑Validity‑‑‑Framing of additional assessment on the basis of notice which had been sent through registered post, without annexing acknowledgment receipts, was not valid service and framing of an ex parte assessment by resort to S.63 of the Income Tax Ordinance, 1979 consequent upon service of such statutory notice was not sustainable in law‑‑‑Annulment of assessment by the First Appellate Authority on account of improper service of statutory notice issued under S.65 of the Income Tax Ordinance, 1979 was upheld by the Appellate Tribunal and Departmental appeal was dismissed for want of merits.

Mian Javed‑Ur‑Rehman, D.R. for Appellant.

Nemo for Respondent.

Date of hearing: 18th February 2001.

2004 P T D (Trib.) 1812

[Income‑tax Appellate Tribunal Pakistan]

Before Inam Ellahi Sheikh, Chairman and Muhammad Jahandar, Judicial Member

I.T.As. Nos.321/IB and 368/IB of 2003, decided on 6th March, 2004.

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

‑‑‑‑S. 134‑‑‑Income Tax Ordinance (XLIX of 2001), S. 239‑‑‑Appeal to Appellate Tribunal‑‑‑Maintainability‑‑‑Assessment year 2001‑2002‑‑­Assessee contended that since the appeal had been filed by the Commissioner of Income‑tax/Wealth Tax and proceedings for this year were to be continued under the provisions of Income Tax Ordinance, 1979 under which the Assessing Officer was required to be a party to the appeal‑‑‑Validity‑‑‑Appellate Tribunal was not convinced with the arguments of the assessee and observed that a number of departmental appeals had been rejected by the Appellate Tribunal on the score that such appeals had not been filed by the Deputy Commissioner who had raised assessments instead of the Commissioner of Income Tax who was properly authorized to file appeals after the commencement of the Income Tax Ordinance, 2001.

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

‑‑‑‑S. 239(1)‑‑‑Removal of difficulties‑‑‑Computation of total income and tax payable‑‑‑Provisions of S.239(1) of the Income Tax Ordinance, 2001 clearly showed that the provision of Income Tax Ordinance, 1979 were to apply only to the computation of total income and tax payable thereon.

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

‑‑‑‑S. 59(1)‑‑‑C.B.R. Circular No. 4 of 2001, dated 18‑6‑2001 (Self­ Assessment Scheme 2001‑2002), Para.9‑‑‑Self‑Assessment‑‑‑Paragraph 9 of the Self‑Assessment Scheme for the year 2001‑2002 provided a procedure to select the cases for total audit and there was no contradiction in the provisions.

PLD 1956 SC 331 distinguished.

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

‑‑‑‑S. 59(1)‑‑‑C.B.R Circular No.4 'of 2001, dated 18‑6‑2001 (Self­ Assessment Scheme 2001‑2002), Para. 9 & 7(ii)‑‑‑Self‑Assessment Scheme‑‑‑Paragraph 9 of the Self‑Assessment Scheme for the assessment year 2001‑2002 simply provides for a pr3cedure for selection of cases which were to be excluded from the purview of eligibility for acceptance under clause (vii) of paragraph 7 which in turn was dependent upon paragraph 1.1 of the Self‑Assessment Scheme.

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

‑‑‑‑S. 59(1‑A)‑‑‑C.B.R. Circular No.4 of 2001, dated 18‑6‑2001 (Self­ Assessment Scheme 2001‑2002), para. 9‑‑‑Self‑Assessment‑‑‑Contention of the assessee was that unless there was a selection made under subsection (1‑A) of S.59 of the Income Tax Ordinance, 1979, no return could be selected for total audit out of the returns filed under Self ­Assessment Scheme‑‑‑Validity‑‑‑Provision of subsection (1‑A) of S.59 of the Income Tax Ordinance, 1979 was sufficiently clear that the assessment under S.59 of the Income Tax Ordinance, 1979 could be made if the return filed by the assessee qualified for acceptance in accordance with the provisions of the Self‑Assessment Scheme for that year‑‑‑Contention of the assessee was repelled by the Appellate Tribunal.

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

‑‑‑‑S. 64‑‑‑Assessment‑‑‑Limitation‑‑‑Limitation of two years from the end of assessment year under S.64 of the Income Tax Ordinance, 1979 did not debar the. Assessing Officer, from completing the assessment before the expiry of assessment year.

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

‑‑‑‑S. 59(1)‑‑‑C.B.R. Circular No.4 of 2001, dated 18‑6‑2001 (Self ­Assessment Scheme 2001‑2002), para. 9‑‑‑Self‑Assessment‑‑‑Status of assessee was `Association of Persons" ‑‑‑Name of, the member of "Association of Persons" was inserted in computer ballot list ‑‑‑Assessee contended that return of Association of Persons was not selected for total audit‑‑‑Validity‑‑‑Selection of case was mainly made on the basis of National Tax Number and name of the assessee was there merely to facilitate the matching up/identification‑‑‑Name of the member of the Association of Persons had been given by the assessee alongwith the business name of the Association of Persons on the form of return and it appeared that the name of the member was fed into the computer instead of the name of the Association of Persons‑‑‑Such a lapse would not be fatal to the selection of the case as long as the National Tax Number was not disputed or claimed to be not belonging to the assessee‑‑­Members of Association of Persons had also filed their statements of assets and liabilities indicating the same National Tax Number as in the case of Association of Persons‑‑‑If any member had filed a separate return, there would had been a separate National Tax Number in that case‑‑‑Selection of the case for total audit was not interfered by the Appellate Tribunal.

Muhammad Iqbal Ahmed, D.R. for Appellant (in I.T.A. No.321/IB of 2003).

Mir Ahmed Ali for Respondent (in I.T.A. No. 321/IB of 2003)

Mir Ahmed Ali for Appellant (in T.A No. 368/IB of 2003)

Muhammad Iqbal Ahmed, D.R for Respondent (in I.T.A No.368/IB of 2003)

Date of hearing: 4th March, 2004.

2004 P T D (Trib.) 1825

[Income‑tax Appellate Tribunal Pakistan]

Before Rasheed Ahmad Sheikh, Judicial Member and Amjad Ali Ranjha, Accountant Member

I.T.A. No.4245/LB of 2002 and M.A. (Cond.) No.437/LB of 2003, decided on 13th September, 2003.

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

‑‑‑S. 134(3)‑‑‑Appeal to Appellate Tribunal ‑‑‑Condonation of delay‑‑­Copy of order was communicated to Commissioner of Income Tax as on 8‑7‑2002 while the date of communication of the order appeal against had been mentioned, in the memos of appeal, by the Department as 9‑7‑2002‑‑‑Appeal was filed in the Office of Appellate Tribunal as on 7‑9‑2002‑‑‑Application for condonation of delay of one day‑‑‑Contents of application was self‑contradictory and misstatement of facts ‑‑‑Validity‑‑­Appeal filed by the Department on 7‑9‑2002 was hit by limitation by one day as the Commissioner of Income Tax received copy of order on 8‑7‑2002‑‑‑Revenue was not supposed to misstate the facts before Appellate Tribunal‑‑‑High officials of Income Tax hierarchy should take serious note of such misstatement of facts because such acts diminish credibility of the Department‑‑‑Appeal had been filed by the Department on 61st day from the date of communication of the order appealed against‑‑‑Appeal should be filed within 60 days of the date of which the order is communicated to the Commissioner or the assessee as the case may be‑‑‑Application for condonation of delay was also filed with a delay of 299 days‑‑‑Party in appeal was .obliged to explain the delay of each and every day from the date of knowledge of the order‑‑‑Valuable right had accrued to other side on expiry of period of limitation, which could not be taken away except on making out sufficient cause explaining delay of each day‑‑‑Reasons advanced by the department for condonation of delay in no way was a sufficient cause for extension of time‑‑­Application for condonation of delay was not maintainable in the circumstances.

2001 MLD 1489; 2001 SCMR 1346; 2000 MLD 1335; 2000 SCMR 1197; 1981 SCMR 37 and 2001 SCMR 1630 rel.

Nemo for Appellant.

Ch. Muhammad Tahir for Respondent.

Date of hearing: 13th September, 2003.

2004 P T D (Trib.) 1852

[Income‑tax Appellate Tribunal Pakistan]

Before Rasheed Ahmed Sheikh, Judicial Member and Javed Tahir Butt, Accountant Member

I.T.A. No.2328/LB of 1999, decided on 12th January, 2004.

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

‑‑‑‑S. 66‑A‑‑‑Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order‑‑‑Invocation of provision of S.66‑A of the Income Tax Ordinance, 1979 merely on disagreement in the assessment with Assessing Officer‑‑‑Validity‑‑‑Provisions of S.66‑A of the Income Tax Ordinance, 1979 were supervisory in its character and while exercising the powers under the said section it was statutory obligation of the Inspecting Additional Commissioner to determine as to whether the order sought to be interfered with was erroneous and was also prejudicial to the interest of Revenue.

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

‑‑‑‑S. 66‑A‑‑‑Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order‑‑‑Poor quality of assessment order‑‑­Invocation of provision of S.66‑A of the Income Tax Ordinance, 1979‑‑­Validity‑‑‑Mere poor quality of assessment order could not be a genuine reason to invoke the provisions of S.66‑A of the Income Tax Ordinance, 1979‑‑‑If an assessment order was not found to the satisfaction of the Inspecting Additional Commissioner in quality it could not be held to be a sufficient ground for invoking the provisions of S.66‑A of the Income Tax Ordinance, 1979 as the condition precedent to reach an objective conclusion to the effect that the assessment order was erroneous in law, and fact and at the same time prejudicial to the interest of Revenue‑‑­Unless such two conditions did not simultaneously exist in the completed assessment, the Inspecting Additional Commissioner was debarred to invoke jurisdiction under S.66‑A of the Income Tax Ordinance, 1979.

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

‑‑‑‑S. 66‑A‑‑‑Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order‑‑‑Presumption and assumption‑‑‑There must be some material before the Inspecting Additional Commissioner for holding that the order of the Assessing Officer was erroneous and prejudicial to the interest of Revenue and mere making observation to that effect was not sufficient to assume jurisdiction‑‑‑Presuming and assuming in absence of any material on record for considering that the assessment order was erroneous and resulted in loss of revenue to the exchequer was not a good ground for invoking the provisions of S.66‑A of the Income Tax Ordinance, 1979.

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

‑‑‑‑S. 66‑A‑‑‑Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order‑‑‑Cancellation of assessment on the grounds that expenses claimed on selling and distribution account had recorded an unusual increase, warranting minute examination; that expenses were accepted without documentary evidence for the reason that most of the expenses were small in nature; that Assessing Officer had not examined as to whether the expenditure claimed was actually incurred or not; that Assessing Officer failed to examine disqualification as laid down under S.24(ff) of the Income Tax Ordinance, 1979; that increase in sundry creditors had not been examined and that extent of production with reference to units of electricity and gas consumed had not been examined‑‑‑Validity‑‑‑Inspecting Additional Commissioner had no jurisdiction to invoke the provisions of S.66‑A of the Income Tax Ordinance, 1979‑‑‑Had the Inspecting Additional Commissioner been in possession of some information after completion of the assessment, he could have passed it on to the Assessing Officer to initiate proceedings under S.65 of the Income Tax Ordinance, 1979 but he had no powers to re‑consider the same information in terms of S.66‑A Income Tax Ordinance, 1979 particularly when the already formulated assessment was made after considering all those facts of the case, which now had been made basis for invocation of S.66‑A‑‑‑Noticc was issued on vague assumption based on the hypothesis of "non‑examination of claim of expenses and vouchers as well as the payment made to the creditors of selling and advertisement expenses plus the increase shown in sundry creditors"‑‑‑Inspecting Additional Commissioner being not in possession of definite facts, sufficient to negate the assessment order of the Assessing Officer, order passed in terms of S.66‑A of the Income Tax Ordinance, 1979 was not sustainable in law and as such same was vacated by the Appellate Tribunal and restored that of Assessing Officer.

(1977) 75 Tax (Trib.) 70; 1984 PTD 137; 1990 PTD 914; PLD 1964 SC 410; 1988 PTD 723 = PLD 1988 Kar. 587 and NTR 1990 (Trib.) 267 rel.

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

‑‑‑‑S. 66‑A‑‑‑Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order‑‑‑Supervisory authority‑‑‑While exercising supervisory authority, the Inspecting Additional Commissioner was not expected to indulge in deep enquiry by assuming the role of Assessing Officer.

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

‑‑‑‑S. 66‑A‑‑‑Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order‑‑‑Proceedings initiated under S.66‑A of the Income Tax Ordinance, 1979 could not be held to be administrative in nature though supervisory in its character.

Shahbaz Ahmed Butt for Appellant.

Mian Javed‑ur‑Rehman, D.R. for Respondent.

Date of hearing: 10th January, 2004.

2004 P T D (Trib.) 1868

[Income‑tax Appellate Tribunal Pakistan]

Before Rasheed Ahmad Sheikh and Khawaja Farooq Saeed, Judicial Members and Amjad Ali Ranjha, Accountant Member

I.T.As. Nos. 4114/LB and ‑14115/LB of 2001, decided on 2nd June, 2003.

Per Rasheed Ahmad Sheikh, Judicial Member [Majority view].

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

‑‑‑‑S. 13(1)(e)‑‑‑Unexplained investment etc., deemed to be income‑‑­Word "incurred"‑‑‑Connotation‑‑‑‑‑‑Expenditure‑‑‑Section 13 (1)(e) of the Income Tax Ordinance, 1979 vividly spells out that where an assessee during any income year "incurred" any expenditure and he offered no explanation about the nature and source of such expenditure or the explanation offered by the assessee was not satisfactory in the opinion of the Assessing Officer, the sums so expended shall be deemed to be the income of the assessee of such income year chargeable to tax under the Income, Tax Ordinance, 1979‑‑‑Significant word used in Cl. (e) to subsection 13(1) is "incurred"‑‑‑In common parlance the word "incur" means‑ disbursement of expenses‑‑‑Legislature, has intentionally used second form of verb in‑the clause which would denote actual expending of expenses and not those of .incurring expenses on notional basis.

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

‑‑‑‑S. 13(1)(e)‑‑‑Unexplained‑ investment etc, deemed to be income‑‑­Expenditure‑‑‑Addition of expenditure on the basis of expenses claimed in a civil suit against Municipal Committee in respect of staff salaries and rent paid .for vehicles on notional basis‑‑‑Validity‑‑‑No edifice of assessment could be built on pre‑supposed and imaginary figures' of expenses claimed by the assessee in Civil Suit‑‑‑Purport and the tenor of the Civil, Suit was nothing but to compel the competent authorities to award contract to the assessee, how could the provisions of S.13 of the Income Tax Ordinance, 1979 could be invoked in such eventuality .particularly when not a single penny had been spent by the assessee on account of making payment to the staff and vehicles rental‑‑‑Assessing Officer could very easily ascertain the veracity of the assessee's claim as to whether company's cash had been affected by the such payments or not and whether any corresponding entries were recorded in the respective ledger account or not‑‑‑Fact whether a lump sum salary was paid to staff on a particular date of the year or was paid on periodical basis i.e. month wise could also not be ignored‑‑‑Other factors could also be looked into by adducing additional evidence to corroborate denial of the assessee's claim‑‑‑By doing such exercise, the whole controversy would become crystal clear as to whether the assessee had incurred any expenditures on account of payment made to staff and the vehicles rental‑‑‑Order passed by the two lower authorities suffered from factual infirmity insofar as claim of expenses on account of staff salaries and vehicles rental was concerned‑‑‑Order of First Appellate Authority was vacated and that of Assessing Officer was set aside for de novo consideration‑‑‑Assessing Officer was directed to proceed afresh after resolving factual controversy ‑‑‑Assessee was also allowed to adduce any documentary evidence in support of its claim during the course of re­assessment proceedings‑‑Assessing Officer was also directed to confront the assessee with proposed treatment.

(1989) 59 Tax 112 (High Court) ref.

Per Khawaja Farooq Saeed, Judicial Member [agreeing]‑‑

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

‑‑‑‑S. 13(1)(e)‑‑‑Qanun‑e‑Shahadat (10 of 1984) Art. 144‑‑‑Unexplained investment etc., deemed to be income‑‑‑Expenditure‑‑‑Addition made on the basis of expenses claimed in a civil suit against Municipal Committee in respect of staff salaries and rent paid for vehicles on notional basis was set aside by one of the Members of Appellate Tribunal‑‑‑Department contended that assessee's original statement debared him from changing position and assessee was estopped by law to reprobate from what he had expressed by action earlier‑‑‑ Validity‑‑‑Assessee had statedly not done any business during the assessment years‑‑‑Entire addition was made on account of expenditure, which he claimed against performance of the agreement during continuation before cancellation‑‑‑Denial of assessee from incurring of expenses that the same were notional and claimed to 'pressurise the local government authorities to award contract was not supported by any evidence‑‑‑Assessing Officer, had also been able to prove his onus‑‑‑After denial of assessee the responsibility of proving that the expenses had been incurred lay strongly on the shoulders of the Assessing Officer to prove that the expenses were incurred‑‑‑One may agree with the department that the assessee having taken a stand could not subsequently be allowed to reprobate which means when something suits him he swallows it but when the same could not help him he denies­‑‑Issues of expenses had not yet been touched at any stage of the proceedings‑‑‑Neither Assessing Officer had categorically asked the assessee to explain nor the matter had been thrashed out from that angle‑‑‑Matter was also set aside by the third Member of the Appellate Tribunal.

2000 PTD 869 and 2001 PTD 2274 rel.

Per Amjad Ali Ranjha Accountant Member (Minority view)—--

Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑S. 13(1)(e)‑‑Unexplained investment etc., deemed to be income‑‑­Expenditure ‑‑‑Assessee claimed expenditure in a civil suit against Municipal Committee in respect of staff salaries and rent paid for vehicles but did not claim/declare such expenditure in the income‑ax returns in the relevant assessment years‑‑‑Addition of such expenditure was made by the Assessing Officer ‑‑‑Assessee argued that addition was baseless as the assessee did not incur any such expenditure and the same was mentioned in the civil suit to develop pressure for obtaining the cancelled contract‑‑‑Addition was confirmed by the First Appellate Authority‑‑‑Validity‑‑‑Order of First Appellate Authority was judicious and was based on facts which did not call for any interference‑‑‑Order of First Appellate Authority was maintained and assessee's appeal was rejected.

Muhammad Arshad, I.T.P., for Appellant.

Nemo for Respondent.

Date, of hearing: 30th May, 2003.

2004 P T D (Trib.) 1883

[Income‑tax Appellate Tribunal Pakistan]

Before Khawaja Farooq Saeed, Judicial Member and Imtiaz Anjum, Accountant Member

I.T.As. Nos.1031/LB and 210/LB to 212/LB of 2001, decided on 30th September, 2003.

(a) Income‑tax‑‑‑

‑‑‑‑Profit & Loss account‑‑‑Sale promotion expenses‑‑‑Such expenses allowed to the extent of 45 % were confirmed by the Appellate Tribunal.

I.T.As. Nos. 2801 and 281/LB of 2000 and I.T.A. No.5350/LB of 1997 rel.

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

‑‑‑‑Ss. 108(b), 139, 142, 116 & 50(1)(4)‑‑‑Income Tax Rules, 1982, Rr.53 & 61‑‑‑Penalty for failure to furnish return of total income and certain statements‑‑‑Late filing of statements showing Nil tax deduction‑­Levy of penalty‑‑‑Validity‑‑‑Statements were available on record showing tax deduction at Nil‑‑‑Tax was not deductible on salaries paid to employees‑‑‑No payment was made to any party which attracted the provisions of S.50(4) of the Income Tax Ordinance, 1979‑‑‑Rule 53 of the Income Tax Rules, 1982 did not require furnishing of statement under S.139 of the Income tax Ordinance, 1979 in the circumstances‑‑­Assessee had also not committed any default under S.142 of the Income Tax Ordinance, 1979 as he did not make any payment to any party attracting deduction under S.50(4) of the Income Tax Ordinance, 1979‑‑­Penalties deleted by the First Appellate Authority were confirmed by the Appellate Tribunal.

I.T.A. No. 3412/LB of 1999 rel.

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

‑‑‑‑S.12(18)‑‑‑Income deemed to accrue or arise in Pakistan ‑‑‑Advances‑­Business activity/transaction‑‑‑Addition was made on account of sum received in cash against purchase of tickets on behalf of parties on the ground that once advance is received other than crossed cheque, there was hardly any justification for going into the nature of the advance or for that matter finding out whether it was a trade/business advance or receipt of cash otherwise‑‑‑Validity‑‑‑For the purposes of purchase of ticket the buyer paid a sum while the ticketing agency handed over ticket after few days on fulfillment of the requirements of issuance and confirmation of the dates‑‑‑During that period, deposit remained in the custody of seller yet could not be termed as advance in the spirit of S.12(18) of the Income Tax Ordinance, 1979‑‑‑Nature of advance in fact was not advance in cash other than the ordinary business transaction which did not fall within the mischief of the provisions of S. 12(18), of the Income Tax Ordinance, 1979 and it was never the intention of the legislature‑‑‑Amount received against the purchase of tickets‑ could not be treated as advance in terms of .provisions of S. 12(18) of the Income Tax Ordinance, 1979.

PLD 1991 SC 280 ref.

2001 PTD 1180 and 1973 PTD 375 rel.

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

‑‑‑‑S.12(18)‑‑‑Income deemed to accrue or arise in Pakistan‑‑‑Advances‑­Sale of goods‑‑‑Transaction agreed between parties and money paid before transfer of goods did not amount to advance.

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

‑‑‑‑S. 24(ff)‑‑‑Deductions not admissible‑‑‑Addition‑‑‑Addition made under S.24(ff) of .the Income Tax Ordinance, 1979 at Rs.72,000 was confirmed by the Appellate Tribunal since the amount of Rs.6000 per month was paid in cash‑‑‑Payment was to be made through cross cheque since the aggregate amount exceeded Rs.50,000 and transaction exceeded Rs.5,000 each as well.

Muhammad Bashir Malik for Appellant.

Muhammad Asif, D.R. for Respondent.

Date of hearing: 25th September, 2003.

2004 P T D (Trib.) 1890

[Income‑tax Appellate Tribunal Pakistan]

Before Khawaja Farooq Saeed, Judicial Member and Imtiaz Anjum, Accountant Member

I.T.As. Nos.4471/LB and 4472/LB of 1996, decided on 26th August, 2003.

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

‑‑‑‑Ss. 156 & 80‑D‑‑‑Rectification of mistake‑‑‑Minimum tax on income of certain persons‑‑‑Export rebate‑‑‑Inclusion of turnover by way of rectification for purpose of charging tax under S.80‑D of the Income Tax Ordinance, 1979 in spite of assessee's clarification that export rebate had been treated as sales, while in fact it was refund of the cost of import inputs which he had very rightly deducted from the cost of sale‑‑­Validity‑‑‑Assessing Officer while carrying out rectification under S.156 of the Income Tax Ordinance, 1979 had failed to discuss the explanation rendered with regard to refund/rebate clearly stated to be a duty draw back deducted from the cost of sales‑‑‑Issue of rebate vis‑a‑vis turnover had neither been examined nor appreciated on merit‑‑‑Both the authorities below had dealt with the issue without referring to its exact nature and accounting; appreciation of the claim of rebate having been deducted from the cost of sales and as to how it was to .be treated part of the turnover‑‑‑Authorities had failed to discretely scrutinize nature and consequential accounting of claim of refuted/rebate on account of duty draw back deducted from cost of sale and proceeded arbitrarily to treat the same as compensatory rebate on export‑‑­Rectification carried out by the Department , was not sustainable‑‑­Appellate Tribunal directed the Assessing Officer to do the needful to determine the factual position for the purposes of inclusion or exclusion from turnover to charge tax under S.80‑D of the Income Tax Ordinance, 1979.

2001 PTD 1649 rel.

Muhammad Zia‑ul‑Islam for Appellant. .

Ashraf Ahmad Ali D.R. for Respondent.

Date of hearing: 13th August, 2003.

2004 P T D (Trib.) 2019

[Income‑tax Appellate Tribunal Pakistan]

Before Inam Ellahi Sheikh, Chairman and Muhammad Jahandar, Judicial Member

R.A. No.258/IB of 2003, decided on 14th April, 2004.

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

‑‑‑‑S.136 & Second Sched., Part I, Cl. (86)‑‑‑Reference to High Court---Assessee, a company limited by guarantee, was running flying club‑‑­Income from subscriptions and entrance fee to such club‑‑‑Exemption claimed by the assessee under Cl. (86) of Part 1 of the Second Schedule of the Income Tax Ordinance, 1979, being an educational institution, was allowed by the Appellate Tribunal‑‑‑Question of law put by the Department that "whether Appellate Tribunal was justified to treat the assessee company as an educational institution for the purpose of clause (86) Part I of the Second Schedule to the Income Tax Ordinance, 1979 was referred to High Court by the Appellate Tribunal.

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

‑‑‑‑Ss. 136 & 80‑C‑‑‑Reference to High Court‑‑‑Appellate Tribunal held that spare parts imported for use in the repair and maintenance of own aircraft of Flying Club was exempt from the provisions of S.80‑C of the Income Tax Ordinance, 1979 being not marketed onward‑‑‑Section 80‑C of the Income Tax Ordinance, 1979 provided for the exclusion of raw material imported by an industrial undertaking for own consumption from the purview of said section but no specific mention had been made of spare parts‑‑‑Question of law put by the Department that "Whether Appellate Tribunal was justified to hold that the provisions of section 80C are not applicable to imports of spare parts made by the assessee was referred to High Court by the Appellate Tribunal in circumstances.

(2001) 83 Tax 63; PLD 1962 (W.P.) Kar. 635; 1996 PTD 1192; 2003 PTD 589 and 76 Tax 118 ref.

Khalid Javed, DR for Appellant.

Khalid Majeed, FCA for Respondent.

Date of hearing: 13th April, 2004.

2004 P T D (Trib.) 2038

[Income‑tax Appellate Tribunal Pakistan]

Before S. Hasan Imam, Judicial Member and S. A. Minam Jafri, Accountant Member

M. A. (Rect.) No. 431/KB of 2003 in I.T.A. No. 1350/KB/SB of 1996‑97, M. A. (Rect.) No. 432/KB of 2003 in I.T.A. No.1351/KB/SB­of 1996‑97 and M. A. (Rect.) No. 433/KB of 1003 in I.T.A. No. 1352/KB/SB of 1996‑97, decided on 27th March, 2004.

Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑S. 156‑‑‑Income Tax Ordinance, (XLIX of 2001). 5.221‑‑­Rectificatiom of mistake‑‑‑Appellate Tribunal dismissed the appeals arising from the Rectification Application observing that the grounds taken in the Rectification Application moved before First Appellate Authority were different from the grounds taken in main appeal thus ground not agitated before the First Appellate Authority could not be rectified ‑‑‑Assessee moved Rectification Application for the reason that one of the grounds raised before the Appellate Tribunal was not taken into consideration‑‑‑Validity‑‑‑Such ground was not specific requiring independent decision by the Appellate Tribunal‑‑‑Even if appeal was allowed partly by the First Appellate Authority but in the lest line it was dismissed the Assessing Officer, was legally bound to implement the order in its real spirit and to follow the specific findings on each issue‑‑­Although there was no reason to rectify the order which was not only well discussed but also contained all the relevant facts yet in the interest of justice Appellate Tribunal directed the Assessing Officer to implement the order of First Appellate Authority taking into consideration his findings on each and every issue‑‑‑Rectification Application was dismissed in the circumstances.

Abdul Tahir Ansari, ITP for Applicant.

Gohar Ali, D.R. for Respondent.

Date of hearing: 12th March, 2004.

2004 P T D (Trib.) 2043

[Income‑tax Appellate Tribunal Pakistan]

Before Muhammad Tauqir Afzal Malik, Judicial Member and Muhammad Munir Qureshi, Accountant Member

M.A. No.406/LB of 2003, decided on 16th March, 2004.

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

‑‑‑‑S. 221‑‑‑Income Tax Ordinance (XXXI of 1979), Ss. 156, 23(1) & 66‑A‑‑‑Application for rectification of mistake‑‑‑Penal interest‑‑‑Business expenditure‑‑‑Appellate Tribunal had held that payment made to financial institution by the assessee by way of penal interest' for violation of terms of repayment of loan outstanding advanced to assessee by the Institution and claimed by the assessee asbusiness expenditure' in the final accounts and so allowed by the Assessing Officer, was not allowable as `business expenditure'‑‑‑Rectification application on the ground that such order statedly was not consistent with the order of Supreme Court of Pakistan, thus erroneous and required to be rectified‑‑­Validity‑‑‑Tribunal's judgment disposing of assessee's main appeal against the order of First Appellate Authority focused mainly on the competence of the Commissioner of Income Tax to invoke the provisions of S.66A of the Income Tax Ordinance; 1979 when according to assessee said provision could only have been properly invoked by an Inspecting Additional Commissioner‑‑‑Rectification application was a patent attempt to reargue and improve on the arguments already preferred by the assessee when arguing its main appeal against the order of First Appellate Authority, in which case the Appellate Tribunal had passed final judgment‑‑‑Appellate Tribunal did not have unlimited powers for intervention under S.221 of the Income Tax Ordinance, 2001‑‑‑In disposing of rectification application, Appellate Tribunal could only take note of error(s) floating on the face of the record and arising out of Tribunal's order‑‑‑Judgment of Supreme Court of Pakistan cited for the first time was "in stricto senso" not at par with the circumstances obtaining in assessee's case‑‑‑Banking laws were applicable in assessee's case and there was no concept of "mark‑up on mark‑up" in banking laws and that it was not the assessee's case that only normal mark‑up had been charged by the Financial Institution that was not in the nature of levy of penalty ‑‑‑Assessee had not argued that loan amount outstanding to the Institution could not be cleared in time due to any financial constraints If that had been so, the assessee was expected to move the creditor for rescheduling the repayment terms and conditions‑‑‑No such attempt had been made and the only inference therefore, must be that default on assessee's part was wilful/deliberate and hence of a criminal complexion and thus inviting punitive levy of penalty‑‑‑Rectification application was refused by the Appellate Tribunal.

PLD 2001 SC 201 distinguished.

2000 PTD (Trib.) 2668; 1996 PTD (Trib.) 244; 1983 PTD 246 and PLD 2001 SC 201 ref.

(b) Income‑tax‑‑‑

‑‑‑‑Business expediency‑‑‑Loan‑‑‑Loan default could not be legitimately seen as a mere matter of business expediency‑‑‑Indeed loan default was violative of the entire body of law pertaining to settlement of financial obligations /debtor creditor relations ‑‑‑Debtor/assessee could not be given a licence to return loan amount on its own sweet will‑‑‑Such was not business expediency, rather this was anarchy.

Mian Ashiq Hussain for Applicant.

Waqar Mehmood Khilji, D.R. and Shahid Jami Khan, LA for Respondent:

Date of hearing: 6th January, 2004.

2004 P T D (Trib.) 2051

[Income‑tax Appellate Tribunal Pakistan]

Before Inam Ellahi Sheikh, Chairman and Muhammad Jahandar, Judicial Member

I.T.A. No.705/IB of 2003, decided on 12th April, 2004.

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

‑‑‑‑Ss. 80AA/62, 55, 22 & 23‑‑‑Tax on income of non‑residents from, fees for technical service‑‑‑Income from providing mud logging services to oil exploration companies ‑‑‑Assessee filed return under S.55 of the Income Tax Ordinance, 1979 and desired to be assessed under Ss.22 and 23 of the Income Tax Ordinance, 1979‑‑‑Assessment was made under S.62/80AA of the Income Tax Ordinance, 1979 treating the gross receipts from mud logging services as fee for technical services‑‑­Validity‑‑‑Non‑resident was required to file a six monthly return under the provisions of subsection (2) of S.80AA of the Income Tax Ordinance, 1979‑‑‑Subsection (3) of S.80AA of the Income Tax Ordinance, 1979 required determination of the income referred to in subsection (2) of S.80AA of the Income Tax Ordinance, 1979 and charge tax thereon in accordance with the provision of S.80AA of the Income Tax Ordinance, 1979‑‑‑Assessee filed a return under. S.55 of the Income Tax Ordinance, 1979 and there was only one return filed by the assessee for the whole year which did not fulfill the requirements of S 80AA of the Income Tax Ordinance, 1979‑‑‑Consolidated assessment order was passed for two years instead of passing two orders for one year‑‑­Assessing Officer had assessed the income under S.62/80AA of the Income Tax Ordinance, 1979 as per history or past practice, rejecting the assessee's claim to be assessed under Ss.22 and 23 of the income Tax Ordinance, 1979 without issuing a notice which was the requirement of natural justice‑‑‑Proviso to S.62 of the Income Tax Ordinance, 1979 refers to the assessment to be made under S.62 of the Income Tax Ordinance, 1979 after giving the assessee a notice of defects in the books where the books had been produced as evidence ‑‑‑Assessee's claim o` being assessed under S.62 read with S.22 of the Income Tax Ordinance 1979 could not be brushed aside without providing the assessee an opportunity of being heard‑‑‑Assessment order passed by the Assessing Officer neither fulfilled the requirements of S.62 nor of S.80AA of the Income Tax Ordinance, 1979 and Appellate Tribunal thus annulled the assessment.

I.T.As. Nos. 163 and 164/IB of 2000‑2001; I.T.As. Nos. 405 and 508/IB of 2000‑2001 and R. As. Nos. 150 to 153/113 of 2002 ref.

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

‑‑‑‑Ss. 62 & 80AA ‑‑‑Assessment on production of books of accounts etc.‑‑‑If the Assessing Officer was going to make an assessment under S.80AA of the Income Tax Ordinance, 1979, then the provisions of S.6 of the Income Tax Ordinance, 1979 could not be invoked as the provision of S.80AA of the Income Tax Ordinance, 1979 was a non­ obstante provision which excluded the application of other provisions of Income Tax Ordinance, 1979.

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

‑‑‑‑S. 80AA ‑‑‑Tax on income of non‑residents from fees for technical services‑‑‑Provisions of law under S.80AA of the Income Tax Ordinance, 1979 were non‑obstante provisions and required the assessee to file two returns in a year‑‑‑Section 80AA did not make any provision for the Assessing Officer to force the assessee or taxpayer to file the returns and there was no prescribed form under the said section­ Proviso to subsection (2) of section 80AA of the Income Tax Ordinance, 1979 required a non‑resident assessee to file a return of total income by reference to S.81 of the Income Tax, Ordinance, 1979‑‑‑Said provision did not take care of the situation where a non‑resident company ceases its operations before the expiry of six months‑‑‑Provision of S. 81 just presumes that a non‑resident person receiving fee for technical services is an individual‑‑‑Definition of non‑resident in sub‑Cl. (c) of Cl.(40) of S.2 of the Income Tax Ordinance, 1979 refers to the control and management of the affairs in Pakistan and controls shift more easily as compared to the past since, the relaxation of exchange control‑‑‑Such situation has also to be taken into care while reconsidering the chargeability of income from fee for technical services in the hands of a non‑resident person.

Aaqib Hussain, ITP for Appellant.

Khalid Javed, DR for Respondent.

Date of hearing: 9th April, 2004.

2004 P T D (Trib.) 2074

[Income‑tax Appellate Tribunal Pakistan]

Before Inam Ellahi Sheikh, Chairman and Muhammad Jahandar, Judicial Member

I.T.A. No.791/IB of 2003, decided on 7th April, 2004.

Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑Ss. 65, 59A & 59(1)‑‑‑Additional assessment‑‑‑Re‑opening of assessment on the basis of same information available at the time of framing assessment under S.59A of the Income Tax Ordinance, 1979‑‑­Validity‑‑‑Assessing Officer proceeded on the same information which was available to him before passing the order under S.59A of the Income Tax Ordinance, 1979‑‑‑Assessment could not have been completed under S.59A of the Income Tax Ordinance, 1979 as admittedly detailed proceedings had been conducted and notices had been issued to the assessee‑‑‑Same information had been used for reopening the case which was available at the time of original assessment‑‑‑Apparently Assessing Officer was unable to comprehend the correct provisions of law while making the original assessment‑‑‑Assessing Officer had the information about the various transactions and although he considered transactions to be concealment, he still accepted the declared return considering that the return was qualified for acceptance and was immune from exclusion from the Self‑Assessment Scheme‑‑‑Department was unable to point out any provision of Self‑Assessment Scheme under which the Assessing Officer was compelled to accept the declared income in the presence of such information‑‑‑Appeal of the Department was dismissed by the Appellate Tribunal.

Khalid Javed, DR for Appellant.

Ghulam Sarwar and G. Abbas Chatha for Respondent.

Date of hearing: 7th April, 2004.

2004 P T D (Trib.) 2078

[Income‑tax Appellate Tribunal Pakistan]

Before Ehsan‑ur‑Rehman, Judicial Member and Muhammad Sharif Chaudhry, Accountant Member

I.T.As. Nos.3014/LB of 2000 and 2456/LB of 2003, decided on 10th March, 2004.

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

‑‑‑‑S. 65(3A)‑‑Additional assessment‑‑‑Limitation‑‑‑Assessment was annulled being time‑barred under S.65(3A) of the Income Tax Ordinance, 1979 by the First Appellate Authority without excluding period consumed in Constitutional petition before High Court ‑‑‑Validity‑­Period consumed in Constitutional petition, from the date of filing of the same to the disposal by the High Court, was to be excluded while computing limitation under S.65(3A)of the Income Tax Ordinance, 1979‑‑‑Period of limitation. available to Assessing Officer for making assessment under S.65(3A) of the Income Tax Ordinance., ,1979 would work out up to 30‑6‑2000 and assessment made on 28‑6‑19§9 was very much in time‑‑‑Appeal filed by Revenue was accepted and order passed by the First Appellate Authority was vacated by the Appellate Tribunal.

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

‑‑‑‑Ss. 66(1) & 65(3A)‑‑‑Limitation for assessment in certain cases‑‑­Revenue's contention that period of limitation for making the assessment under S.65 of the Income Tax Ordinance, 1979 should be determined under S.66(1) was not found convincing by the Appellate Tribunal‑‑­Since notice under S. 65 (1) of the Income Tax Ordinance, 1979 was issued and served on the assessee, so period of limitation would be governed under S.65 (3A) of the Income Tax Ordinance, 1979.

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

‑‑‑‑Ss. 66(1) & 65(3A)‑‑‑Limitation for assessment in certain cases‑‑­Section 66(1) of the Income Tax Ordinance, 1979 supersedes period of limitation in Ss. 64 & 65(3A) of the Income Tax Ordinance, 1979 but it does not supersede the period of limitation prescribed under S.65 (3A) of the Income Tax Ordinance, 1979‑‑‑Section 66(1) of the Income Tax Ordinance, 1979 cannot be applied to the case of the assessee upon whom notice under S.65(1) of the Income Tax Ordinance, 1979 has been served and to whom limitation laid down under S.65(3A) has become applicable.

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

‑‑‑‑S.111‑‑‑Penalty for concealment of income etc. ‑‑‑Opportunity of being heard‑‑‑Order had been passed ex parte in absence of assessee and assessee's view point had not been heard‑‑‑Validity‑‑‑Assessing Officer should understand that penalty proceedings were independent of assessment proceedings and the same were in the nature of criminal proceedings‑‑‑Penalty order could not be passed without providing reasonable opportunity of hearing to the assessee and without establishing that action of the assessee regarding concealment of income was deliberate‑‑‑Penalty order passed by the Assessing Officer was vacated by the Appellate Tribunal and Assessing Officer was directed to hear the assessee and pass a speaking order.

Muhammad Zulfiquar Ali, D.R. for Appellant.

Miss Ayesha Qazi for Respondent.

Date of hearing: 10th March, 2004.

2004 P T D (Trib.) 2087

[Income‑tax Appellate Tribunal Pakistan]

Before Ehsan‑ur‑Rehman, Judicial Member and Muhammad Sharif Chaudhry, Accountant Member

I.T.A. No.2097/LB of 2002, decided on 28th February, 2004.

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

‑‑‑‑S. 12 (9A) & Second Sched., Part IV, Cl. (59)‑‑‑Income deemed to accrue or arise in Pakistan‑‑‑Bonus shares‑‑‑Distribution of bonus shares, in no way fulfils the conditions laid down under Cl. (59) of Part IV of the Second Schedule of the Income Tax Ordinance, 1979‑‑‑Bonus shares were not dividend as defined in the Income Tax Ordinance, 1979.

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

‑‑‑‑S. 2 (20)‑‑‑Definition‑‑‑Dividend‑‑‑Bonus shares‑‑‑Income Tax Ordinance, 1979 defines dividend in its S.2(20) and dividend did not include bonus shares.

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

‑‑‑‑S. 12(9)‑‑‑Income deemed to accrue or arise in Pakistan‑‑‑Bonus shares‑‑‑Income of company or shareholder‑‑‑According to Scheme of Income Tax Ordinance, 1979 (as it existed during the period under consideration) bonus shares were treated as income of the shareholders rather the same were treated as income of the company under S.12(9) of the Income Tax Ordinance, 1979.

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

‑‑‑‑S.12(9A)‑‑‑Income deemed to accrue or arise in Pakistan‑‑‑Purpose‑‑‑Purpose of enacting .subsection (9A) of S.12 of the Income Tax Ordinance, 1979 was to ensure payment of cash dividend to the share holders (who were complaining against the attitude of the companies and their demand was also voiced by the Stock Exchanges of the Country that companies were not issuing dividend to them) and also to ensure 10% tax to the Government of Pakistan which was levied on dividend in the hands of the shareholders‑‑‑Both of these purposes could not be solved by issuance of bonus shares.

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

‑‑‑‑S. 12(9A) & Second Sched., Part I, Cl. (108)‑‑‑Income deemed to accrue or arise in Pakistan‑‑‑Bonus shares‑‑‑By issuing bonus shares, a company capitalizes the profit and issues merely papers to the shareholders which might have or might not have ready buyers in the stock market and shareholders did not receive dividend in cash‑‑­ Government was also deprived of tax because bonus shares were treated as income in the hands of the company under S.12(9A) of the Income Tax Ordinance, 1979 but such income was exempt from tax under Cl. (108) of Part 1 of the Second Schedule to the Income Tax Ordinance, 1979.

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

‑‑‑‑S. 12(9A) & Second Sched: Part‑IV, Cl. (59)‑‑‑Income deemed to accrue or arise in Pakistan‑‑‑Bonus shares‑‑‑Contention of the assessee that "by issuing bonus shares the company had fulfilled the condition laid down under clause (59) of the Second Sched., Part IV of the Income Tax Ordinance, 1979 and so S.12(9A) of the Income Tax Ordinance, 1979 was not applicable" was rejected by the Appellate Tribunal.

(2003) 87 Tax 524 (Trib.) distinguished.

(g) Precedents‑‑‑

‑‑‑‑Observations in the nature of obiter dicta recorded by Supreme Court of Pakistan have legal force.

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

‑‑‑‑S. 12(9A)‑‑‑Income deemed to accrue or arise in Pakistan‑‑‑Reserves for the purpose of subsection 12(9A) of the Income Tax Ordinance, 1979 were those amounts which had been set out of revenues or other surpluses excluding capital reserve, share premium reserve and reserve required to be created under any law, rules and regulations.

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

‑‑‑‑Ss. 12(9A) & 66A‑‑‑Income deemed to accrue or arise in Pakistan‑‑‑Reserve of bonus shares created out of profit accumulated and profit for the preceding years, for the purpose to issue bonus shares to the shareholders, was neither in the nature of capital reserve nor it was share premium reserve nor it was any other reserve required to be created under any law, rules or regulations‑‑‑Contention of assessee that bonus shares reserve was capital reserve and should be excluded from the amount of reserves for the purpose of S. 12(9A) of the Income Tax Ordinance, 1979 was not correct‑‑‑Inspecting Additional Commissioner was justified to include such reserve with other reserve for the purpose of S.12(9A) of the Income Tax Ordinance, 1979‑‑‑Computation of reserve made by the Inspecting Additional Commissioner for subjecting the assessee to tax under S.12(9A) of the Income Tax Ordinance, 1979 was maintained by the Appellate Tribunal.

(2003) 87 Tax 524 (Trib.) distinguished

I. T. A. No. 1117/LB of 2002 ref.

I.T.A. No. 4304/LB of 2001 per incuirum.

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

‑‑‑‑S. 25(e)‑‑‑Word "Pay"‑‑‑Meanings‑‑‑Word "pay" means to discharge a debt or to give compensation for the goods supplied or services rendered in cash or in kind, in other words, "pay" means to pay in money or money's worth‑‑‑Payment can be made in cash or in kind, for example in the form of handing over some goods or shares or property or land or building according to the satisfaction of a creditor or a person to whom payment is due.

Oxford Dictionary; New Webster's Dictionary; Chambers 20th Century Dictionary and Volume LXX by Corpus Juris Secundum at p.70 ref.

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

‑‑‑‑S. 25 (c)‑‑‑Amounts subsequently recovered in respect of deductions, etc.‑‑‑Trading liability‑‑‑Conversion of such liability into medium term loan‑‑‑Taxation‑‑‑Validity‑‑‑Liability due from the assessee to the Government of Pakistan had neither been paid in money or in money's worth or in form of any property or goods‑‑‑Merely conversion of such liability in medium term loan with enhanced rate of interest was not the discharge of assessee's trading liability as it had not been paid in terms of S.25(c) of the Income Tax Ordnance, 1979‑‑Change of nomenclature of the liability or rescheduling of loan or extension of period of payment did not mean that the liability had been paid.

(l) Interpretation of statutes‑‑‑

‑‑‑‑ Interpretation of law has to be strictly made within the premises or contours prescribed by law and ‑ suppositions or presumptions or assumptions or its ands and buts do not have any, relevance while interpreting the law.

(m) Income Tax Ordinance (XXXI of 1979)—--­

‑‑‑‑S. 25(c)‑‑‑Amounts subsequently recovered in respect of deductions, etc. ‑‑‑Trading liability‑‑‑ Conversion of such liability into medium term loan‑‑‑Taxation‑‑‑Validity‑‑‑Under S.25(c) of the Income Tax Ordinance, 1979 the assessee was required to pay the trading liability within three years of the expiration of the income year in which it was allowed but the same had not been paid either in cash or to terms of property or goods or in any form of money's worth‑‑‑Liability had not been paid and Inspecting Additional Commissioner was right in charging the same to tax a deemed income of the assessee‑‑‑Appeal filed by the assessee on the issue of trading liability under S.25(c) of the Income Tax Ordinance, 1979 was rejected and action of the Inspecting Additional Commissioner on the issue was maintained by the Appellate Tribunal.

2000 PTD (Trib.) 1328 distinguished.

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

‑‑‑‑Ss. 66A & 65‑‑‑Powers of inspecting Additional Commissioner to revise Deputy Commissioner's order‑‑‑Change of opinion ‑‑‑Bar‑‑­Change/difference of opinion was the biggest bar against action under S.65 of the Income Tax Ordinance, 1979 but it was not the bar in terms of application of S.66A of the Income Tax Ordinance, 1979‑‑‑Under S.65 of the Income Tax Ordinance, 1979 action is taken by an Assessing Officer against order passed by himself/Assessing Officer and such change of opinion or difference of opinion is not allowed to be made basis for such an action‑‑‑Under S.66A of the Income Tax Ordinance, 1979 action is to be taken by a higher authority i.e. by an Inspecting 'Additional Commissioner against order passed by his subordinate i.e. an Assessing Officer and difference of opinion is essential for taking action under S.66A of the Income Tax Ordinance, 1979 because if an Inspecting Additional Commissioner agrees with the opinion of an Assessing Officer then there is no ground for taking action‑‑ ‑Difference of opinion between the Inspecting Additional Commissioner and the Assessing Officer leads as Inspecting Additional Commissioner to hold that the order passed by the Assessing Officer is erroneous and prejudicial to the interest of Revenue.

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

‑‑‑‑S. 23, Third Sched., R.8(8)(e) & S.66A‑‑‑Deductions‑‑‑Exchange risk coverage fee‑‑‑Capitalization of ‑‑‑Assessee claimed an expense incurred on account of exchange risk coverage fee relating to foreign currency loan used for import of plant and machinery‑‑‑Assessing Officer capitalized only 30% of the claimed amount while the Inspecting Additional Commissioner capitalized whole amount under R.8(8)(e) of the Third Schedule of the Income Tax Ordinance, 1979‑‑‑Validity‑‑Exchange risk fee incurred by the assessee was a revenue expense and not an expense of capital nature and the same was deductible under the law ‑‑‑Application of R.8(8)(e) of the Third Schedule of the Income Tax Ordinance, 1979 by the Inspecting Additional Commissioner was absolutely unjustified because said Rule applied to a situation where an assessee had imported any plant and machinery from a foreign country for installation in Pakistan for his business and due to fluctuation of rate of exchange, his liability to repay the loan in Pak Rupee increases or decreases‑‑‑Payment of fee to State Bank as sort of security or insurance to safeguard against loss due to adverse exchange fluctuation was not relevant to R.8(8)(e) of the Third Schedule of the Income Tax Ordinance, 1979.

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

‑‑‑‑S. 66A (1A)‑‑‑Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order‑‑‑Section 66A (1A) of the Income Tax Ordinance, 1979 did not permit an Inspecting Additional Commissioner to take action under said section against order of Assessing Officer on an issue which had been decided in appeal by the First Appellate Authority or by Appellate Tribunal because the order of the Assessing Officer merges with the order of First Appellate Authority or Appellate Tribunal‑‑‑Issue of capitalization of exchange risk fee was, decided by the First Appellate Authority against the Department' so the Inspecting Additional Commissioner was debarred from taking action on this issue under S.66A (1A) of the Income Tax Ordinance, 1979.

(q) Words and phrases‑‑‑

‑‑‑‑"Pay"‑‑‑Meaning.

Asim Zulfiquar Ali, A.C.A. and Shahzad Hussain, F.C.A. for Appellant.

Zulfiquar Ali, D.R. and Shahid Jamil Khan, L.A. for Respondent.

Date of hearing: 14th February, 2004.

2004 P T D (Trib.) 2219

[Income‑tax Appellate Tribunal Pakistan]

Before Khalid Waheed Ahmad, Judicial Member Nazeer Ahmad Saleemi, Accountant Member

I.T.As. Nos.2228/LB and 454/LB of 1998, decided on 10th October, 1998.

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

‑‑‑‑Ss. 59 & 62‑‑‑C.B.R. Circular No.16 of 1992, dated 1‑7‑1992, para.4(i) [Self-Assessment Scheme]‑‑‑Self‑assessment‑‑‑Return filed under Self‑Assessment Scheme was taken up under normal course on the ground that assessee concealed his bank balance ‑‑‑Assessee contended that bank account was part of the capital disclosed and was not required to be reflected in the wealth statement separately under the head cash outside business‑‑‑Validity‑‑‑No reason was shown to treat the case as a concealment case for proceedings under normal law‑‑‑No provision existed for taking out concealment case from the Self‑Assessment Scheme as was available in earlier scheme‑‑Departmental action was totally unjustified and uncalled for‑‑‑Provision did exist for selection with the prior approval of the senior officers as per sub‑pare. (ii) of para. 4 of the Central Board of Revenue's Circular No. 16 of 1992, dated 1-7‑1992‑‑‑Approval of the Regional Commissioner of Income Tax was required in cases where gross understatement of income is suspected on the basis of definite information based on material evidence‑‑‑Not only that the requisite conditions were not available in the present case but legally required approval of Regional Commissioner of Income Tax was also missing‑‑‑Good case had been lost by the Department on account of the incompetency of the officer concerned‑‑‑Order passed under S.62 of the Income Tax Ordinance, 1979 was cancelled by the Appellate Tribunal by directing for the acceptance of the declared income under the Self‑Assessment Scheme.

Lakhmichand Baijnath v. Commissioner of Income‑tax 1959 ITR 35; Black's Law Dictionary p.208 and Hand Book of Legal Terms and Phrases p.111 ref.

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

‑‑‑‑Ss. 111, 62 & 13(1)(d)‑‑‑Penalty for concealment of income etc.‑‑­Order passed under S.62 of the Income Tax Ordinance, 1979 was cancelled by the Appellate Tribunal and order being no more in the field, the consequential addition of deemed income and the resultant' penalty did not stand‑‑‑Penalty imposed was cancelled by the Appellate Tribunal in circumstances.

Rana Afzal for Appellant.

Asad Ali Jan, D.R. for Respondent.

Date of hearing: 6th October, 1998.

2004 P T D (Trib.) 2225

[Income‑tax Appellate Tribunal Pakistan]

Before Muhammad Munir Qureshi, Accountant Member

I.T.A. No.552/LB of 2002, decided on 10th February, 2004.

Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑Ss. 27(2)(a)(i)(ii), 22 & Third Sched., R. 7‑‑‑Capital gain‑‑‑Capital gain arising out of sale of share of Association of Persons was taxed as business income‑‑‑Order of Assessing Officer was vacated by the First Appellate Authority‑‑‑Validity‑‑‑Assessee sold his 10% share in the Association of Persons and had realized a gain‑‑‑Such was clearly a capital gain and was required to be brought to tax accordingly‑‑­Assessee's capital investment was not subject to any depreciation allowance and did not constitute immovable property and was therefore, not within the purview of sub‑Cl. (i) & (ii) of Cl. (a) of subsection (2) of S.27 of the Income Tax Ordinance, 1979‑‑‑Order of First Appellate Authority was vacated by the Appellate Tribunal being misconceived tin law and order of Assessing Officer 'was also not maintained as the Assessing Officer had wrongly treated the gain realized on the sale of his share in the capital of the Association of Persons as business income when it was actually a capital gain‑‑‑Order of Assessing Officer was annulled by the Appellate Tribunal with the observation that Assessing Officer may explore the possibility of suitable remedial action, as feasible in law, subject to limitation of time laid down in. law.

I.T.A. No.5572/LB of 2002 per incurium.

Anwar Ali Shah, DR for Appellant.

Mirza Saleem Baig for Respondent.

Date of hearing: 10th February, 2004.

2004 P T D (Trib.) 2231

[Income‑tax Appellate Tribunal Pakistan]

Before Muhammad Tauqir Afzal Malik, Judicial Member and Imtiaz Anjum, Accountant Member

I.T.As. Nos.3561/LB, 3562/LB, 4105/LB and 4106/LB of 2002, decided on 25th March, 2004.

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

‑‑‑‑S 62‑‑‑Assessment on production of accounts, evidence etc.‑‑­Rejection of accounts on the grounds that sales and purchases of the assessee were partially unverifiable and assessee failed to produce comprehensive quantitative and qualitative details of purchases, raw material consumed, work in progress and finished goods‑‑‑Validity­ Complete postal addresses of the purchasers/sellers were provided to the Assessing Officer and verification letters were duly sent to such parties‑‑‑Such exercise had not been mentioned in the assessment order by the Assessing Officer‑‑‑Copies of ledger accounts of the parties were also produced before the First Appellate Authority‑‑­Payments of sales and purchases made through proper banking channel were duly accepted‑‑‑Bulk of purchases and sales were made from and to a verifiable limited company‑‑‑Assessing Officer failed to determined the percentage of allegedly unverifiable sales and purchases.

1997 PTD (Trib.) 1408; Messrs Ayenbee (Pvt.) Ltd. v. ITAT 2002 PTD 407; Barry Brothers v. CIT 2001 PTD 2612 and Messrs Solvex Pakistan Limited v. CIT in PTR 2 of 2001; Vel Matel Industries v. The State of Tramil Nadu 68 STC 55 (Mad.); Agrawal Bhatta Company v. Commissioner of Sales Tax, U.P. Lucknow 93 STC 423 (All); K. Ramlinga Mudaliar and Co. v. State and another 86 STC‑475 (Mad); Solvex Pakistan Limited v. Commissioner of Income‑tax in PTR No. 2 of 2001 and 79 Tax 263 (Trib.) ref.

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

‑‑‑‑S. 62--Assessment on production of accounts, evidence etc.‑‑­Rejection of accounts‑‑‑Without there being any allegation of suppression of sales or sale rate or inflation of purchases, the declared version could not be rejected on account of partial un‑verifiability of sales and purchases.

(c) Income Tax-----

‑‑‑‑Gross profit‑‑‑Gross profit rate of ghee manufacturer could not be applied to an assessee who runs only a solvent plant.

1984 PTD 150 ref.

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

‑‑‑‑S. 62‑‑‑Assessment on production of accounts, evidence etc.‑‑­Rejection of accounts‑‑‑When First Appellate Authority had rejected the estimation of sales by the Assessing Officer, as without any basis it should have directed the acceptance of the declared sales instead of only reducing the same.

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

‑‑‑‑S. 62‑‑‑Assessment on production of accounts, evidence etc.‑‑­Addition in Profit & Loss account‑‑‑No addition could be made by relying on stock phrases such as un‑verifiability, excessiveness and element of personal use without pointing out specific instances and also quantifying the ratio of the same‑‑‑Such an ad hoc approach was in violation of the mandatory provisions of S.62 of the Income Tax Ordinance, 1979.

(2003) 88 Tax 48 (Trib.) rel.

Bashir Ahmed Shad, D.R. for Appellant.

Sajid Ejaz Hotiana for Respondent.

Date of hearing: 13th March, 2004.

2004 P T D (Trib.) 2250

[Income‑tax Appellate Tribunal Pakistan]

Before S. Hasan Imam, Judicial Member and S. A. Minam Jafri, Accountant Member

I.T.A. No.264/KB of 2003, decided on 3rd April, 2004.

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

‑‑‑‑Ss. 52/86, 50(7B) & 24C‑‑‑Liability of persons failing to deduct or pay tax‑‑‑Addition was confirmed by the First Appellate Authority on account of rental for non‑deduction of tax under S.50 (7B) of the Income Tax Ordinance, 1979‑‑‑Order treating the assessee in default under S.52 of the Income Tax Ordinance, 1979 and charge of consequential additional tax under S.86 of the Income Tax Ordinance, 1979 was also confirmed ‑‑‑Assessee contended that First Appellate Authority was not justified in holding that, tax should have been deducted under S.50(7B)of the Income Tax Ordinance, 1979 treating the payment made to Association of Persons without ascertaining the facts that same had been paid to few tenants and that payment did not exceed Rs.100,000‑‑­Validity‑‑‑Withholding tax under S.50(7B) of the Income Tax Ordinance, 1979 was deductible in cases where annual Pent of property exceeded Rs.100,000‑‑‑Argument that rent had been paid to 4 persons had no weight because it was the only rent of the property which attracts the provisions of the withholding tax under S.50(7B) of the Income Tax Ordinance, 1979‑‑‑On the contrary the rent had not been paid individually‑‑‑Rent was paid to Association of Persons which was an independent entity for which tax was liable to be deducted as separate entity‑‑‑Assessee was entitled to benefit allowed by S.21 of the Income Tax Ordinance, 1979‑‑‑Assessee was under legal obligation to deduct tax under S.50(7B) of the Income Tax Ordinance, 1979 as the said amount exceeded Rs.100,000 and as a result, the action under S.52 read with S. 86 of the Income Tax Ordinance, 1979 due to non‑deduction of tax was confirmed by the Appellate Tribunal.

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

‑‑‑‑Ss. 21 & 19‑‑‑Liability in the case of co‑owners‑‑‑Section 21 of the Income Tax Ordinance, 1979 specifically provides that where any property to which S.19 of the Income Tax Ordinance, 1979 applies is owned by two or more persons and their respective shares are definite and ascertainable, such persons shall not, in respect of such property, be assessed as an Association of Persons, but the share of each person in the income from the property shall be included in his total income.

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

‑‑‑‑S. 2(32)‑‑‑Definitions‑‑‑Person‑‑‑Definition of 'person' was inclusive and not exclusive‑‑ ‑Term "individual" did not mean only a human being but is wide enough to include a group of persons, firm, a unit‑‑‑Word individual could only mean a natural person and shall include a group of individuals‑‑‑Contrary to this the term Association of Persons has not been used in any technical sense, therefore, same should be constituted in its plain and ordinary meaning.

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

‑‑‑‑S. 21‑‑‑Liability in the case of co‑owners‑‑‑In case of Association of Persons the Assessing Officer had the option to assess the tax either on the Association itself as a unit of assessment or of the members of Association as individual in respect of their respective shares of the profits made by the Association‑‑‑In case shares of the owners are not definite and ascertainable they may be assessable as an Association of Persons.

(e) Word and phrases‑‑‑

‑‑‑‑Definite‑‑‑Term definite means fixed, exact and clear.

Nizamuddin, ITP for Appellant.

Gohar Ali, D.R. for Respondent.

Date of hearing: 2nd April, 2004.

2004 P T D (Trib.) 2261

[Income‑tax Appellate Tribunal Pakistan]

Before Ehsan‑ur‑Rehman, Judicial Member and Muhammad Sharif Chaudhry, Accountant Member

I.T.A. No.4936/LB of 2001, decided on 13th March, 2004.

Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑Ss. 65, 59A, 148, 13(1)(aa) & (d)‑‑‑C.B.R. Circular No.4 of 1996, dated 1‑7‑1996‑‑‑Additional assessment‑‑‑Assessment under S.59A of the Income Tax Ordinance, 1979 was finalized‑‑‑Initiation of proceedings under S.65 of the Income Tax Ordinance, 1979 on the basis of wealth statement and wealth tax return available on record at the time of finalization of assessment under Self‑Assessment Scheme and addition was made under Ss. 13(1)(aa) and 13(1)(d) of the Income Tax Ordinance, 1979 ‑‑First Appellate Authority set aside the assessment for de novo proceedings‑‑‑Validity‑‑‑Assessing Officer by passing an order under section 59‑A of the Income Tax Ordinance 1979 had accepted in letter and spirit whatever information filed by the assessee as 100% correct without . requiring, the collection of further information or probe—­Assessing Officer now was bound by his own conduct not to take a stand which was contrary to the earlier one when order under S.59A of the Income Tax Ordinance, 1979 was passed Prior to passing of order under S.59‑A of the Income Tax Ordinance, 1979 the Assessing Officer was duty bound to firstly make it sure that without requiring further details/evidence the order of assessing the income under S.59 of the Income Tax Ordinance, 1979 could be made and secondly to follow the provisions of Self‑Assessment Scheme wherein it was clearly written in para.2(i) of the Broad Based Self‑Assessment Scheme, that no concealment of income cases shall be processed under Self‑Assessment Scheme‑‑‑Assessing Officer by subsequent findings drew a conclusion that it was a case of concealment‑‑‑Re‑opening of assessment was also devoid of any definite information‑‑‑Initiation of proceedings under S.65 and thereafter passing an order under S.65 of the Income Tax Ordinance, 1979 was illegal and void ab initio and all the subsequent steps taker. by the Assessing Officer on the basis of such proceedings by invoking the proceedings under S.65 of the Income Tax Ordinance, 1979 were also illegal‑‑‑Issues which had emanated from the illegal action were also not legal which required any type of findings by the Appellate Tribunal‑‑‑Assessment framed under S.65/62 of the Income Tax Ordinance, 1979 was cancelled by the Appellate Tribunal with the direction that declared income be accepted under Self‑Assessment Scheme.

(2003) 87 Tax. 120 (Trib.); 2003 PTD (Trib.) 242; Vol. 5 No. 10 Tax Forum 27; 1997 PTD (Trib.) 2344; 1997 PTD 1184 (Trib.); 1990 PTD (Trib.) 774; (2003) 88 Tax 245 (Karachi High Court); (2003) 88 Tax 158 (Trib.); 2003 PTD (Trib.) 714; 1989 PTD 311 and Vol. 6 No. 12 Tax Forum 25 ref.

1993 SCMR 1108 = 1993 PTD 1108 and (2003) 88 Tax 245 (Trib.) rel.

Liaqat Baig for Appellant.

Muhammad Zulfiqar Ali, D.R. for Respondent.

Date of hearing: 13th March, 2004.

2004 P T D (Trib.) 2287

[Income‑tax Appellate Tribunal Pakistan]

Before Muhammad Tauqir Afzal Malik, Judicial Member and Shariq Mahmood, Accountant Member

I.T.As. Nos.8114/LB, 8115/LB of 1996, 1782/LB, 1783/LB and 2181/LB of 1998, decided on 7th October, 1998.

Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑S. 62‑‑‑Assessment on production .of books of accounts, etc.‑‑Business of running an agency of Tractors Manufacturers and sale of its parts‑‑‑No‑account case‑‑‑Estimation of sales‑‑ ‑Add‑backs in profit and loss account‑‑‑Sales estimated by the First Appellate Authority was upheld by the Appellate Tribunal and Gross Profit Rate 7.5 % being as per history was confirmed‑‑‑Add‑backs under the heads "bonus to staff and printing and stationery" being unreasonable was deleted‑‑‑Add‑backs under the heads "entertainment, discount on tractors, ,booking and property tax" were set aside and case was remitted back to Assessing Officer for its decision afresh giving an opportunity to the assessee.

Aftab Ahmad Qazi for Appellant.

Sameera Yasin D.R. for Respondent.

Date of hearing: 22nd September, 1998.

2004 P T D (Trib.) 2292

[Income‑tax Appellate Tribunal Pakistan]

Before Khalid Waheed Ahmed, Judicial Member and Inam Ellahi Sheikh, Accountant Member

I.T.A. No. 1902/LB of 1998, decided on 26th September, 1998.

(a) Workers Welfare Fund Ordinance (XXXVI of 1971)‑‑‑

‑‑‑‑S. 4‑‑‑Income Tax Ordinance (XXXI of 1979‑‑‑Time for levy of Workers' Welfare Fund‑‑‑Appellate Tribunal in a judgment had found that period of 90 days was reasonable time for levy of Workers' Welfare Fund after the assessment‑‑‑Such reasonable time could not be applied so strictly as the same was not a provision of law‑‑‑Levy of Worker Welfare Fund could not be annulled for the reason that the same was levied on 91st day from the date of assessment.

(1997) 75 Tax 12 ref.

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

‑‑‑‑Second Sched: Cl. 118‑C‑‑‑Workers Welfare Fund Ordinance (XXXVI of 1971), Preamble‑‑‑Exemption‑‑‑Levy of Workers Welfare Fund was cancelled since the income of the assessee was exempt under Cl. 118‑C of the Second Schedule of the Income Tax Ordinance, 1979.

(1990) 61 Tax 9 rel.

Latif Ahmed Qureshi for Appellant.

Ahmad Kamal, D.R. for Respondent.

Date of hearing: 20th August, 1998.

2004 P T D 21

[Karachi High Court]

Before Anwar Zaheer Jamali and Gulzar Ahmed, JJ

Messrs INTERGLOBE COMMERCE PAKISTAN (PVT.) LTD.

Versus

GOVERNMENT OF PAKISTAN and others

C.P.D. No.373 of 2003, decided on 4th July, 2004.

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

----S. 21---S.R.O. 400(1)/97, dated 31-5-1997---S.R.O. 435(I)/2001, dated 18-6-2001---Customs General Order No.7 of 1998---Constitution of Pakistan (1973), Art. 199---Constitutional petition---Exemption from duty granted on import of equipments not included in list of locally manufactured goods---Clearance of such equipments on furnishing bank guarantee under S.R.O. 400(I)/97 and S.R.O. 435(I)/2001--­Petitioner applied for granting exemption certificate and release of bank guarantee---Matter was referred to Engineering Development Board for opinion about local manufacturing status of, such equipments ---Board after providing opportunity of hearing to the petitioner and obtaining information from local manufacturers opined that some of the imported equipments were locally manufactured---Contention of petitioner was that locally manufactured equipments were not compatible with the imported equipments ---Validity---High Court in exercise of Constitutional jurisdiction, would not enter into disputed questions of fact such as technical aspects of the imported equipments ---Function of Board was only to determine question as to whether equipments imported by the petitioner were being manufactured locally or not and not to determine compatibility or suitability of the imported equipments of petitioner with that of equipments manufactured locally---Law had not made any provision for determination of compatibility or suitability--­Statutory forum created under law to determine disputed question about status of imported equipments had decided same by impugned order, which did not suffer from any illegality---High Court dismissed Constitutional petition.

(b) Constitution of Pakistan (1973)---

----Art. 199---Disputed questions of fact---High Court in exercise of Constitutional jurisdiction would not enter into such questions.

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.

2004 P T D 94

[Karachi High Court]

Before S. Ahmed Sarwana and Muhammad Mujeebullah Siddiqui, JJ

MUHAMMAD UMER

Versus

FEDERATION OF PAKISTAN and others

Constitutional Petitions Nos. 33 to 51, 60 to 87, 105 to 107 and 113 to 118 of 2003, heard on 26th February, 2003.

Imports and Exports (Control) Act (XXXI of 1950)----

----S.3(1)---Import Trade and Procedure Order, 2000, paras. 18 & 19--­Levy of additional surcharge of 10 per cent over and above the duties and taxes to be paid for release of consignment---Powers of Ministry of Commerce---Scope of paras. 18 & 19 of Import Trade and Procedure Order, 2000, was confined to issue relating to importability of items and related matters---Ministry of Commerce was empowered to control import' and export and devise-policies in that behalf, but was not empowered to levy any duty, tax or surcharge which was within exclusive jurisdiction of Ministry of Finance/Revenue Division--­Customs Officials had no jurisdiction/authority to demand 10% surcharge for release of goods imported in absence of any S.R.O. issued by the Revenue Division in such respect.

Ch: Muhammad Iqbal for Petitioners.

S. Tariq Ali, Federal Counsel, Shakeel Ahmed, Ata-ur-Rehman and Ms. Masooda Saraj for Respondents.

Date of hearing; 26th February, 2003.

2004 P T D 136

[Karachi High Court]

Before S. Ahmed Sarwana and Muhammad Mujeebullah Siddiqui, JJ

SADRUDDIN ALLADIN

Versus

COLLECTOR OF CUSTOMS (APPRAISEMENT), KARACHI and 3 others

Constitutional Petition No.D-1002 of 2003, decided on 25th September, 2003.

Customs Act (IV of 1969)---

----S.25-A---Constitution of Pakistan (1973), Art. 199---Constitutional petition---Power to take over the imported goods---Appropriate Officer, for the purpose of S.25-A, Customs Act, 1969 to order the take over of imported goods is Additional Collector of Customs and he is the only officer in the hierarchy of Customs Officials who could pass an order under. S.25-A of the Customs Act, 1969---Customs Authorities, in the present case, had not stated in their comments that any order was passed by the Additional Collector of Customs but the sole reliance had been placed on the notice issued by the Assistant Collector of Customs--­Validity---Notice in question was without jurisdiction and consequently, the entire proceedings, in the absence of any order by the appropriate officer, were without jurisdiction which were declared to be inoperative, null and void by the High Court---Importer yeas entitled to get the imported goods cleared in terms of S.25(1) of the Customs Act, 1969 on payment of Customs duty and taxes assessed by the Customs Officials at the declared value only and Customs Authorities were directed accordingly.

Khawaja Shamsul Islam for Petitioner.

Miss Masooda Siraj for Respondent No. 1.

Raja Muhammad Iqbal for Respondent. No.2.

M.G. Dastagir for Respondent No.3.

Syed Ziauddin Nasir, Standing Counsel for Respondent No.4.

Date of hearing; 25th September, 2003.

2004 P T D 188

[Karachi High Court]

Before Anwar Zaheer Jamali and Gulzar Ahmed, JJ

Messrs AFZAL FLOUR MILLS (PVT.) LTD.

Versus

COMMISSIONER OF INCOME-TAX and others

Wealth Tax Appeal No.2 of 1999, decided on 30th June, 2003.

(a) Wealth Tax Act (XV of 1963)---

----S. 2(e)(ii)---Immovable property when to be an asset under Wealth Tax Act, 1963---Essentials---Such property should be held for purpose of letting out.

B.P. Biscuit Factory Ltd., Karachi v. Wealth Tax Officer-II Circle, Karachi 1981 PTD 217 and Ibrahim Brothers Ltd. v. Wealth Tax Officer, Circle-III, Karachi PLD 1985 Kar. 407 rel.

(b) Wealth Tax Act (XV of 1963)-----

----S. 2(e)(ii)---Leasing out Flour Mills installed in a building raised on plot of land---Liability to wealth tax ---Validity---Assessee had not leased out only the plant and machinery of Four Mills nor he was occupying the land and building, wherein Flour Mills was situated---Name Flour Mills had in fact been assigned to land and building, wherein plant and machinery of Flour Mills had been installed---Such assigning of name to a place by virtue of installation of specified nature of plant and machinery would not change actual fact that land and building was a one set of thing, while plant and machinery the other---Flour Mills was comprised of land, building, plant and machinery---Flour Mills having been leased out, thus, would include leasing out of land and building--­Terms "lease" and "letting out". are synonymous ---Assessee held immovable property comprised in land and building of Flour Mills for letting out, which was an asset within meaning of Wealth Tax Act, 1963 and liable to levy of wealth tax.

Lauri Joseph Newton v. Commissioner of Taxation of Common Wealth of Australia 1959 PTD 273 and Commissioner of Income-tax, Madras v. A.M.M. Muhammad Ibrahim Sahib 1963 PTD 687 ref.

B.P. Biscuit Factory Ltd., Karachi v. Wealth Tax Officer-II Circle, Karachi 1981 PTD 217 and Ibrahim Brothers Ltd. v. Wealth Tax Officer, Circle-III, Karachi PLD 1985 Kar. 407 fol.

(c) Words and phrases-----

---"Lease" and "letting out" ----Synonymous.

Rehan Hassan Naqvi for Appellant.

Arif Moton for Respondents.

Date of hearing: 2nd May, 2003.

2004 P T D 295

[Karachi High Court]

Before Shabbir Ahmed and Gulzar Ahmed, JJ

Messrs UROOJ (PVT.) LTD., KARACHI through Chief Executive

Versus

DEPUTY COMMISSIONER OF INCOME-TAX, CIRCLE-6, COMPANIES IV, KARACHI and 2 others

Income-tax Appeal No.D-983 of 1999, decided on 25th September, 2003.

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

----S. 136---Appeal raising questions of facts---Validity---High Court had no, jurisdiction to go into such questions within meaning of S.136 of Income Tax Ordinance, 1979---Appeal, was dismissed in. circumstances.

Engro Chemical Pakistan Ltd. v. Additional Collector of Customs 2003 PTD 777; Ambika Silk Mills Co. Ltd. v. Commissioner of Income-tax, Bombay City (1952) 22 ITR 58; Messrs Ahmad Karachi Halva Merchants and Ahmad Food Products v. Commissioner of Income Tax, South Zone, Karachi 1982 SCMR 489 and I.T.C. No. 192 of 2002 ref.

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

----S. 136---Jurisdiction of High Court---Scope---Questions which High Court can examine or consider highlighted.

High Court is only competent to examine or consider question of law, which had arisen out of the order of Tribunal or the question which was raised before Tribunal and was dealt with by Tribunal or the question which was not raised before Tribunal, but was dealt with by Tribunal or the question which was raised, but has not been dealt with by Tribunal.

Commissioner of Income-tax v. National Refinery Ltd. 2003 PTD 2020 fol.

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

----S. 136---Question neither raised nor dealt with by the Appellate Tribunal---Effect---Such question could not be raised for first time before High Court.

Rehan-ul-Hassan Naqvi and Miss Lubna Pervez for Appellant Aqeel Ahmed Abbasi for Respondents.

Date of hearing: 2nd September, 2003.

2004 P T D 318

[Karachi High Court]

Before S. Ahmed Sarwana and Gulzar Ahmed, JJ

COMMISSIONER OF INCOME-TAX

Versus

Messrs CHINKIONG CHINESE RESTAURANT

Income Tax Reference No.71 of 2002, decided on 30th May, 2003.

Income Tax Ordinance (XXXI of 1979)---

----S. 136 [as substituted by Finance Ordinance (XXI of 2000)]--­Reference to High Court without first approaching Tribunal for referring proposed questions of law---Validity---High Court dismissed such reference in limine for being misconceived.

Arif Moton for Applicant.

Aminuddin Ansari for Respondents.

Date of hearing: 30th May, 2003.

2004 P T D 330

[Karachi High Court]

Before Saiyed Saeed Ashhad, C.J. and Ghulam Rabbani, J

Messrs S.N. H. INDUSTRIES (PVT.) LTD.

Versus

INCOME-TAX DEPARTMENT and another

Constitutional Petition No. D-620 of 1993, decided on 14th November, 2003.

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

----S.66-A---Re-opening of case---Power of Inspecting Additional Commissioner to revise Deputy Commissioner's order---Scope and prerequisites---Phrase "Prejudicial to the interests of the Revenue" has to be read in conjunction with "an erroneous order passed by the Assessing Officer"---Every loss of revenue in consequence of an order of the Assessing Officer could not be treated as prejudicial to the interests of the Revenue---Principles.

Section 66-A of the Income Tax Ordinance, 1979 had conferred powers on the Inspecting Assistant Commissioner/Additional Inspecting Assistant Commissioner to revise the order of Assessing Officer/Deputy Commissioner of Income Tax, after calling for and examining the record of any proceedings under the Ordinance, if he considered and was of the view that an order passed by the Assessing Officer/Deputy Commissioner of Income Tax was erroneous inasmuch as it was prejudicial to the interests of the Revenue. It further empowered the Assessing Officer/Deputy Commissioner of Income Tax to pass such order as the circumstances of the case would justify including an order enhancing or modifying the assessment, or cancelling the assessment and directing' a fresh assessment to be made subject to the condition that appropriate and effective opportunity of being heard was provided to the assessee/aggrieved party. From a bare perusal of section 66-A of the Ordinance it is to be noted that the Inspecting Assistant' Commissioner, was required to minutely examine the record of any proceedings which included the assessment finalized by the Assessing Officer/Deputy Commissioner of Income Tax to conclude that the assessment was erroneous and prejudicial to the interests of the Revenue to attract the provisions of this section.

The prerequisite to the exercise of jurisdiction by the Commissioner suo motu under it, is that the order of the Income-tax Officer is erronebus insofar as it is prejudicial to the interests of the Revenue. The Commissioner has to be satisfied of twin conditions, namely, (i) the order of the Assessing Officer sought to be revised is erroneous; and (ii) it is prejudicial to the interests of the Revenue. If one of them is absent i.e. if the order of the Income-tax Officer is erroneous but is not prejudicial to the Revenue or if it is not erroneous but is prejudicial to the Revenue; recourse cannot be had to the said section.

There can be no doubt that the provisions cannot be invoked to correct, each and every type of mistake or error committed by the Assessing Officer, it is only when an order is erroneous that the section will be attracted. An incorrect assumption of facts or an incorrect application of law will satisfy the requirement of the order being erroneous. In the same category falls orders passed without applying the principles of natural justice or without application of mind.

The phrase `prejudicial to the interests of the Revenue' has to be read in conjunction with an erroneous order passed by the Assessing Officer. Every loss of revenue as a consequence of an order of the Assessing Officer cannot be treated as prejudicial to the interests of the Revenue. For example, when an Income-tax Officer adopted one of the courses permissible in law and it has resulted in loss of Revenue; or where two views are possible and the Income-tax Officer has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the Revenue; unless the view taken by the Income-tax Officer is unsustainable in law.

Malabar Industrial Co. Ltd. v. Commissioner of Income-tax 2001 PTD 1106 applied.

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

----S.66-A---Constitution of Pakistan (1973), Art.199---Constitutional petition-- Reopening of case---Change of opinion by the Assessing Officer---Powers of Inspecting Additional Commissioner of Income Tax to revise Deputy Commissioner's order---Scope and extent---Capital gain---Business income---Loss of revenue ---Determination-- Principles--­Assessee, a company engaged in manufacturing and assembling television sets---Show-cause notice under S.66-A; Income Tax Ordinance, 1979 was issued to the assessee by Inspecting Assistant Commissioner on the ground of assessment order being erroneous as the Assessing Officer had wrongly dealt with a sum of Rs.75,00,000 by treating the amount as "capital gain" instead of "business income/profit and not subjecting same to tax which had led to the loss of revenue to the Government---Validity---Ground given in the show-cause notice that the sale of a commercial property by the assessee within a span of one and half years for a solitary transaction, was a transaction clearly in the nature of trade and business liable to be taxed, was a change of view/mind as previously after, accepting the explanation given by the assessee, the Assessing Officer had agreed with the assessee and had accepted the claim that the gain of Rs.75,00,000 was a "capital gain" exempt from tax and had been rightly transferred to profit and loss account---Assessment order had been finalized in consultation with the approval of the Commissioner of Income Tax and Assessing Officer before finalizing the assessment and releasing the same had discussed the same with the Inspecting Assistant Commissioner, thus both the Inspecting Assistant Commissioner and the Commissioner of Income Tax had scrutinized and examined the case of the assessee with regard to the nature of gain/profit of Rs.75,00,000 claimed by the assessee as "capital gain"---Both the Commissioner as well as Inspecting Assistant Commissioner, in circumstances, were stripped of the powers to exercise jurisdiction under S.66-A, Income Tax Ordinance, 1979 and the impugned notice was not issued in lawful exercise of jurisdiction---

The assessee, a private limited company incorporated under the Companies Ordinance, 1984, engaged in the business of manufacturing/assembling television sets filed its return of income for the assessment year 1991-1992 under section 55 of the Income Tax Ordinance, 1979 declaring a total income from business at Rs.29,17,506 in Part I of the return; in Part II of the return it claimed exemption in respect of-an amount of Rs.75,00,000 from sale of a portion of plot on the ground that it was capital gain; and in Part III of the return disclosed an amount of Rs.46,98,034 which was the tax deducted at source under section 50(5) of the Ordinance on imports, whereas the total tax payable by the assessee was Rs.16,30,371, thus claiming refund of a, sum of Rs.30,67,663 which was paid/deducted at source in excess of the tax due and payable. The assessment was finalized under section 62 in pursuance of a notice under section 61 of the Ordinance after detailed examination and scrutiny of the books of accounts, documents and the explanations submitted by the assessee. The assessee further submitted that additional evidence was also called for by the Income Tax Officer, as well as elaborate details of various accounts, reasons for lower production, reduced sales and explanations as to why the sale proceeds of Rs.5,000,000 from sale of a portion of plot was not to be treated income liable to tax. The assessee submitted that Assessing Officer, perusal, examination and scrutiny of all the above evidence, books of accounts and explanations finalized the assessment approval of the Commissioner of Income Tax, to whom the was forwarded by the Inspecting Assistant Commissioner of Income Tax. Inspecting Assistant Commissioner of Income Tax issued show-cause notice under section 66-A of the Ordinance calling upon the assessee to show cause as to why the assessment order be not cancelled and correct assessment be made. Feeling aggrieved and dissatisfied with the above show-cause notice and having no other alternate, adequate and efficacious remedy for assailing the same, the assessee filed Constitutional petition.

In the present case, in the show-cause notice under, section 66-A, Income Tax Ordinance, 1979 issued by the Inspecting Assistant Commissioner, the reason advanced for the order Being erroneous was that the Assessing Officer had wrongly dealt with a sum of Rs.75,00,000 by treating it as capital gain instead of treating the same as business income/profit and not subjecting it to tax which led to loss of revenue to the Government. The assessee had claimed the excess price of Rs.75,00,000 as capital gain on the ground; that at the time of purchase of the plot the assessee had no intention of retaining it for sale thereof at enhanced price for earning business income; that, it was not carrying on business of sale and purchase of immovable properties for earning its income; that transaction of sale of a portion of the plot was a single and isolated transaction not in the line of business of the assessee; and that the excess/enhanced sale proceeds of Rs.75,00,000 was a casual income which could not be subjected to tax. The sum of Rs.75,0,0,000 was declared by the assessee in his return and was claimed as capital gain. The assessee had provided very detailed arguments in support of his contention that the gain/profit of Rs.75,00,000 was treated by him as capital gain and not as income or profit. It was submitted by the assessee that as the available space at the plot was proving inadequate, the assessee acquired an industrial plot measuring 38,720 square 1989 for a consideration of Rs.85,18,400 on which after construction and installation of plant and machinery manufacturing/assembling TV sets an area of 20,000 square yards remained unutilised which was to be utilized for expansion/enlargement of manufacturing plant with the increase in the demand of the TV sets. However, the policy relating to the manufacture/assembling TV sets underwent a drastic change on account of liberal Import Policy Government in allowing import of manufactured TV sets pressure of IMF, and other foreign lending agencies which market with foreign assembled/manufactured TV sets and placed the assessee in a very adverse and difficult situation forcing it to abandon his plans of expansion the manufacturing/assembling plant by adding additional construction to the existing plant rendering the industrial plot of 38,720 square yards unwieldy too big and surplus, which was the ground for selling a portion thereof measuring 20,000 square yards for Rs.1,25,00,000. An explanation to the above effect was submitted by the assessee which was taken into consideration by the Assessing Officer before accepting the version of the assessee. In the circumstances, the contention raised in the show-cause notice that the sale of a commercial property within a span of one and half years for a solitary transaction, was a transaction clearly in the nature of trade and business liable to be taxed, was a change of view/mind as previously, after accepting the explanation given by the assessee, the Assessing Officer had agreed with the assessee and accepted the claim that the gain of Rs.75,00,000 was a capital gain exempt from tax and had been rightly transferred to profit and loss account.

The assessment order was finalized in consultation and with the, approval of the Commissioner of Income Tax, as is evident from the office note attached to the assessment order. As a matter of fact specific notice under section 62 of the Ordinance calling upon the assessee to submit their explanation with regard to their claim of Rs.75,00,000 as capital gain exempt from tax was issued on the direction of the Commissioner of Income Tax, to whom the matter was sent by the Inspecting Assistant Commissioner of Income Tax who had no jurisdiction to accord approval in the matter as the assessed income exceeded Rs.10,00,000 and according to the instructions issued by the Central Board of Revenue such matters were to be referred to the Commissioner of Income Tax for approving the proposed assessment. The Assessing Officer, before finalizing the assessment and releasing the same, had discussed it with the Inspecting Assistant Commissioner. Thus, both the Inspecting Assistant Commissioner of Income Tax and the Commissioner of Income Tax had scrutinized and examined the case of the assessee with regard to the nature of gain/profit of Rs.75,00 000 claimed as capital gain. In the circumstances, even if it be accepted for the sake of argument that the finding of the Assessing Officer holding the gain/profit of Rs.75,00,000 from sale of the portion of plot as capital gain was not in accordance with law, the Inspecting Assistant Commissioner of Income Tax would have no authority and jurisdiction under section 66-A of the Ordinance to issue notice to the assessee to show cause why the assessment be not cancelled as being erroneous and prejudicial to the Revenue inasmuch as he himself had become a party to the said finding when he examined, scrutinized and discussed the issue with the Assessing Officer on the principle that one could not be a Judge in his own cause. This is so because when the Inspecting Assistant Commissioner of Income Tax on account of his collaboration with the Assessing Officer, scrutinizing and examining the case, had more or less acted as an Assessing Officer, then in respect of such assessment he would not be allowed to exercise the powers of revision under section 66-A of the Ordinance. In such a situation by having recourse to section 5(1)(c) of the Ordinance the powers of revision under section 66-A could have been exercised by the Commissioner of Income Tax. However, in the present case even the Commissioner of Income Tax, could not have exercised these powers as he also had been associated with the assessment of the assessee and had scrutinized, examined and issued directions to the Assessing Officer for finalizing the assessment. As a matter of fact notice under section 62 of the Ordinance calling for explanation and production of relevant material for deciding the nature of the sale transaction was issued on his direction. He, therefore, also became a party to the assessment and was precluded from issuing a notice under section 66-A of the Ordinance to the petitioner for showing cause as to why the assessment order be not cancelled being erroneous and prejudicial to the Revenue as the same was made and finalized on his advice and recommendation. Both of them, therefore, were stripped of powers to exercise jurisdiction under section 66-A of the Ordinance and the impugned notice was not issued in lawful exercise of jurisdiction.

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

----S.66-A---Re-opening of case---Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order, scope and extent---Inspecting Assistant Commissioner of Income Tax was authorized under S.66-A, Income Tax Ordinance. 1979 to issue a notice for re-opening the case if he considered that any order passed by the Income Tax Officer was erroneous causing prejudice to the interests of the Revenue---Mere erroneous order of the Income Tax Officer without causing prejudice to the interests of the Revenue would not authorize the Inspecting Assistant Commissioner to exercise power under S.66-A of the Ordinance and the two requirements mentioned above were to be necessarily established.

Glaxo Laboratories Ltd. v. Inspecting A.C. PLD 1992 SC 549 fol.

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

----S.66-A---Constitution of Pakistan (1973), Art.199---Constitutional petition-- Re-opening of case---Change of opinion by the Assessing Officer---Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order---Scope and extent---Issuance of show-cause notice to the assessee by Inspecting Additional Commissioner of Income Tax under S.66-A, Income Tax Ordinance, 1979---Essential ingredients-- -"Capital gain" or "adventure in the nature of trade" of a transaction by the assessee---Determining factors ---Assessee, in the, present case, was engaged in the manufacturing/assembling of television' sets and acquired an industrial plot for meeting with the requirements of further expansion of manufacturing/assembling plant on account of increased demand of television sets ---Assessee actually utilized a portion of the said plot for existing plant---Planning of the assessee of further expansion was adversely affected by the Government Policy in allowing the import of television sets as a result of which the market was flooded with imported television sets and on account of such situation the assessee was faced with a dilemma as a huge amount got stuck up in the plot in question Which was of no use to the assessee because of shattering of his plan of expanding the television manufacturing/assembling plant--­Assessee's assertion was that the untilized portion of the plot was proving to be a white elephant for it thus forcing the assessee to take a decision for its disposal---Effect---Purchase and sale of immovable properties was not the line of business of the assessee and the purchase of plot and sale of portion thereof was a single and isolated transaction of its kind which had been undertaken by the assessee---Record had established that initially when the assessee had purchased the plot in question assessee had no intention to sell the same for earning profits or income by getting enhanced price---Assessing, Officer, in circumstances, had correctly concluded that the transaction of sale of a portion of the plot was not an adventure in the nature of trade and accepting the sale proceeds from the portion of the plot as "capital gain" not liable to be taxed---Assessing Officer, in coming to such conclusion did not commit any illegality, warranting interference by the Inspecting Additional Commissioner of Income Tax---Decision to issue a notice under S.66-A of the Ordinance calling upon the assessee to show cause as to why the assessment be not cancelled and a fresh assessment be made was a "change of view or mind"---Assessment was neither erroneous nor was prejudicial to the interests of the Revenue which were the IN essential ingredients to be fulfilled before a notice under S.66-A of the Ordinance could be issued---Show-cause notice under S.66-A of the Ordinance on the basis of change of view or mind would not be a valid and proper notice being without lawful authority and thus void---Principles.

No hard and fast rules or principles can be laid down for determining whether a transaction of sale of immovable property or movable property resulting in profit/gain was a transaction in the nature of trade or not. In deciding the above issue many factors and circumstances are required to be taken into consideration and the primary factor is the intention of the party at the time when he acquired the asset whether immovable or movable. Such intention is to be gathered from the attending circumstances, facts, the nature of the business of the assessee, the nature of the transaction of sale, the nature of the assets/properties and the relationship ref the assessce with the purchaser. In the present case the business or trade of the assessee was manufacturing/assembling of TV sets. It acquired an industrial plot measuring 38,720 square yards for meeting with the requirement of further expansion of manufacturing/assembling plant on account of increased demand of TV sets It actually utilised a portion of 18,720 square yards for existing manufacturing/assembling plant the planning of the assessee of further expansion was adversely affected on account of the Government Policy in allowing import of TV sets as a result of which the market was flooded with imported TV sets. It is also to be taken into consideration that the public generally prefers a commodity or article manufactured in a foreign country as compared to the locally manufactured similar commodity or article. On account of this situation the assessee was faced with a dilemma as a huge amount got stuck up in the plot in question which was of no use to it on account of shelving his plan of expanding TV manufacturing/assembling plant. Assessee's assertion was that the unutilized portion of the plot was proving to be a white elephant for the assessee thus forcing him to take a decision for its disposal. The purchase and sale of immovable properties was not the line of business of the assessee and the purchase of plot measuring 38,720 square yards and sale of a portion thereof measuring 20,000 square yards was a single and isolated transaction of its kind which had been undertaken by the assessee. From the material on record it was established beyond any doubt that initially when the assessee had purchased the plot in question it had no intention to sell it for earning profits or income by getting enhanced price.

The Assessing Officer had correctly concluded that the transaction of sale of a portion of plot measuring 20,000 square yards was not art adventure in the nature of trade and accepting the sale proceeds from the portion of the plot as capital gain not liable to be taxed. The Assessing Officer in coming to the above conclusion did nor commit any illegality, which would have warranted interference with such finding. The decision to issue a show-cause notice under section 66-A of the Ordinance calling upon the assessee to show cause as to why the assessment be not cancelled and a fresh assessment be made, was a change of view or mind. The assessment was neither erroneous nor was prejudicial to the interests of, the Revenue which were two essential ingredients to be fulfilled before a notice under section 66-A of the Ordinance: for its cancellation could be issued. Show-cause notice tinder section 66-A of the Ordinance on the basis of change of view or mind would not he a valid and proper notice. The show-cause notice under section 66-A of the Ordinance was without lawful authority and was void.

Glaxo Laboratories Ltd. v. Inspecting A.C. PLD 1992 SC 549; Commissioner of Income-tax, Karachi v. A. Razak H.K. Dada 1979 PTD 465; G. Venkataswami Naidu & Co. v. Commissioner of Income-­tax (1959) 35 ITR 595; Jaldu Manikyala Rao v. Commissioner of Income-tax, Madras (1955) 28 ITR 220,and Commissioner of Income­tax, Bombay v. H. Holck Larsen (1986) 160 ITR 67 fol.

(e) Constitution of Pakistan (1973)---

----Art. 199---Constitutional jurisdiction of High 'Court---Scope---Alternate remedy, existence of---Significance---If the order or action complained of was so patently illegal, void or wanting in jurisdiction that any further recourse to alternative remedy may only be counter­productive and by invoking of Art. 199 of the Constitution the mischief could forthwith be nipped in the bud then in such matters existence of alternative remedy would not bar the exercise of Constitutional jurisdiction by the High Court.

Khalid Mahmood v. Collector of Customs 1999 SCMR 1881; Gatron Industries Ltd. v. Government of Pakistan and others 1999 SCMR 1072; Adamjee Insurance Company Ltd. v. Pakistan through the Secretary to Government of Pakistan in the Ministry of Finance, Islamabad and 5 others 1993 SCMR 1778; Edulji Dinshaw Ltd. v. Income Tax Officer PLD 1990 SC 399 = 1990 PTD 155; The Murree Brewery Co. Ltd. v. Pakistan through the Secretary to Government of Pakistan, Works Division and 2 others PLD 1972 SC 279 and Usmania Glass Sheet Factory v. Sales Tax Officer 1971 PTD 1 ref.

(f) Constitution of Pakistan (1973)---

----Art.199---Constitutional jurisdiction of High Court---Scope---Relief in Constitutional jurisdiction would be available to a party where impugned order was without lawful authority, prejudicial, unjust and mala fide.

Khalid Mahmood v. Collector of Customs 1999 SCMR 1881; Gatron Industries Ltd. v. Government of Pakistan and others 1999 SCMR 1072; Adamjee Insurance Company Ltd. v. Pakistan through the Secretary to Government of Pakistan in the Ministry of Finance, Islamabad and 5 others 1993 SCMR 1778; Edulji Dinshaw Ltd. v. Income Tax Officer PLD 1990 SC 399 = PTD 1990 155; The Murree Brewery Co. Ltd. v. Pakistan through the Secretary to Government of Pakistan, Works Division and 2 others PLD 1972 SC 279 and Usmania Glass Sheet Factory v. Sales Tax Officer 1971 PTD 1 ref.

Sirajul Haque Memon for Petitioner.

Aqeel Ahmed Abbasi for the Income-tax Department.

Sajjad Ali Shah, Standing Counsel for the Pakistan.

Date of hearing: 16th September, 2003.

2004 P T D 369

[Karachi High Court]

Before S. Ahmed Sarwana and Muhammad Mujeebullah Siddiqui, JJ

Messrs ZEB TRADERS through Proprietor

Versus

FEDERATION OF PAKISTAN through Secretary, Ministry of Finance, Islamabad and 3 others

Constitutional Petition No.D-781 of 2003, decided on 7th October, 2003.

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

----Ss.168 & 169---Constitution of Pakistan (1973), Art, 199--­Constitutional jurisdiction of -High; Court---Scope---Disputed facts--­Seizure of imported goods by, the Customs Authorities ---Validity--­Contention of the Department was that the petitioner/importer had imported counterfeit goods and had also made misdeclaration in that behalf---High Court declined. to consider such contention for the reason that it was a question of fact which could not be ascertained and decided in exercise of the jurisdiction under Art.199 of the Constitution---High Court, under said jurisdiction could consider the admitted facts and the actions taken by the Department during the pendency of the Constitutional petition and could examine whether the Department had exercised their jurisdiction in accordance with law or had acted otherwise than in due course of law.

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

----S. 168(1)---Seizure of things liable to confiscation ---Concept--­Blockade of goods by an appropriate officer amounts to seizure within the contemplation of S.168(1) of the Customs Act, 1969.

Syed Muhammad Razi v. Collector of Customs and others C.P. No. D-713 of 2003 fol.

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

---Ss.168(1), (2) & 171---Provisions of Ss.168(1), 168(2) .& 171, Customs Act, 1969 are to be read together.

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

----Ss.168 & 171---Seizure of things liable to confiscation--Procedure--­If no grounds of seizure have been served as required under S.171, Customs Act, 1969 the order' under S.168, Customs Act, 1969, is rendered ineffective---Principles.

It is provided in section 168(1) of the Customs Act, 1969 that the appropriate officer, may seize any goods liable to confiscation under the Customs Act, 1969. The mandatory requirement contained in section 171 is that, when anything is seized or any person is arrested under the Customs Act, 1969; the officer or other person making such seizure or arrest shall, as soon as may be, inform in writing the person so arrested or the person. from whose possession, the things are seized, of the grounds of such seizure or arrest.

If no grounds of seizure have been served as required under 'section 171 of the Customs Act, 1969 the order under section 168 is rendered ineffective. and the owner/the person from whose possession the goods are seized is entitled to delivery of the goods.

Section 171 requires that when anything is seized, the officer making such seizure shall, as soon as may be; inform in writing the person from whose, possession the things are seized, of the grounds of such seizure or arrest.

N6n-compliance of the provisions contained in section 171 of the Customs Act, 1969 renders the seizure of goods illegal.

The things should be done as they are required to be done or not at all and the orders are to be made by the officer/authority specified in the law and not by any other person on his behalf until and unless authorized to do so in law. A bare reading of section 171. of the Customs Act, 1969, shows that, "the officer or other person making such seizure or arrest shall, as soon as may be, inform in writing the person so arrested or the person from whose possession the things are seized, of the grounds of such seizure or arrest". The language used by the Legislature is very clear and the officer or other person making the seizure has been enjoined upon to record the reasons of seizure/arrest in writing and inform the, same to the person arrested or the person from whose possession the things are seized. The law requires that` the officer or other person making seizure shall as soon as may be, inform the reasons for such seizure. It does not authorize or empower any other superior or subordinate officer to assign the reason for seizure and inform the same to the person arrested or from whose possession thing is seized.

Ilam Khan v. Government of Pakistan 1983 CLC 786; Muhammad Mahfooz v. Collector of Customs PLD 1986 Kar. 28 and Shaukat Hussain v. Zulfiqar Ahmed and others PLD 1981 Lah. 1318 ref.

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

----Ss.168, 171 & 180---Seizure of things liable to confiscation--­Extension of period for issuance of notice under S.180 of the Customs Act, 1969 by the Collector---Requirements to be complied with by the Collector--Guidelines by High Court. '

There appears to be no application of mind by the Collector of Customs, in the present case, while extending the period of limitation, he has not made any query from the Directorate of Intelligence as to what progress was made in the case in between 26-5-2003 when the goods were seized and 23-7-2003 when the extension of time under section 168(2) vas sought. The learned Collector did not examine that till then neither any notice was issued under section 171 of the Customs Act, 1969 nor any progress was made in the matter. The Legislature while enacting various provisions in the Customs Act has on the one hand empowered the Customs Officials to protect the State revenue and the evasion of tax, and at the same time has provided safeguards to the citizens so that the citizens may not be left at the vagaries of the tax officials and are not dealt with in an arbitrary manner. It goes without saying that any arbitrary act by its very nature is negation of the rule of law and has to be struck down in whatever manner and form it may be. The Legislature has thus, by empowering the tax officials on one hand for protecting the State revenue, has provided safeguards to the citizens on the other hand the by creating a check and balance. The provisions contained in sections 171 and 168(2) of the Customs Act, 1969 are in the nature of safeguards provided to the citizens. The period of two months provided in section 168(2) for issuance of notice under section 180 is not without purpose. The intention of the Legislature is that the citizens should not be left at the mercy of the tax officials for indefinite period. The Investigating Department including the appraisement officers are required to initiate the action for any violation of the provisions contained in the Customs Act, 1969 expeditiously and the adjudicating officers are required to apply their minds to the material placed before them in the contravention report and to decide within the period of two months if they intend to proceed with the adjudication, otherwise the person whose goods have been seized becomes entitled to the return of the seized goods.. However, if any offence has been committed the offender is not absolved of its civil/or criminal liability and the goods seized are to be returned if no notice is issued under section 180 within two months of the seizure of goods. This period can be extended by the Collector only and that too for the reasons to be recorded in writing. The extension of period is not to be granted without application of mind and without reasons to be recorded in writing. If these conditions are not fulfilled the extension of period under proviso to subsection (2) of section 168 is not sustainable in law.

The Collector of Customs, while extending period provided in section 168(2) has acted mechanically and therefore, extension of time under proviso to section 168(2) is of no avail. When the Legislature has provided for recording reasons in writing by Collector of Customs, he is required to apply his mind and after making an objective assessment, if he comes to the conclusion that the extension of time is to be granted he has to grant the same. Mere reference to the request made by the Investigating Officers, would amount to grant the extension in a mechanical manner and thus, it is not in consonance with the intention of the law. A practice has developed in the Customs Department whereby the orders are being made mechanically. It is evident from the fact that a statement has been produced, in the present case, to the effect that the investigation in the case has been completed and seizure report has been submitted to the competent authority alongwith draft show-cause notice in respect of the petitioners for initiation of adjudication proceedings. The proceedings before Adjudicating Officer, under the Customs Act, 1969 are in the nature of quasi-judicial proceedings and issuance of notice under section 180 of the Customs Act, is very important document. The decision to issue show-cause notice is to be taken by the Collector Adjudication, by application of independent mind and not merely signing the draft show-cause notice submitted by the investigating agency. The conducting of investigation/inquiry has been assigned to an agency separate from the Adjudication Department and each category of officers are required to perform their respective functions/duties under the law. The practice to submit draft show-cause-notice by the Director ­General of Intelligence and Investigation to the Collector Adjudication is deprecated. It is for the C.B.R. which is occupying the apex position in the hierarchy of tax administration to ensure that the Collector Adjudication while granting extension under provisions of section 168(2) and issuance of notice under section 180 applies his own independent mind and no mechanical orders are made at the instance of Intelligence and Investigating Officers.

Abdul Zahir v. Director-General, Pakistan Coast Guards PLD 1990 Kar. 412 and Haji Noorul Haq v. Collector of Customs and others f998 MLD 650 ref.

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

----Ss.168, 171, 180 & 32---Constitution of Pakistan (1973), Art. 199--­Constitutional petition- --Seizure of things liable to confiscation---Goods in question were appraised and assessed to the customs duties and taxes and duties so assessed had already been deposited---Customs Authorities; in circumstances, were not entitled to retain the goods and such action on their part was illegal and without authority-- -Customs Authorities were directed by the High Court to release the goods forthwith to the importer with observation that Department would be at liberty to take appropriate action in accordance with the law---Principles.

Messrs Yousuf Re-Rolling Mills v. Collector of Customs (Appraisement, Karachi 1986 CLC 77 fol.

(g) Administration of justice---

---- Things should be done as they are required to be done or not at all and the orders are to be made by the Officer/Authority specified in the law and not by any other person on his behalf until and unless authorized to do so in "law.

S. Ali Bin Adam Jafri for Petitioner.

Syed Tariq Ali for Respondent No. 1.

Ashfaq Ali Khan, I.O. for Respondent.

Mohsin Inam for Respondent No.4.

Dates of hearing: 7th; 26th August; 3rd and 9th September,

2004 P T D 449

[Karachi High Court]

Before S. Ahmed Sarwana and Muhammad Mujeebullah Siddiqui, JJ

ATLAS CABLES (PVT.) LIMITED

Versus

FEDERAL GOVERNMENT OF PAKISTAN and others

Constitutional Petition No. D-2521 of 1995, decided on 6th June, 2003.

Customs Act (IV of 1969)---

----Ss.18, 30 & 31-A---Constitution of Pakistan (1973), Art.199-.

Constitutional petition---Imposition of regulatory duty on goods imported during currency of exemption notification---Validity---Government power to impose regulatory duty---Effect of Al-Samrez case SCMR 1917) stood nullified after insertion of S. 31-A in ms Act, 1969---All importers were liable to pay customs duty at ate of duty applicable to any goods on the date on which Bill of was manifested---High Court dismissed Constitutional petition.

Al-Samrez's case 1986 SCMR 1917 and Collector of Customs v Spinning Ltd. .1999 SCMR 412 rel.

Amer Raza Naqvi for Petitioner.

S. Tariq Ali, Federal Counsel for Respondents.

Date of hearing: 26th February, 2003.

2004 P T D 509

[Karachi High Court]

Before S. Ahmed Sarwana and Zia Perwaz, JJ

Messrs BULK SHIPPING & TRADING (PVT.) LTD.

Versus

COLLECTOR OF CUSTOMS and others

Constitutional Petition No. D-863 of 2003, decided on 11th July, 2003.

Customs Act (IV of 1969)---

----Ss.16, 23, 156(1)(9) & 168---General Clauses Act (X of 1897), S.24-A---Constitution of Pakistan (1973), Art.199---Constitutional petition---Seizure/impounding of vessel as derelict'---Issuance of show­-cause notice---Customs Authorities found vessel grounded in sea which appeared to be abandoned- --Customs Authorities being of the opinion that vessel fell within definition ofderelict', seized/impounded it in terms of S.168 of Customs Act, 1969---Notice was issued to the petitioners who were Shipping Agents of vessel to show cause as to why action should not be taken against them for violation of Customs Act, 1969---Petitioners appeared before Collector and sought time to file a reply to said show-cause notice and matter was adjourned---Petitioners instead of filing reply before Collector, filed Constitutional petition, alleging that show-cause notice issued to them was void ab initio and illegal and that owners of vessel neither had abandoned nor had intended to abandon vessel at any time and that Authority had wrongly declared vessel as derelict'---Validity---Show-cause notice was issued to petitioners who had to explain as to why vessel could not be treated asderelict' and in response to said show-cause notice petitioners should have produced evidence---By issuance of show-cause notice Authority had not made any final determination about status of vessel as being `derelict'---Constitutional petition was not maintainable against a show­-cause notice---Petitioners had already availed adequate remedy available under law by seeking time to file a reply to show-cause notice--­Petitioners, in circumstances, should follow normal procedure provided in Customs Act, 1969 and contest proceedings before Collector who would decide the issue on the basis of evidence on record according to law.

Al-Ahram Builders v. ITAT 1993 SCMR 29 ref.

Shakeel Ahmed for Petitioner.

Date of hearing: 11th July, 2003.

2004 P T D 534

[Karachi High Court]

Before S. Ahmed Sarwana and Muhammad Mujeebullah Siddiqui, JJ

ADEEL-UR-REHMAN and others

Versus

FEDERATION OF PAKISTAN and others

C.P. Nos. D-703, D-704, D-770, D-914, D-934, D-1132, D-1133 and D-1134 of 2003, decided on 7th October, 2003.

(a) Constitution of Pakistan (1973)---

----Arts. 9 & 14---Life and dignity of citizens---Duty of Court.

It is the duty of the Court under Articles 9 and 14 of the Constitution to safeguard and preserve life and dignity of the citizens and protect them from serious and hazardous risks, so that they can live a happy and meaningful life.

Ms. Shehla Zia v. WAPDA PLD 1994 SC 693 rel.

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

----Preamble---Constitution of Pakistan (1973), Arts. 23, 24 & 199--­Civil Procedure Code (V of 1908), S. 9---Constitutional petition--­Imported betel nuts---Detention of consignment for examination of its quality---Refusal of Collector of Customs to release consignment for being unfit for human consumption as per microbiological reports obtained by him---Validity---Duty of Court to ensure that citizens were not deprived of their property except in accordance with law---Betel nuts were eaten with betel leaf while chewing pan and consumed with other ingredients---Petitioner (importer) could not be deprived of his property, if he was not doing anything interfering with or likely to interfere with rights of citizens guaranteed under the Constitution---Opinions on microbiological analysis of betel nuts were conflicting---Recording of evidence of specialists, who had conducted microbiological analysis of betel nuts was necessary to decide such issue---Such specialists had neither been examined nor subjected to cross-examination on microbiological state of betel nuts or feasibility of separation of infested from non-infested betel nuts---Expert evidence of clinical microbiolgoists and medical researchers was also imperative to decide question, whether such betel nuts were fit for human consumption or not---True picture of microbiological state of betel nuts and their effect on human health would be available before Court only after recording such evidence--­Such exercise could only be done by filing a suit under general jurisdiction of Civil Court---High Court dismissed Constitutional petition lacing not maintainable.

Ms. Shehla Zia v. WAPDA PLD 1994 SC 693 rel.

(c) Constitution of Pakistan (1973)---

----Art. 199---Disputed questions of facts---High Court does not record evidence to investigate and resolve such questions.

Dr. Babar Awan, Saadat Yar Khan and Mazhar Jafri, Muhammad Salim, Haider Iqbal Wahniwal and Raja Qureshi for Petitioners.

Nadeem Azhar Siddiqui, D.A.-G. and Yawar Farooqui for Respondents.

Dates of hearing: 16th, 17th and 23rd, September, 2003.

2004 P T D 559

[Karachi High Court]

Before Shabbir Ahmed and Muhammad Mujeebullah Siddiqui, JJ

Messrs IRAM GHEE MILLS (PVT.) LTD., LAHORE

Versus

CUSTOMS, CENTRAL EXCISE, AND SALES TAX (APPELLATE) TRIBUNAL, KARACHI and another

Special Custom Appeal No. 143 of 2001, decided on 14th November, 2003.

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

----Ss. 32(1) & 156(1)(14)---Imported RBD palm oil---Test reports showed such oil was not fit for human consumption---Authority confiscated detained oil, while imposed penalty equivalent to value of oil already got released---Tribunal upheld such decision ---Validity- Question of fact that declaration made by appellant in Bill of Entry was false, - had attained finality---Appellant had challenged imposition of penalty only, thus, outright confiscation of imported oil; which had not been released, had attained finality---Commission of offence under S.32(1) of Customs Act, 1969 had been brought home to the appellant--­High Court dismissed appeal.

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

----S. 159(1)(9)(14)---Provisions of cls. (9) & (14) of S.159(1) of Customs Act, 1969---Distinction---Both such provisions were independent and separate of each other---Penalty provided in cl. (9) of S.156(1) of the Act, 1969 was not dependent or contingent on establishing of offence under S.32 of the Act; rather same related to violation of provisions of Ss. 15 & 16 of the Act--Provision of S.156(9) of the Act was of absolute statutory liability as for taking action there­under, no mens rea was required to be proved.

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

----S. 32(1)---Making out an offence under S. 32(1) of Customs Act­--- 1969 Requirements of law stated.

For the purpose of making out an offence under section 32(1) of Customs Act, 1969, it was required to show that the misdeclaration in connection with any matter of customs had been made by a person knowing or having reason to believe that such document or statement was false. For this purpose, the Customs Authorities were not required to give any specific finding on such point. If on the examination and scrutiny, it could be found that the misdeclaration was made with the knowledge or having reason to believe that it was untrue/false, it fulfilled the requirement of law.

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

----Ss. 32 & 156(1)(9)(14)---Provisions of S. 32(1)(2)(3)(3A)(4)(5) & S.156(1)(9)(14) of Customs Act, 1969---Distinction---Proof of mens rea---Section 32(1) of the Act, defined offence committed on account of misdeclaration/misstatement with any matter of customs---Provision of S.32(2) could be invoked in consequence of misdeclaration/misstatement without establishing commission of offence on its account---Provisions of S.32(3)(3A) had no nexus' with subsection (1) thereof---Provisions of S;32(4)(5) of the Act, were procedural in natural containing parameters for passing orders under subsection (2)(3) thereof---Liabilities provided in S.156(1)(14) of the Act on commission of offence under S.32(1) were totally independent of fiscal measures provided in' S.32(2)(3)(3A)(4)(5)--­No specific finding on point of mens rea would be required to be given by Adjudicating Authority while imposing penalty and confiscating goods---Specific finding on point of mens rea would be required to be given by Special Judge for purpose of conviction, imposition of sentence and fine---Principles.

Pakistan v. Hardcastle PLD 1967 SC 1; Kamrah Industries v. Collector of Customs (Exports) PLD 1996 Kar. 68; AI-Hamd Edible Oil v. Collector of Customs 2003 PTD 552; Battala Ghee Mills (Pvt.) Ltd. v. Collector of Customs 2003 SCMR 1040; Appeals Nos.1201-K and 1226-K of 2001; Messrs Sikandar and Brothers v. Government of Pakistan PLD 1986 Kar. 373; Finest Corporation v. The Collector of Customs PLD 1990 Kar. 338 and Eastern Rice Syndicate v. The Central Board. of Revenue PLD 1959 SC (Pak.) 364 ref.

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

----Ss. 179 & 185---Proceedings by Adjudicating Officer and before Special Judge---Distinction---Proceedings .by Adjudicating Officer was not purely criminal in nature while proceedings before the Special Judge was purely criminal in nature---Standard of burden of proof in both such proceedings was not same.

(f) Criminal trial----

---Mens rea (presence of guilty intent)---Proof of---For establishing an offence, which was quasi-criminal or criminal in nature, presence of 'mens rea would be required to be established, unless and until there was a case of absolute statutory liability, where no mens era would be required to be proved.

(g) Criminal trial---

---- Penalty and fine, imposition of---Distinction---Imposition of penalty was not a criminal liability and did not carry a stigma---Imposition of fine on conviction was purely criminal liability and carried a stigma with same.

Shaiq Osmany for Appellants.

Raja M. Iqbal for Respondent No.2

S. Ziauddin Nasir, Standing Counsel.

Date of hearing: 21st October, 2003.

2004 P T D 616

[Karachi High Court]

Before Shabbir Ahmed, J

Messrs COLONY TEXTILE MILLS LTD., MULTAN through Accountant and another

Versus

COLLECTOR OF CUSTOMS (APPRAISEMENT), KARACHI and another

Suit No. 1061 and. Civil Miscellaneous Application No.8208 of 2001, decided on 13th November, 2001.

Customs Act (IV of 1969)---

----S. 19---Exemption---S.R.O. exempting goods from levy of duty was withdrawn by a subsequent S.R.O.---Goods arrived when subsequent S.R.O. was effective---Held, importer could not claim exemption on import after withdrawal of earlier S.R.O.---Duty payable on imported goods would be in terms of subsequent S.R.O.

Messrs M.Y. Electronics Industries (Pvt.) Ltd. through Manager and others v. Government of Pakistan through Secretary Finance, Islamabad and others 1998 SCMR 1404 ref.

Miss Munawar Sultana for Plaintiffs.

Raja Muhammad Iqbal for Defendants.

2004 P T D 621

[Karachi High Court]

Before Sabihuddin Ahmed and Muhammad Moosa K. Leghari, JJ

Messrs FAUJI CEMENT CO. 'LTD. through Additional Managing Director, Rawalpindi

Versus

APPELLATE TRIBUNAL CUSTOMS, CENTRAL EXCISE AND SALES TAX, LAHORE and another

Appeal No. 66 of 1998, decided on 24th July, 2001.

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

----S. 196---Appeal dismissed for non-prosecution, restoration of---Plea of appellant was that appeal was directed to be fixed along with Constitutional petition, which had been heard, whereupon judgment was reserved, thus, he thought that such judgment covered both petition and appeal; and that he came to know about dismissal of appeal, when Customs Authorities revived their demand---Explanation being plausible, High Court condoned delay and restored the appeal.

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

----S. 196---Appeal before High Court involving only question of fact, in respect of which there was concurrent finding of appropriate Tribunal--­Maintainability---High Court under S. 196 of Customs Act, 1969 declined to interfere with such finding and dismissed the appeal.

C. P. No. D-1244 of 1997 ref.

Talib H. Rizvi for Appellant.

Raja Muhammad Iqbal for Respondents.

2004 P T D 735

[Karachi High Court]

Before Shabbir Ahmed and Gulzhar Ahmed, JJ

Messrs SATTER FLOUR MILLS PRIVATE LTD., SUKKUR

versus

DEPUTY COMMISSONER OF INCOME‑TAX and another

Income Tax Appeals Nos. 85 and 779 of 2000, decided on 7th November, 2003.

Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑Ss. 22 & 30‑‑‑Income from lease of Flour Mills‑‑‑Assessing Officer assessed such income as income from other sources under S.30(2(d) of Income Tax Ordinance, 1979‑‑‑Appellate Authority took the view that such income was to be assessed as business income under S.22 of the Ordinance‑‑‑Tribunal upheld the order‑in‑original‑‑‑Plea of assessees was that although Mills were leased out, assessee continued to use wheat quotas, telephones, employed Chowkidars and pay taxes of Mills like property tax etc.‑‑‑Validity‑‑‑Letting of building was inseparable from letting of plants, machineries, godowns, machinery rooms of Flour Mills‑‑‑Such plea was of no relevance to controversy involved‑‑‑High Court dismissed the appeal.

Sultan Brothers Private Ltd. v. Commissioner of Income‑tax, Bombay City‑II (1964) 51 ITR 353 rel.

Javed Zakaria for Appellants.

Muhammad Arif Moten for Respondents.

Date of hearing: 25th September,' 2003.

2004 P T D 791

[Karachi High Court]

Before S.A. Sarwana and Muhammad Mujeebullah Siddiqui, JJ

Messrs SUPER CAN through Proprietor, Khawaja Tariq Rauf

versus

CUSTOMS, EXCISE AND SALES TAX and 2 others

Special Central Excise Appeal No.58 of 2003, decided on 23rd September, 2003.

Central Excises Act (I of 1944)‑‑‑

‑‑‑‑Ss. 2(25) & 3(1)‑‑‑Tin containers‑‑‑Levy of excise duty‑‑‑Act of cutting tin plates to size, which were ultimately moulded and converted into containers, was a process incidental to manufacture of tin container, which was the final product‑‑‑Such act of cutting tin plates to size would amount to manufacture within definition of term "manufacture" as given in S. 2(25) of Central Excises Act, 1944.

Assistant Collector of Central Excise and Land Customs v. Orient Straw Board and Paper Mills Ltd. PLD 1991 SC 992 ref.

Chaudhry M. Iqbal for Appellant.

Nemo for Respondents.

Date of hearing: 23rd September, 2003.

2004 P T D 801

[Karachi High Court]

Before Shabbir Ahmed and Muhammad Mujeebullah Siddiqui, JJ

Messrs AL‑HAJ INDUSTRIAL CORPORATION (PVT.) LTD., PESHAWAR

Versus

COLLECTOR OF CUSTOMS (APPRAISEMENT), CUSTOMS HOUSE, KARACHI

Special Customs Appeal No.97 of 2002, decided on 18th November, 2003.

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

‑‑‑‑Ss. 50(5) & 86‑‑‑Customs Act (IV of 1969), Ss. 156(1) (10‑A)(14) & 202‑‑‑Evading deduction of advance income‑tax by mis‑declaration of description of imported goods‑‑‑Recovery of such evaded income‑tax from importer by Collector of Customs alongwith additional tax under S.86 of Income Tax Ordinance, 1979 and penalty under S. 156(1) (10‑A)(14) of Customs Act, 1969‑‑‑Validity‑‑‑Advance income‑tax under S.50(5) of Income Tax Ordinance, 1979 could be collected as customs duty and recovered by Collector of Customs under S.202 of Customs Act, 1969‑‑‑Such recovery would not have effect of converting income-­tax into customs duty, thus, applicability of S. 156 of Customs Act would be excluded‑‑‑Section 86 of Ordinance, 1979 involved process of assessment, which power had not been conferred on Customs Authorities‑‑‑Additional tax under S.86 of Ordinance, 1979 could be imposed on deducting authority and not on importer (the payer)‑‑‑No exception could be taken to recovery of such evaded determined amount of income‑tax‑‑‑Imposition of additional tax under S.86 of the Income Tax Ordinance, 1979 and penalty under S. 156(1)(10‑A)(14) of Customs Act, 1969 were annulled being without jurisdiction.

Crescent Pak Industries (Pvt.) Limited v. Government of Pakistan 1990 PTD 29; Messrs English Biscuit Manufacturers Ltd. v. The Assistant Collector, Central Excises and Land Customs, Landhi Division Karachi 1991 PTD 178; Kohinoor Textile v. Federation of Pakistan 2002 PTD 121 and Messrs Nadeem Electronics (Pvt.) Ltd. v. Collector of Customs, Central Excise and Sales Tax PTCL 2000 CL 582 ref.

(b) Taxation‑‑‑

‑‑‑‑ Nature of tax would not be changed by merely providing the manner and time of its collection under any tax enactment.

(c) Taxation‑‑‑

‑‑‑‑ Collection and assessment of tax‑‑‑Not one and the same thing.

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

‑‑‑‑S. 86‑‑‑Additional tax, imposition of‑‑‑Scope‑‑‑Such tax could be imposed on deducting authority and not on importer (the payer).

Junaid Ghaffar for Appellant.

Ms. Masooda Siraj for Respondent.

Date of hearing: 23rd October, 2003.

2004 P T D 868

[Karachi High Court]

Before Shabbir Ahmed and Muhammad Mujeebullah Siddiqui, JJ

AL‑HILAL MOTORS STORES and another

Versus

COLLECTOR, SALES TAX AND CENTRAL EXCISE (EAST) and another

Special Sales Tax Appeals Nos.99 and 100 of 2002, decided on 12th November, 2003.

Sales Tax Act (VII of 1990)‑‑‑

‑‑‑‑Ss.3, 2(41), 2(35) & 2(33)‑‑‑Scope of tax‑‑‑"Taxable supply"‑‑­"Taxable activity"‑‑‑"Supply"‑‑‑Definition‑‑‑Sales tax shall be charged, levied and paid on taxable supplies made in Pakistan by a registered person in the course of furtherance of any taxable activity carried on by him on the goods imported in Pakistan‑‑Sales tax liability could not be assessed/imposed solely on the basis of Bank statement of the registered person without any evidence of corresponding taxable supply made in the course of taxable activity‑‑‑Cash‑credits appearing in the account books for which no satisfactory explanation was furnished could not be treated as the amount received on account of taxable supplies or in furtherance of taxable activity‑‑‑Any Bank account of a registered person without any nexus to taxable supplies, could not be treated as amount received from such "supplies" and liable to sales tax‑‑‑Where the allegation of "tax‑fraud" was made, the onus of proof was on the Department‑‑­Principles.

In terms of the provisions contained in section 3 of the Sales Tax Act, 1990, which is the charging section, the sales tax shall be charged, levied and paid on taxable supplies made in Pakistan by a registered person in the course of furtherance of any taxable activity carried on by him and on the goods imported in Pakistan.

While defining the terms "supply" and "taxable activity" the Legislature has enacted deeming provision also and by fiction of law has included private business or non‑business the course of business and an activity without pecuniary profit, as well as supply without any consideration is taxable activity. But, for the definitions contained in the Sales Tax Act, 1990, the above acts could not be treated as "supply" or "taxable activity". The definition of term "supply" has excluded the doctrine of mutuality. Thus, wherever the Legislature has deemed fit, resort has been made to the deeming provisions by fiction of law. However, there is no provision in the Sales Tax Act, 1990 analogous to the provisions contained in the Income Tax Law, whereby the discovery of any cash‑credits in the accounts of an assessee can be deemed to be supply, taxable supply or the amount received on account of taxable activity in furtherance of any business. An assessee can be subjected to tax under a provision of law, which is unambiguous and, clear. There is no room for any intendment and there is no presumption as to tax. In the absence of any deeming provision the Revenue is required to establish that a transaction falls within the parameters of taxable supplies or in furtherance of any taxable activity, failing which the sales‑tax imposed on the basis of some assumption or presumption not warranted in law, shall always be struck down. In the present cases it is apparent that except discovering certain cash‑credits entries in the books of the appellants, the Revenue Officers have not been able to produce any material to show that the said amounts are in any way linked with the taxable supplies or with any taxable activities or present an amount on account of any business activity. A perusal of the show‑cause notice as well as material produced further shows that no case of any tax­ fraud has been made out whereby the burden of proof can be shifted to the appellants The two forums below have misdirected themselves in placing the burden of proof on the appellants in terms of the provisions contained in section 2(37) defining the expression "tax‑fraud" without realising that in order to attract the above provision, the initial burden lies on the Department to show that an assessee, knowingly, dishonestly or fraudulently and without any lawful excuse has done any act or has caused to be done or has omitted to take any action or has caused the omission to take any action in contravention of duties or obligations imposed under the Sales Tax Act or rules or instructions issued thereunder with the intention of, understating the tax liability or underpaying the tax liability. Once this burden is discharged by the Department, only then, the burden is shifted to the assessee to establish that the act done was without any knowledge on his part or without any intention of dishonesty or fraud and was done with any lawful excuse.

Two forums below had misdirected in law in holding that the cash‑credits appearing in the account books for which no satisfactory explanation was furnished could be treated as the amount received on account of taxable supplies or in furtherance of taxable activity. The orders of the two forums below were set aside in circumstances.

Khalid Jawed Khan for Appellants.

Raja M. Iqbal for Respondent No. 1 (in both the Cases).

Date of hearing: 12th November, 2003.

2004 P T D 901

[Karachi High Court]

Before Shabbir Ahmed and Muhammad Mujeebullah Siddiqui, JJ

Messrs HASHWANI HOTELS LIMITED through Executive Director

Versus

GOVERNMENT OF PAKISTAN through Secretary, Ministry of Finance, Islamabad and 5 others

Constitutional Petition No. D‑615 of 1996, decided on 12th December, 2003.

(a) Sales Tax Act (VII of 1990)‑‑‑

‑‑‑‑Ss.5, proviso II, 6 & 15‑‑‑Customs Act (IV of 1969), Ss.30, 79 & 104‑‑-Finance Act (IX of 1996), Preamble‑‑‑S.R.O. 212(I)/91, dated 14‑3‑1991 [as amended by S.R.O. 367(I)/91, dated 7‑5‑1994]‑‑­Notification No. SL No.65/96(A) dated 6‑4‑1996‑‑ Constitution of Pakistan (1973), Art. 199‑‑‑Constitutional petition‑‑‑Sales tax exemption‑‑‑Change in rate of tax‑‑‑Promissory estoppel, principle of‑‑­Applicability‑‑‑Home consumption‑‑‑Provision of IInd proviso to S.5 of the Sales Tax Act, 1990 [as it stood prior to 1st July, 1996] did cover the presentation of Bills of Entry under S.104 as well as S.79 of the Customs Act, 1969 and the applicability thereof to the Bill of Entry under S.79, was excluded by the amendment introduced by Finance Act, 1996 only with effect from 1‑7‑1996‑‑‑If the intention of the Legislature had been to apply it retrospectively it could have done it by expressly stating so‑‑­Provision of IInd proviso to S.5 of the Sales Tax Act, 1990 as it stood during the period relevant, in the present case, was fully applicable and consequently the exemption from payment of sales tax on the import claimed by the importer was not available‑‑‑Action of the Department charging the sales tax on the said import was not open to any exception‑­When the Bill of Entry in the present case was filed amendment was still available but the importer could not avail the same because the requirements for availing the exemption could not be fulfilled by the importer before 11‑4‑1996, while the exemption was already withdrawn, with effect from 6‑4‑1996 and the provisions contained in IInd proviso to S.5 of the Sales Tax Act, 1990 had become operative‑‑‑Doctrine of promissory estoppel, in circumstance, was also not attracted‑‑‑Principles.

For the purpose of determination of the rate of import duty under the Customs Act, the relevant date is the presentation of Bill of Entry for home consumption under section 79 of the Customs Act. However, second proviso was added to section 30 of the Customs Act, by Finance Ordinance, 1979 pertaining to the Bill of Entry under section 104 of the Customs Act, providing that if the duty is not paid within seven days of the Bill of Entry being presented, the value and rate of duty applicable would be the date on which the duty is actually paid. There is no ambiguity in this proviso, that, it is applicable to the Bill of Entry presented under section 104 of the Customs Act, 1969 only and was not applicable to the Bill of Entry presented under section 79 of the Customs Act. Although it is provided in section 6 of the Sales Tax Act, that the tax in respect of goods imported into Pakistan shall be charged and paid in the same manner and at the same time as if it were a duty of customs payable under the Customs Act, 1969, but this provision shall not change .the nature of tax and therefore, except the provisions pertaining to the collection of sales tax, no other provision in the Customs Act, is attracted and particularly the provisions pertaining to the assessment or exemption of sales tax ‑shall still be dealt with under the provisions of the Sales Tax Act.

The issue in the present case pertained to the exemption under the Sales Tax Act and a simple question of collection of the sales tax as customs duty was not involved, therefore, the provisions contained in this behalf in the Sales Tax Act, 1990, pertaining to the chargeability and rate of tax, shall be applicable as in force at the time of import in this case. As already observed, so far as the question of the date of determination of the rate of import duty under the Customs Act was concerned, it was the date of presentation of the Bill of Entry for home consumption. Similar provisions were contained in section 5 of the Sales Tax Act. Second proviso to section 30 of the Customs Act however, provided that in respect of goods for the clearance of which a Bill of Entry for clearance had been manifested under section 104 and duty was not paid within 7 days of the Bill of Entry being manifested, the rate applicable would be the rate of duty on the date on which duty was actually paid. The proviso is in the nature of exception to the general principle contained in section 30 of the Customs Act. Thus, it places a limitation upon the effect of general principle, contained in section 30 of the Customs Act and serves the purpose of qualifying the applicability of the general rule to the Bill of Entry presented under section 104 of the Customs Act. Similar provision is contained at present in second proviso to section 5 of the Sales Tax Act.

A comparison of the proviso as existing at present with the proviso as existed till 30th June, 1996 shows that the words "under section 104 of the Customs Act" were inserted by Finance Act, 1996, with effect from 1‑7‑1996. The result was that prior to the amendment made by Finance Act, 1996, the Second proviso to section 5 was applicable generally to the Bills of Entry whether presented under section 79 or section 104 of the Customs Act, 1969. Section 5(b) of the Sales Tax Act, deals with the charge of sales tax and under clause (i) thereof the rate as is in force on the date of presentation of Bill of Entry under section 79 of the Customs Act, shall be applicable and in the case of Bill of Entry under section 104 similar provision is contained in clause (ii). Under section 30 of the Customs Act, similar provisions were in force at the time of import and presentation of the Bills of Entry in this case with the difference that the second proviso which was inserted by Finance Ordinance, 1979 placed the classification/limitation for payment of customs duty within 7 days of the presentation, of Bill of Entry under section 104 only. The proviso was not applicable since very inception to the presentation of Bill of Entry under section 79 of the Customs Act. However, the second proviso to section 5 of the Sales Tax Act, 1990 enacted initially, was in general terms meaning thereby, that it was applicable to the Bill of Entry presented under section 79 of the Customs Act, as well as section 104 of the Customs Act. It was only after amendment inserted by Finance Act, 1996 with effect from 1st July, 1996 that the second proviso was made applicable to the Bill of Entry presented under section 104 of the Customs Act, thereby excluding the applicability of the proviso to the Bill of Entry presented under section 79 of the Customs Act, 1969. In the present case, the Bill of Entry was presented on 15‑2‑1996 and the sales .tax was charged on 13‑4‑1996 when the exemption was already withdrawn with effect from 6‑4‑1996 under the notification dated 4‑4‑1996.

Amendment has been enacted by Finance Act, 1996 with effect from 1‑7‑1996, but the amendment has been made with retrospective effect, and therefore, the law as it stood up to 30th June, 1996 envisaged that the second proviso to section 5 was applicable to the Bills of Entry presented under section 104 of the Customs Act, as well as to the Bills of Entry presented under section 79 of the said Act. Therefore, it cannot be said that the law as it stood up to 30th June, 1996 provided any immunity to the Bill of Entry presented for home exemption under section 79 of the Customs Act from the condition prescribed in the second proviso to section 5 of the Sales Tax Act, 1990.

The Courts are required to interpret and apply the law as they exist at a particular point of time relevant for consideration and not on the basis of law as it ought to be or ought to have been. A transaction governed under the Sales Tax Act, 1990 is to be considered in the light of provisions contained in the Sales Tax Act and not on the basis of a law contained in another tax statute, in the present case the Customs Act. The sales tax and customs duty although belong to the species of indirect tax but they are not the same and operate in their distinct and separate field in accordance with the provisions contained in the relevant statutes. On the basis of analogy in any other statute the clear language of a law cannot be stretched so as to bring it in conformity with the provisions contained in another statute or in consonance with the amendment subsequently made with prospective effect.

In a taxing Act one has to look merely at what is clearly said. There is no room for any intendment. There is no equity about a tax, There is no presumption as to a tax. Nothing is to be read in, nothing is to be employed. One can only look fairly at the language used.

Thus, the applicability of second proviso to section 5 of the Sales Tax Act to the present case cannot be resorted to merely on the basis of intendment or presumption. The principle of purposive interpretation cannot be employed also for the reason that the principle of purposive approach is to be resorted to in the case, where there is any ambiguity. However, when the language of law is very clear, it is to be followed.

While interpreting the taxing statute the Courts must look to the words of the statute' and interpret it in the light of what is clearly expressed. It cannot imply anything which is not expressed, it cannot import provisions in the statute so as to support assumed deficiency.

While finding out intention of the Legislature language of the law is to be seen and if the intention is clear, from the language used nothing else is to be done.

If the Legislature has not sufficiently expressed itself Court has no duty to act for it, for Court is concerned with what it lays down and not with what it has only in mind, but once it has been articulate enough Court does no more than give effect to the intention that it has succeeded in expressing. That intention may be expressed in faulty language, in very faulty language, in extremely faulty language. This is of no consequence as long as there is no doubt as to the intention. A draftsman's mistake as long as it relates to the form in which the legislative intent is expressed and not to the substance of it, is‑of no effect. Of course once an element of doubt as to the intention of the Legislature enters the field considerations otherwise irrelevant may all become relevant.

In a statute of this nature if there is a case, which is not covered by the words of the statute are interpreted according to their natural meaning, that can only be cured by legislation and not by any attempt to construe it benevolently by the Courts.

The consideration of hardship or injustice does not weigh with the Courts while interpreting the statute.

The second proviso to section 5 of the Sales Tax Act, 1990, as it stood prior to 1st July, 1996, covered the presentation of Bills of Entry under section 104 as well as section 79 of the Customs Act and the applicability thereof to the Bill of Entry under section 79, was excluded by the amendment inserted by Finance Act 1996 only with effect from 1‑7‑1996. If the intention of the Legislature had been to apply it retrospectively the Legislature could have done it by expressly stating so. The second proviso to section 5 of the Sales Tax Act 1990, as it stood during the period relevant in the present case was fully applicable and consequently the exemption from payment of sales tax on the import claimed by the petitioner was not available. Thus, the action of the Department charging the sales tax on the import made by the petitioner was not open to any exception.

Principle of promissory estoppel is not attracted for the reason that at the time of filing of Bill of Entry the amendment was still available but the importer could not avail the same because the requirements for availing the exemption could not be fulfilled by the importer before 11‑4‑1996, while the exemption was already withdrawn, with effect from 6‑4‑1996 and the provisions contained in second proviso to section 5 of the Sales Tax Act became operative.

Abbas Steel Industries Ltd. v. Collector of Customs 1989 CLC 1463; Crescent Pak Industries (Pvt.) Limited v. Government of Pakistan 1990 PTD 29; Messrs English Biscuit Manufacturers Ltd. v. The Assistant Collector, Central Excises and Land. Customs, Landhi Division, Karachi 1991 PTD 178; Kohinoor Textile v. Federation of Pakistan 2002 PTD 121; Messrs Nadeem Electronics (Pvt.) Ltd. v. Collector of Customs, Central Excise and Sales Tax 1999 PTD 1912; Cape Brandy Syndicate v. I.R. (1921) 1 KB 67; Canadian Eagle Oil Co. Ltd. v. The King 27 TC 205; Hirjina & Co. (Pakistan) Ltd., Karachi v. Commissioner of Sales Tax 1971 PTD 200; Muhammad Amir Khan v. Controller of Estate Duty, Government of Pakistan PLD 1962 SC 335 and A. Ghafoor v. The State PLD 1965 Quetta 10 ref.

(b) Interpretation of statutes‑‑‑

‑‑‑‑ Court is required to interpret and apply the laws as they exist at a particular point of time relevant for consideration and not on the basis of law as it ought to be or ought to have been.

(c) Interpretation of statutes‑‑‑

‑‑‑‑Clear language of a law cannot be stretched on the basis of analogy in any other statute so as to bring it in conformity with the provisions contained in another statute, or, in consonance with the amendment subsequently made with prospective effect.

(d) Interpretation of statutes‑‑‑

‑‑‑‑Taxing statute‑‑‑One has to look merely at what is clearly said; there is no room for any intendment; there is no equity about a tax and there is no presumption as to a tax‑‑‑Nothing is to be read in, nothing is to be employed and one can, only look fairly at the language used.

Cape Brandy Syndicate v. I.R. (1921) 1 KB 67 ref.

(e) Interpretation of statutes‑‑‑

‑‑‑‑ Purposive approach to be resorted to in a case where there is any ambiguity, however, when the language of law is very clear, same is to be followed.

(f) Interpretation of statutes‑‑‑

‑‑‑‑Taxing statute‑‑‑While interpreting the taxing statute the Court must look to the words of the statute and interpret it in the light of what is clearly expressed‑‑‑Court cannot import provisions in the statute so as to support assumed deficiency.

(g) Interpretation of statutes‑‑‑

‑‑‑‑ Intention of the Legislature‑‑‑While finding out intention of the Legislature language of the law is to be seen and if the intention is clear from the language used, nothing else is to be done.

(h) Interpretation of statutes‑‑‑

‑‑‑‑ Intention of the Legislature‑‑‑If the Legislature has not sufficiently expressed itself, Court has no duty to act for it, for the Court is concerned with what the Statute lays down and not with it has only in mind, but once it has been articulate enough Court does no more than give effect to the intention that it has succeeded in expressing‑‑‑Intention may be expressed in faulty language, in very faulty language in extremely faulty language which is of no consequence as long as there is no doubt as to the intention‑‑‑Draftsman's mistake, as long as it' relates to the form in which the legislative intent is expressed and not to the substance of it, is of no effect‑‑‑Once an element of doubt as to the intention of the Legislature enters the field considerations otherwise irrelevant may all become relevant.

Muhammad Amir Khan v. Controller of Estate Duty, Government of Pakistan PLD 1962 SC 335 ref.

(i) Interpretation of statutes‑‑‑

‑‑‑‑ Taxing statute‑‑‑If there is a case, which is not covered by the words of the statute, those are interpreted according to their natural meaning, that can only be cured by legislation and not by any attempt to construe it benevolently by the Courts.

(j) Interpretation of statutes‑‑‑

‑‑‑‑Consideration of hardship or injustice does not weigh with the Courts while interpreting the statute.

A. Ghafoor v. The State PLD 1965 Quetta 10 ref.

Mushtaque A. Memon for Petitioner.

Shakeel Ahmed for Respondent No.3.

Syed Ziauddin Nasir, Standing Counsel.

Date of hearing: 4th November. 2003.

2004 P T D 921

[Karachi High Court]

Before Shabbir Ahmed and Muhammad Mujeebullah Siddiqui, JJ

COMMISSIONER OF INCOME‑TAX, KARACHI

Versus

Messrs NAZIR AHMED AND SONS (PVT.) LTD., KARACHI

Income Tax Appeal No.790 of 2000, decided on 30th October, 2003.

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

‑‑‑‑S. 50(4), Explanation [as added by (Finance Act III of 1998) w.e.f. 1‑7‑1998]‑‑‑Deduction of tax at source on payments made on purchases prior to insertion of Explanation to S. 50(4) of Income Tax Ordinance, 1979 by Finance Act, 1998‑‑‑Scope‑‑‑Said Explanation deeming a sale by fiction of law to be supply of goods was a substantive piece of legislation enlarging and extending scope of S. 50(4) of the Ordinance and could not be applied retrospectively‑‑‑No person could be saddled with responsibility/liability for non‑compliance of law to be enacted in future‑‑‑Requirement of deduction of tax on purchase would apply from the date of insertion of such explanation and not since the very inception of the Income Tax Ordinance, 1979.

Dream Land Cinema v. CIT PLD 1977 Lah. 292 fol.

(b) Interpretation of statutes‑‑‑

‑‑‑‑ Explanation to a statutory provision‑‑‑Object, scope and effect‑‑­Principles elaborated.

The ordinary object of an explanation to a statutory provision is to explain the meaning and intendment of the Act. Where there is any obscurity, ambiguity or vagueness in the main enactment, the explanation clarifies the same so as to make it consistent with the dominant object, which it seems to be subservient. The explanation is a note of caution by the Legislature to rectify the judicial error and give guideline for future clarifying the intention of the Legislature. Normally, the explanation does not enlarge or limit the provision already enacted. Some times, the Legislature steps in to convey its real intention, if not fully conveyed by the earlier enactment or there has been a misconception about the scope of a provision. Some times, a definition or a deeming clause is inserted by an explanation. Some times on account of inaptness or lack of dexterity on the part of draftsman, substantive provisions are also enacted with the heading explanation. If an explanation is merely declaratory or clarificatory in nature or is meant to fill in certain obvious gaps or to convey the real intention of the Legislature by explaining the meaning and intendment of the Act or by clarifying an obscurity or vagueness in the main enactment, it is always retrospective in effect and is operative since the very inception of the enactment and shall be held to be existing all along. However, where a substantive/a new enactment has been made or a new definition is added or a deeming provision is inserted or the scope of a provision particularly a substantive/charging provision is enlarged or extended, it shall not have the retrospective effect, until and unless specifically specified so by the Legislature.

No hard and fast rule can be made applicable to all the explanations inserted by subsequent legislation. The explanations squarely falling within the normal purpose and scope of enactments, to wit, being declaratory, clarificatory meant for removal of doubt, obscurity or an ambiguity or filling in any obvious gap or correcting any pronouncement by the Court taking as judicial error by the Legislature, shall have the retrospective effect. However, the explanation whereby substantive legislation has been made or deeming provisions have been enacted or substantive provisions of law have been enlarged or extended creating new liabilities, they shall not have retrospective effect.

Muhammadi Bibi v. Kashi Upadhya AIR 1926 All. 725; Joti Ram Khan v. Jonaki Nath Jhosi 33 IC 54; Young v. Adams 1898 AC 469; Pakistan Petroleum v. Commissioner of Income‑tax 1985 PTD 1; Rehman Corporation v. Income‑tax Officer 1985 PTD 787; Commissioner of Income‑tax v. Mangalore Ganesh Beedi Works (1992) 193 ITR 77; Hindustan Steel Foregings v. CIT (1989) 179 ITR 280 and CIT v. Nitro Phosphetic Fertilizer (1998) 174 ITR 269 rel.

(c) Interpretation of statutes‑‑‑

----Real intent and purpose of a provision can be determined by examining entire statute and comparing various provisions contained therein.

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

‑‑‑‑Ss. 12(4) Expln., 19(3) Expln., 22 Expln. 23(1) Expln., 23(1)(vii­-dd) Expln., 24(e) Expln., 36 Expln., 41 Expln., 50(5) Expln., 54 Expln., 59(1) Expln., 65 (2) Expln., 80‑D Expln., First Sched., Part II, Cls. (c), Expln., First Sched., Part IV, para. A, Expln.‑‑‑Explanations enacted initially or added subsequently‑‑‑Nature and scope‑‑‑All such explanations are not necessarily declaratory and clarificatory or for removal of doubt‑‑‑Some Explanations are definitive in nature, some have been specifically inserted with retrospective effect, some have enlarged/extended scope of already enacted provisions, while through some Explanations substantive legislation has been resorted to‑‑‑No hard and fast rule could be applied to all such Explanations‑‑‑Explanations squarely falling within normal purpose and scope of enactment being declaratory, clarificatory meant for removal of doubt, obscurity or an ambiguity or filling in any obvious gap or correcting any pronouncement by Court taking as judicial error by Legislature, would have retrospective effect‑‑‑Explanations whereby substantive legislation have been made or deeming provisions have been enacted or substantive provisions of law have been enlarged/extended creating new liabilities, would not have retrospective effect.

(e) Interpretation of statutes‑‑‑

‑‑‑‑ Fiscal statutes‑‑‑Words used in tax laws, until and unless defined in the statute shall be taken in the same sense and meaning as is understood in the common parlance by the business community.

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

‑‑‑‑S. 50(4), Explanation [as added by Finance Act (III of 1998)]‑‑‑"Supply of goods" and "sale of goods"‑‑‑Distinction‑‑‑Supply of goods and sale are not one and the same in nature‑‑‑Every supply is sale, but every sale is not supply.

(g) Interpretation of statutes‑‑‑

‑‑‑‑No absurdity or unreasonableness is to be attributed to Legislature.

(h) Interpretation of statutes‑‑‑

‑‑‑‑ No person can be saddled with responsibility or liability for non­compliance of law to be enacted in future.

Aqeel Ahmed Abbasi for Appellant.

Nemo for Respondent.

Date of hearing: 30th October, 2003.

2004 P T D 948

[Karachi High Court]

Before S. Ahmed Sarwana and Muhammad Mujeebullah Siddiqui, JJ

KARACHI PROPERTIES INVESTMENT COMPANY (PVT.) LIMITED, KARACHI

Versus

INCOME‑TAX APPELLATE TRIBUNAL, KARACHI and another

Constitutional Petition No.658 of 1998, decided on 10th October, 2003.

(a) Constitution of Pakistan (1973)‑‑‑

‑‑‑‑Art. 199‑‑‑Income Tax Ordinance (XXXI of 1979), S.136‑‑­Constitutional petition‑‑‑Alternate remedy, availability of‑‑‑Effect‑‑­Where remedy by way of appeal/revision was available in the statute, Constitutional petition would not lie, except where impugned order was without jurisdiction or remedy provided in law was illusory.

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

‑‑‑‑Ss. 156 & 136‑‑‑Constitution of Pakistan (1973), Art. 199‑‑­Constitutional petition filed after withdrawal of appeal against order under S.156 of Income Tax Ordinance, 1979 on wrong perception of law‑‑‑Maintainability‑‑‑Such Constitutional petition would not be maintainable‑‑‑High Court, however, declined to nod‑suit the petitioner on such score as same would amount to technical knock‑out‑‑‑Appeal withdrawn had been filed within period of limitation‑‑‑Constitutional petition had been filed within period of limitation provided for filing appeal‑‑‑High Court showing indulgence converted the Constitutional petition into appeal.

Pakistan Electric Fittings Manufacturing Company Limited v. Commissioner of Income‑tax and 2 others 2000 PTD 2407 rel.

(c) Constitution of Pakistan (1973)‑‑‑

‑‑‑‑Art. 199‑‑‑Income Tax Ordinance (XXXI of 1979), Ss. 129, 134 & 136‑‑‑Conversion of Constitutional petition into another proceedings‑‑­Scope‑‑‑Such concession would not be available to petitioner ignoring forum of appeal/reference provided in statute and filing Constitutional petition particularly after expiry of limitation for filing appeal/reference.

Pakistan Electric Fittings Manufacturing Company Limited v. Commissioner of Income‑tax and 2 others 2000 PTD 2407 ref.

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

‑‑‑‑Ss. 136 & 156‑‑‑Appeal/reference to High Court and rectification application‑‑‑Scope‑‑‑Scope of appeal/reference is much wider than rectification application‑‑‑Party in appeal/reference can raise all questions of law arising out of findings of Tribunal‑‑‑Objection allowable to be raised in rectification application is restricted to mistake apparent from record.

Islamuddin and 3 others v. Income Tax Officer and 4 others 2000 PTD 306 rel.

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

‑‑‑‑Ss. 19(2), 66‑A & 156‑‑‑Rectification of mistake‑‑‑Authority revised assessment for subsequent years on basis of order of Tribunal for earlier years‑‑‑Facts of subsequent years were entirely different from facts forming basis for orders of earlier years‑‑‑Tribunal after considering such facts by deliberate and conscious findings deviated from its earlier judgment‑‑‑Tribunal rejected rectification application‑‑‑No exception could be taken to impugned order being not suffering from any illegality and infirmity‑‑‑High Court answered, reference in negative.

1996 PTD (Trib.) 122; 1989 PTD (Trib.) 859; CIT Companies‑II v. National Food Laboratories 1992 PTD 570; 1996 PTD (Trib.) 420; 1996 PTD (Trib.) 492; 1997 PTD (Trib.) 831; 1997 PTD (Trib.) 902; Glaxo Laboratories Ltd. v. Inspecting Assistant Commissioner of Income‑tax and others 1992 PTD 32 = PLD 1992 SC 549; Mansab Ali v. Amir and 3 others PLD 1971 SC 124; Major Syed Walayat Shah v. Muzaffar Khan and 2 others PLD 1971 SC 184; Messrs Julian Hoshang Dinshaw Trust and others v. Income Tax Officer, Circle XVIII South Zone, Karachi and others 1992 PTD 1; Yousuf Ali v. Mohammad Aslam Zia and 2 others PLD 1958 SC (Pak.) 104; Abdul Rauf and others v. Abdul Hamid Khan and others PLD 1965 SC 671; Utility Stores Corporation of Pakistan v. Punjab Labour Appellate Tribunal and others PLD 1987 SC 447; PLD 2003 Lah. 614 and Pakistan Electric Fittings, Manufacturing Company Limited v. Commissioner of Income‑tax and 2 others 2000 PTD 2407 ref.

Muhammad Rafique v. Baqar 2003 SCMR 1401 fol.

(f) Merger, doctrine of‑‑‑

‑‑‑‑Doctrine of merger in judicial/quasi‑judicial proceedings‑‑‑Basis of such principle is that appeal is continuation of original proceedings, and when Appellate Authority hears appeal against order of original/lower forum, then all issues considered and adjudicated upon by Appellate Court merge in order of Appellate Court‑‑‑Pre‑condition for law of merger is existence of an original lower forum order and appeal against such order.

(g) Income‑tax‑‑‑

‑‑‑‑Res judicata, principle of‑‑‑Applicability‑‑‑Every assessment year and order is ‑an independent unit‑‑‑Such principle not applicable to Income Tax Law‑‑‑If facts and circumstances are changed in subsequent years, then neither assessee nor Assessing Officer would be bound by assessment order or finding of Appellate Court given in earlier assessment years‑‑‑With changed facts and circumstances, assessment and finding can also be changed, to which no exception can be taken.

CIT, Central Zone "B", Karachi v. Farrokh Chemical Industries 1991 SCC 805 rel.

Shahenshah Hussain for Petitioner.

Jawaid Farooqi for Respondent.

Dates of hearing: 10th and 11th September, 2003.

2004 P T D 973

[Karachi High Court]

Before Shabbir Ahmed and Muhammad Mujeebullah Siddiqui, JJ

COLLECTOR OF CUSTOMS (APPRAISFMENT), CUSTOM HOUSE, KARACH

Versus

Messrs SUNSHINING CLOTH LIMITED

Special Customs Appeal No.10 of 1999, decided on 23rd December, 2003.

(a) Administration of justice‑‑‑

‑‑‑‑ Law as in force on the date of commission or omission of an act and the date on which a right accrues to a person or liability is incurred, is the relevant law and not the law as in force at the time of hearing of a case at original stage or appellate one‑‑‑Numerous and frequent amendments take place in tax laws, therefore, all the Advocates practising on tax side are specially required to keep them abreast of all changes in law and the law as in force on the date when a tax is to be levied, failing which the miscarriage of justice is bound to occur.

(b) Customs Act (IV of 1969)‑‑‑

‑‑‑‑Ss.30 & 79‑‑‑Legislative history of Ss.30 & 79 of the Customs Act, 1969 recorded.

(c) Customs Act (IV of 1969)‑‑‑

‑‑‑‑S.79(2) [as stood in June/July, 1993]‑‑‑Time for filing of Bill of Entry‑‑‑Scope and principles.

A perusal of subsection (2) of section 79 as it stood in the months of June and July, 1993 shows that a bill of entry under, subsection (1) of section 79, could be presented at any time after the delivery of the manifest. However, under proviso the appropriate officer was empowered, in any special circumstances to permit bill of entry to be presented before the delivery of the manifest. At the relevant time a bill of entry could not be filed before the delivery of manifest, as a matter of right. It could be filed with the permission of the appropriate officer. In the present case no material has been produced and there is nothing on record from which it could be examined whether the bill of entry was filed on 23‑6‑1993 before the delivery of manifest, with the permission of appropriate officer or without the permission of appropriate officer. However, keeping in view the principle that when there is any ambiguity, it is to be resolved in favour of an assessee and not the State, it has been held that when the department has alleged that the bill of entry was filed on 23‑6‑1993 and the concerned group finalised the assessment on the same date, it was filed with the permission of the appropriate officer. Thus, the bill of entry was lawfully filed on 23‑6‑1993.

(d) Customs Act (IV of 1969)‑‑‑

‑‑‑‑Ss.30 [as stood in 1993] & 79‑‑‑Exemption from Iqra Surcharge‑‑­Value of and rate of duty payable on imported goods declared for home consumption under S.79 of the Customs Act, 1969 on the date on which a bill of entry was presented under S.79‑‑‑Scope and principles.

Provisions of section 30 of the Customs Act, 1969, as it stood in the year 1993 provide that the value of, and the rate of duty payable to any imported goods was to be taken at the value and the rate of duty in force in case of goods declared for home consumption under section 79, on the date on which a bill of entry was presented under that section. However, the first proviso dealt with the situation as in the present case. A bare perusal of the first proviso to section 30 as it stood in the year 1993 shows that the issue under consideration is fully clinched with this provision. According to proviso where a bill of entry has been filed in advance of the arrival of the conveyance by which the goods have been imported, the relevant date for the purposes of section 30 shall be the date on which the manifest of the conveyance is delivered. It is admitted position that in the present case the bill of entry was filed in advance of the arrival of conveyance on 23‑6‑1993 but the manifest was delivered on 8‑7‑1993. Thus, the relevant date for the purposes of section 30 was 8‑7‑1993, on which date the manifest of conveyance was delivered. The finalisation of assessment on 23‑6‑1993 by the concerned group of the Custom Department, prior to the arrival of conveyance was totally unwarranted and demonstrated collusion on the part of the importer bringing the case within the purview of subsection (2) of section 32. Collector had thus rightly issued the show‑cause notice and had passed the order for the retrieval of the taxes short‑levied. The penalty was also not open to any exception. It is also pertinent to note that the importer had not filed any written reply in response to the show‑cause notice issued by the Collector with the result that the allegations in the show­-cause notice had gone un-rebutted which clearly amounts to admission of the facts alleged in the show‑cause notice. The Tribunal has clearly misdirected in coming to the contrary conclusion while allowing the appeal. The Tribunal has not considered the law as it prevailed at the relevant time. Tribunal has committed an error in observing that the version put‑forth by the importer before the Tribunal was more logical, weighty, well‑founded, well‑substantiated and definitely in line with the spirit and contents of the governing notification. Without adverting to the provisions contained in section 30 of the Customs Act, the Members of the Tribunal have formed opinion that the bill of entry was filed on 23‑6‑1993 and therefore, the importer became entitled to exemption from payment of Iqra Surcharge. There is another gross mistake on the part of Members of the Tribunal. Without properly appreciating the facts, in the light of the provision contained in section 30, they have observed that the act alleged on the part of importer does not fall within the provisions of section 32(2) of the Customs Act and at the best it falls within the purview of section 32(3) and which became barred by limitation. All these observations have been made out of total ignorance of the relevant provisions of law and non‑appreciation of facts. First, the collusion of the Customs Officials is apparent on the face of record. The assessment was made on 23‑6‑1993, before the arrival of the conveyance, in flagrant violation of the provisions contained in the first proviso to section 30. Secondly, the show‑cause notice was not barred even under sub­section (3) of section 32, as at the relevant time the period of limitation provided in subsection (3) of section 32 was six months from the relevant date. The assessment was completed on 23‑6‑1993; while the show‑cause notice was issued on 24‑8‑1993 i.e. after two months of the relevant date. The Members of the Tribunal had passed strictures against the Customs Officials, which were totally uncalled for and were thus expunged. The impugned order of the Tribunal was not sustainable in law which was set aside. The question of law was answered in negative.

(e) Customs Act (IV of 1969)‑‑‑

‑‑‑‑Ss.30 & 79 [as stood in 1993]‑‑‑Iqra Surcharge‑‑‑Exemption, claim of‑‑‑Date for claiming exemption from Iqra Surcharge was not the date when the bill of entry was filed but the date on which the manifest was delivered.

Jawaid Farooqi for Appellant.

S. Mahmood Ali Askari for Respondent.

Date of hearing: 2nd December, 2003.

2004 P T D 997

[Karachi High Court]

Before Shabbir Ahmed and Muhammad Mujeebullah Siddiqui, JJ

Messrs AVIA INTERNATIONAL and others

Versus

ASSISTANT COLLECTOR OF CUSTOMS (IMPORT), APPRAISEMENT COLLECTORATE, CUSTOMS HOUSE, KARACH and others

Constitution Petitions Nos. D‑766 and D‑767 of 2003, decided on 8th January, 2004.

(a) Administration of justice‑‑‑

‑‑‑‑Every person is responsible for his own deeds/misdeeds, acts and omissions and nobody incurs any liability on account of any wrong committed by any other person.

(b) Customs Act (IV of 1969)‑‑‑

‑‑‑‑S.45‑‑‑Contents of import manifest and amendment thereof‑‑‑Scope‑‑­Allegation of mis-declaration on the part of importer by Collector of Customs‑‑‑Nothing was available on record to the effect that the said importers were also a party to the alleged misdeclaration in other imports‑‑‑Refusal of amendment to the manifest on the, ground of alleged misdeclaration was not tenable.

(c) Customs Act (IV of 1969)‑‑‑

‑‑‑‑S.138‑‑‑Frustrated cargo‑‑‑Where any goods were brought into a custom station by reason of inadvertence, misdeclaration, or untraceability of the consignee, the Collector of Customs may, on application by any person‑in‑charge of the conveyance which brought such goods and subject to rules, allow export of such goods without payment of any‑ duty‑‑‑If none of the conditions for treating the consignment as frustrated cargo was satisfied any action in that behalf by the Department was uncalled for.

(d) Customs Act (IV of 1969)‑‑‑

‑‑‑‑S.45(2)‑‑‑Contents of import manifest and amendment thereof‑‑­Scope‑‑‑Obvious error‑‑‑Concept‑‑‑Line of demarcation drawn in major and minor penalties by the Customs Department was imaginary and such "figment of imagination" was not warranted in law‑‑‑Principles.

A perusal of section 45(2), Customs Act, 1969 shows that it empowers the appropriate officer to allow the correction of any obvious error in the import manifest or to rectify any omission which in the opinion of such officer results from accident or inadvertence. The present case is not a case of any omission but is a case of correction sought in the IGM. The law has provided for correction of any obvious error in the import manifest. An obvious error is an error which is plain and open and is plainly visible and evident. Now, if the IGM sought to be amended is read with other import documents, Clarification Certificate of the supplier and NOC of the party named as consignee in the IGM cannot be termed anything else but an obvious error with the result that the amendment sought falls squarely within the purview of section 45(2) of the Customs Act. The line of demarcation drawn by the Collector of Customs in major and minor amendment is imaginary and such figment of imagination is not warranted in law. While implementing a law the clear and plain language of the law is to be seen and nothing is to be added or substracted. The golden principle of the interpretation of statute is that in the absence of any ambiguity the plain language of law and the words used in the enactment are to be considered and no additions, insertions or alternations are warranted in the language of law. Collector of Customs had travelled beyond the mandate of law in observing that the request of change of the consignee's name amounted to a major amendment which did not fall within the purview of section 45(2) of the Customs Act

(e) Customs Act (IV of 1969)‑‑‑

‑‑‑‑S.45(1)‑‑‑Import manifest‑‑‑Nature, object and scope‑‑‑Change of ownership‑‑ Ownership of goods was' not dependent on the entry on import manifest but on the other import documents‑‑‑If all the import documents were in favour of a person while the name of consignee was shown to be different in the IGM, it would not be a case of change of ownership but would be a case of error/mistake, albeit subject to the surrounding circumstances in each case, which were to be examined objectively and not on extraneous considerations.

A perusal of section 45(1), Customs Act, 1969‑shows that the import manifest is not a document of title but it merely contains the particulars of the goods imported and other particulars as prescribed by the Board from time to time which include the name of consignee. Thus, it is clear that, so far, the question of ownership of the goods is concerned it is not dependent on the entry on import manifest but on other import documents. The purpose of submission of the import manifest by the person in-charge of the conveyance is to ascertain the nature and particulars of the goods brought by the vessel in a particular customs station or customs airport as the case may be and to examine the same with reference to the entries in the Bill of Entry and other import, documents. Thus, if, all the import documents are in favour of a person while the name of consignee is shown to be different in the IGM, it would not be a case of change of ownership but would a case of error/mistake, albeit subject to the surrounding circumstances in each case, which are to be examined objectively and not on extraneous considerations.

(f) Customs Act (IV of 1969)‑‑‑

‑‑‑S.45(2)‑‑‑Constitution of Pakistan (1973), Art. 199‑‑‑Constitutional petition‑‑‑Import-manifest and amendment thereof‑‑‑Amendment sought was to the effect that the name of the consignee be substituted and thereafter the assessment proceedings be completed in respect of the consignment in accordance with law‑‑‑Collector of Customs had misdirected himself in refusing the amendment sought and had thereby failed to exercise jurisdiction vested in him and had resorted to the wrong exercise of, jurisdiction not warranted in law‑‑‑Validity‑‑‑High Court set aside the impugned order and Collector of Customs was directed to allow the amendment sought and ordered that consignments be released on payment of duty and taxes assessed and issue the Delay and Detention Certificate and free slip accordingly.

Khawaja Shamsul Islam for Appellants.

Shakeel Ahmed for Respondents.

Dates of hearing: 18th and 19th December, 2003.

2004 P T D 1173

[Karachi High Court]

Before Shabbir Ahmed and Muhammad Mujeebullah Siddiqui, JJ

ALLIED MOTORS LTD. through Manager Finance

Versus

COMMISSIONER OF INCOME-TAX and another

Constitutional Petition No. D-588 of 2003, decided on 13th January, 2004.

(a) Interpretation of Statutes---

---- Scheme of law has to be examined in its totality in order to arrive at correct conclusion---No provision of law is to be considered in isolation.

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

----Ss. 2(13), 210 & 239---Income Tax Ordinance (XXXI of 1979), S.66-A---Matter pending at the time of commencement of Income Tax Ordinance, 2001---Decision of such matter by Commissioner of Income Tax---Validity---Such matter would be decided in accordance with substantive law contained in repealed Income Tax Ordinance, 1979, but by authority competent under Income Tax Ordinance, 2001---Authority competent under Income Tax Ordinance, 2001 to exercise power of inspecting Additional. Commissioner (IAC) was Commissioner of Income Tax also having power to delegate his power to IAC---Non-delegation of such power to IAC could not be objected to as the same was within discretion of the Commissioner of Income Tax- --Exercise of discretion in law by competent authority would not to be open to any exception.

(c) Discretion--­

----When ,discretion in law was exercised by competent authority, then the same would not be open to any exception.

Agha Faquir Muhammad for Petitioner.

Aqeel Ahmed Abbasi for Respondents.

Date of hearing: 13th January, 2004

2004 P T D 1189

[Karachi High Court]

Before Shabbir Ahmad and Gulzar Ahmed, JJ

FEDERATION OF PAKISTAN and others

Versus

Messrs SAMAN DIPLOMATIC BONDED WAREHOUSE

H.C.A. No. 88 of 2003, decided on 10th October, 2003.

(a) Civil Procedure Code (V of 1908)---

----S. 9---Jurisdiction of Civil Courts---Scope---Provisions in a statute ousting such jurisdiction---Interpretation of---Order or action of Authority or Tribunal, if violative of provisions conferring jurisdiction thereon or passed/taken in excess of jurisdiction or without jurisdiction or mala fide or violative, of principles of natural justice, can be challenged before Civil Court in spite of provisions in a statute barring its jurisdiction---Principles elaborated.

The Civil Courts under section 9, C.P.C., are competent to try all suits of civil nature except those of which their jurisdiction is barred either expressly or by necessary implication.

The provisions contained in a statute ousting the jurisdiction of Court of general jurisdiction is to be construed very strictly and unless the case falls within the letter and spirit of the barring provisions, it should not be given effect to.

The bat of jurisdiction can never be sustained, if it can be shown that impugned order/action was passed/taken not in bona fide exercise of powers conferred by the Act or the Rules.

A mala fide order or one without jurisdiction is a fraud on the law and can never be assumed to have been passed under a particular statute.

Where the jurisdiction of Civil Court is challenged on the ground of ouster of jurisdiction of the Civil Court, it must be shown that the authority or Tribunal was validly constituted under the Act; and that the order passed or action taken by authority or Tribunal was not mala fide, and that order passed or action taken was such which could be passed or taken under the law, which conferred exclusive jurisdiction on the authority or Tribunal; and that in passing the order of taking the action, the principles of natural justice were not violated. Unless all the conditions mentioned above are satisfied, the order or action of the authority or Tribunal would not be immune from being challenged before a Civil Court.

Where authority or Tribunal acts in violation of provisions of statute, which conferred jurisdiction on it or the order is exercised in lack of jurisdiction of mala fide or passed in violation of principles of natural justice, such order can be challenged before Civil Court in spite of provisions in a statute barring jurisdiction of Civil Court.

Commissioner of Income-tax, Companies-II and another v. Hamdard Dawakhana (Waqf), Karachi PLD 1992 SC 847; Rehmat Ali v. Additional District Judge, Multan 1999 SCMR 900; Industrial Development Bank of Pakistan v. Allied Bank of Pakistan and another PLD 1986 SC 74; Abbasia Cooperative Bank and another v. Hakeem Hafiz Muhammad Ghous and 5 others PLD 1997 SC 3; Deputy Collector of Customs (Appraisement) and another v. Messrs K.G. Traders and another H.C.A. No. 213 of 1997 and Abdul Rauf and others v. Abdul Hamid Khan and others PLD 1995 SC 671 ref.

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

----S. 13---Licence to set, up Bonded Warehouse, grant of ---Validity--­Setting up of Bonded Warehouse with necessary infrastructure by investing huge amount by licensee would not make such licence coupled with interest, irrevocable---Setting up of Bonded Warehouse and employment of necessary staff was essential for carrying on its business-­ Such acts were neither interior to licence nor were consideration to such right of licensee.

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

----S. 32---Untrue declaration or statement with regard to material particular in absence of any non-levy or short-levy---Effect---Such declaration or statement would attract other provisions of Customs Act, 1969.

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

----Ss. 2(s)(ii) & 32(1)---Import of excess quantity of liquor under Diplomatic Duty Free Licence by under-invoicing---Substitution of British currency with U.S. dollars in invoices after, attestation by Pakistan Consulate abroad---Contention of Revenue was that importer by such act sh0Ving low invoice value (under-invoicing) had succeeded in bringing into country against permissible limit a much larger quantity of liquor than what they could bring, had they not manipulated invoices in such manner---Validity---In absence of short-levy or non-levy, such was a misdeclaration in tens of S.32(1) of Customs Act,1969 as consignment being liquor would bring the case of excess quantity within mischief of S. 2(s)(ii) thereof.

Messrs Eastern Rice Syndicate v. Central Board of Revenue PLD 1959 SC 364; Messrs Kamran Industries v. The Collector of Customs PLD 1996 Kar. 68; Ebrahim Textile Mills v. Federation of Pakistan PLD 1989 Lah. 47; Messrs Al-Hamd Edible Oil (Pvt:) Ltd. and others v. Collector of Customs and others 2003 PTD 552; Assistant Collector Customs and others v. Messrs Khyber Electric Lamps 2001 SCMR 838 and Federation of Pakistan v. Messrs Ibrahim Textile Mills 1992 SCMR 1898 ref.

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

----Ss.32 & 180---Untrue statement with respect to material particulars--­Powers of Adjudicating Officer---Scope---Only Adjudicating Officer could determine the question, whether fact of such untrue statement was within knowledge of importer or not, and that whether excess quantity of liquor had been imported by under-invoicing.

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

----S. 180---Initiation of adjudication proceedings---Pre requisites---No order for confiscation of goods or imposition of penalty could be passed against any person without service of notice on owner of goods informing him in writing about grounds of proposed action and giving him reasonable opportunity of being heard.

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

----Ss. 2(a)(b), 13, 156, 179 & 180--"Adjudication proceedings" and "Cancellation proceedings"---Distinction---Both such proceedings are distinct and separate proceedings---Outcome of former proceedings can be a ground for initiation of latter proceedings---Former proceedings are initiated by Adjudicating Authority, while latter by appropriate officer.

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

----Ss. 13, 32, 156 & 180---Civil Procedure Code (V of 1908), S-9--­Import of excess quantity of liquor under Diplomatic Duty Free Licence by under-invoicing---Issuance of show-cause notice to cancel licence of Bonded Warehouse and refusal of authority to issue import permit--­Filing of suit in Civil Court to challenge such act of Authority--­Maintainability---Authority in absence of any finding had issued show ­cause notice with pre-supposition of proved violation of provisions of S.32. of Customs Act. 1969---Refusal to issue import permit also suffered from the same defect- --Proceedings initiated on such show-cause notice by authority were not within four corners of the Customs Act, 1969--­Plea of ouster of jurisdiction, held was, not available to the authority in circumstances.

Syed Tariq Ali and Ashfaq Hussain for Appellants.

Mrs. Navin Merchant for Respondent.

Dates of hearing: 20th, 28th August, 2003, 2nd and 3rd September, 2003.

2004 P T D 1304

[Karachi High Court]

Before Shabbir Ahmed, Muhammad Mujeebullah Siddiqui, JJ

COMMISSIONER OF INCOME-TAX, EAST ZONE, KARACHI

Versus

MERCHANT NAVY CLUB

I.T.R. No.72 of 1988, decided on 18th February, 2004.

(a) Income Tax Act (XI of 1922)-----

----S. 4(3)(i)---Income derived by assessee (Merchant Navy Club) from business carried out by same in the course of carrying out its charitable purpose---Order-in-original denying the exemption from tax to assessee ­Club was upheld by Appellate Authority, but was set aside by the Appellate Tribunal---Validity---Object of establishing assessee-Club had fulfilled requirement of charitable purpose---Officers and sea-men of assessee-Club constituted sufficient segment of society, so as to bring beneficiaries within purview of general public---Purpose would be fulfilled, where a sufficient segment of society was beneficiary, without any distinction of religion, caste, creed or sect---Admission to. Assessee ­Club was without any distinction on account of nationality or religion, thus, amenities offered would be deemed to be for general public utility---Mere ancillary and incidental activity of performance of dancing and supplying of wine to sea-men (who were mostly non ­Muslims) would not take out activities of assessee-Club from ambit of charitable purpose---Authority and Appellate Authority had ignored main object of establishing assessee-Club as contained in Memorandum of Association, Rules and Regulations---High Court answered the question in the affirmative by upholding findings of Appellate Tribunal.

(b) Income Tax Act (XI of 1922)---

----S. 4(3)(i) & Expln.---Expression "charitable purpose" as used in S.4(3)(i) of Income Tax Act, 1922---Connotation.

The expression "charitable purpose' carries a broader and extended connotation. The definition given in the explanation to section 4(3) of Income Tax Act, 1922 to the effect that it included relief to the poor, education, medical relief and the advancement of any other object of general public utility, is inclusive and is not exhaustive, conclusive or exclusive. The words "advancement of any other object of general public utility" are of very wide amplitude, which have to be interpreted liberally when examined in its true spirit. The expression "charitable purpose" as used, in a statute shall always be susceptible to the extended meaning from time to time and shall always be open to broader meaning in the facts and circumstances of the particular cases.

Commissioner of Income-tax v. Muhammad Abdur Rauf Khan PLD 1963 SC 209; Sadar Anjuman-i-Ahmedia, Rabwa v. Commissioner of Income Tax PLD 1977 Lah. 1121; C.I.T., Madras v. Andhra Chamber of Commerce, (1965) 11 Taxation 306; Fauji Foundation v. Shamimur Rehman PLD 1983 SC 457; Commissioner of Income-tax v. West Pakistan Management Association 1985 PTD 287; Commissioner of Income-tax v. Banaras Brass Merchant and Manufacturers Association (2000) 82 Tax 120; Pakistan Seamen Contributory Welfare Fund v. Income Tax Appellate Tribunal 1993 PTD 734; Hamdard Dawakhana v. Commissioner of Income-tax, Karachi, (1980) Tax 1; Commissioner of Income-tax, Bombay City v. Breach Candy Swimming Bath Trust, Bombay (1955) 27 ITR 278 and D' Aguiar v. Guyana I.R. Comrs (1970) 15 W.I.R. 198 (P.C) ref.

Nasrullah Awan for Applicant.

Muhammad Farid for Respondent.

Date of hearing: 20th January, 2004.

2004 P T D 1449

[Karachi High Court]

Before Shabbir Ahmed and Muhammad Mujeebullah Siddiqui, JJ

Messrs EXIDE PAKISTAN LIMITED, KARACHI

Versus

DEPUTY COLLECTOR, (ADJUDICATION‑III), COLLECTORATE CUSTOMS, SALES TAX AND CENTRAL EXCISE (ADJUDICATION), KARACHI and another

Special Sales Tax Appeal No. 13 of 2003, decided on 10th February, 2004.

Sales Tax Act (III of 1951)‑‑­

‑‑‑‑Ss. 3, 12, 12‑A, 34 & 49 (1)(a)‑‑‑Demand/imposition of additional tax penalty without issuance of show‑cause notice‑‑‑Validity‑‑‑No additional tax could be levied without issuance of show‑cause notice‑‑­Mere observation in the order that in case of failure to pay tax, provisions of S.12‑A of Sales Tax Act, 1951 would be enforced, would not amount to confronting assessee with intention to levy additional tax‑‑‑Such intention had to be specifically stated in show‑cause notice, otherwise assessee would be deemed to have been condemned unheard.

Collector Central Excise and Land Customs v. Rahim Din 1987 SCMR 1840 rel.

Ms. Sana Minhas for Appellant.

Raja M. Iqbal for Respondents.

Date of hearing: 29th January, 2004.

2004 P T D 1482

[Karachi High Court]

Before Shabbir Ahmed and Muhammad Mujeebullah Siddiqui, JJ

Messrs MEHRAN MOTOR CAR CO. through Chief Executive

Versus

COLLECTOR OF CUSTOMS, (APPRAISEMENT), KARACHI and 2 others

Special Customs Appeal No.38 of 1999, decided on 24th February, 2004.

(a) Customs Act (IV of 1969)‑‑‑

‑‑‑‑Ss. 32 & 156(1)(14)‑‑‑Customs General Order No. 6 of 1979‑‑­Customs General Order No.4 of 1993‑‑‑Declaration of correct enhanced value of goods in Bill of Entry‑‑‑Imposition of penalty for not intimating to customs authorities subsequent enhancement in price of goods‑‑­Validity‑‑‑Customs General Order No. 4 of 1993 having been issued on 7‑7‑1993 would not apply to period under consideration i.e. from .27‑3‑1993 to 3‑7‑1993‑‑‑Nothing was found in the Customs General Order No. 6 of 1979 which obliged the importer to intimate change in prices to customs authorities or get enhanced ITP approved‑‑‑In absence of any law to such effect, importer was merely required to declare true and correct fact in the Bill of Entry‑‑‑ importer in the present case, by declaring correct enhanced value in Bill of Entry had fulfilled his responsibility‑‑‑Importer could not be saddled with offence under S.32(1) of Customs Act, 1969 for non‑application of mind by the customs officials‑‑‑Authority in the case of taxes short levied due to inadvertence, error or, misconstruction could retrieve loss under S.32(3) of the Customs Act, 1969‑‑‑Authority .in separate proceedings had enforced demand of loss against importer‑‑‑No offence having been committed by the importer penalty imposed was not justified, and was set aside by the High Court in appeal.

(b) Customs Act (IV of 1969)‑‑‑

----Ss. 32 & 156(1)‑‑‑Recovery of tax short levied‑‑‑Proceedings for imposition of penalty‑‑‑Double jeopardy, principle of‑‑‑Applicability‑‑­Where recovery of tax short levied and imposition of penalty in appropriate cases operated into different field and their areas of operation being distinct, then question of double jeopardy would not arise‑‑‑If after enforcement of demand on account of short levy, Authority, through separate proceedings again called upon importer to pay the short levied amount, then same would be a case of double jeopardy.

Zamiruddin Ahmed, for Appellant.

Jawaid Farooqui for Respondent.

Date of hearing: 27th January, 2004.

2004 P T D 1769

[Karachi High Court]

Before S. Ahmed Sarwana and Muhammad Mujeebullah Siddiqui, JJ

Messrs GHULAM MUHAMMAD DOSSUL & CO.

Versus

C.B.R. and others

C. Ps. Nos.D‑1672, 2134 of 1994, D‑30, 31 and 152 of 1995, decided on 28th August, 2003.

(a) Customs Act (IV of 1969)‑‑‑--

‑‑‑‑Ss. 25‑B & 30‑‑‑Notification, S.R.O. No. 114 (KE)/94, dated 29‑5‑1994‑‑‑Constitution of Pakistan (1973), Art.199‑‑‑Constitutional petition‑‑‑Notional price‑‑‑Object‑‑‑Confiscation of excess consignment‑­Issuance of Delay and Detention Certificates‑‑‑Condition‑‑‑Grievance of importers was that the goods imported by them were wrongly, detained by Customs Authorities by evaluating the price under S.25‑B of Customs Act, 1969‑‑‑Validity‑‑‑Price fixed under S.25‑B of Customs Act, 1969, was the notional value of the goods independent of its actual value in the country of its origin from where it was exported‑‑‑Such value was determined only for the purpose of levy of import duty under Customs Act, 1969‑‑‑Both Trade Discounts and Quantity Discounts were common in international and domestic trade and were mentioned in the Explanatory Notes to, the Brussels Definition of Value‑‑No substantial difference existed between the notional price and the normal price of goods which could be fetched on sales in open market in the country of origin where the buyer and the seller were not in any way related with each other‑‑‑Similarly there could be a difference between the normal price or the invoice vice and the pace determined under S.25‑B of Customs Act, 1969, after taking into account the various discounts given by the seller to the customer‑‑Notional value which was determined trader S.‑25-B of Customs Act, 1969, was exclusively for the purpose of levy of customs duty arid could not be used for any other purpose as the law did not indicate such application‑‑‑‑High Court directed the Customs Authorities to release the detained goods after charging the customs duty and taxes at the rate applicable under S.30 of Customs Act, 1969‑‑As the Customs Authorities had detained the goods on unlawful grounds, High Court further directed them to issue Delay and Detention Certificates to the importers to enable them to claim exemption from payment of demurrage and storage charges in accordance with the relevant law‑‑‑Petition was allowed accordingly.

Eastern Rice Syndicate PLD 1959 SC 364 rel.

1992 SCMR 1652; 1999 SCMR 95; PLD 1986 Kar. 373 and PLD 2000 SC 825 ref.

(b) Customs Act (IV of 1969)‑‑‑--

‑‑‑‑S. 25‑B—Public Notice 70/93 (A), dated 30‑12‑1993, policy instruction No. 2(ii)‑‑‑Constitution of Pakistan (1973), Art.199‑‑­constitutional jurisdiction of High Court‑‑‑Vires of Policy Instruction No.2(ii) of Public Notice 70/93 (A), dated 30‑12‑‑1993‑‑‑In the policy instruction, Central Board of Revenue instructed the Customs Authorities to release the present consignments in excess of value of import licence against redemption price equivalent to 100% of the ascertained value and in future such consignment be confiscated‑‑‑Validity‑‑‑Central Board of ‑‑‑‑ ‑‑empowered to issue such instructions under any provision of Customs Act, 1969‑‑‑Instructions were ultra vires to the Customs Act, 1969.

Raja Iraq Nawaz Khan for Petitioner.

Raja Muhammad Iqbal and Shakeel Ahmed for Respondents Nos. 2 & 3.

S. Tariq Ali, Federal Counsel.

Date of hearing: 7th November, 2002.

2004 P T D 1901

[Karachi High Court]

Before Saiyed Saeed Ashhad, C. J. and. Ghulam Rabbani, J

Messrs MUSLIM COMMERCIAL BANK LTD.

Versus

DEPUTY COMMISSIONER OF INCOME‑TAX and others

C. P. No. D‑1574 of 1994, decided on 3rd April, 2004.

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

‑‑‑‑Ss. 17(1)(a) & 65‑‑‑Constitution of Pakistan (1973), Art. 199‑‑­Constitutional petition‑‑‑Re‑opening of assessment, notice for‑‑‑" Definite information"‑‑‑Scope‑‑‑Disclosing income from interest on Government securities in return as income on receipt basis, but not on accrual basis‑‑‑Validity‑‑‑Assessing Officer while framing assessment had not raised such objection, but with conscious application of mind had accepted version of assessee that such income was to be disclosed as income on receipt basis‑‑‑Objection as to method of accounting followed by assessee could be raised by Assessing Officer at the time of framing assessment, thus, such fact could not be said to have come to his knowledge later on‑‑‑Misapplication of law and ignorance of law or decisions of superior Courts would not furnish ground for re‑opening of assessment under S.65 of Income Tax Ordinance, 1979‑‑‑Such misapplication or ignorance could not come within scope of definite information as same would amount to a change of opinion, which did not warrant action under S.65 of Ordinance, 1979‑‑‑Impugned notice was in excess of jurisdiction, illegal and void‑‑‑Objection as to maintainability of Constitutional petition without having recourse to remedies available under Ordinance, 1979 was repelled‑‑‑High Court accepted Constitutional petition and quashed impugned notice.

Inspecting Assistant Commissioner and Chairman, Penal 20 Companies and another v. Pakistan Herald Ltd. through Director, Finance and Corporate Affairs 1997 SCMR 1256; Messrs Pakistan Tobacco Co. Ltd. v. Government of Pakistan through Secretary, Ministry of Finance and 3 others 1993 SCMR 493; Commissioner of Income Tax v. GEO Tech Construction Corporation 1998 PTD 479; Commissioner of Income Tax v. Mangat Ram Hazari Lal 1998 PTD 2188; and Tamil Nadu Small Industries Development Corporation Ltd. v. Commissioner of Income Tax 2002 PTD 1421 ref.

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

‑‑‑‑Ss. 17(1)(a) & 32(1)‑‑‑Interest on securities‑‑‑Method of accounting‑‑­Provisions of S.17 of Income Tax Ordinance, 1979 were subservient to and were regulated by S.32 thereof‑‑‑Income from interest on Government securities would be computed under, S.17(1)(a) of Ordinance, 1979 in accordance with method of accounting regularly employed by assessee.

(c) Constitution of Pakistan (1973)‑‑‑--

‑‑‑‑Art. 199‑‑‑Impugned order was without lawful authority, prejudicial, unjust and mala fide‑‑‑Relief in Constitutional petition would be available to a party against such order.

SNH Industries (Pvt.) Ltd. v. Income Tax Department and another S.B.L.R 2004 Sindh 1; Khalid Mahmood v. Collector of Customs 1999 SCMR 1881; Gatron Industries Ltd. v. Government of Pakistan and others 1999 SCMR 1072; Adamjee Insurance Company Ltd. v. Pakistan through the Secretary to Government of Pakistan in the Ministry of Finance, Islamabad and 5 others 1993 SCMR 1778; Edulji Dinshaw Ltd. v. Income Tax Officer PLD 1990 SC 399 = 1990 PTD 155; The Murree Brewery Co. Ltd. v. Pakistan through the Secretary to Government of Pakistan, Works Division and 2 others PLD 1972 SC 279; and Usmania Glass. Sheet Factory v. Sales Tax Officer 1971 PTD 1 fol.

(d) Constitution of Pakistan (1973)‑‑‑--

‑‑‑‑Art. 199‑‑‑Alternate remedy, non‑availing of‑‑‑Constitutional petition‑‑‑Maintainability‑‑‑Where order or action complained against was so patently illegal, void and wanting in jurisdiction that any further recourse to alternative remedy might only be cfiunter productive and by invoking Art. 199 of the Constitution, such mischief could forthwith be nipped in the bud, then in such matters existence of alternative remedy would not bar exercise of Constitutional jurisdiction by High Court.

Khalid Mahmood v. Collector of Customs 1999 SCMR 1881; Gatron Industries Ltd. v. Government of Pakistan and others 1999 SCMR 1072; Adamjee Insurance Company Ltd. v. Pakistan through the Secretary to Government of Pakistan in the Ministry of Finance. Islamabad and 5 others 1993 SCMR 1778; Edulji Dinshaw Ltd. v. Income Tax Officer PLD 1990 SC 399 = 1990 PTD 155; The Murree Brewery Co. Ltd. v. Pakistan through the Secretary to Government of Pakistan, Works Division and 2 others PLD 1972 SC 279; and Usmania Glass Sheet Factory v. Sales Tax Officer (1970) 22 Taxation 229 fol.

Iqbal Salman Pasha for Petitioners.

Nasrullah Awan for Respondent.

Date of hearing: 27th February, 2004.

2004 P T D 1916

[Karachi High Court]

Before Gulzar Ahmed, J

GAP, INC. (A COMPANY ORGANIZED AND EXISTING UNDER THE LAWS OF THE STATE OF DELAWARE) through Authorized Signatory

Versus

SHAHID CORPORATION through Shahid Maqbool (Sole Proprietor) and 2 others

J. Misc. No.31 of 2001 decided on 8th December, 2003.

Trade Marks Act (V of 1940)‑‑‑--

‑‑‑‑Ss. 6, 8, 14, 37(1)(a)(b) & 46(2)‑‑‑Expunging/canceling/removing rectifying of trade mark‑‑‑Prior user of trade mark‑‑‑Applicant was an international company using the trade mark all over the world‑‑­Respondent got the same trade mark registered in their name in Pakistan‑‑‑Effect‑‑‑Respondents had not contested the matter and there was .no opposition to the applicant's allegation that there was no bona fide intention on the part of the respondent for registration that it should be used in relation to the goods and that there had in fact been no bona fide use up to date‑‑‑Continuous period of five years or longer had elapsed during which there had been no bona fide use‑‑‑Applicant had established that it was a proprietor and user of the disputed trade mark and desired it to be registered with the Registrar‑‑‑Applicant being obstructed and restricted from registration of its trade mark because of registration of respondents had made the applicant aggrieved person and its application maintainable‑‑‑High Court directed the Registrar to allow the entry of registration of the applicant and expunge/remove the trade mark from the name of the respondents‑‑‑Application allowed accordingly.

Abdul Aziz v. Seven‑Up Co., Karachi and another PLD 1978 Karachi 10; The Seven‑Up Company v. Abdul Aziz and another 1983 CLC 522; Chiswick Products Ltd. v. The Registrar of Trade Marks Karachi and another PLD 1975 Karachi 421; Sindh Match Works (Private) Limited v. The Deputy Registrar of Trade Marks and another 1991 CLC 47; and Culett, Peabody and Company Inc. v. Assistant Registrar of Trade Marks and another 1991 SCMR 921 ref.

Abdul Hameed Iqbal and Hasan Irfan for Applicant.

2004 P T D 1919

[Karachi High Court]

Before Saiyed Saeed Ashhad, C.J. and Ghulam Rabbani, J

Messrs HAJI DOSSA LIMITED

Versus

FEDERATION OF PAKISTAN and others

Constitution Petition No.D‑1546 of 1991, decided on 11th September, 2003.

(a) Import and Export (Control) Act (XXXIX of 1950)‑‑‑

‑‑‑‑S.3‑‑‑Constitution of ‑ Pakistan (1973), Art. 199‑‑‑Constitutional petition‑‑‑Export of cotton‑‑‑Conditions and requirements for‑‑‑Principle of approbate and reprobate‑‑‑Federal Government decided to allow Private Sector Exporters to export raw cotton which was within the exclusive domain of Cotton Export Corporation and laid down certain conditions' and procedure which was to be followed by Private Sector Exporters for exporting cotton‑‑petitioners, without any protest or objection or reservation, agreed to abide by said conditions and to follow the procedure laid down for exporting cotton‑‑‑Effect‑‑‑Once petitioners had submitted themselves to and had Agreed to abide by conditions as well as the procedure laid down for exporting cotton, they would be precluded from challenging the vires,‑ legality or reasonableness of various Notifications and public notices issued by Government relating to control of export of cotton by Private Sector Exporters‑‑‑Petitioners by submitting to the provisions of the Notifications and public notices, had waived all their rights .which they might have possessed to challenge the vires legality and reasonableness of Notifications and public notices‑‑‑Petitioners, who had entered into contracts fully ­knowing the requirements which they were called upon to fulfill, could not challenge Notifications issued in that respect‑‑‑Law did not permit a person to approbate and reprobate; meaning thereby that a person could not be allowed to change his stand or take wavering positions in respect of transactions which had been entered into by him and he would be compelled by law to stick to one stand‑‑­Petitioners having agree' with the conditions and having chosen to follow , the procedure laid down for regulating export, had made their intentions clear in accepting the conditions and the procedure‑‑­Subsequently, on account of any loss or adverse circumstances they could not be permitted to take a different stand and challenge the vires, legality or the reasonableness of the conditions and procedure.

(b) Constitution of Pakistan (1973)‑‑‑

‑‑‑‑Art.199‑‑‑Constitutional jurisdiction of 'High Court‑‑‑Scope‑‑‑High Court in exercise of its Constitutional jurisdiction, would not enter into investigation or making an inquiry with regard to disputed, controversial and complicated questions of fact which required determination by means of a full‑fledged inquiry requiring recording of evidence of the parties and other concerned witnesses.

Rasheeda M.H. Patel for Petitioner.

Sajjad Ali Shah, Standing Counsel and S. Mamnoon Hasan for Respondents.

Date of hearing: 8th August, 2003.

2004 P T D 1934

[Karachi High Court]

Before Zahid Kurban Alvi and Muhammad Mujeebullah Siddiqui, JJ

Messrs QUETTA TEXTILE MILLS LTD., KARACHI

Versus

GOVERNMENT OF PAKISTAN through Additional Secretary, Ministry of Finance, Karachi and 2 others

Constitutional Petition No.D‑666 of 1991, decided on 25th September, 2001.

(a) Customs Act (IV of 1969)‑‑‑

‑‑‑‑Ss. 19 & 33‑‑‑S.R.O. No. Nil (I)/87, dated 19‑11‑1987 ‑‑‑ S.R.O, 674(I)/80, dated 26‑6‑1980‑‑‑Constitution of Pakistan (1973)., Art. 199‑‑Constitutional petition ‑‑‑Refund of duty, claim for‑‑‑Authority admitted shipment of goods on 23‑9‑1987, but refused refund on the ground that mates receipt was issued on 1‑10‑1987‑‑Validity‑‑‑Date fixed under S.R.O. dated 19‑11‑1987 for opening of Letter of Credit was 12‑6‑1987 and for shipment of goods was 30‑9‑1987‑‑‑Letter of Credit had been established on 11‑6‑1987‑‑‑Sealed container was available on 14‑7‑1987, which had been sealed on 14‑9‑1987‑‑‑Loading had taken place on 16‑9‑1987‑‑‑Bill of Lading had been issued on 23‑9‑1987‑‑­Word "shipped" as used in S.R.O., dated 19‑11‑1987 in normal connotation would mean delivery of goods on board carrier meant for transportation‑‑‑All documents pertaining to shipment of goods had been issued before 30‑9‑1987 and goods were in physical custody of shipping company, thus, same would fall within ambit of word "shipped"‑‑‑Reliance on mates receipt, dated 1‑11‑1987 in such circumstances was unjustified‑‑‑High Court accepted Constitutional petition and ordered for payment of refund to petitioner by authority.

DADA Steel Mills v. Balochistan Government and another 1983 CLC 571 rel.

(b) Words and phrases‑‑‑

‑‑‑‑"Shipped"‑‑‑Connotation.

Chambers 21st Dictionary; Black's Law Dictionary; Words and Phrases Vol. XXXIX; Words & Phrases Vol. V and Stround' Judicial Dictionary (IVth Edn.) ref.

(c) Words and phrases‑‑‑

‑‑‑‑"Shipment"‑‑‑Connotation.

British Shipping Laws (Vol. V) at p. 36 and British Contract ref.

(d) Words and phrases‑‑‑

‑‑‑‑"Bill of Lading"‑‑‑Connotation.

Messrs Tar Muhammad Janoo & Co. v. Messrs Maldiyian National Corporation (Ceylon) Ltd. and another PLD 1969 Kar. 495 and Crescent Sugar Mills and Distelry Ltd. v. American Export Isbrandt Sen Inc. and others PLD 1983 Kar. 29 ref.

(e) Words and phrases‑‑‑

‑‑‑‑"Export"‑‑‑Meanings.

Chambers 21st Dictionary and Black's Law Dictionary ref.

(f) Customs Act (IV of 1969)‑‑‑

‑‑‑‑S. 33‑‑‑Constitution of Pakistan (1983), Art. 199‑‑‑Refund refused by authority, but not specifically claimed in Constitutional petition‑‑‑Effect‑­Where Court comes to conclusion that refund should be given to petitioner, then keeping in mind philosophy of multiplicity of proceedings, an order should be passed instead of issuing a direction for initiating separate proceedings for recovery.

DADA Steel Mills v. Balochistan Government and another 1983 CLC 571 fol.

I.H. Zaidi for Petitioner.

Raja Muhammad Iqbal for Respondent.

Date of hearing: 14th September, 2001.

2004 P T D 1944

[Karachi High Court]

Before Ata‑ur‑Rehman and Sarmad Jalal Osmany, JJ

Messrs UNIVERSAL BUSINESS EQUIPMENT (PVT.) LIMITED through Chief Executive

Versus

DEPUTY COLLECTOR OF CUSTOMS, CUSTOMS HOUSE, KARACHI and another

Spl. Custom Appeal No.26 of 2000, decided on 13th April, 2002.

(a) Customs Act (IV of 1969)‑‑‑

‑‑‑‑S. 196‑‑‑Appeal‑‑‑Questions formulated being questions of fact related to issue, whether subject machines were in fact typewriter or type‑setting machines‑‑‑Order‑in‑original and appellate order had dealt with such aspect of matter by concluding that such machines could be used as type‑writer as well‑‑‑High Court dismissed appeal by, refusing to interfere in such matter.

(b) Limitation‑‑‑

‑‑‑‑ Issue of limitation could be agitated before any forum including Supreme Court, although same had not been agitated before any of lower Courts.

Messrs Faran Enterprises v. The Appellate Tribunal, Customs, Excise and Sales Tax 1999 CLC, 735 and Messrs Baba Khan v. Collector of Customs, Quetta 2000 SCMR 678 ref.

(c) Administration of Justice‑‑‑--

‑‑‑‑Legal issues, which are specifically not pleaded before any judicial forum, can be taken up and decided by higher forum, since a duty is cast upon such forum to take notice of such legal issues itself.

(d) Customs Act (IV of 1969)‑‑‑--

‑‑‑‑Ss. 32(2)(3) & 196‑‑Issuance of show‑cause notice ‑‑‑Limitation‑‑­Goods were released on 16‑7‑1987‑‑‑Show‑cause notice was issued on 4‑2‑1988‑‑‑Tribunal was of view that case of importer was not of intentional mis declaration or concealment of facts so as to attract provision of S.32(2) of Customs Act, 1969, rather same was a case falling under S.32(3) thereof‑‑‑High Court remanded case to Tribunal to consider, whether show‑cause notice issued on 4‑2‑1988 was within time or not.

Sattar Silat for Appellant.

Raja Muhammad Iqbal for Respondent.

Date of hearing: 4th April, 2002.

2004 P T D 1957

[Karachi High Court]

Before Shabbir Ahmed and Muhammad Mujeebullah Siddiqui, JJ

DIRECTOR, DIRECTORATE GENERAL OF INTELLIGENCE AND INVESTIGATION, (CUSTOMS AND EXCISE, KARACHI

Versus

Messrs TESSORI TRADING CO., (PVT.) LTD. and another

Spl. Customs Appeals Nos. 140 and 141 of 2002, decided on 18th December, 2003.

(a) Limitation Act (IX of 1908)‑‑‑--

‑‑‑‑S. 4‑‑‑Expiry of limitation on the day on which High Court was closed due to summer vacation‑‑‑Filing of appeal on first opening day after vacation ‑‑‑Effect‑‑‑Notification provided that High Court and its Branches would remain closed due to summer vacation, but during such period, petitions would be received on working days ‑‑‑Such notification could not take precedence over provision of S.4 of Limitation Act, 1908‑‑‑Term "petition" as used in such notification would not cover appeal‑‑‑Relevant rules of Sindh High Court pertaining to long vacation and holidays only required for making suitable arrangements for "urgent work" during Court holidays‑‑‑Appeal was not a work of urgent nature‑‑­Mere fact that appeal was about to become time‑bared would not itself make its presentation as work of urgent nature‑‑‑Appeal was, with in time.

Fateh Ali Khan v. Subedar Muhammad Khan 1970 SCMR 238; Jumma v. Maulvi Mubarak 1971 SCMR 779; Lehar Khan v. Amir Hamza 1999 SCMR 108; Nooruddin and 3 others v. Pakistan through the Secretary, Ministry of Communication, Government of Pakistan 2000 SCMR 354; Fazal Karim and another v: Ghulam Jilani and others 1975 SCMR 452; Ikramullah v. Said Jamal 1980 SCMR 375; Appeal 746 in Suit No. 383 of 1886; Ranchordas Tri Bhowandas v. Pestonji Jehamgir (1907) Vol. IX Bombay Law Report 1329 and Nachiyapa Mudait and others v. Ayyasama Ayyar ILR Vol. V Madras Series 189 ref.

(b) Limitation Act (IX of 1908)‑‑‑--

‑‑‑‑S. 4‑‑‑Closure of Court on the day of which limitation expired‑‑­Exclusion of time‑ ‑‑Principle underlying S.4 of Limitation Act, 1908 is that party should not be prejudiced by act of Court.

(c) Customs Act (IV of 1969)‑‑‑--

‑‑‑‑Ss. 194‑A & 196‑‑‑Appeal before High Court against order of Tribunal by Director, Directorate General of Intelligence and Investigation (Customs and Excise)‑‑‑Maintainability‑‑‑Right of appeal in terms of S.196 of Customs Act, 1969 was restricted to "an aggrieved person" and "Collector" instead of an Officer of Customs‑‑‑Director could not be termed as "Collector" in absence of any authorization for exercise and discharge of functions of Collector‑‑‑Director could not file appeal as he was not an aggrieved person‑‑‑Appeal was not maintainable.

Spl. Customs Appeals No. 282 of 2002 and 283 of 2002 (Director, Directorate General of Intelligence and Investigation, (Customs and Excise), Karachi v. Messrs Al‑Faiz Industries (Pvt.) Limited and others) by order, dated 11‑12‑2003 rel.

Raja Muhammad Iqbal for Appellants (in both appeals).

Khawaja Naveed Ahmed and Mrs. Ismat Mehdi for Respondents.

Date of hearing: 4th December, 2003.

2004 P T D 1964

[Karachi High Court]

Before Shabbir Ahmed and Gulzar Ahmed, JJ

Messrs EURO GULF TRADING FZOO

Versus

DIRECTOR OF INTELLIGENCE AND INVESTIGATION

H.C.A. No. 10 of 2003, decided on 5th September, 2003.

(a) Civil Procedure Code (V of 1908)‑‑‑

‑‑‑‑O.XLI, R. 33‑‑‑Appeal against interlocutory order‑‑‑Power of Appellate Court‑‑‑Scope‑‑‑Appellate Court would not substitute its own discretion for that of Trial Court, except where discretion was exercised arbitrarily, perversely, contrary to legal principles and on basis of assumption not borne out by record.

(b) Specific Relief Act (I of 1877)‑‑‑----

‑‑‑‑S. 54‑‑‑Directory injunction, grant of‑‑‑Guidelines.

Directory injunction can be granted in a case, where the party has a strong case for trial, that is, it shall be of a higher standard than prima facie case that is normally required for a prohibitory injunction; that it is necessary to prevent irreparable or serious injury, which normally cannot be compensated in terms of money; and that balance of convenience is in favour of the one seeking such relief.

(c) Customs Act (IV of 1969)—­

‑‑‑‑S. 138‑‑‑Customs Rules, 2001, R. 86‑‑‑Expression "frustrated cargo" as used in S. 138 of Customs Act, 1969 and R.86 of Customs Rules, 2001‑‑‑Connotation‑‑‑Re‑shipment of such cargo, entitlement for‑‑­Frustrated cargo is a cargo brought into a customs‑station by reason of inadvertence or misdirection or where consignee is untraceable or has dishonoured his commitment and consignor wishes to have same re­ shipped‑‑‑Collector of Customs can, subject to rules, allow export of such goods without payment of duties on application of person‑in­ charge of conveyance which brought such goods or consignor thereof.

(d) Customs Act (IV of 1969)‑‑‑--

‑‑Ss. 138 & 2(s)‑‑‑Customs Rules, 2001, R. 86‑‑‑Frustrated cargo‑‑Proof‑‑‑No document (like invoice, packing list or Bill of Lading) was placed on record to show nature of consignment, its destination for Zimbabwe and its advertent stuffing in container destined for Karachi‑‑­Prohibited items attracting provisions of S.2(s) of Customs Act, 1969 were found in such container, for which proceedings had been initiated‑‑­Held: Such consignment was not a "frustrated cargo".

Muhammad Muzaffar Khan v. Muhammad Yousuf Khan PLD 1969 SC 9 ref.

(e) Specific Relief Act (I of 1877)‑‑‑--

‑‑‑S. 54‑‑‑Injunction, grant of‑‑‑Principles‑‑‑No injunction could be granted, where party could be compensated in terms of money.

Muhammad Ibrahim Khan v. Pateshwari Parshad Singh AIR 1960 All. 252 rel.

Ms. Navin S. Merchant for Appellants.

Syed Tariq Ali for Respondents No. 1, 2 & 4.

Miss Masooda Siraj for the Respondent No.2.

Date of hearing: 22nd August, 2003.

2004 P T D 1979

[Karachi High Court]

Before Saiyed Saeed Ashhad, C. J. and Ghulam Rabbani, J

Messrs HASSAN TRADING COMPANY through Manzoor Hussain

Versus

CENTRAL BOARD OF REVENUE, GOVERNMENT OF PAKISTAN, ISLAMABAD through, Chairman and 2 others

Petition No.3047 of 1992, decided on 25th March, 2004.

(a) Constitution of Pakistan (1973)‑‑‑

‑‑‑Art. 199‑‑‑Constitutional petition‑‑‑Alternate remedy, non‑availing of‑‑‑Effect‑‑‑Where impugned action or order of public functionary was illegal, mala fide, without jurisdiction and void ab initio, then recourse to alterative remedies available under a statute would not be compulsory and aggrieved party could approach High Court directly.

Fecto Cement Limited v. The Collector of Customs Appraisement and another 1994 MLD 1136 rel.

(b) Customs Act (IV of 1969)‑‑‑

‑‑‑‑Ss. 32 & 81‑‑‑Issuance of notice under S.32 of‑Customs Act, 1969 after expiry of period provided under S.81 thereof for finalizing provisional assessment of duty‑‑‑Validity‑‑‑Imported goods, if did not conform to description of goods mentioned in Letter of Credit, IGM and Bill of Entry, then before expiry of such period, such notice ought to be issued to importer to explain discrepancy‑‑‑On failure of Customs Authorities to take any such action, provisional assessment would attain finality after expiry of period of 270 days, which would confer right on importer to get imported goods cleared on value/price declared by him.

Messrs Abdul Aziz Ayoob v. Assistant Collector of Customs and 3 others PLD 1990 Kar. 378 rel.

Junaid Ghaffar for Petitioners

Sajjad Ali Shah for Respondent No.1

Haider Iqbal Wahniwal for Respondent No.2

Date of hearing: 11th March, 2004.

2004 P T D 1991

[Karachi High Court]

Before Saiyed Saeed Ashhad, C.J. and Ghulam Rabbani, J

RAFIQ & CO. through Managing Partner

Versus

CHAIRMAN, CENTRAL BOARD OF REVENUE, ISLAMABAD and 2 others

C. P. No.D‑3378 of 1993, decided on 18th March, 2004.

Customs Act (IV of 1969)‑‑‑--

‑‑‑‑Ss. 18 & 19‑‑‑Constitution of Pakistan (1973), Art.199‑‑‑Constitutional petition‑‑‑Tyres imported for use of agricultural tractors‑‑‑ Release of such tyres free of customs duty, claim for‑‑‑Plea of department was that such tyres could not be mounted on any of the four kinds of tractors in use in Pakistan‑‑‑Such issue stood already decided by High Court of another Province‑‑‑High Court accepted Constitutional petition and remanded case to Adjudicating Officer for its decision to accordance with such earlier decision of High Court within specified time.

Customs Appeal No.43 of 1998 fol.

Mian Abdul Ghaffar for Petitioners.

Nadeem Azhar, D.A.‑G. and Raja M. Iqbal for Respondents.

Date of hearing: 18th March, 2004.

2004 P T D 2014

[Karachi High Court]

Before Ghulam Rabbani and Muhammad Moosa K. Leghari, JJ

Messrs ROCKLAND, KARACHI through Sole Proprietor, Sikandar Butt

Versus

GOVERNMENT OF PAKISTAN through Secretary of Ministry of Finance and Economic Affairs, Central Board of Revenue, Islamabad and 2 others

Constitution Petition No.D‑1522 of 1995, decided on 25th April, 2003.

Customs Act (IV of 19(9)‑‑‑--

‑‑‑‑S. 41‑‑‑Customs General Order No.8/91, dated 12‑2‑1991‑‑‑S.R.O. 839(I)/88, dated 20‑9‑1988‑‑‑Constitution of Pakistan (1973), Art. 199‑‑­Constitutional petition‑‑‑Customs duty drawback claim‑‑‑Rejection of claim as time‑barred on grounds of exporter's failure to file claim within 210 days of shipment of goods or within 15 days of receipt of Bank Credit Advice and his failure to justify delay of 55 days ‑‑‑Validity‑‑­High Court would not interfere with discretion exercised by subordinate Tribunal, unless same was shown to be arbitrary or fanciful‑‑‑No plausible and satisfactory explanation for such extraordinary delay had been made‑‑‑Discretion exercised by Tribunal neither appeared arbitrary nor fanciful‑‑‑High Court dismissed Constitutional petition in circumstances.

Messrs Kalani Textiles v. Central Board of Revenue (Constitutional Petition No.D‑25 of 1994) fol.

Ch. Rasheed Ahmed for Petitioner.

Syed Sajjad Ali Shah, Federal counsel for Respondent.

Raja Muhammad Iqbal for the Department.

2004 P T D 2204

[Karachi High Court]

Before Zahid Kurban Alvi and Muhammad Mujeebullah Siddiqui, JJ

RAY SHIPPING ENTERPRISES LIMITED

Versus

ASSISTANT COLLECTOR OF CUSTOMS and others

Constitutional Petition No.D‑979 of 1995, decided on 25th June, 2002.

Customs Act (IV of 1969)‑‑‑

‑‑‑‑Ss. 30, 79 & 83‑‑‑S.R.O. 482(I)/92, dated 14‑2‑1992‑‑‑S.R.O. 487(I)/94, dated 9‑6‑1994‑‑‑Constitution of Pakistan (1973), Art. 199‑‑­Constitutional petition‑‑‑Bill of Entry for import of ship for trading‑‑­Importer after importing ship and registering same as Pakistani Flag Vessel, decided to break up same‑‑‑Importer sought substitution of Bill of Entry filed for import of ship for trading with a Bill of Entry for breaking up and claimed free assessment of ship being exempt under S.R.O. 482(I)/92, dated 14‑2‑1992‑‑‑Authority declined such claim of importer being inadmissible in law and demanded customs duty‑‑Validity ‑‑‑Bill of Entry was presented on 8‑2‑1995, when importer claimed exemption in terms of S.R.O. 482(I)/92‑‑‑Such exemption was valid up to 31-12‑1995‑‑‑Importer was liable to pay 10% customs duty and sales tax in the same manner and at the same rate as was applicable at such time to ship imported for breaking up‑‑‑High Court accepted Constitutional petition on such terms.

Asghar Ali v. P.K. Shahani and 2 others 1992 CLC 2282; Amin & Co. v. Province of East Pakistan PLD 1966 Dacca 231; M.A. Jalil v. Group Capt. (Retd.) Salah‑ud‑Din Khan 1983 CLC 1685 and Province of Balochistan v. Tribal Friends Company PLD 1986 Quetta 321 ref.

Abdul Hafeez Prizada for Petitioner.

Akhtar Hussain and Raja M. Iqbal for Respondents.

Date of hearing: 4th October, 2001.

2004 P T D 2278

[Karachi High Court]

Before Zia Perwaz, J

MICHEAL D'SOUZA

Versus

SAGEERUDDIN KHAN and others

Suit No. 1073 of 2003, decided on 12th April, 2004.

Customs Act (IV of 1969)‑‑‑

‑‑‑‑Ss.138 & 217‑‑‑Civil Procedure Code (V of 1908), O.XXXIX, Rr.1 & 2‑‑‑Frustrated cargo‑‑‑Protection of action taken under Customs Act, 1969‑‑‑Bar to maintainability of a suit in the exercise of jurisdiction had to be interpreted to the extent as expressly specified and not by implication‑‑‑Where suit for possession, declaration and permanent injunction had been filed against the inactions of the department contrary to S.138, Customs Act, 1969 which was a special provision covering frustrated cargo and no Bill of Entry for clearance of the consignment had been filed rather efforts for reshipment were made without delay, conditions as given in S.217(2) Customs Act, 1969 would not be attracted‑‑‑Contention that mere disowning of consignment would not constitute a shipment attracting the provisions of S.138, Customs Act, 1969 was opposed to the Scheme of Customs Act, 1969 which expressly provides for such an eventuality‑‑‑Question of export in S.138, Customs Act, 1969 could not be equated with the policy for export could not be extended to such a consignment‑‑‑Application under O.XXXIX, Rr.1 & 2 was allowed to the extent that plaintiff was allowed to benefit of the provisions of S.138, Customs Act, 1962 for reshipment of the consignment within seven days subject to furnishing of a surety in form of Bank guarantee in the sum of Rs.20,00,000 to the satisfaction of the Nazir of the High Court.

A plain reading of section 217 Customs Act, 1969 shows that while subsection (1) pertains to anything done in pursuance of the Customs Act or Rules same provides protection to the Federal Government or any public servant for actions, done in good faith. Subsection (2) restrains the Civil Court to set aside or modify any order passed, any assessment made, any tax levied, any penalty imposed or collection of any tax made under the said Act. The present suit (for possession, declaration and injunction) does not attract any of the conditions and has been filed against the inactions of Defendants contrary to the provisions of section 138 which is special section covering frustrated cargo.

Moreover, the bar to maintainability of a suit in the exercise of jurisdiction has to be interpreted to the extent as expressly specified and not by implication. The fact of institution of the present suit by the plaintiff under the circumstances would hardly attract a bar as the plaintiff has neither filed any bill of entry for clearance of the consignment, nor the efforts for shipment were made without delay and the fact of wrong shipment has been affirmed by the Embassy. Under these circumstances the natural course of events would be a requirement of affirmation of the fact that the plaintiff is the supplier of the Embassy, for purposes of Bonded warehouses and that the present consignment has been wrongly shipped. These ingredients are already available in the letters from the Embassy which are available on record; however, under these circumstances it would be illogical to expect that the Embassy would own a shipment wrongly made. This being the logical chain of events, a conclusion that mere disowning of consignment would not constitute a shipment attracting the provisions of section 138 is opposed to the Scheme of the Customs Act, 1969 which expressly provides for such an eventuality by incorporating this section.

An interpretation to the contrary would amount to making the provisions of section 138 redundant for their application to the cases specially provided for and disregard constituting a violation of the safeguards provided by the Legislature "requites consideration".

The question of export in section 138 cannot be equated with and the policy for export can hardly be extended to such consignment. An example of such trade is transit cargo of loaded from one vessel for onward shipment to its port of destination. Mere fact that prohibition of such goods from Pakistan as may be forming part of the transit, cargo would hardly call for its confiscation. Likewise the consumption of prohibited items on foreign flag vessels, aircrafts and their respective storage as supplied at Port also does not attract such a prohibition as they are not part of the Export trade. 'The present case of impart of goods prohibited for reshipment from Pakistan also falls under the same category.

Application Under Order XXXIX, Rules 1 and 2 is allowed to the extent that the plaintiff is allowed to benefit of the provisions of section 138 of Customs Act, 1969 for reshipment of the consignment within seven days subject to furnishing of a surety in the form of Bank guarantee in the sum of Rs.20,00,000 (twenty lacs) to the satisfaction of the Nazir of High Court.

Tahir A Khan v. Central Board of Revenue 2003 PTD 1155, S.M. Shafi Zaidi v. Hassan Ali Khan 2002 SCMR 338; Dewan Scrap (Pvt.) Ltd. v. Customs, Central Excise and Sales Tax Appellate Tribunal 2003 PTD 2127; Dream World Limited v. Cotecna Inspection S.A. 2003 PTD 2809; Collector of Customs (Exports) v. Chemitex Industries (Pvt.) Ltd. 2002 MLD 836; Aluminum Processing Industries International (Pvt.) Ltd. v. Federation of Pakistan 2003 PTD 1411; Muhammad Idris v. Collector of Customs, Karachi PLD 1971 Karachi 911: Khadija Karim v. Zia‑ur‑Rahman Khanzada PLD 1999 Karachi 223; Amin Textile Mills (Pvt.) v. Commissioner of Income Tax 2000 SCMR 201; Iftikhar Hussain Khan of Mamdot v. Ghulam Nabi Corporation Ltd. PLD 1971 SC 550; Khalid Mehmood v. Collector of Customs 1999 SCMR 1881; Walayat Begum v. Collector of Customs 2003 PTD 1144; Noor Elahi v. Member, Board of Revenue 2003 SCMR 1045; Income Tax Officer v. Chappal Builders 1993 SCM‑R 1108; Adamjee Insurancc Company Ltd. v. Pakistan 1993 SCMR 1798; Commissioner of Income Tax v. Hamdard Dawakhana (Waqf) PLD 1992 SC 847; Punjab Small Industries Corporation v. Ahmad Akhtar Cheema 2002 SCMR 549; Finest Corpdration v. Collector of Customs PLD 1990 Karachi 338: Sikandar and Brothers v. Government of Pakistan (PLD 1986 Karachi 373), Nisar Art Press (Pvt.) Ltd. v. Chief Collector of Customs 1997 MLD 1859; Sandalbar Enterprises (Pvt.) Ltd. v. Central Bqard of Revenue PLD 1997 SC 334; tram Ghee Mills (Pvt.) Ltd. v. Customs, Central Excise and Sales Tax 2004 PTD 559; Baba Khan v. Collector of Customs 2000 SCMR 678; Director, Investigation and Intelligence, Customs v. Muhammad Nawaz 2003 PTD 1392; Mr. Sohail Muzaffar has placed reliance on the cases of East and West Steamship Co. v. Collector of Customs, PLD 1976 SC 618 and Amir Ali Automobiles Ltd. v. Assistant Collector of Customs, PTCL 1983 CL 141 distinguished.

Collector of Customs v. S.M. Yousuf 1973 SCMR 411 ref.

Sohail Muzaffar for Plaintiff.

Raja Muhammad Iqbal for Defendants Nos.2 and 3.

Mansoor Shaikh for Defendant No.4.

2004 P T D 1

[Lahore High Court]

Before Nasim Sikandar, J

Messrs SAHIB TEXTILES (PVT.) LTD. through Managing Director, Faisalabad

Versus

FEDERATION OF PAKISTAN through Secretary Finance, Secretariat, Islamabad and 4 others

Writ Petitions Nos. 9979, 4699, 6478, 3896, 6471, 929,- 2358, 4029, 4054, 4055, 4056, 4057, 4143, 4144, 4319, 4320, 4358, 4407, 4470, 4481, 4545, 4546, 4551, 4582, 4583, 8662, 4584, 4648, 4639, 4651, 4653, 4654, 4682, 4683, 4688, 4691, 4700, 4721, 4786, 4861, 4862, 4874, 4877, 4875, 4876, 4954, 5033, 5317, 5318, 5320, 5368, 5376, 5397, 5396, 5461, 5968, 5971, 5973, 5974, 5975, 5976, 5977, 5978, 5717, 5880, 6074, 6223, 6228, 6230, 6342, 6343, 6344, 6345, 6477, 6490, 6521, 6797, 7293, 7235, 7228, 7022, 6843, 7764, 7238, 3779, 9016, 6370, 7026, 7886, 6971, 6641, 6523, 4476, 6827, 6883, 6786, 6808 and 10328 of 2003, decided on 24th September, 2003.

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

----S. 59---Self-Assessment Scheme---Development of the scheme--­History and background---Unchanging desire of Revenue to have absolute jurisdiction to pick up any assessee out of the scheme for total audit---Method suggested for saving Revenue from such endless exercises and assessees from unjust harassment.

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

----Ss. 7, 8 & 59---Fixation of a cut off date for doing a job and then its extension within domain of Board of Revenue being a pure policy matter---Fixation of such date has nothing to do with assessee, who has already filed return---Extension in cut off date would not give birth to any corresponding liability or responsibility on the part of taxpayer--­Principles.

Central Board of Revenue has authority to issue direction to subordinate authorities fixing a date for doing a job and then extending the same. Not only in matters of such scheme, the Board is otherwise competent to make orders 'under sections 7 and 8 of Income Tax Ordinance, 1979 for the purposes mentioned in those provisions.

The fixation of a cut off, date for doing a particular job and then its extension is a pure policy matter falling within the domain of the officers in the official hierarchy. The fixation of such date has nothing to do with the assesses, who had already filed their returns. If the Central Board of Revenue fixed a certain period for a certain officer or a region to recover the outstanding revenue and that dead line is not met by the concerned officer or the region it would not mean that the amounts, which could not be recovered during that period, had become non-recoverable or time-barred allowing the assessee taxpayers a right to refuse to pay the-same.

The extension in cut off date does not give birth to any corresponding liability or responsibility on the part of taxpayers.

When both original cut off date and its extension are made by Central Board of Revenue, then there would be no question of violation of the direction of the Board by a subordinate Revenue Authority.

Such extension is nothing more than a direction by superior autho­rity to complete a job already assigned to a lower authority.

(c) Vested right----

---- Vested right would not create on the basis of direction made by higher Revenue Authority to lower Revenue Authority touching a pure administrative act.

(d) Administration of justice---

---- Accrual of a right immediately creates a corresponding liability.

(e) Income Tax Ordinance (XXXI of 1979)---

----Ss. 59, 7 & 8---Self-Assessment Scheme---Extension in cut off date for selection of cases for total audit---Object and effect---Such -extension would not destroy the scheme---Purpose of such extension is to allow more time to taxpayers to place their view point before Revenue Authorities against selection of their cases out of scheme---Such extension cannot be termed "mala fide" for mere reason that possibly that some more returns can be taken out of the scheme in the meanwhile existed---Such extension can be described mala fide only, if fixation of such date is itself mala fide.

Abdul Rauf and others v. Abdul Hamid Khan and others PLD 1965 SC 671 fol.

(f) Income Tax Ordinance (XXXI of 1979)---

----S. 59---Self-Assessment Scheme----Fixation of cut off date for selection of cases for total audit and then its extension---Effect---Such fixation would not confer any vested right on the assessee---Question of taking away of such right by another executive action, thus, would not arise at all---Retrospective effect of such extension can be challenged only, if original cut off date has resulted in creating or vesting of any right in assessee---Extension of date either made before or after cut off date would not give rise to any right.

Bannu Sugar Mills (Pvt.) Ltd. v. Inspector, Customs and Central Excise 1990 CLC 569; Messrs Flying Board and Paper Products v. Central Board of Revenue, Government of Pakistan, Islamabad and 3 others PLD 1996 Lah. 718 and Al-Sumrez v. Federation 1986 SCMR 1917 ref.

(g) Vested right---

----Connotion---Vested right is a right, which is complete and nothing remains to be done to fix such right.

Messrs Mardan Industries Ltd. v. Government of Pakistan and another PLD 1965 Pesh. 47 ref.

2000 NLR 302 fol.

(h) Income Tax Self-Assessment Scheme----

---- Fixation of cut off date by higher Revenue Authority to a lower in hierarchy and its extension---Effect---Such act is mere administrative communication between the two---Fixation and extension of such date is an administrative act---Legal, status is different of both notifications granting exemption and a letter by superior Authority to its subordinate directing him to dispose of certain matter within specified time---Letter containing a direction by one officer to his subordinate to complete an assignment within a certain period of time does not vest any right in a private citizen or in taxpayer.

Ellahi Cotton Mills Ltd. v. Federation of Pakistan PLD 1997 SC 582 = 1997 PTD 1555 ref.

(i) Income Tax Ordinance (XXXI of 1979)-----

----Ss. 59 & 62---Self-Assessment Scheme---Direction by C.B.R to RCIT giving a time limit to select cases for total audit---Validity---Such direction was not "performance of a legal duty" qua assessee, the denial or absence whereof could amount to accrual of legal right.

Fazal Din v. Lahore Improvement Trust, Lahore and another PLD 1969 SC 223 rel.

(j) Income Tax Ordinance (XXXI of 1979)-----

----Ss.59, 7 & 8---General Clauses Act (X of 1897), S.23 --- Self­ Assessment Scheme---Issuance of policy guidelines by Central Board of Revenue to Regional Commissioners of Income-tax---Non-publication of such guidelines in the official Gazette---Effect---Such guidelines were basically a communication between the Board and its subordinate Authority conveying administrative decision---Such guidelines would neither result in investing any right in any individual nor take away a vested right of an individual---Question of publication thereof, thus, would not arise at all.

Mian Kamal Anwar, Sargodha Road, Faisalabad v. Income Tax Appellate Tribunal, Lahore and others 2002 PTD 1895 and Muhammad Suleman v. Abdul Ghani PLD 1978 SC 190 ref.

(k) General Clauses Act (X of 1897)-----

----S. 23---Publication in official Gazette---Effect---Such publication is legally presumed to be an information to all and, sundry---Absence of such publication cannot be pleaded in the same way as ignorance of law.

(l) Income Tax Ordinance (XXXI of 1979)-----

----S. 59---Self-Assessment Scheme---Guidelines/circular specifying categories of assessees liable to be selected for total audit---Holding back such guidelines till filing of returns---Validity---Such holding back was unethical and unjustified as State does not cheat citizens---Such withholding would amount to keep most important aspect of scheme in dark and would be an attempt to trap unwary assessee---Issuance of such guidelines/circular would nullify part of such scheme---Identification of any such category must be in accordance with scheme either by declaring therein or at least before last date for submission of returns---Criteria for selection of cases for total audit, after filing of returns, would indicate complete lack of confidence in assessee---Such withholding might not be mala fide---Where all requirements of scheme were answered, then Assessing Officer was obliged to frame assessments in accordance with returns in view of the words "shall assess" as used in S. 59(1) of Income Tax Ordinance, 1979---Selection of cases for process under normal law on the basis of guidelines issued after filing of returns could not be approved on any legal, moral or ethical basis.

Dr. M.D. Youchi, Mayo Hospital, Lahore v. Assistant Commissioner of Income-tax, Circle 20, Companies Zone-I, Lahore and others Writ Petition No. 2331 of 2001 fol.

Cannon Products Ltd. v. IT Officer, Companies Circle, Karachi 1985 PTD 549; Muhammad Asghar and others v. Income Tax Officer and others 1986 PTD 357 and. Ikhlaq Cloth House, Faisalabad v. ALIT, Faisalabad 2001 PTD 3121 ref.

(m) Income Tax Ordinance (XXXI of 1979)-----

----S. 59---Self-Assessment Scheme---Change in or extension of scheme after its announcement and filing of returns--Scope and validity--­Availing of scheme is optional for assessee, but such fact, would not justify issuance of parameters of denial of scheme to assessee individually or collectively after filing of returns---After filing of returns and taking final and decisive step by assessee in response to scheme notified for, the year, no change or extension detrimental to assessee can be made therein.

(n) Income-tax-----

----Declared income---Proof---Privilege or right of Revenue to require a taxpayer to support his declared version cannot be questioned.

Mian Ashiq Hussain, Siraj-ud-Din Khalid, .Naeem Shah, Rana Muhammad Afzal, Shahbaz Butt, M. Iqbal Hashmi and Shafqat Mehmood Chohan for Petitioners.

Muhammad Ilyas Khan, Shahid Jamil and Mian Yousaf Umar for Respondents.

Date of hearing: 5th August, 2003.

2004 P T D 26

[Lahore High Court]

Before Tassaduq Hussain Jilani and M. Bilal Khan, JJ

Messrs CARGILL PAKISTAN SEEDS (PVT.) LTD. through Chief Executive

Versus

CUSTOMS, EXCISE AND SALES TAX APPELLATE TRIBUNAL, through Assistant registrar, Lahore

Customs Appeals Nos.25 and 26 of 1999, heard on 2nd October 2003.

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

----S. 32(2)(3)---Non-levy or short levy of duty of its erroneous refund---Show-cause notice---Limitation---When Bill of Entry was filed and assessment was made, then period of limitation was shorter.

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

----S. 32(2)---Misdeclaration of goods---Scope---Such case could be made out against importer, where Bill of Entry was false or on account of some collusion, duties had been short levied.

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

----S. 32(2)(3)---S.R.O. 490(I)/95, dated 14-6-1995---Short levy of duty---Show-cause notice---Limitation---Goods were cleared at concessionary rate on 3-1-1996 and 25-1-1996---Show-cause notice issued on 12-7-1997 alleging that importer could not get benefit of S.R.O. 490(I)/95---Validity---Goods and PCT Headings were correctly mentioned in Bills of Entry, thus, there was no misdeclaration on such count---Such was clearly a case of "error or misconstruction" within meaning of S.32(3) of Customs Act as there was no allegation of collusion with Customs staff---Notice beyond period of limitation prescribed could not be issued to importer---High Court accepted appeal and set aside impugned orders.

Federation of Pakistan v. Ibrahim Textile Ltd. 1992 SCMR 1898 and Assistant Collector of Customs and others v. Khyber Electric Lamps and others 2001 SCMR 838 rel.

Zaheer Ahmad Khan for Appellant.

A. Karim Malik with Mr. Shahid Siddiqui, Deputy Superintendent Custom for Respondent.

Date of hearing: 2nd October, 2003.

2004 P T D 30

[Lahore High Court]

Before Nasim Sikandar and Muhammad Sair Ali, JJ

PAKISTAN GENERAL STORE through Tariq Pervaiz

Versus

INCOME-TAX APPELLATE TRIBUNAL and 2 others

Income Tax Appeal No. 979 of 2000, decided on 24th September, 2003.

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

----Ss. 55, 62 & 64---Income from business---Reopening of assessment on basis of, inquiry report---Appellate Authority found estimation of sales to be on higher side, while Tribunal upheld order-in-original--­Validity ---Assessing Officer had based estimation of sales mostly upon inquiry report having been made more than one year after expiry of relevant income year and more than six months after expiry of next income year---Inquiry report was not supported by any documentary evidence both regarding availability of stock or capital involved---High Court set aside impugned order and restored that of Appellate Authority.

Mian Ashiq Hussain for Appellant.

Muhammad Ilyas Khan for Respondent.

2004 P T D 31

[Lahore High Court]

Before Sheikh Hakim Ali, J

Messrs SARFRAZ ICE FACTORY

Versus

CENTRAL BOARD OF REVENUE and another

Writ Petition No. 1396 of 1995, heard on 16th October 2003.

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

----S.59---C.B.R. Circular No.16 of 1992, dated 1-7-1992---C.B.R. Circular No.9 of 1994, dated 11-7-1994---Constitution of Pakistan (1973), Art. 199---Constitutional petition ---Self-assessment---Assessee, vide C.B.R. Circular No-16 of 1992 dated 1-7-1992, was assured that "the case of assessee once selected through computer ballot will not be earmarked for such ballot in the next two years", assessee, therefore, had contended that a vested right had accrued in its favour and its case could not be selected for total audit in the next two years and that the Department had illegally resiled from its promise which could not be allowed by any law---Validity---When a person represented and made an offer to a person and on the representation/offer of that person, the latter changed his position, then the former remained bound to honour that representation and could not resile from that representation afterwards--­Representation made to the assessee in the year 1992-1993, that the case once selected through computer ballot will not be earmarked for such ballot in the next two years, was a representation made to the assessee and acting upon said representation, he had subjected himself to the total audit and the Department after having found the amounts due against the assessee, the assessee had paid the same in the year 1992-1993---Said total audit and the payment of the income tax in the year 1992 had created a vested right in favour of the assessee, therefore, he could not be subjected to the total audit in the next two years--­Principles.

Millat Bottle Store Faisalabad v. Additional Commissioner of Income Tax 1998 PTD 2555 ref.

Mirza Muhammad Waheed Baig for Petitioner.

Ch. Abdul Sattar for Respondent.

Date of hearing: 16th October, 2003.

2004 P T D 38

[Lahore High Court]

Before Mansoor Ahmad and Sardar Muhammad Aslam, JJ

Messrs INNOVATIVE TRADING COMPANY LTD.

Versus

APPELLATE TRIBUNAL and 2 others

Custom Appeals Nos.40, 29 and 30 of 2002, decided on 21st October, 2003.

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

----S.194-A [as amended by Finance Ordinance (XXI of 2000)] & S.195---Appeal to the Appellate Tribunal---Powers of Board of Revenue or Collector of Customs to pass certain orders---Scope---Right of appeal is one of the substantive rights---Insertion of words "an Officer of Customs" after the expression "any person" in S.194(1) of the Customs Act, 1969 by Finance Ordinance, 2000---Connotation and effect--­Insertion of said words not retrospective in nature---Computation of period of limitation in case of appeal---Principles.

Vide insertion made through the Finance Ordinance, 2000, the expression "an Officer of Customs" was made after the expression "any person". This insertion was made on 19th of June, 2000 and it was made effective from the said date. Prior to this an Officer of the Customs was not competent to file an appeal under section 194-A. The jurisdiction to file an appeal by any Officer of the Customs was thus conferred on 19th of June, 2000 and before that although right to file appeal was available to any person aggrieved but it was not within the competency of any of the Officers of Customs to file such an appeal. In the present case order under section 195 was passed by the Member of Customs, Central Board of Revenue by exercising his revisional jurisdiction on 3/6-5-2000. On the said date when the decision was made and when it was conveyed on 19-5-2000 to the Collector Customs, he was not competent to file any appeal. As such the order passed by the revisional Authority had attained finality. Subsequent amendment in law clothing the Collector with the right to file an appeal on 19th of June, 2000, would not tend to destroy the right of the appellant acquired by it before 19th of June, 2000. It is a settled in the domain of fiscal law that the amendment touching upon and dealing with substantive right could not be given retrospective effect until and unless it is specifically intended to be so by the Legislature. Conferring a right of appeal is one of the substantive rights which was thus provided to the Officers of the Customs on 19th of June, 2000. Conversely, it also abridges the right other other party to claim immunity against any order passed in their favour by revisional forum. Amendment brought under section 194-A by virtue of Finance Ordinance, 2000 was not merely procedural in nature.

Therefore, on examining the various provisions of law the right to file an appeal by any officer of the Customs, was not available before 19th of June, 2000 and the appellant acquired a valuable right through the judgment dated 6-5-2000 and this right could not be taken away by construing the amended provision retrospectively. On 6-5-2000, when the Revisional Authority passed a judgment in favour of the appellant, as it was non-appealable order, therefore, it had-attained the finality and it had become a past and closed transaction. Admittedly, the Finance Act, came after 50 days of, the judgment and conferred right on any Officer of the Customs to file the appeal, which could not be used by the Collector Customs, to challenge the order' dated 6-5-2000 passed by C.B.R. in its revisional jurisdiction. Even sub-clause (3) which deals, with the limitation of 60 days did not confer any right as the question of limitation is dependent on the competency to file appeal. Sub-clause (3) could not be interpreted in a manner so as to give retrospectivity to the amended provision of sub-clause (1). The contention on behalf of the Revenue was that under sub-clause (3) because of the fact that limitation of 60 days was available and computing the 60 days from 6-5-2000 the date of revisional order, the right of appeal was available to the Collector up to 6th of July and the 3rd July was a day within which he had a right to file the appeal, the appeal was competently filed. The contention was not well taken. Computation would be dependant on a kind of order described under sub-clause (1) and the competency to challenge the said order, under, the law. In the absence of any competency, the-procedural provision relating to limitation would not confer any substantive right on the Collector to file an appeal. The appeal filed by the appellant before the Tribunal was not competent as the Collector Customs was not conferred any jurisdiction to file the appeal and the order dated 6th of May, 2000 had attained finality and it was past and closed transaction in the present case.

Haji Abdullah Jan v. State 2003 SCMR 1063 ref.

(b) Interpretation of statutes---

---- Fiscal statute---Amendment touching upon and dealing with substantive rights could not be given retrospective effect until and unless it is specifically intended to be so by the Legislature.

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

----Ss. 25 & 30---Determination of Customs value of imported goods--­Criterion---Date for such determination and rate of import duty--­Principles---Classification of goods---Contravention---Onus of proof.

The value of any imported goods shall be taken to be the normal price, that is to say, the price which they would fetch (on the date referred to in section 30), on a sale in open market between a buyer and `a seller independent of each other.

According to section 30, the value and rate of duty leviable on the imported goods are those which shall be in force for the goods meant for home consumption, like the consignment in dispute, on the date when the "Bill of Entry" is presented to the Customs Authority. Section 25 speaks of "normal price" which is described as the price, the goods would fetch on sale in "open market" in a bona fide transaction. The "open market" here means the market in the country of origin and not at the place of importation. Thus, criterion for determination of the value of the goods should have been the prevailing commercial price in the country of export at the time of import and not the price obtaining in the regional, countries. Admittedly, the price list of similar goods of origin was not before the Authorities concerned when the consignment was evaluated. The onus to establish that the importer made a misstatement was entirely on the department who failed to muster any evidence from the country of origin to belie the declared value.

All 241 invoices in the present case pertained to the period December, 1995 to August, 1997, therefore, section 25 as it existed prior to 1st January, 2000 was applicable and the value of the imported goods was to be taken as normal value that is to say, the price would fetch a sale in open market, between the buyer and seller independent of each other. In the process of determination of value in the present case, if the Department disagreed with the value declared by the importer, the onus shifted on it to prove that the consignment imported was different than the one described in the invoices. It is surprising that the Department in the first instance accepted the bill of entry and import invoices submitted by the importer; accepted the version of the importer that the auto parts imported were non-genuine parts, charged them to customs duty and other taxes and released those consignments. It was in 1997, that on the receipt of some information a truck of the appellant ­Company was intercepted which was carrying auto parts for supply to another city. It was a fraction of the huge imports spread over a period of 1-1/2 years even then the Department did not proceed to seek the proper identification and examination of the seized goods as to find out whether those were genuine auto parts or non-genuine auto parts. Instead of adopting a logical course the department presumed the seized parts as the genuine one and using the price list of genuine parts made out a case of contravention against the importer. Presupposition of the department before making out a case of contravention was, that the normal price of the auto parts was that which was given in the price list issued by the original Companies of manufacturers. This presupposition could only be taken if the department would have scrutinized, examined and determined the classification of the goods in the first instance. In the absence of any such exercise, the application of the price list of the genuine parts was not warranted its the circumstances of the case.

The Tribunal also relied on price list of genuine spare parts. Real link in the chain was missing that the Department did not determine the classification of the imported goods. It could not be in respect of the consignment which was already released and consumed but this could be done in respect of the parts seized by intercepting the truck. The invoices which were produced by the importer were already accepted and therein these auto parts were declared to be non-genuine, so there was no tangible evidence available with the department to reach a conclusion that the imported parts which had already been released were genuine in kind and the same were mis declared in the original invoices. The department sought the production of the price list of the genuine auto parts from the company and the same were produced. It was presumed that the goods which were imported during 1-1/2 years were also genuine. The same error was also committed in the decision of the Tribunal which had vitiated its decision as such it was not sustainable.

Messrs Latif Brothers v. Deputy Collector of Customs, Lahore 1982 SCMR 1083 fol.

Punjab Beverages v. Appellate Tribunal (Customs, Excise and Sales Tax) 2002 PTD 2957; Irfan Tayyab v. Collector Customs 2003 PTD 890; Messrs Abdul Aziz Ayoob v. Assistant Collector, Customs PLD 1997 Kar. 378; Kausar Trading v. Government of Pakistan 1986 CLC 612; Saleem & Co. v. Deputy Collector, Customs PLD 2001 Lah. 5; Farooq International v. Chief Controller, Imports and Exports 1985 CLC 1781; Dawood Cotton Mills v. Central Board of Revenue 1985 MLD 1610; Ali Muhammad v. Deputy Collector Customs 1986 MLD 1429; Messrs Sasta Autos v. Government of Pakistan 1991 MLD 1582; Capital Supports, Sialkot v. Government of Pakistan 1989 MLD 999; Indus Auto Mobile Ltd. v. C.B.R. PLD 1988 Kar. 99; Commercial Pipes Ltd. v. Federal Government of. Pakistan PLD 1989 Lah. 89 and Haji Abdullah Jan v. The State 2003 SCMR 1063 ref.

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

----S.32---Misdeclaration---Concept---Charging for mis declaration--­Prerequisites.

Charging of misdeclaration on untrue statement, misdeclaration pre-requisites a fact that the person charged for the same made or signed or causes to be made any statement in answering to any question which he knows or have reason to believe that such documents are false. In the present case importer has been filing bills of entry and import invoices before the Customs Authorities. They were accepting these invoices and bills of entry and charging them the customs duties and other taxes on the basis of declaration made therein. All 241 invoices presented by the importer were accepted and the consignment was released on payment of customs duty and other taxes as determined by the Customs Department. It came to the notice of the Customs Department that the declarations made by the importer were not true. They accordingly intercepted one truck carrying imported parts which was bound for delivery of the same to NLC, Gujranwala. The consignment in the truck was seized. Notice under section 26 of the Customs Act, 1969 was issued to the importers for production of documents which were produced. As it was a case of misdeclaration on presentation of a document and misdeclaration was alleged in respect. of a part of a consignment which was allegedly seized by the Customs Department, the onus shifted to the Department and it heavily lay on them first to classify the goods seized as the genuine auto parts and thereafter use price list of the genuine auto parts so as to determine the value of the consignment. It was not possible for the Customs Department to take the entire import ranging from December, 1995 to August, 1997 as the import of genuine parts merely on the basis of consignment intercepted on one truck which was hardly, a little fraction of the entire import. The Department in the first instance would have determined the classification of the goods seized and as the most of the import was made by the importer for supply to NLC a Government Organization, the record could have been verified: to find out the kind and classification of the goods imported. The department did not undertake either of the exercises and merely thought it proper to take the price from the price list of the genuine auto parts. The Department did not act diligently and failed to perform their functions and the contravention case was either not made with serious mind or it was not initiated with the serious object. Departmental representative made a statement before the High Court that all the invoices on the basis of which the goods were released were not available in the Department for producing the same in the Court. The Department did not act with diligence and the serious approach on its part to make a case of contravention, which was lacking. Contravention under section 32 is not merely making of a false statement but it should contain an element of mens rea as it defines an offence and makes it punitive. Failure to bring on record, through scrutiny, examination or any other means, that the imported auto parts were genuine in kind, price list was of no use to the Department and it could not be proved that the value declared in bills of entry and import invoices by the importer were untrue and false. Thus, no case of contravention was proved against the importers and the provisions of section 32 were misapplied in the circumstances of the case.

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

----Ss.194-A & 196---Appeal to, Appellate Tribunal---Tribunal had not rendered any finding on the question raised by the appellant and merely in the last three lines of the judgment stated that "as regards the remaining appeals these are dismissed in toto"---Effect.

M.S. Athar Minallah and Qazi M. Naeem for Appellant.

Raja Khalid Ismail Abbasi for Respondent No-3

Date of hearing: 6th October, 2003.

2004 P T D 62

[Lahore High Court]

Before Muhammad Sayeed Akhtar and Muhammad Sair Ali, JJ

GOVERNMENT EMPLOYEES COOPERATIVE SOCIETY, LAHORE

Versus

INCOME-TAX OFFICER, CIRCLE-07, LAHORE

C. T. R. No. 52 of 1996, decided on 16th June, 2003.

(a) Practice and procedure---

---- When a Bench adopts a view different or contrary to the view earlier expressed by a Bench of equal jurisdiction, then legal propriety demands reference of case of constitution of a larger Bench or be left to be settled in appeal by higher Court.

PLD 1963 S C 296 and PLD 1995 S C 423 fol.

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

----S. 31(1)(b)---Interest income generated from Bank, deposits--­Deduction of overhead expenses from such income---Tribunal denied such deductions to assessee, though in its earlier judgments it had allowed 10% flat rate deductions to other Cooperative Housing Societies---Validity---Section 31(1)(b) of Income Tax Ordinance, 1979 did not allow deduction of expenses from income derived from other sources at a flat rate nor did the. said section permit deduction of expenses, unless same had been particularly set apart as a claim and were attributable to earning interest income---Assessee had neither claimed any ascertained sum nor had set apart any particular amount of, expenses associated with earning, generation, management and administration etc. of interest income from Bank deposits---Tribunal was justified in passing impugned judgment wherein reasons had been given for departing from its earlier judgments---High Court answered reference in affirmative.

Siraj-ud-Din Khalid for Petitioner.

Muhammad Ilyas Khan for the Revenue.

Date of hearing: 11th March, 2003.

2004 P T D 122

[Lahore High Court]

Before Maulvi Anwarul Haq and Tanvir Bashir Ansari, JJ

Messrs SADIQ BROTHERS

Versus

APPELLATE ADDITIONAL COMMISSIONER, INCOME-TAX/WEALTH TAX, RAWALPINDI and another

Writ Petitions Nos. 1722, 1882, 2386, 2908 and 2446 of 2002, 54, 2585 to 2588 of 2003; heard on 24th October, 2003.

(a) Appeal----

---- Right of appeal was a substantive right which had to be conferred in express terms by an express enactment.

Hassan Bakhsh v. Settlement Commissioner, Rawalpindi and others PLD 1970 SC 1 and Muzaffar Ali v. Muhammad Shafi PLD 1981 SC 94 ref.

(b) Appeal----

----Right of appeal does not exist merely on the theory that an appeal is regarded as continuation of trial but has to be created and granted by a Statute.

(c) Constitution of Pakistan (1973)-----

----Art.227---Scope and application of Art.227 of the Constitution.

Article 227 of the Constitution enjoins upon the State to bring all existing, laws in conformity with the Injunctions of Islam as laid down in the Holy Qur'an and Sunnah and no law is to be enacted which is repugnant to the Injunctions of Islam. The effect to the provision of Article 227 is to be, given only in the manner provided in Part-IX of the Constitution. However, question arises as to what would be the mode of interpretation till such time that exercise envisaged in Part-IX of the Constitution is undertaken and completed. The point came up for consideration in the case of Commissioner of Income-tax, Peshawar v. Messrs Siemen A.G. PLD 1991 SC 368.

So long as the existing statutes are not brought in conformity with the Injunction of Islam (Article 227 of the Constitution), in their interpretation, application and enforcement wherein discretionary judicial elements are involved, only that course would be adopted which is in accord with the Islamic Philosophy, its common law and' jurisprudence.

Commissioner of Income-tax, Peshawar v. Messrs Siemen A.G. PLD 1991 SC 368 fol.

(d) Islamic Jurisprudence-----

---- Appeal---Barring a right of appeal offends against Injunctions of Islam.

PLD 1989 SC 6 and PLD 1988 SC 2002 ref.

(e) Income Tax Ordinance (XXXI of 1979)-----

----S.129(1)---Appeal---Right of appeal conferred by S.129(1), Income Tax Ordinance, 1979 is substantive right and further it is in consonance with Islamic Injunctions and its absence in the Statute or its taking away by any legislative exercise would be repugnant to the Injunctions of Islam.

Hafiz Abdul Waheed v. Miss Asma Jehangir and another PLD 1997 Lah. 301 ref.

(f) Income Tax Ordinance (XXXI of 1979)-----

----S.129(1)---Mere filing of appeal provided under S.129(1), Income Tax Ordinance, 1979 does not operate as stay of recovery of tax.

(g) Income Tax Ordinance (XXXI of 1979)---

----S.129(2) [as added by Finance Ordinance, (XXI of 2000), S.5(21)]--­Constitution of Pakistan (1973), Art. 199---Constitutional petition--­Provision of S.129(2), Income Tax Ordinance, 1979 prescribing precondition for appeal which, by all means, constitutes an abridgement of right of appeal and its exercise by the person in whom it is vested, cannot at all be said to be reasonable---Contention that right of appeal has been restricted in order to ensure smooth recovery, in presence of relevant recovery provisions in the Ordinance, itself, cannot at all be termed as a rationale for the same---Provision of S.5(21), Finance Ordinance, 2000 by which subsection (2) of S.129 of the Income Tax Ordinance, 1979 was amended was declared to be unconstitutional and as such without lawful authority by the High Court.

Elahi Cotton Mills Ltd. and others v. Federation of Pakistan PLD 1997 SC 582 distinguished.

Chanab Cement Products (Pvt.) Ltd. and others. v. The Banking Tribunal, Lahore and others PLD 1996 Lah. 672. Aashi Packages (Pvt.) Ltd. v. Federation of Pakistan 2002 PTD 2797; Chamman Milk Shake Ice Cream v. CIT, Lahore and others W.P. 5838 of 2002; Hassan Bakhsh v. Settlement Commissioner, Rawalpindi and others PLD 1970 SC 1; Muzaffar Ali v. Muhammad Shafi PLD 1981 SC 94; Pakistan through Secretary, Ministry of Defence v. The General Public PLD 1989 SC 6 Commissioner of Income Tax, Peshawar v. Messrs Siemen A.G. PLD 1991 SC 368; PLD 1989 SC 6; PLP 1988 SC 2002; Hafiz Abdul Waheed v. Miss Asma Jehangir and another PLD 1997 Lah. 301 and Messrs Eastern Rice Syndicate v. C.B.R. PLD 1959 SC (Pak.) 364 ref.

Hafiz Muhammad Idrees for Petitioner.

Ch. Sultan Mansoor D.A.-G., Malik Muhammad Nawaz and Ms. Shaheena Akbar for Respondents.

Date of hearing: 24th October, 2003.

2004 P T D 315

[Lahore High Court]

Before Maulvi Anwarul Haq, J

Messrs QUREL CASSETTES LTD. Through Managing Director, Islamabad

Versus

ADDITIONAL SECRETARY, GOVERNMENT OF PAKISTAN, CENTRAL BOARD OF REVENUE, KARACHI and 5 others

Writ Petition No.228 of 1994, heard on 1st September, 2003.

Customs Act (IV of 1969)---

----Ss. 27(2) & 108---Constitution of Pakistan (1973), Art. 199---Constitutional petition---Imported goods were damaged due to unavoidable accident after authority allowed same to be transported for warehousing---Authority refused petitioner's claim for abatement of duty in respect of damaged goods---Validity---Goods had been damaged after same had been entered for warehousing---Petitioner was entitled to relief in terms of S.27(2) of Customs Act, 1969--High Court allowed Constitutional petition with directions to the Authority to proceed in the matter in terms of S.108 read with S.27 of the Customs Act, 1969.

Messrs Tata Textile Mills Ltd. through Director v. Assistant Collector (Recovery Officer), Customs, Central Excise and Customs, Multan and another PLD 2000 Lah. 286 rel.

Mian Nazir Azhar for Petitioner.

Khurram M. Hashmi for Respondent.

Date of hearing: 1st September, 2003.

2004 P T D 417

[Lahore High Court]

Before Tassaduq Hussain Jilani and M. Bilal Khan, JJ

Messrs COOL FRIDGE (PVT.) LTD. through Commercial Manager

Versus

CENTRAL EXCISE, SALES TAX AND CUSTOMS APPELLATE TRIBUNAL, CUSTOMS HOUSE, NABAH ROAD, LAHORE and another

Customs Appeal No.258 of 2002, decided on 16th September, 2003.

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

----Ss.25 & 196---Valuation -of imported goods, determination of---Appeal before High Court---Importer declared value of imported goods as U.S.$275 per unit, but Adjudicating Officer/Deputy Collector after requisite investigation abroad, assessed value of imported goods as U.S.$295 and such assessment was upheld by the Custom Appellate Tribunal---Importer had challenged concurrent orders in appeal before High Court on the ground that assessment of Authority was arbitrary as Adjudicating Officer did not issue any notice to the importer before assessing goods and that, both Tribunals below had not considered evidence which importer wanted to rely upon and that value assessed by the Adjudicating Officer was excessive---Validity---Order passed by Adjudicating Officer had clearly shown that importer was provided an opportunity for hearing and was requested to produce any material evidence in support of his claim for acceptance of value of goods declared by him, but he failed to substantiate his claim---No reference had been made by the importer either in appeal before Custom Appellate Tribunal or in the body of appeal before High Court as to what evidence importer wanted to produce in support of his claim that value of the goods as declared by him should be accepted by Customs Department--­Forums below had determined value of goods imported by importer after considering evidence available on record and Adjudicating Officer had also prepared a chart showing: as to how he had calculated the value, it could not, in circumstances, be said that orders passed by Adjudicating Officer or by Customs Appellate Tribunal were arbitrary---Appeal filed by importer under S.196 of Customs Act, 1969, could only be maintained if a question of law had been raised---No question of law being discernible to warrant interference-in appeal, same-was dismissed.

Shahzada Mazhar for Appellant

2004 P T D 557

[Lahore High Court]

Before Nasim Sikandar and Muhammad Sair Ali, JJ

Messrs BILAL & CO., TANDLIANWALA

Versus

APPELLATE TRIBUNAL, CUSTOMS, CENTRAL EXCISE AND SALES TAX, LAHORE and another

Sales Tax Appeal No. 108 of 2002, heard on 27th October, 2003.

Sales Tax Act (VII of 1990)---

----Ss.2(25) & 3(1-A)---Sales tax, recovery of---Taxable supplies made to registered or to unregistered persons---No efforts were made at any stage either by Adjudicating Officer or by the Customs, Central Excise and Sales Tax Appellate Tribunal to see whether there was any material available on record to ascertain whether the taxable supplies were made to registered persons or to persons liable to be registered or to unregistered persons---Effect---Minimum requirement was that every case should have been examined individually to ascertain the number of taxable supplies made by wholesaler to the retailers and out of those who were registered, not registered or liable to be registered or even were covered under the proviso to S.3(1-A) of Sales Tax Act, 1990---Order passed by Customs, Central Excise and Sales Tax Appellate Tribunal was set aside---Appeal was allowed accordingly.

C. A. No.54 of 2002 fol.

Phalia Sugar Mills v. Collector of Sales Tax Writ Petition No-21776 of 2001 and C. P. No. 1457 of 1999 ref.

Nasar Ahmad for Appellant.

A. Karim Malik for Respondents.

Date of hearing: 27th October, 2003.

2004 P T D 624

[Lahore High Court]

Before Nasim Sikandar, J

AAA STEEL MILLS LIMITED through Proprietor Mrs. Shaista Kausar

Versus

COLLECTOR OF SALES TAX AND CENTRAL EXCISE, COLLECTORATE OF SALES -TAX

Writ Petition No. 10840 of 2003, heard on 5th November, 2003.

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

----Ss. 11(2) & 45---S.R.O. 377(I)/2002, dated 15-6-2002---Customs Act (IV of 1969), S. 179---Constitution of Pakistan (1973), Art. 199--­Constitutional petition---Show-cause notice alleging adjustment of inadmissible input tax---Collector, Sales Tax assessed such amount as payable by assessee alongwith additional tax and penalty---Validity--­Assessee was not falling under any of the categories mentioned in para. 2(2) of S.R.O. 307(I)/2002---Collector on executive side could not pass impugned order, which could only be done by the Collector (Adjudication) in view of S. 179 of Customs Act, 1969 read with said S.R.O.---Collector had violated provisions of Ss. 11 & 45 of Sales Tax Act, 1990 and the S.R.O.---High Court allowed Constitutional petition and declared the impugned order to be without jurisdiction.

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

----Ss. 11 & 11-A---Assessment and recovery of tax under Ss. 11 & 11-A of Sales Tax Act, 1990---Such proceedings are summary in nature-­Authority on executive side can proceed to make assessment of tax due on basis of return/record submitted by assessee---Collection of further evidence is not required in such cases---Authority acts both as prosecutor and Judge in such cases---Recovery of short paid admitted liability in a return is recoverable in a summary manner.

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

----S. 45---Adjudication proceedings---Essentials---Such proceedings contemplates not only issuance of show-cause notice, but also requiring assessee and Department to produce evidence and material in support of their respective stands---Such proceedings are normally initiated on basis of a contravention report, which is akin to submission of challan in Court of criminal jurisdiction---Such proceedings though not criminal in nature, but summary allegations in the form of contravention report submitted before Adjudicating Officer partakes a number of characteristics of a challan submitted before a Judge or Magistrate on criminal side.

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

----S. 73---Violation of provisions of S. 73 of Sales Tax Act, 1990---Such case generally could not be made out from return filed for a tax period---Such default, if actually committed, could come to surface only on examination of record or audit of, registered person­.

Imran Shafique for Petitioner.

Muhammad Iqbal Choudhry Ambalvi for Respondent.

Date of hearing; 5th November, 2003.

2004 P T D 632

[Lahore High Court]

Before Maulvi Anwarul Haq, J

MANZOOR A. MALIK

Versus

FEDERATION OF PAKISTAN, MINISTRY OF FINANCE, ISLAMABAD through Secretary and 3 others

Writ Petition No.2966 of 2002, heard on 14th November, 2003.

Customs- Act (IV of 1969)---

----S. 32---Constitution of Pakistan (1973), Art. 199---Constitutional petition---Claim for refund---Amount received by Government not lawfully due from the importer---Plea of Government that claim was time-barred would be violative of morality and justice, and could not be looked upon with favour.

Pfizer Laboratories Limited's case PLD 1998 SC 64 fol.

Ms. Rukhshanda Shaheen for Petitioner.

Mrs. Farhat Zafar for Respondents.

Date of hearing: 14th November, 2003.

2004 P T D 633

[Lahore High Court]

Before Nasim Sikandar and Muhammad Sair Ali, JJ

MUHAMMAD SALEEM

Versus

INCOME-TAX APPELLATE TRIBUNAL and 2 others

P.T.R. No. 125 of 2001, heard on 30th September, 2003.

Income Tax Ordinance (XXXI of 1979)---

-----Ss. 59-A, 65 & 136(1)---Additional assessment for reason of non­-disclosing source of income for investment made during relevant year---Tribunal upheld order-in-original---Validity---Tribunal had rightly observed that acceptance of disclosed income under S. 59-A of Incomc Ordinance, 1979 was without application of mind, thus, there could be no question of probing or accepting same after examination---Question as to whether assessee had made investment from source disclosed try Revenue, was a question of fact---Such question had been answered against assessee on his failure to establish source of income---High Court dismissed reference application.

Zia Haider Rizvi for Appellant.

Mian Yousuf Omar for Respondent.

Date of hearing: 30th September, 2003.

2004 P T D 636

[Lahore High Court]

Before Muhammad Sair Ali

Mirza NASRULLAH KHAN

Versus

SUPERINTENDENT, CENTRAL EXCISE AND SALES TAX, HAFIZABAD and 2 others

Writ Petition No. 4361 of 1996, decided on 14th November, 2003.

Sales Tax Act (VII of 1990)---

----Ss. 2(16) & 3---Central Excises and Salt Act (I of 1944), Ss.2(f) & 3---S.R.O. 546(I)/94, dated 9-6-1994, Hdg. No. 2710.0082--­S.R.O. 545(I)/94, dated 9-6-1994, Hdg. No. 2710.0081---Pakistan Petroleum (Refining, Blending and Marketing) Rules, 1977, R. 18--­Constitution of Pakistan (1973), Art. 199---Constitutional petition--­Reclaimed lubricating oil produced through reprocess of used/rejected mobile oil by employing chemicals and acids---Levy of sales tax and excise duty on sale of reclaimed oil---Validity---Blending and reclamation plant of petitioner was registered under R.18 of Pakistan Petroleum (Refining, Blending and Marketing) Rules, 1977---Petitioner was issued licence by Assistant Collector for manufacture of and dealing in lubricating oils---Petitioner had not denied his engagement in business of producing oil under such licences by reprocessing and reclaiming used mobile oil in reclamation plant---Nothing on record to show that reclaimed oil was different from lubricating oil included in Table of S.R.O. 546(I)/94 and S.R.O., 545(I)/94 against Hdg. No.2710.0081 and 2710.0082---Such reclaimed and reprocessed oil was also different and distinct in its properties, propensities, uses and value from original or used mobile oil---Such product, thus, would attract levy and charge of excise duty and sales tax---Distinct and new product could not be said to be subjected to double or manifold taxation---High Court dismissed Constitutional petition.

Deputy Collector Central Excise v. Tyrex Pakistan Limited PLD 1992 SC 364; Noori Trading Corporation v. Federation of Pakistan P.LD f989 Quetta 74; Union of India v. Dehli Cloth and General Mills AIR 1963 SC 791; Black's Law Dictionary; Ayer's Terms and Phrases; Assistant Collector of the Central Excise and Land Customs and others v. Orient Straw Board Papers Mills PLD 1991 SC 992 and Sethi Straw Board Mills Limited v. Pakistan through Secretary to the Government of Pakistan and others 1994 SCMR 1872 ref.

Malik Saeed Hassan for Petitioner.

Izharul Haq Sheikh for Respondent.

Date of hearing: 17th October, 2003.

2004 P T D 714

[Lahore High Court]

Before Nasim Sikandar, J

Messrs MUSKZAR KNITWEARS (PVT.) LTD. through Chief Executive, Lahore

versus

FEDERATION OF PAKISTAN, MINISTRY OF FINANCE, ECONOMIC AFFAIRS AND STATISTICS through Secretary, Islamabad and 2 others

Writ Petition No. 18599 of 2002, decided on 17th October, 2003.

(a) Sales Tax Act (VII of 1990)‑‑‑

‑‑‑‑Ss. 22, 25 & 45‑A‑‑‑Sales Tax General Order No. 1/1999, dated 7‑1‑1999‑‑‑Sales Tax General Order No.9/1999, dated 22‑9‑1999‑‑­Constitution of Pakistan (1973), Art. 199‑‑‑Constitutional petition‑‑‑Re­-audit of registered person approved without notice by Central Board of Revenue few days after completion of third audit‑‑‑Validity‑‑‑Amount found due by last audit team as additional tax and penalty against the petitioner had been deposited‑‑‑Neither any reason nor, existence of exceptional circumstances had been stated for impugned approval of fresh audit‑‑‑Proposed action was unjustified as report did not show as to why a number of firms had been found suspected‑‑‑Powers vested in Board of Revenue under S.45‑A of Sales Tax Act, 1990 could not be exercised in such a manner=‑‑Board of Revenue could not ,recall order of subordinate Authority‑‑‑Record did not show that Board of Revenue had invoked its jurisdiction after calling for record of Deputy Collector (Refund)‑‑‑No action had been taken against the officer, whose order allowing revising of stock statements, if found to be illegal‑‑­Revenue could use last audit report in adjudication proceedings‑‑­Initiation of proposed action would not permit Revenue to block refund claim of petitioner till such time the Adjudicating Officer reaches a conclusion against petitioner and directs action against suppliers/ purchasers‑‑‑High Court allowed Constitutional petition and declared the impugned approval for fresh audit to be without lawful authority.

Shaukat Ali and other v: Government of Pakistan through Chairman, Ministry of Railways arid others PLD 1997 SC 342; Muhammad Latif & Co. v. Chief Settlement and Rehabilitation Commissioner and others PLD 1974 SC 130; Mrs. Shahida Zahir Abbasi and 4 others v. President of 'Pakistan PLD 1996 SC ' 632; Abdul Hafeez Abbasi and others v. Managing Director, Pakistan International Airlines Corporation Karachi and others 2002 SCMR 1034; Mian Iqbal Mahmood Banday v. Muhammad Sadiq PLD 1995 SC 251; Messrs Airport Support Services v. The Airport Manager, Quaid‑e‑Azam International Airport, Karachi and others 1999, SCMR 2268; Zain Yar Khan v. . Chief Engineer, C.B:R.C., WAPDA, D.A. Khan and another 1998 SCMR 2419; Messrs Faisal Enterprises v. Federation of Pakistan 2003 PTD 899 and Messrs Punjab Beverage Company (Pvt.) Limited v. Central Board of Revenue and 4 others 2001 PTD 3929 ref.

(b) Sales Tax Act (VII of 1990)‑‑‑

‑‑‑‑Ss. 22, 25 & 45‑A‑‑‑Sales Tax General Order No.1 of 1999, dated 7‑1‑1999‑‑‑Sales Tax General Order No.9'of 1999, dated 22‑9‑1999‑‑­Re‑audit of registered person‑‑‑Scope‑‑‑Re‑audit in routine would be conducted once during financial year‑‑‑Another audit could be conducted in exceptional circumstances.

(c) Sales Tax Act (VII of 1990)‑‑‑

‑‑‑‑Ss. 25, 36 & 45‑‑‑Amount found erroneously refunded to registered person in approved audit‑‑‑Recovery of such amount after service or show‑cause notice under S.36 of Sales Tax Act, 1990‑‑‑Validity‑‑­Adoption of such course, per se would be violative of adjudication proceeding contemplated under S.45 of Act, 1990.

(d) Taxation‑‑‑

‑‑‑‑ Person can adopt all legal modes to avoid taxation.

(e) Sales tax‑‑‑

‑‑‑‑ Audit report and material collected during course of, audit‑‑­Evidentiary value‑‑‑Principles explained.

Sales Tax Department takes the report of an audit as a gospel truth, which is against law and facts both. Most of the auditors are departmental officials with half‑cooked knowledge of accounting and trans‑national business transactions. Legally speaking, an audit report is at best an opinion of the auditor and a material, in support of the departmental version. It is nothing more than part of a charge‑sheet, which needs to be established through the process of adjudication. A material collected during the course of audit is only an evidence to support the case of the department in adjudication proceedings.

Syed Mansoor Ali Shah for Petitioner.

Ahmad Bilal Soofi for the Revenue.

2004 P T D 748

[Lahore High Court]

Before Maulvi Anwarul Haq, J

Messrs KHAN BROTHER (PVT.) LIMITED

versus

FEDERATION OF PAKISTAN through Federal Secretary Finance, Government of Pakistan, Islamabad and 2 others

Writ Petition No.917 of 2003, heard on 3rd November, 2003.

(a) Sales Tax Act (VII of 1990)‑‑‑

‑‑‑‑S.13(2)‑‑‑Exemption‑‑‑Provision of S.13(2), Sales Tax Act, 1990 .does .empower .the Federal Government and the Board of Revenue to exempt taxable supplies made in Pakistan or any goods or class of goods from the whole or any part of the tax chargeable under the Sales Tax Act, 1990‑‑‑Nothing is spelt out from the said provision that any person had a right to claim exemption‑‑‑Provision of S.13(2), Sales Tax Act, 1990 cannot be invoked as of right and the grant of said exemption is not a right.

(b) Sales Tax Act (VII of 1990)‑‑‑

‑‑‑‑Ss.12(2) & 6(1‑A)‑‑‑Customs Act (IV of 1969), S.31‑A‑‑‑S.R.O. 6(68) E&F/98 dated 27‑5‑1999, para. 5 (ii) & (iv)‑‑‑S.R.O. 816(1)/99 dated 1‑7‑1998‑‑‑Constitution of Pakistan (1973), Art. 199‑‑Constitutional petition‑‑‑Exemption‑‑‑Entitlement‑‑‑Importers had ‑ commenced their import operation under a clear understanding that the exemption in the matter of sales tax was not available‑‑‑Effect‑‑‑Provision of S.6(1‑A), Sales Tax Act, 1990 had the same effect as S.31‑A, Customs Act, 1969 has on the judgment in Al‑Samrez's case (1986 SCMR 1917) and said judgment would not be of any help to the importers as in the said case exemption was granted and then withdrawn‑‑‑Importers; in the present case, admittedly were not granted exemption by the Competent Authority and the importers were vying for the grant of said exemption, which, could not be granted as of right.

(c) Mala fides‑‑‑

‑‑‑‑ Mala fides was not to be attributed to the Legislature.

Ahmed Awais, M.S. Babar and Ibad‑ur‑Rehmar Lodhi for Petitioner.

Farhat Nawaz Lodhi and Shahzad Mazhar for Respondents.

Date of hearing: 3rd November, 2003.

2004 P T D 788

[Lahore High Court]

Before Maulvi Anwarul Haq and Abdul Shakoor Paracha, JJ

Messrs FACTO CEMENT SANGJANI, ISLAMABAD

versus

FEDERATION OF PAKISTAN through Secretary, Ministry of Finance and 4 others

Sales Tax Appeals Nos.87 and 105 of 2002, heard on 4th December, 2003.

Sales Tax Act (VII of 1990)‑‑‑

‑‑‑Ss.3, 2(16) & 45‑‑‑Constitution of Pakistan (1973), Fourth Sched., Federal Legislative List, Part I, Item No. 49‑‑‑Taxable supply ‑‑‑Assessee Company was involved in the business of production of cement‑‑­Limestone and clay being the essential raw material, leaseholders for mining limestone and clay had been obtained by the assessee and those were excavated by the assessee Company and then utilized in the process of :manufacture of cement‑‑‑Show‑cause notice for levy ‑of sales tax on the said self‑excavated and self‑consumed items to be used in the manufacturing of cement ‑‑‑Assessee contested the notice but the Department directed the assessee to pay sales tax alongwith additional tax and penalty‑‑‑Appellate Tribunal dismissed the appeal of the assessee against the Department‑‑‑Validity‑‑Once a taxable goods had been supplied by a person even to itself it would fall within definition of "taxable supply" notwithstanding the fact whether the sale had taken place or not between two persons‑‑‑Process of excavation of limestone ‑and clay was a process of manufacture and consequently 'a process in furtherance of taxable activity‑‑‑Limestone and clay were identifiable/ marketable goods on which the tax could, be levied and as such even if the taxable goods had been supplied by a person to itself the same would fall within the definition of taxable supply.

Messrs Vishnu Agencies (Pvt.) Ltd. v. Commercial Tax Officer and others AIR 1978 SC 449; Deputy Commercial Tax Officer, Saidapet, Madras and another v. Enfield. India Ltd., Cooperative Canteen Ltd. AIR 1968 SC 838; Bhopal Stigar Industries Ltd. M.P. and another v. D.P. Dube, Sales Tax Officer, Bhopal Region, Bhopal and another AIR 1964 SC 1037; Fauji Cement Company Ltd. through Secretary v. Additional Collector, Customs, Central Excise and Sales Tax. Islamabad and another 2002 PTD 609; Sheikou Sugar Mills Limited v. Government of Pakistan 2001 SCMR 1376 and Messrs Service Industries Ltd. v. Federation of Pakistan and 5 others 2002 PTD 2845 ref.

Mian Gul Hassan Aurangzeb for Appellant, Ms. Farhat Zafar for Respondents

Date of hearing: 4th December, 2003.

2004 P T D 795

[Lahore High Court]

Before Nasim Sikandar, J

Messrs FAROOQ WOOLLEN MILLS

versus

COLLECTOR OF CUSTOMS, CUSTOMS DRYPORT, SAMBRIAL and 2 others

Writ Petition No. 7865 of 2003, decided on 14th November, 2003.

(a) Customs Act (IV of 1969)‑‑‑

‑‑‑‑S.81‑‑Scope of S.81, Customs Act, 1969.

Section 81 of the Customs Act, 1969 provides for, provisional assessment of duty, subsection (1) thereof explains the reasons and the conditions in which a provisional assessment of duty can be made. The proviso to subsection (1) contemplates payment of additional amount as security or furnishing of bank guarantee by the importer or exporter to meet the excess of the final assessment of duty over the provisional assessment, subsection (2) of section 81 provides for a time limit of one year from the date of provisional assessment. Subsection (3) contemplates that on framing of final assessment the amount already paid or guarantees furnished shall be adjusted against the amount payable on the final assessment and the difference between the two shall be paid forthwith by the importer or exporter. Lastly subsection (4) of section 81 is a mere affirmative of proviso to subsection (2) stating that if a final assessment is not completed in the period given in subsection (2) the provisional assessment shall become final.

(b) Customs Act (IV of 1969)‑‑‑

‑‑‑‑S.81(2) & (4)‑‑‑Provisional assessment of duty‑‑‑Goods allowed to be cleared or delivered on the basis of final assessment was to be finally assessed within one year of the provisional assessment‑‑‑If the final assessment was not completed within that period, the provisional assessment shall become final‑‑‑Both the Department and the assesee, in the present case, had agreed that a period of more than two years since the passing of provisional assessment had already lapsed‑‑‑Assessment had thus become final under S.81(4) of the Customs Act, 1969 and the Department could not be allowed to take advantage of its own default.

(c) Customs Act (IV of 1969)‑‑‑

‑‑‑‑S. 81(1), proviso‑‑‑Provisional assessment of duty‑‑‑Maximum figure at which the interim assessment was made would not automatically mature into final assessment‑ ‑‑Principles elucidated‑‑‑No final assessment, in the present case, was made within the prescribed period and the taxpayer was not even informed for another year and it was only after expiry of almost two years that he demanded release of Bank guarantees when the Department came up with the plea that the provisional assessment had become final and therefore he was not entitled to the return of 'guarantees‑‑‑Validity‑‑‑Such plea of the Department was not available to the Revenue Authorities by any rule of reason, logic or law‑‑‑High Court rejected the plea of the Department and directed that the. Revenue will be obliged to return Bank guarantees submitted by the assessee within seven days when the present order was conveyed to it and after expiry of that period, for whatever reasons, if the guarantees were not released, the payment of interest or profit on these guarantees shall be the responsibility of the Revenue.

Generally provisional assessments under section 81 of the Customs Act, 1969 involve two amounts besides the declared value by the importer or exporter. Obviously the declared value is not acceptable to the Revenue and therefore a provisional assessment can be framed for the reasons stated in subsection (1) of section 81. The Revenue on the basis of comparable case or material available with it makes a tentative assessment. That tentative amount is the upper‑ceiling and at the same time the Assessing Officer leaving a room for allowing the importer or exporter a possibility to contest the same fixes a lower sum on which the duties and levies are charged to release the consignment while the upper limit is secured through payment of additional amount or a bank guarantee. The two sums disclose the mind of the Revenue. Provisional assessment could not in any case be less than the amount at which duties and levies are charged and the consignment released. It further indicates that the Revenue is of the tentative view that final assessment or valuation of goods will not increase normally beyond the upper limit. Therefore, the, difference between tentative minimum and maximum is secured by way of requiring payment of additional amount or bank guarantee. The payment of additional amount or bank guarantee having been‑ required to secure the tentative maximum in the mind of the Revenue it cannot mature into final assessment merely for the reason of expiry of the period of one year contemplated in subsection (4) of section 81. No mechanism is available in the Customs Act, 1969 whereby an importer or exporter can force the department to finalize an assessment. On the other hand the Revenue, if one goes by its interpretation, will gain by not doing anything. It may be noted that the Department having given the tentative maximum still remains comfortable as the importer/exporter remains at a disadvantageous position either depositing the additional amount or furnishing the bank guarantee on which he is liable to pay interest as long it remains intact.

The Revenue nay partly be correct in asserting that sub­section (4) of section 81 gives it protection against a slow or even a mala fide functionary. Also the maturity of provisional assessment into a final assessment after expiry of that period appears reasonable and in accordance with the, facts on ground. However, the contention of the Revenue that the maximum figure at which the interim assessment was made automatically matures into final assessment cannot be accepted. The proviso to section 81(1) of the Customs Act, 1969 makes it clear that an exporter will be required to pay additional amount as security or a bank guarantee, "to meet the excess of the final assessment of duty over the provisional assessment". These words indicate that the amount at which the consignment was released on payment of taxes and duties was the provisional assessment while the difference secured through Bank guarantee was tentatively the final assessment. The word "provisional" according to Chamber's 20th Century Dictionary, 1983 Edition means "provided for the occasion", "to meet necessity", "adopted can the understanding, that it will probably be changed later". The amount on which a consignment is generally released on payment of levies is therefore, provisional assessment as the goods are released on the understanding that it could be charged later. To secure the change which must happen in the form of final assessment or expiry of a period of one year additional amount as security or furnishing of Bank guarantee is required. Although the provisions of subsection (3) of section 81 do leave a room open for the possibility that the amount of provisional assessment including the one for which, a bank guarantee was required could further be pushed up at the final assessment stage yet that probability is not strong enough to restrain one from interpreting the term provisional assessment in the above manner.

In the present case no final assessment wag made within the prescribed period and the taxpayer was not even informed for another year. It was only after expiry of almost two years that he demanded release of bank guarantee when the Department came up with the plea that provisional assessment had become final and therefore he was not entitled to return of the guarantee.

The above defence is not available to the Revenue Authorities by any rule of reason, logic or law. Therefore, it shall be rejected. The Revenue will be obliged to return bank guarantees submitted by the assessee within 7 days when the present order is conveyed to it. After expiry of that period, for whatever reason if the guarantees are not released, the payment of interest or profit on these guarantees shall be the responsibility of the Revenue.

Chamber's 20th Century Dictionary, 1983 Edn. ref.

Muhammad Akram Nizami for Petitioner.

Dr. Sohail Akhtar for the Revenue.

2004 P T D 811

[Lahore High Court]

Before Muhammad Sair Ali, J

Messrs ESSEM POWER (LTD.), ESCORTS HOUSE through Company Secretary Mr. Qaim Mehdi

Versus

FEDERATION OF PAKISTAN through Secretary, Ministry of Finance and 2 others

Writ Petition No. 15058 of 2003, heard on 14th January, 2004.

Income Tax Appellate Tribunal Rules, 1981‑‑‑

‑‑‑‑R.20‑‑‑Constitution of Pakistan (1973), Art.199‑‑‑Constitutional petition‑‑ Interpretation, scope and application of R.20, Income Tax Appellate Tribunal Rules, 1981‑‑‑"Default of hearing"‑‑‑Concept‑‑‑of assessee for rehearing the appeal on the ground that announcement of the judgment by the Tribunal after nine months amounted to "default of hearing" by the Tribunal and that the case deserved rehearing‑‑‑Validity‑‑‑None of the parties, in the present case, were in default during the hearing of the appeal before the Tribunal; Counsel for the assessee had admitted that both the parties appeared and participated in the appeal hearing and were not absent and the judgment was neither, a default nor an ex parte judgment‑‑‑Delayed delivery of judgment, in circumstances, did not amount to "default of hearing" for invoking proviso to R.20 by the assessee‑‑‑Principles.

Examination of Income Tax Appellate Tribunal Rules, 1981, rule 20 shows that the Tribunal is empowered under sub‑rules (2) and (3) of the said Rules to proceed ex parte and decide the appeal on merits in case of non‑appearance of any of the parties or both the parties before it and pronounce a judgment on merits. The proviso to Rule 20 under sub‑rule (3) provides that the "Tribunal may recall the order passed under this Rule if the party in default applies within 30 days ... ... . and satisfies the Tribunal that he was prevented by any sufficient cause from appearing ... ... ..." The assessee, in the present case, invoked the proviso to file application against order of the Tribunal dismissing its appeal on the ground of elapse of nine months in the judgment and the hearing of the appeal.

The resort to the proviso is available to a "party in default" to show a "sufficient cause" preventing it from appearing before the Tribunal on the day of appeal hearing. In the present case, none of the parties 'were in default during the hearing of the appeal before the Tribunal. The counsel for the assessee admitted that both the parties appeared and participated in the appeal hearing and were not absent and that the judgment was neither a default nor an ex parte judgment. He however, contended that delayed delivery of judgment amounts to "default of, hearing" wherefore the proviso could be invoked by the assessee.

This argument has no weight. The words "party in default" as used in proviso to Rule 20 is obviously meant for the person or persons failing to appear and, attend the hearing of appeal before the Tribunal in terms of sub‑rule (2) or sub‑rule (3) of Rule 20 and thus inviting a judgment in default or ex parte.

These sub‑rules respectively apply where "the appellant or the respondent does not appear" (sub‑rule (2)) or where "both the parties remain absent" (sub‑rule (3)), the Tribunal may decide the appeal on merits. The proviso provides a remedy against the decisions made by the Tribunal in the absence of one or both the parties referred to in the proviso as "the party in default". Such "party in default" can apply within thirty days to the Tribunal for recalling the order by proving that such party was prevented by a sufficient cause from appearing when the case was called on for hearing. This remedy is against default or ex parte decisions if the non‑appearing party can show a sufficient cause for its absence. The word "party in default" as used in the proviso and in the context of Rule 20 of ITAT Rules can by no stretch be interpreted to mean "the default in hearing". Default in hearing is denying an opportunity of hearing to a party even when the party was present before the Court or the Tribunal. The terms "party in default" and "default in hearing" or non‑hearing connote different meanings and arise out of different situations and entail different consequences. The non‑appearing party denies itself the hearing by remaining absent from the Court when the case is called for hearing. Its default in appearance becomes the reason for the judgment in default or ex parte judgment by the Court. Contrarily the default in hearing a party is attributable to the Court before whom the party or the parties appear but are denied the opportunity by the Court to submit their case either adequately or otherwise. The absence of hearing can also arise from the absence of notice or adequate notice in the case. As a consequence of no notice or inadequate notice if a party is unable to attend the Court on the day the case was fixed, remedy of the application under the proviso can be availed of if a decision is made on such non‑appearance of a party. If a party attends and participates in the hearing of the case proceedings, the proviso to Rule 20 will not be applicable.

"Hearing" is obviously a proceeding where the parties are heard or evidence is taken to determine the issue and also to record decision on the basis thereof. It consists of any confrontation, oral or otherwise, between an affected individual and the decision maker sufficient to allow individual to present his case in a meaningful manner. Sub‑rules (2) and (3) of Rule 20 of ITAT Rules can only be resorted to by the Tribunal to proceed ex parte or in default upon non­appearance of one or both the parties. Sub‑rule (1) however applies where both the parties appear. On the appearance of both the parties, the Tribunal under sub‑rule (1) is bound to give hearing to both the parties. Scope of these sub‑rules is thus well defined. Each sub‑rule applies to a distinct situation. A judgment delivered after hearing the parties under sub‑rule (1) cannot be recalled by the Tribunal under the proviso, which is applicable only to judgments delivered under sub‑rule (2) or (3) of Rule 20.

Assessee's application before the Tribunal under the proviso was not maintainable as the assessee was not a party in default. It had appeared through its counsel and had fully participated in the appeal proceedings.

Syed Iftikhar‑ud‑Din Shaider Gardazi v. Central Bank of India Ltd., Lahore 1996 SCMR 669 and Aftab Ahmad C/o Automotive Components Ltd., Lahore v. Assistant Commissioner of Income‑tax and others PTR No. 1 of 1998 ref.

Sajid Ijaz Hotiana for Appellant.

Nemo for Respondent.

Date of hearing: 14th January, 2004.

2004 P T D 817

[Lahore High Court]

Before Nasim Sikandar and Muhammad Sair Ali, JJ

COLLECTOR OF CUSTOMS, LAHORE

Versus

Messrs GULSHAN INTER TRADE, LAHORE

C. As. Nos. 133, 134 and 135 of 2003, decided on 6th October, 2003.

Customs Act (IV of 1969)‑‑‑

‑‑‑‑S.196‑‑‑Appeal to High Court ‑‑‑Misdeclaration with regard to quantity as well as the origin of goods‑‑‑Order of the Tribunal had not given rise to any question of law which was sine qua non for exercise of appellate jurisdiction by the High Court‑‑‑Tribunal had found it as a fact that in the given situation, the amount of fine as well as the penalty was harsh inasmuch as immediately on arrival of the consignment the importer himself made a .request for reshipment of goods to the exporter and the Tribunal was also of the view that mere non‑mentioning of imported goods in Appendix B of the Import Policy Order did not make the item as a banned item merely for the reason of its Indian origin‑‑­Tribunal having exercised a discretion vested in it under law for the reasons which found support from the record, High Court declined interference.

Zahid Farani for Appellant.

2004 P T D 819

[Lahore High Court]

Before Tassaduq Hussain Jilani and Bashir A. Mujahid, JJ

COLLECTOR OF CUSTOMS, CUSTOM HOUSE, LAHORE

Versus

SAHIB ULLAH

Customs Appeal No. 168 of 2003, decided on 17th November, 2003.

Customs Act (IV of 1969)‑‑‑

‑‑‑‑S. 181‑-‑Personal Baggage and Gift Scheme (Import of Vehicles) Rules, 2000, R.3(4)‑‑‑General Clauses Act (X of 1897), S.21‑‑‑Principle of locus poenitentiae‑‑‑Executive notification, validity of‑‑‑Non-retrospective effect of amended notification‑‑‑Additional Collector Customs, in the light of an amended notification brought about under the first proviso of S. 181 of Customs Act, 1969, applying it retrospectively, to the act of the respondent, barred the Custom Authorities to give option to the respondent to pay fine in lieu of the confiscation of the imported vehicle, considering the import of vehicle to be in violation of R.3(4) of the Personal Baggage and Gift Scheme (Import of Vehicles) Rules, 2000‑‑‑Appellate Tribunal set aside the order of the Additional Collector in appeal‑‑‑Held, that the right of respondent as provided under S.181 of Customs Act, 1969 to pay fine in lieu of confiscation could not be taken away arbitrarily, as under the principle of locus poenitantia where a Central Authority had provided a power to a department to issue executive notification, the Central Authority also had the power to add to, amend, vary or rescind any such notification‑‑­Executive notification, which is detrimental or prejudicial to the interest of a person, cannot operate retrospectively, however, a beneficial executive notification issued by an executive functionary can be given retrospective effect.

Elahi Cotton Mills Limited and. others v. Federation of Pakistan through Secretary, Ministry of Finance, Islamabad and others PTCL 1997 CL 260 and Army Welfare Sugar Mills Limited and others v. Federation of Pakistan and others 1992 SCMR 1652 ref.

Ahmer Bilal Soofi for Appellant.

2004 P T D 823

[Lahore High Court]

Before Nasim Sikandar and Muhammad Sair Ali, JJ

COLLECTOR OF SALES TAX AND CENTRAL EXICSE, LAHORE

Versus

BABA FARID SUGAR MILLS LIMITED, FAISALABAD ROAD, OKARA

C.A. Nos. 85 to 94 and 99 of 2002, decided on 2nd October, 2003

(a) Sales Tax Act (VII of 1990)‑‑‑

‑‑‑‑Ss. 33, 34 & 46‑‑‑Additional tax‑‑‑Appeal to Appellate Tribunal‑‑­Appellate Tribunal, while setting aside the order of levy of additional tax and imposition of penalties by the Department, after the assessee had failed in convincing the Tribunal of their arguments against such levy etc., ought to have assigned reasons in view of Ss. 23 & 24, Sales Tax Act, 1990.

(b) Sales Tax Act (VII of 1990)‑‑‑

‑‑‑‑Ss. 3, 7, 33 & 34‑‑‑Bagasse consumed as in‑house fuel by the assessee, a sugar manufacturer, was chargeable to sales tax‑‑‑Default in payment of such levy‑‑‑Charge of additional tax, and imposition of penalties‑‑‑Validity‑‑‑High Court restored the order‑in‑original imposing additional tax as well as penalties with the direction that amendments made in S.34, Sales Tax Act, 1990 being the beneficial one and made during pendency of proceedings, Revenue shall charge the additional tax at the rate which was applicable in similar cases.

Maqsood Ahmad for Appellant.

Mian Abdul Ghaffar for Respondent.

Date of hearing: 31st July, 2003.

2004 P T D 965

[Lahore High Court]

Before Maulvi Anwarul Haq and Abdul Shakoor Paracha, JJ

Mst. RASHIDA BEGUM

Versus

INCOME TAX APPELLANT TRIBUNAL, ISLAMABAD BENCH, ISLAMABAD and another

Tax Reference No. 3 of 1993, heard on 11th December, 2003.

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

‑‑‑‑S.136(2)‑‑‑Reference‑‑‑Decision of the Tribunal declining to refer the question alongwith other questions to High Court, was not challenged in the manner prescribed in S.136(2), Income Tax Ordinance, 1979‑‑Such objection was not raised when the appeal was heard by the Tribunal and even during a sufficiently long period elapsing between the hearing and delivery of judgment‑‑‑High Court declined to enter upon the said controversy.

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

‑‑‑‑Ss.136 & 27‑‑‑Reference to High Court‑‑‑Adventure in the nature of trade‑‑‑Finding of fact recorded by the Tribunal and not denied by the assessee was to the effect that the assessee, in fact, was running a real estate business and she was being continuously assessed vis‑a‑vis the returns being filed by her for the income received from the, said source‑‑­Property in question, a hotel, was purchased by the assessee in August, 1982 and was sold during the said assessment year‑‑‑Reasons recorded by the Tribunal that the assessee was never involved in the hotel business, the building admittedly remained on lease from the date when its possession was delivered to the assessee till it was sold and that the assessee being in the trade of estate agency had waited for an appropriate time to dispose of the building at the best price, could not be said to be inappropriate or perverse‑‑‑Finding of fact recorded was that the transaction was in line with the business or trade usually being undertaken by the assessee i.e. sale and purchase of immovable property for deriving profits and that she was being regularly assessed for the income on the said account‑‑‑Transaction pertaining to immovable property of such nature, would not constitute an adventure in the nature of trade, provided it was in line with the business or trade of the assessee‑‑‑Such transaction, in circumstances, could not be termed as isolated transaction and thus was not an adventure in the nature of trade.

Radha Vilas Karyalaya, Varanasi v. Commissioner of Income Tax, Lucknow 71 ITR 279 (All.); Michael A. Kallivapalil v. Commissioner of Income Tax, Kerala (1976) 102 ITR 202; Commissioner of Income Tax v. Anandlal Bechari Al & Co. 1990 PTD 345; Sarojkumar Mazumdar v. Commissioner of Income Tax, West Bengal (1959) 37 ITR 242; Ramnarain Sons (Pvt.) Ltd. v. Commissioner of Income Tax, Bombay (1961) 41 ITR 534; V.S.R. Firm v. Commissioner of Income Tax, Madras (1963) 47 ITR 720; Shri Ram Jha v. Commissioner of Income Tax U.P. (1957) 31 ITR 987) (All.), Commissioner of Income Tax v. Mohammad Mohideen (1989) 176 ITR 393 (Mad.); Julian Hoshang Dinshaw Trust and others v. Income Tax Officer, Circle XVIII, South Zone, Karachi and others 1992 SCMR 250 = 1992 PTD 1; Messrs Nafees Cotton Mills Ltd., Lahore v. Income Tax Appellate Tribunal, Lahore and 2 others 2001 PTD 1380; Messrs Schowk International (Pvt.) Ltd. v. Commissioner of Income‑tax 2002 PTD 498; Commissioner of Income Tax/Wealth Tax, Companies Zone‑III, Lahore v. Messrs Margala Textile Mills Limited, Lahore 2002 PTD 327; Smt. Indramani Bai and another v. Commissioner of Income Tax (Addl.) 1993 PTD 988 arid G. Venkataswami Naida & Co. v: Commissioner of Income Tax AIR 1959 SC 359 ref.

(c) Income‑tax‑‑‑

‑‑‑‑Adventure in the nature of trade‑‑‑Determining factors stated.

It is the intention, to be gathered from the circumstances, with which the property was acquired to determine the nature of the ultimate transaction of resale and further that in considering whether a transaction is an adventure in the nature of trade, matter is to be approached in the light of the intention of the assessee having regard to the legal requirements which are associated with the concept of trade or business. An isolated transaction of such a nature would not constitute the adventure in the nature of a trade. Not only the character of such a transaction but several factors arc relevant such as, whether the purchaser was a trader and the purchase of the commodity and its re‑sale were allied to his usual trade or business or incidental to it, the nature and quantity of the commodity purchased and re‑sold; and act subsequent to the purchase to improve the quality of the commodity purchased thereby made it more readily resaleable, any act prior to the purchase showing a design or purpose, the incidents associated with the purchase and resale, the similarity of the transaction to operations usually associated with the trade or business, the repetition of the transaction. In each case, it is the total effect of all relevant factors and circumstances that determines the nature of the transaction.

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

‑‑‑‑S.27(2)(ii)‑‑‑Capital gain‑‑‑Immovable property is not included in capital asset for purposes of capital gain.

Sikandar Hayat Khan for Petitioner.

Miss Shaheena Akbar for Respondents.

Date of hearing: 11th December, 2003.

2004 P T D 1048

[Lahore High Court]

Before Nasim Sikandar and Muhammad Sair Ali, JJ

Messrs BHOLA WEAVING FACTORY

Versus

CUSTOMS, EXCISE AND SALES TAX APPELLATE TRIBUNAL and another

Civil Appeals Nos. 312 to 326 of 2002, decided on 4th December, 2003.

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

----Ss. 33(4-A), 34 & 36---Securing sales tax refund of Rs.2,057 on basis of fake invoices---Plea of assessee was that claim of such refund was made due to lack of knowledge as to status of suppliers---Authority directed for recovery of such amount from assessee alongwith additional tax under Ss. 34 & 36 and penalty of Rs.25,000 under S. 33(4-A) of Sales Tax Act, 1990---Tribunal reduced amount of penalty to Rs.10,000 as assessee had paid principal amount and additional tax ---Validity--­Imposition of penalty and its reduction by Tribunal was still on higher side---Intention of assessee to commit fraud did. not exist---Department and Tribunal should have allowed assessee an allowance for absence of mens rea and for not contesting charge and having willingly repaid refund alongwith additional tax---Purpose of penalty provisions and intended deterrence would be well-served, if amount of penalty was reduced to a token sum of Rs.250---High Court allowed appeal.

Additional Commissioner of Income-tax v: Narayandas Ramkishan 1994 PTD 199 rel.

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

----S. 33--Penalty---Mens rea---Proof of ---Mens rea is an essential ingredient in penalty proceedings taken against assessee---Levy of penalty is a matter of discretion to be exercised judiciously---Penalty should not be imposed merely because doing so would be lawful---Levy of penalty should be refused, where offence is of technical or venial in nature.

The nature of penalty provisions in taxing statutes and the proceedings held to bring assessee home are criminal or at least quasi ­criminal in nature. In such-like proceedings, proving of mens rea is an essential ingredient. Revenue is under a statutory obligation to prove that assessee had acted deliberately in defiance of law or was guilty of conduct contumacious or dishonest or acted in conscious disregard of his obligation.

Levy of penalty is a matter of discretion, which must be exercised by the Authorities judiciously on consideration of relevant circumstances. Penalty should not be imposed merely because it is lawful to do so. If the offence is of a technical or venial in nature, the Authorities will be justified in refusing to levy penalty.

Additional Commissioner of Incomes-tax v. Narayandas Ramkishan 1994 PTD 199 fol.

Shafaqat Mahmood Chohan for Appellant.

A. Karim Malik for the Revenue.

2004 P T D 1123

[Lahore High Court]

Before Nasim Sikandar and Jawwad S. Khawaja, JJ

Messrs MOLVI BROTHERS

Versus

COMMISSIONER OF INCOME-TAX, FAISALABAD

C.T.R. No.64 of 1993, decided on 21st December, 2000.

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

----S. 136---Reference to High Court---Party at whose instance question was referred, remained absent at the time of hearing of case---Effect---High Court would decline to answer.

Dada Bahi H. Mama & Sons, Karachi v. Commissioner of Income Tax (1967) 16 Tax 43 and M. M. Ispahani Ltd. v. Commissioner of Excess Profits Tax West Bengal (1955) 27 ITR 188 ref.

Nemo for Petitioner, Muhammad Ilyas Khan for Respondent

Date of hearing: 21st December, 2000.

2004 P T D 1128

[Lahore High Court]

Before Nasim Sikandar and Jawwad S. Khawaja, JJ

COMMISSIONER OF INCOME-TAX, ZONE-B, LAHORE

Versus

Messrs ABID HUSSAIN BHATTI

C.T.R. No.321 of 1991, decided on 2nd November, 2000.

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

----S. 13---Income Tax Act (XI of 1922), S. 4---Making any addition as deemed income---Essentials--Issuance of notice to assessee hand approval of IAC would be necessary before making any addition as "deemed income" under S. 4 of Income Tax Act, 1922 and S. 13 of Income Tax Ordinance, 1979---Approval of assessment order as a whole by IAC would have no validity in eye of law and the same could not be treated as substitute for specific approval of any amount to be added.

Messrs Khurram Sagir Industries Ltd. v. CIT Zone-A, Lahore C. T. R. No. 107 of 1991 fol.

Muhammad Ilyas Khan for Petitioner.

Nemo for Respondent.

Date of hearing: 2nd November, 2000.

2004 P T D 1132

[Lahore High Court]

Before Mansoor Ahmad, J

MARGALA TEXTILE MILLS LIMITED

Versus

FEDERATION OF PAKISTAN through Ministry of Finance, Revenue and Economic Affairs, Islamabad and others

Writ Petition No.1956 of 1996, decided on 5th July, 2001.

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

----S. 18-B---S.R.O. 1198(I)/1996, dated 22-10-1996---Constitution of Pakistan (1973), Art. 199---Constitutional petition---Levy of 2% service charges under S.18-B of Customs Act, 1969 through S.R.O. 1198(I)/1996---Validity---High Court by following judgment of Supreme Court (1999 SCMR 1402) accepted Constitutional petition, declared such, levy as ultra vires and struck down the same.

Collector of Customs and others v. Sheikh Spinning Mills 1999 SCMR 1402 fol.

Kh. Muhammad Akram for Petitioner.

2004 P T D 1169

[Lahore High Court]

Before Ali Nawaz Chowhan, J

MUHAMMAD HUSSAIN & SONS

Versus

TAXATION OFFICER

Writ Petition No.8295 of 2003, heard on 20th February, 2004.

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

----Ss.80-BB & 80-C---Constitution of Pakistan (1973), Art. 199­Constitutional petition---Maintainability---Question involved in the case was as to whether loading and unloading would constitute a part of "transportation" or not---Such aspect did not entail any detailed factual inquiry, therefore, Constitutional petition was maintainable.

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

----Ss.80-BB & 80-C---Constitution of Pakistan (1973), Art.199--­Cons.titutional petition---Income derived from plying of goods trans­port vehicles---"Transportation" and "ply"---Meaning---Provisions of Ss.80-BB & 80-C, Income Tax Ordinance, 1979 were to be read in harmony and any interpretation was to be made accordingly---Taxation Officer, in the present case, had failed to amplify his opinion with reference to the meanings of words "transportation" and "to ply" as used in the relevant S.R.O. and sections of the statute---High Court in circumstances, directed the Taxation Officer to interpret the whole issue involving the said words in accordance with their meanings, given in the judgment of the High Court and come to a conclusion accordingly---If the Taxation Officer needed to take any guidance from the Commissioner who was the Controlling Officer, he should have no reservation about the same---High Court further observed that the impugned assessment order will not be acted upon until the new finding had been given by the Taxation Officer---Principles.

Section 80-BB, Income Tax Ordinance, 1979 in its text uses the words "in respect of income derived from plying of goods transport vehicles".

"Transportation" means: "the movement of goods or persons from one place to another, by a carrier". Whereas, the meanings of word ply'are to use or wield diligently or vigorously, to make regular journeys over a route; to make one's way, direct one's course'.

Section 80-BB which was brought on the statute book by the Finance Ordinance, 2000, dealt with such matters.

According to the present situation, section 80-BB and section, 80-C are to be read in harmony and any interpretation shall be done accordingly.

Taxation Officer, in the present case, had failed to augment with reference to the meanings of these words which were boldly used in the S.R.O. and the relevant sections and Was himself looking for decision of a superior Court for enabling him in taking a correct decision.

High Court directed the Taxation Officer to interpret the whole issue involving these words in accordance with their meanings, given above, and come to a conclusion accordingly. In case the Taxation Officer has to take any guidance from his Commissioner who is the Controlling Officer, he should have no reservation about it.

The assessment order which was impugned, therefore, will not be acted upon until the new finding had been given.

Black's Law Dictionary and Chambers' Twentieth Century Dictionary ref.

(c) Words and phrases---

--------“Transportation” and "ply"---Meaning.

Black's Law Dictionary and Chambers' Twentieth Century Dictionary ref.

Latif Ahmad Qureshi for Petitioner.

Shahid Jamil for Respondent.

Dates of hearing: 19th and 20th February, 2004.

2004 P T D 1263

[Lahore High Court]

Before Nasim Sikandar and Muhammad Sair Ali, JJ

Messrs RAHIM BAKHSH through General Manager

Versus

COMMISSIONER OF INCOME-TAX, LAHORE

Income Tax Appeals Nos.512 and 513 of 2000, heard on 6th October, 2003.

Income Tax---

---- Addition---Assessee, a public limited company engaged in manufacturing of yarn---Rejection of wastage declared by the assessee--­No deficiency was pointed out in the books maintained by the assessee--­Loss shown by the assessee due- to dryage was a normal and unavoidable feature of the manufacturing process and the same could be verified from the quantitative details of the cotton purchased, consumed and the yarn manufactured given in the record maintained for the purpose of excise duty---Rejection of claimed dryage was not factually correct as their addition to the total production resulted in absurdity-- -Appellate Tribunal, in circumstances, was not justified to uphold the addition on account of alleged suppression of production, without finding any defect or discrepancy in the books of accounts of assessee---Principles.

Tanvir Textile Mills Ltd. v. Commissioner of Income-tax 1990 PTD 254 fol.

Mian Ashiq Hussain for Appellant.

Mian Yousaf Umar for Respondent/Revenue.

Date of hearing: 6th October, 2003.

2004 P T D 1339

[Lahore High Court]

Before Ali Nawaz Chowhan, J

MEGNA TEXTILE MILLS

Versus

COLLECTOR OF CUSTOMS

Writ Petition No.5150 of 2003, decided on 27th February, 2004.

(a) Sales Tax Act (VII of 1990)‑‑‑

‑‑‑‑Ss. 40, 40‑A & 38‑‑‑Criminal Procedure Code (V of 1898), Chap. VII, (Ss. 94 to 105), Ss.96 & 97‑‑‑Constitution of Pakistan (1973), Art. 199‑‑‑Constitutional petition‑‑‑Search with or without warrant‑‑­Procedure for carrying on search and seizure‑‑ Principles‑‑‑Action under S.40 Sales Tax Act, 1990 had to be carried on under the provisions of Chap. VII, Criminal Procedure Code pertaining to search and seizure‑‑ Search without warrant was possible provided a Sales Tax Officer not' below the rank of an Assistant Collector of Sales Tax had reasons to believe that a document which was required for investigational purposes or proceedings may be concealed or likely to be removed before a search could be effected under S.40, Sales Tax Act, 1990‑‑‑After expressing his such belief through a statement in writing, said officer could cause search to be made for documents or things in that place‑‑‑Copy of the statement with respect to the place of search was to be delivered to the occupier as provided by S.40‑A(2) of the Sales Tax Act, 1990‑‑‑No material was shown, in the present case, which would reflect the basis for the belief of Assistant Collector of Sales Tax for adopting the extraordinary remedy of search without warrant and the apprehension he might have for an action under S.40‑A‑‑‑Effect‑‑‑Lightening action under S.40‑A of the Sales Tax Act, 1990 was to be taken on the basis of said belief to be transcribed in the shape of a written statement which was the prelude to the action initiated‑‑‑Search and seizure by Government functionaries which was required to be done in a particular way having not been done in accordance with law, had no legal value.

According to the Sales Tax Act, 1990, there were provisions pertaining to the accessibility of the record and the powers of the Department for its procurement in case action under section 38 was not sufficient. The other two sections are 40 and 40‑A of the Sales Tax Act, 1990. The latter having been incorporated by Finance Act, 1994. Both are relevant sections for purposes of search with or without warrant.

Action under section 40 of the Sales Tax Act, 1990 has to be carried on under the provisions of Chapter VII of the Cr.P.C. pertaining to search and seizure.

Section 96 of the Cr.P.C. lays down the procedure for issuance of a search warrant. Section 97 of the Cr.P.C. allows power to restrict warrant and requires the intervention of a Court for initiating the action. Whereas, according to section 40‑A, Sales Tax Act, 1990 search without warrant was possible provided a Sales Tax Officer not below the rank of an Assistant Collector of Sales Tax Department has reasons to believe that a document or thing which is required for investigational purposes or proceedings and which may be concealed or likely to be removed before a search can be effected under section 40 after expressing his belief through a statement in writing and cause search to be made for documents or things in that place. According to section 40‑A(2), after a search is made, a copy of the statement with respect to the place of search is to be delivered to the occupier.

The question, in the present case is, were these provisions of law followed. The Department in their statement challenged the maintainability of the Constitutional petition calling it premature and without showing a cause of action and sought for its dismissal also on the ground that proceedings were pending adjudication before a Collector and statutory remedy more efficacious than the writ jurisdiction was available.

The scrutiny of notice under section 40‑A, Sales Tax Act, 1990 shows that it is only signed by the Superintendent Sales Tax. However, the resumption memo on scrutiny shows that it is signed by the Assistant Collector with signatures of others.

Nothing explicitly has been stated with respect to the factum of raid.

No notice is shown to have been given to the petitioner under section 38 of the Sales Tax Act for making the alleged concealed record accessible to the Department.

The Assistant Collector in his reply has categorically stated that as he had to conduct plural raids, it was not possible for him personally to conduct the raid at the premises of the petitioners and, therefore, he caused the search to be conducted through the Deputy Superintendent to resume the record.

No material has been shown which would reflect the basis for the belief of Assistant Collector of Sales Tax for adopting the extraordinary remedy of search without warrant and the apprehension he may be having for an action under section 40‑A. The lightening action under section 40‑A is to be taken on basis of such a belief to be transcribed in the shape of a written statement which is the prelude to the action to be initiated.

Search and seizure by Government functionaries which is required to be done in a particular way and was not done in accordance with law, has no legal value.

The seizure of the documents, in the present case, had not taken place in the presence of the Assistant Collector which is an admitted position. The words `search or cause search to be made" appearing in section 40‑A, obviously imply in the right spirit of this section that either the Assistant Collector be physically present during the search or causes search in his presence. But this cannot be achieved through proxy while he himself is away somewhere.

The intention of the Legislature in empowering the Assistant Collector or person only above him has a rationale and this is to protect the rights of the citizens and their privacy guaranteed by the Constitution, otherwise there would be anarchy and a perennial threat to the citizens.

The documents which were required, could have been asked for under the provisions of section 38 or search could have been effected under section 40 or action followed strictly in accordance with the provisions of section 40‑A.

(b) Constitution of Pakistan (1973)‑‑­-

‑‑‑‑Art.199‑‑‑Constitutional jurisdiction of High Court‑‑‑Scope‑‑‑High Court has jurisdiction to look into the question of abuse of power on the part of public functionaries and where mala fides are alleged, through the exercise of its Constitutional jurisdiction‑‑‑Such powers can be exercised in spite of the fact that there exists statutory bodies having appellate or revisional or review jurisdiction.

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

‑‑‑‑S.40‑A‑‑‑Search without warrant‑‑‑Words "search or cause search to be made" imply that either the Assistant Collector be physically present during the search or causes search in his presence but this cannot be achieved' through proxy while he himself is away somewhere.

Shafqat Mahmood Chohan for Petitioner.

A. Karim Malik for Respondent.

Dates of hearing: 10th and 13th February, 2004.

2004 P T D 1388

[Lahore High Court]

Before Ali Nawaz Chowhan, J

Messrs PRIME CHEMICALS through Member of Association of Person

Versus

GOVERNMENT OF PAKISTAN through Secretary Finance, Islamabad and 3 others

Writ Petition. No. 7967 of 2003, decided on 16th December, 2003.

(a) Words and phrases‑‑­

‑‑‑‑"Adjudicate"‑‑‑Connotation‑‑‑To adjudicate, necessarily implies settling a matter‑‑‑Word adjudicate' is synonymous with the wordadjudge'‑‑‑Adjudicatory process may be before an administrative authority or before a Court of law‑‑‑Even if it is before an administrative agency, the rights are to be adjudged after notice to parties affording them opportunity of hearing and appraisal of record.

People v. Rave 364, III, 72, 3 N.E. 2d 972, 975; Allegpeny Ludlum Steel Corp. v. Pennsylvania Public Utility Com'n, 501 pa. 71, 459A. 2d 1281 1221 ref.

(b) Sales Tax Act (VII of 1990)‑‑‑

‑‑‑‑S.7‑‑‑Constitution of Pakistan (1973), Art. 199‑‑‑Constitutional petition‑‑‑Imposing of sales tax‑‑‑Factual inquiry, non‑conducting of‑‑­Grievance of the petitioner was that the order‑in‑original passed by the authorities was not based upon proper factual inquiry‑‑‑Petitioner contended that the authorities while passing the order had relied upon the facts of some other case which were not applicable to the case of the petitioner‑‑‑Validity‑‑‑Factual inquiry based on record for purpose of adjudication had to be conducted‑‑‑Bald statement of the authorities that the case of the petitioner and of an other being identical, the order was extendable even to the petitioner, made it no order in the eye of law‑‑­Such order had violated the purpose of adjudication as well as the principle of natural justice, which required formulation of a speaking order, disposing of a case after discussion of factual position and giving judgment on such basis‑‑‑Order passed by the authorities against the petitioner was not an order on the touchstone of the standards laid for the purposes of adjudication‑‑‑Such order was perverse and was nullity in the eye of law and the same deserved to be quashed‑‑‑High Court directed the Deputy Collector Customs, Sales Tax and Central Excise (Adjudication), to re‑write the order afresh after hearing the petitioner and to dispose of the matter in accordance with the observation made by High Court‑‑‑Constitutional petition was allowed accordingly.

Samuel Goldwyn, Inc. v. United Artists Corporation C.C.A. Del., 113 F.2d, 703, 706 and Campbell v. Wyoming Development Co. 55 Wye. 347, 100 P.2d 124, 132 ref.

Muhammad Azhar for Petitioner.

Ahmad Sibtain Fazli for Respondents.

2004 P T D 1460

[Lahore High Court]

Before Nasim Sikandar and Muhammad Sair Ali, JJ

Messrs PUNJAB BEVERAGES (PVT.) LTD., FAISALABAD

Versus

CUSTOMS, CENTRAL EXCISE AND SALES TAX APPELLATE TRIBUNAL and another

Central Excise Appeal No.380 of 2001, decided on 30th September, 2003.

(a) Excise Duty on Production Capacity (Aerated Waters) Rules, 1990‑‑‑

‑‑‑‑Rr. 7‑A(3) & 10(2)‑‑‑Demand of excise duty and additional tax for period prior to actual installation of permitted spouts‑‑‑Central Board of Revenue through letter, dated 27‑2‑1993 allowed assessee to install additional spouts w.e.f. 1‑1‑1993‑‑‑Such spouts were actually installed w.e.f. 1‑4‑1993‑‑‑Revenue raised demand of excise duty and additional tax w.e.f. 1‑1‑1993 to 31‑3‑1993‑‑‑Validity‑‑‑Board having granted permission on 27‑2‑1993 could not demand duty two months prior to grant of such permission ‑‑‑Assessee could not be required to pay tax even before a taxable activity had come into being‑‑‑Tax‑payer, irrespective of his consent, could not be burdened with payment of duty before machinery to be used in taxable activity was actually installed‑‑‑Machinery had actually been installed only after such permission‑‑‑High Court accepted appeal and set aside demand of excise duty for impugned period alongwith additional tax and penalty.

(b) Taxation‑‑‑

‑‑‑‑ Assessee could not be required to pay tax even before a taxable activity had come into being.

(c) Taxation‑‑‑

‑‑‑‑Tax‑payer, irrespective of his consent, could not be burdened with payment of duty before machinery to be used in taxable activity was actually installed.

(d) Interpretation of statutes‑‑-

--‑Fiscal statute‑‑‑Where two equally acceptable interpretations of a provision were possible, then the one favourable to tax‑payer should be adopted.

Ali Sibtain Fazli for Appellant.

Ch. Muhammad Hussain for Revenue.

2004 P T D 1609

[Lahore High Court]

Before Nasim Sikandar and Muhammad Sair Ali, JJ

Messrs HOLIDAY INN, MULTAN

Versus

ADDITIONAL COLLECTOR CUSTOMS, CENTRAL EXCISE AND SALES TAX (ADJUDICATION), MULTAN and another

C. A. No.8 of 2002, heard on 21st October, 2003.

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

‑‑‑‑S. 3‑‑‑S.R.O. 456(I)/96, dated 13‑6‑1996‑‑‑PCT Headings 9801‑1010 & 9801‑1030‑‑‑Marriage Functions (Prohibition. of Ostentatious Displays and Wasteful Expenses) Ordinance (II of 2000), S.2‑‑‑Amount received by assessee‑Hotel for rendering services for parties relating to ordinary matrimonial ceremonies and functions‑‑‑Demand of excise duty @ 20% on such amount instead of 12.50% as statutory rate of duty ‑‑‑Validity‑‑­Word "function" was used in both PCT Headings 9801‑1010 & 9801‑1030‑‑‑Word "and" used in PCT Heading 9801‑1030 was not disjunctive‑‑‑PCT Heading 9801‑1010 was a general heading providing for all kinds of functions falling under any other specific heading‑‑‑PCT Heading 9801‑1030 was relating to marriage ceremonies‑‑Other functions not directly relating to marriage could not be read or considered to be part of marriage ceremonies‑‑‑Residual PCT Heading 9801‑1010 providing for charge of exercise duty @ 12.50 % would apply to all kinds of functions excluding marriage ceremonies covered by specific PCT Heading 9801‑1030‑‑‑Impugned order imposing 20% exercise duty on account of ordinary functions was, against law.

(b) Interpretation of statutes‑‑‑

‑‑‑‑ Fiscal statutes‑‑‑Where two equally reasonable interpretations of a taxing provision are possible, then the one favourable to the subject should be adopted.

Sajjid Hussain and Mian Nazir Azhar for Appellant.

Izhar‑ul‑Haq for Respondents.

2004 P T D 1614

[Lahore High Court]

Before Mansoor Ahmed and Sardar Muhammad Aslam, JJ

COLLECTOR, COLLECTORATE .OF SALES TAX AND CENTRAL EXCISE, RAWALPINDI

Versus

Messrs ISLAMABAD FEEDS, RAWALPINDI and another

Tax Appeal No.73 of 2002, heard on 25th February, 2004.

Sales Tax Act (VII of 1990)‑‑‑

‑‑‑‑Ss. 2(40), 7(2)(i) [as amendment by Finance Act (I of 2003)] & 23‑‑­Adjustment of input tax on basis of tax invoice from a registered or un­registered person‑‑‑Scope‑‑‑Qualification of registered or unregistered person was not available under un‑amended S. 7 of Sales Tax Act, 1990‑‑‑Right to seek an adjustment under S.7 of Act, 1991 was independent of provision of S.23 thereof‑‑‑Provision of S.23(2) of Act, 1991, thus, could not be read in S.7 thereof‑‑‑Tax invoice was qualified to be by a registered person after amendment made in S.7(2)(i) of Act, 1990 through Finance Ordinance, 2003‑‑‑Input tax was a species of sales tax, which was paid only once‑‑‑Adjustment of input tax at the time of payment of output tax was co‑related with journey of raw material to finished products‑‑‑Provisions of Sales Tax would be construed strictly to avoid any possibility of double taxation‑‑‑If assessee was not allowed adjustment of output tax against a valid tax invoice showing payment of input tax, then same would lead to double taxation, which was not sustainable under present scheme of Sales Tax Act, 1990.

Mrs. Farhat Zafar for Appellant.

Farhat Nawaz Lodhi for Respondents.

Date of hearing: 25th February, 2004.

2004 P T D 1621

[Lahore High Court]

Before Nasim Sikandar, J

SHAHTAJ SUGAR MILLS LTD. through Chief Executive

Versus

G. A. JAHANGIR and 2 others

Writ Petition No. 1283 of 1989, decided on 12th February, 2004.

(a) Central Excise Rules, 1944‑‑‑

‑‑‑‑S. 11‑‑‑Sales Tax Act (VII of 1990), S. 66‑‑‑Constitution of Pakistan (1973), Art. 199‑‑‑Constitutional petition‑‑‑Claim for refund on basis of principle settled in a subsequent judgment of Supreme Court, whereto petitioner was not party‑‑‑Authority rejected such claim for having been made after statutory period of one year‑‑‑Validity‑‑‑Petitioner had paid duty in accordance with. law at relevant time without any objection‑‑‑Had there been any objection on his part, petitioner would have agitated same, whereupon process of raising of demand on recording of assessment order would have started‑‑‑Principle settled in such judgment of Supreme Court would not be available to petitioner for not being party thereto‑‑‑Matter of petitioner had matured into a past and closed transaction after expiry of statutory period to make application for refund‑‑‑Inadvertence, error or misconstruction contemplated in R.11 of Central Excise Rules, 1944 and S.66 of Sales Tax Act, 1990 referred to inadvertence, error or misconstruction on the part of either taxpayer, or Revenue existing on date of issuance of notice or actual demand‑‑­Petitioner had made payment through an order‑in‑original‑‑‑Findings of Supreme Court recorded subsequently in similar facts could not be made a reason or a basis to allege existence of inadvertence, error or misconstruction on the part of any of the parties at relevant time‑‑‑Such judgment of Supreme Court would be operative from date of announcement and would have no retroactive legal implication‑‑‑High. Court dismissed Constitutional petition.

Colony Thal Textile Mills Ltd. v. Assistant Collector Central Excise and Land Customs, Faisalabad and another PLD 1980 Lah. 377; C.B.R. and others v. Colony Thal Textile Mills Ltd. 1981 SCMR 303; Messrs Pfizer Laboratories Ltd. v: Federation of Pakistan and others PLD 1998 SC 64; Kohinoor Industries Ltd. Faisalabad v. Government of Pakistan through Secretary, Ministry of Finance, Islamabad and others 1994 CLC 994; Rapidur (India) Ltd. v. Union of India and others 1987 (27) ELT 222; Azizuddin Industries Ltd. v. Collector of Central Excise and Land Customs PLD 1967 Dacca 58; R.R. Textile Mills Ltd. v. Collector of Central Excise and Land Customs and others PLD 1968 Dacca 808; Income Tax Officer, Central Circle II, Karachi and another v. Cement Agencies Ltd. PLD 1969 SC 322; Superior Textile Mills Ltd. v. Federation of Pakistan and others 2000 PTD 399; The Collector of Sales Tax and others v. Superior Textile Mills Ltd. 2001 PTD 1486 = PLD 2001 SC 600; Dr. Tariq Nawaz and another v. Government of Pakistan 2000 SCMR 1956; Abdul Samad and others v. Federation of Pakistan and others 2002 SCMR 71; Zaman Cement Company (Pvt.) Ltd. v. Central Board of Revenue and others 2002 SCMR 312; Nazir Ahmed and another v. Muhammad Din and another' 2000 SCMR 440; Ch. Ghulam Ghaus v. Saifullah and another 2001 SCMR 159; Chairman Central Board of Revenue Islamabad and 3 others v. Messrs Pak‑Saudi Fertilizer Ltd. and another 2001 SCMR 777; Trustees of the Port of Karachi v. Muhammad Saleem 1994 SCMR 2213; (1898) AC 375; Quinn v. Leathem (1901) Ac 495 ref.

(b) Constitution of Pakistan (1973)‑‑‑

---Art. 189‑‑‑Law laid down by Supreme Court would be prospective in operation.

Mst. Attiiyya Bibi Khan and others v. Federation of Pakistan 2001 SCMR 1161; Pir Bakhsh v., Chairman, Allotment‑Committee PLD 1987 SC 145 and Ali Hussain v. Mir Zaman 1987 CLC 127 rel.

(c) Interpretation of statutes‑‑‑

---Amendment in fiscal statutes providing for remedial measures‑‑‑Effect‑‑‑Such amendment would be effective anal applicable only to cases, wherein assessment had not been made by Assessing Officer or where matter was pending in appeal before Tribunal or High Court a; the time of amendment‑‑‑Cases finally determined or having attained finality (i.e. past and closed transactions) could not be re‑opened under amending yaw in absence of express words to such effect.

Commissioner of Income Tax v. Shahnawaz Ltd. and others 1993 SCMR 73 fol.

(d) Taxation‑‑‑

‑‑‑‑ Judgment of superior Court deciding a legal issue in favour of Revenue subsequently‑‑‑Opening of fresh cases or re‑opening cases of existing tax‑payers on basis of such judgment, who were not party thereto‑‑‑Validity‑‑‑Revenue could not be allowed to open cases against tax‑payers, who had not been served with statutory notices within time prescribed by law‑‑‑Rule of past and closed transactions would be attracted against Revenue in such cases.

(e) Central Excise Rules, 1944‑‑­

‑‑‑‑R. 11‑‑‑Claim for refund of duty‑‑‑Prescribing period of one year for making such claim‑‑‑Necessity underlined.

All budgetary estimates are made on yearly basis, therefore, a number of fiscal steps are taken either to improve or change the fiscal rules and regulations keeping in view the condition of the economy. These fiscal rules, regulations and instructions are relevant, by and large, to a particular assessment or financial year and altogether change their implications after a passage of time. The period of one year laid down for the purpose of claiming of refund needs to be seen in that background as well.

Messrs Pfizer Laboratories Ltd. v. Federation of Pakistan and others PLD 1998 SC 64 rel.

(f) Sales tax‑‑‑

‑‑‑‑ Incidence of sale tax and excise duty for being indirect levies is invariably transferred to consumer‑‑‑Government, while fixing consumer price does take into consideration payment of excise duty‑ by manufacturer.

(g) Central Excise Rules, 1944‑‑‑

‑‑‑‑Rr. 11 & 213‑‑‑Central Excises Act (I of 1944), Ss. 35 & 36‑‑­Constitution of Pakistan (1973), Art. 199‑‑‑Claim of refund of excise duty‑‑‑Refusal of such claim by Appellate and Revisional Authorities‑‑­Constitutional petition‑‑‑Maintainability‑‑‑Mere non‑availability of any further remedy against impugned order recorded in revision would not be itself make Constitutional petition competent‑‑‑No Constitutional petition could possibly be maintained in absence of jurisdictional fact, which had not been pointed out in impugned revisional order‑‑‑High Court dismissed Constitutional petition.

(h) Constitution of Pakistan (1973)‑‑‑

‑‑‑‑Art. 199‑‑‑Constitutional Jurisdiction‑‑‑Scope‑‑‑Constitutional petition against order of Tribunal‑‑‑Maintainability‑‑‑High Court in extraordinary jurisdiction would not sit as a Court of Appeal against order of Tribunal recorded by a competent authority observing all procedural rules including rule of natural justice.

(i) Central Excise Rules, 1944‑‑‑

‑‑‑‑R. 11‑‑‑Sales Tax Act (VII of 1990), S. 66‑‑‑Constitution of Pakistan (1973), Art. 199‑‑‑Rejection of claim for refund of tax‑‑‑Non-­filing of appeal against order‑in‑original‑‑‑Constitutional petition‑‑­Maintainability‑‑‑Mere fact that order‑in‑original had become final in absence of any appeal before hierarchy provided for under law as well as refusal of Revenue to make a revision on such ground would not make Constitutional petition competent‑‑‑High Court dismissed Constitutional petition.

Qamar‑ul‑Islam for Petitioner.

Mr. A. Kari\m Malik for Respondents.

Date of hearing: 15 September, 2003.

2004 P T D 1719

[Lahore High Court]

Before Nasim Sikandar, J

Messrs SUPER ELECTRONICES

Versus

REGIONAL COMMISSIONER OF I/T & W/T and others

Writ Petition No. 7746 of 2002, decided on 1st October, 2002.

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

‑‑‑‑Ss. 55, 59 (1‑A) & 62‑‑‑Self‑Assessment Scheme‑‑‑Object and scope‑‑‑Detailed scrutiny, selection of cases‑‑‑Jurisdiction of Income Tax Authorities‑‑‑Self‑Assessment Scheme is in a nature of a promise held out by Revenue to an assessee to accept a declared version if certain conditions are met‑‑‑Revenue, at the same time has been given a privilege to take certain kinds of returns fir assessment under normal law‑‑‑Method for such selection is left open and uncertain so that an assessee could be discouraged from making wrong declarations or taking chance‑‑‑Scheme of self assessment reposes confidence in assessee and equally binds the Revenue to accept his return where the conditions prescribed are fully answered‑‑‑Revenue cannot be allowed to turn :round to deny the concession in a light vein in one guise or the other‑‑‑ Selection for total audit on the recommendations of Income Tax Authorities can be done only where there is evidence, information or reasons to believe that‑true particulars of income have been suppressed.

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

‑‑‑‑Ss.55, 59 (1‑A) & 62‑‑‑Circular No.4 of 2001, para.9‑A(ii)‑‑‑Constitution of Pakistan (1973), Art. 199‑‑‑Constitutional petition‑‑‑Self Assessment Scheme‑‑‑Jurisdiction of Regional Commissioner Income Tax‑‑‑Judicious exercise of discretion, principle of ‑‑‑Applicability‑‑­ Assessee filed its return under Self Assessment Scheme showing increase in sales by 32%, profit by 20% and tax actually paid by 22% compared with the immediate preceding year to fulfil the eligibility criteria‑‑Income Tax Authorities selected the case of assessee for detailed scrutiny on the ground that factual position regarding magnitude of business of the assessee, quantum of turn over and profits were required to be ascertained‑‑‑Validity‑‑‑Mere opinion of a Revenue Authority regarding such factual position was not a good reason to deny the assessee a concession promised to it on fulfillment of the conditions of the scheme‑‑‑Opinion of the Authorities which was not supported by tangible evidence or an information ex facie acceptable and useable in a case, would be against the policy guidelines provided by Central Board of Revenue for selection of cases out of the scheme on the recommendations of Regional Commissioner Income Tax‑‑‑Same held true with regard to the material which could form basis for a reason to believe that income in a particular case tad been suppressed‑‑‑Discretion vested in the Regional Commissioner Income Tax, like any other discretion vesting in an authority needed to be exercised judiciously‑‑‑Judicious exercise of discretion meant a balanced approach towards a declared version keeping in view the obligation of an assessee to make a faithful declaration as well as the duty of Revenue to come up to its promise of acceptance of declared version which was not dishonest on the face of it‑‑‑Reasons with which the assessee was confronted were so general in nature that the same could be confronted to any other assessee who had shown the stipulated increase when compared with the previous year‑‑‑Regional Commissioner Income Tax was required to proceed under Para.9‑A(ii) of Circular No. 4 of 2001, only »when the guidelines mentioned therein were satisfied‑‑‑Income Tax Authorities while proceeding to take the case of the assessee out of the scheme had not kept in sight the policy directions‑‑‑View of Regional Commissioner Income Tax that the assessee had suppressed his income could not be accepted on its face value since policy directions had been disregarded and there was no evidence or even information in that regard‑‑‑Plucking of the case of the assessee out of scheme was not within the parameters contemplated by Central Board of Revenue through its policy directions‑‑‑Order of the Regional Commissioner Income Tax was illegal and void‑‑‑Petition was allowed accordingly.

(c) Penal Code (XLV of 1860)‑‑‑

‑‑‑‑S.26‑‑‑Term, reasons to believe'‑‑‑Connotation‑‑‑Person is said to havereasons to believe' a thing if such person has sufficient cause to believe a thing but not otherwise.

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

‑‑‑‑Ss.55, 59 (1‑A) & 62‑‑‑Self Assessment Scheme year, 2001‑2002, Policy Directions dated 17.7.2001, Para.2‑‑‑Expression reasons to believe' as appearing in Self Assessment Scheme year, 2001‑2002, Policy Directions dated 17.7.2001, Para. 2‑‑‑Applicability‑‑‑Assessee filed its return under Self Assessment Scheme showing increase in sales by 32 %, profit by 20 % and the tax actually paid by 22 % compared with the immediate preceding year to fulfil the eligibility criteria‑‑‑Income Tax Authorities selected the case of assessee for detailed scrutiny on the ground that factual position regarding magnitude of business of the assessee, quantum of turn over and profits were required to be ascertained‑‑‑Cause that led the Regional Commissioner Income Tax to believe in the instant case, as confronted to the assessee, was increase in sales while decrease in income when compared with the previous year and secondly increase in administration, selling and distribution expenses‑‑‑Validity‑‑‑Such was not sufficient cause to lead to the belief of the Regional Commissioner Income Tax‑‑‑1n the first place the figures confronted to the assessee were misleading and in the second, decrease in business income and increase in miscellaneous income as well as administration expense by itself was nova sufficient which could lead to a ,reason to believe' that the assessee had suppressed its income‑‑‑If the Regional Commissioner Income Tax had sufficient cause to believe, then he would not have sought ascertaining factual position regarding magnitude of the business of the assessee, quantum of turnover and profits‑-‑Expressionreason to believe' was not applicable in circumstances.

Waqar Azeem for Petitioner.

Muhammad Ilyas Khan for Respondent.

2004 P T D 1731

[Lahore High Court]

Before Muhammad Sair Ali, J

Messrs FOOD CONSULTS (PVT.) LTD., LAHORE and others

Versus

COLLECTOR (CENTRAL EXCISE & SALES TAX), LAHORE and 2 others

Writ Petitions Nos.7035, 10311 of 2000, heard on 25th March, 2004.

(a) Sales Tax Act (VII of 1990)‑‑‑

‑‑‑‑Ss. 37, 38 [as substituted by Finance Act (IX of 1996)], 40 & 40A‑‑­Central Excises Act (I of 1944), S. 18‑‑‑Central Excise. Rules, 1944, Rr.197 & 201‑‑‑Criminal Procedure Code (V of 1898), Ss. 96, 98, 99‑A, 100 & 103‑‑‑Constitution of Pakistan (1973), Arts. 9, 14, 15, 18, 23 & 24‑‑‑Powers of "Free Access" "Free Inspection" and "Custody" as contained in S.38 of Sales Tax Act, 1990‑‑‑Scope‑‑‑Legislature had not given such unchecked powers to Taxation Officer‑‑‑Resort to free access and free inspection provisions without essential safeguards would be violative of guarantees under Arts. 9, 14, 15, 18, 23 & 24 of the Constitution‑‑‑Legislature had incorporated necessary safeguards and standards in provisions of S. 40 of the Sales Tax Act, 1990 or S. 18 of Central Excises Act, 1944‑‑‑Sections 38, 40 and 40‑A of the Sales Tax Act, 1990 would be read together, otherwise Ss. 40 and 40‑A would become superfluous‑‑‑Provisions of S.38 read with those of S.37 of Sales Tax Act, 1990 would be adequate as complete Codes of entry, inspection, acquisition, information, evidence and custody‑‑‑Section 40 of Sales Tax Act, 1990 and S.18 of Central Excises Act, 1944 required "all searches" to be in accord with Cr.P.C.‑‑‑Exercise of powers of search without warrant as provided under S.40‑A of Sales Tax Act, 1990 was conditional upon a statement of grounds of belief as to showing of danger of removal or destruction of record‑‑‑Section 40‑A of Sales Tax Act, 1990 could be invoked only in extreme and extraordinary situations, but all searches would be carried out as per provisions of Cr.P.C.‑‑­Principles.

(b) Sales Tax Act (VII of 1990)‑‑‑--

‑‑‑‑S. 38(3)‑‑‑Powers of "inquiry or investigation"‑‑‑Scope‑‑‑Such powers are synonymous to "search" powers.

(c) Words and phrases‑‑‑--

‑‑‑‑"Search"‑‑‑Connotation.

Ihsan Yousaf Textile Mills v. Federation of Pakistan Writ Petition No. 19482 of 2002 and Words and Phrases Volume 38‑A ref.

(d) Words and phrases‑‑‑

‑‑‑‑"Search" and "Inspection"‑‑‑Distinction.

"Entry, Search and Seizure" (Sweet and Maxwell 3rd Edn.) ref.

(e) Taxation‑‑‑

‑‑‑‑"Probe", "Investigation" or "inquiry" into affairs or business or trade or occupation or record or accounts etc.‑‑‑Effect‑‑‑Such powers are in fact the powers to "search"‑‑‑Principles.

It cannot be denied that "Probe", "Investigation" or ‑"Inquiry" into affairs or business or trade or occupation or record or accounts etc., is a search for answers to any question or allegation regarding possible evasion. of tax or violation of law. The information or the document etc. accessed or obtained or taken into custody during such inquiry or investigation are usable in evidence and are also incriminating. Such powers of access, inspection, resumption and information cannot, therefore, be termed as anything, but the powers to "search".

(f) Interpretation of statutes‑‑‑

‑‑‑‑ Fiscal statutes‑‑‑Interpretation and meaning which are protective of rights and interest of tax‑payers would be adopted, if more than one meanings could be attributed to the whole scheme of "the Access" and "Search" provisions.

(g) Sales Tax Act (VII of 1990)‑‑‑

‑‑‑‑Ss. 38 [as substituted by Finance Act (IX of 1996)], 40 & 40A‑‑­Central Excises Act (I of 1944), S. 18‑‑‑Central Excise Rules, 1944, Rr.197 & 201‑‑‑Criminal Procedure Code (V of 1898), Ss. 96, 98, 99‑A, 100 & 103‑‑‑Constitution of Pakistan (1973), Art. 199‑‑‑Constitutional petition‑‑‑Raiding and seizing record without search warrant in the garb of pre textual business transaction employed as reason for entry into premises of petitioner‑‑‑Validity‑‑‑Authority had admitted that male members of raiding staff were waiting outside premises of petitioner for support and backing, while female members of team had entered premises pretending to be ordinary and normal customers interested to receive services‑‑‑Purpose of, such pretextual business transaction was to investigate and determine, gurported evasion of excise duty by petitioner‑‑‑Such pre textual business transaction by female staff of the Authority had been created and devised to test and probe into conduct of petitioner having been employed as excuse for entry into premises and consequent inquiry without a warrant‑‑‑Seizure of record was, thus, pre­determined‑‑‑Danger or risk of removal of evidence, goods, record, accounts or computers had not been alleged by authority‑‑‑Authority had physically searched for, recovered and taken custody of petitioner's record and assets‑‑‑Such exercise by authority was a "search, which could not be termed as "routine inspections", but was akin to a raid and investigation in a criminal matter or an offence‑‑‑High Court accepted Constitutional petition and declared such raid and seizure of record/ assets to be without lawful authority and of no legal effect including issuance of show‑cause notice, registration of F.I.R., complaint, prosecution or recovery proceedings.

Collector of Customs (Preventive) and 2 others v. Muhammad Mahfooz PLD 1991 SC 630; Master Enterprises (Pvt.) Ltd. v. Federation of Pakistan and others CP No. 1926 of 2000; Federation of Pakistan and 4 others v. Messrs Master Enterprises (Pvt.) Ltd. 2003 PTD 1034; Shaukat Hussain v. Zulfiqar Ali and 2 others" PLD 1981 Lah. 13; S.M Yousaf v. Collector of Customs PLD 1968 Kar. 599; S.M. Yousaf v. Collector PLD 1969 SC 153 and Iqbal Akhtar v. Ch. Muhammad Mushtaq and 4 others PLD 1977 Lahore 1318 rel.

(h) Customs Act (PV of 1969)‑‑‑--

‑‑‑‑Ss. 162 & 163‑‑‑Customs General Order No. 9 of 1981, dated 27‑8‑1981‑‑‑Issuance and continued validity of Customs General Order No.9 of 1981, dated 27‑8‑1981 would show that Central Board of Revenue wanted its officers to follow such instructions meticulously and stringently.

Customs General Order, 1971‑1995 (Fourth Edition) at page 245 ref

Ali Sibtain Fazli, Shamoon Zakaria, Ahmad Sibtain Fazli and Nasar Ahmad for Petitioner.

Izharul Haq Sheikh for Respondents.

Date of hearing: 25th March, 2004.

2004 P T D 1759

[Lahore High Court]

Before Maulvi Anwarul Haq, J

Messrs VARAN TOURS

Versus

FEDERATION OF PAKISTAN through Federal Secretary Finance Government of Pakistan, Islamabad and 2 others

Writ Petitions Nos.916 to 918, 1282, 1306 of 2003 and 3409 of 2002, heard on 3rd November, 2003.

(a) Sales Tax Act (VII of 1990)‑‑‑--

‑‑‑‑S. 13(2)‑‑‑Scope‑‑‑Exemption clause, interpretation of‑‑‑Section 13(2) of Sales Tax Act, 1990, empowered the Federal Government and the Central Board of Revenue to exempt taxable supplies made in Pakistan or any goods or class of goods from the whole or any part, of the tax chargeable under the said Act‑‑‑Nothing was available in S.13(2) of the said Act providing that any person had a right to claim such exemption‑‑­Principles‑‑‑Exemption clauses could not be invoked as of right and, their grant was also not a right.

(b) Finance Act (IV of 1999)‑‑‑

‑‑‑‑S. 18‑‑‑Constitution of Pakistan (1973), Art. 199‑‑‑Constitutional petition‑‑‑Statutory notifications‑‑‑Validity‑‑‑Earlier notification by the Authorities provided for exemptions of customs duties and sales tax on import of certain goods‑‑‑Subsequent notification by the Authorities, however, placed limitations on the said exemptions by excluding sales tax exemption from its ambit‑‑‑Grievance of the petitioner was that it Commenced import operations on the understanding of earlier notification, but the Authorities refused to grant exemption in the matter Of sales tax‑‑‑Validity‑‑‑Import documents revealed that they were with deference to the subsequent notification and, therefore, the petitioner had 4 clear understanding that the exemption in the matter of sales tax was not available‑‑‑Petition, in circumstances, was dismissed.

(c) Sales Tax Act (VII of 1990)‑‑‑---

‑‑‑S. 6(1‑A)‑‑‑Customs Act (IV of 1969), S. 31‑A‑‑‑Constitution of Pakistan (1973), Art. 199‑‑‑Constitutional petition‑‑‑Analogy of provisions of Sales Tax Act, 1990 and Customs Act, 1969 with reference to their effect on superior Court cases considered‑‑‑Earlier notification by the Authorities provided for exemptions of customs duties and sales tax on import of certain goods‑‑‑Subsequent notification by Authorities, however, placed limitations on the said exemptions by excluding sales tax exemption from its ambit‑‑‑Grievance of the petitioner was that exemption was granted by the Authorities and then withdrawn, was not accepted as no exemption was ever granted by the Authorities and the petitioner was still vying for the gray: of said exemption, which could riot be granted as of right.

Fecto Belarus Tractors Limited v. Pakistan through Ministry of Finance Economic Affairs and another 2001 PTD 1829 and Al‑Samraz's case 1986 SCMR 1917 ref.

(d) Constitution of, Pakistan (1973)‑‑‑--

-----Art. 199‑‑‑Constitutional petition ‑‑‑Mala fide legislation, attribution of‑‑‑Contention of the petitioner was that a certain amendment was made the law in order to undo the effect of a judgment of a Superior Court, which amounted to mala fide legislation‑‑‑Principle‑High Court under Constitutional jurisdiction refused to accept the same on the principle that mala fides cannot to be attributed to the Legislature.

Ahmad Awais, M.S. Babar and Ibad‑ur‑Rehman Lodhi for Petitioner.

Farhat Nawaz Lodhi and Shahzad Mazher for Respondent.

Date of hearing: 3rd November, 2003.

2004 P T D 1796

[Lahore High Court]

Before Muhammad Sair Ali, J

WAPDA

Versus

FEDERATION OF PAKISTAN and others

Writ Petition No. 166 of 1996, heard on 22nd January, 2004.

Central Excises Act (I of 1944)‑‑‑

‑‑‑‑S. 12‑A(1) & First Sched., Part II, Item 14.14 (as amended by Finance Act, (XII of 1991) and Finance Act (VII of 1992)‑‑‑S. R. O. 519(1)/92, dated 25‑5‑1992‑‑‑Pakistan Water and Power Development Authority Act (XXXI of 1958), Ss. 3,.13 & 22‑‑‑Constitution of Pakistan (1973), Arts. 157, 165. & 199‑‑‑Constitutional petition‑‑‑Levy and demand of excise duty on outstanding. advances of Wapda‑‑‑Validity‑‑­Legal status of Wapda was an Agency or Authority of Federal Government performing functions of Federal Government ‑‑‑Wapda could not be burdened with a tax through a Provincial Statute and was entitled to same exemptions as permissible to Federal Government under Art. 165 of the Constitution ‑‑‑Wapda being an .Agency of Government was entitled to exemption or "Nil" levy of excise duty as per Item "g" of S.R.O. 519(1)/92, dated 25‑5‑1992‑‑‑High Court accepted Constitutional petition and declared impugned levy and demand of duty to be without lawful authority.

Central Board of Revenue v. S.I.T.E. PLD 1985 SC 97; Chairman, District Council, Rahim Yar Khan v. United Bank Limited, Rabin Yar Khan 1989 CLC.1397; Messrs Rice Export Corporation, of Pakistan v. Karachi Metropolitan Corporation PLD 1990 Karachi 186; Messrs Gadoon Textile Mills and 814 others v. WAPDA and others 1997 SCMR 641; Water and Power. Development Authority and Ghazi Barotha Contractors v. Administrator, District Council, Swabi and others 2000 CLC 40 rel.

M. Saleem Chaudhry for Petitioner.

Muhammad Nawaz Bhatti, D.A.‑G., Izhar‑ul‑Haq Shaikh and Karim Nawaz Malik for Respondents.

Date of hearing: 22nd January, 2004.

2004 P T D 1911

[Lahore High Court]

Before Nasim Sikandar and Muhammad Sair Ali, JJ

SARGODHA JUTE MILLS LTD.

Versus

COLLECTOR and others

Customs Appeal No.98 of 2003, decided on 29th March, 2004.

(a) Customs Act (IV of 1969)‑‑‑--

‑‑‑‑Ss. 27(2), 84 & 108‑‑‑Damage by fire to imported goods before reaching bonded warehouse‑‑‑Importer claimed remission of duty with request of Revenue to conduct joint inspection of damaged goods‑‑­Revenue without conducting joint survey raised demand against importer, which order was upheld by Tribunal‑‑‑Validity‑‑‑Failure of Revenue to conduct joint survey as requested by importer showed that goods had been totally damaged and, nothing had remained marketable even as junk‑‑‑Goods though entered for warehousing had .not been actually warehoused‑‑‑Admitted damage to goods could not be denied on technicalities‑‑‑Partial payment on account of customs duty/taxes as interim relief made by Insurance Company would be of no relevance as importer had duly informed Revenue about damage to goods‑‑‑High Court accepted appeal and set aside impugned order with observations that importer was not liable to‑any sum as customs duty, taxes and other dues to Revenue in respect of goods damaged by fire.

Tata Textile Mills Ltd. v. Assistant Collector (Recovery Officer PLD 2000 Lah. 286 fol.

(b) Customs Act (IV of 1969)‑‑‑--

‑‑‑‑S. 108‑‑‑Damaged or deteriorated goods‑‑‑Part payment of insurance claim to importer by Insurance Company‑‑‑Effect‑‑‑Revenue would not become entitled to proportionate sum as customs duty on payment of such insurance claim to importer.

Civil Appeal No. 1333 of 2001 ref.

(c) Customs Act (IV of 1969)‑‑‑--

‑‑‑S. 108‑‑‑Re‑assessment of damaged or deteriorated goods‑‑‑Only Customs Authorities were empowered to do so under S.108 of Customs Act; 1969.

(d) Customs Act (IV of 1969)‑‑‑

‑‑‑‑S. 108‑‑‑Damage/deterioration or diminishing in value of imported goods could not be partial only, but there could be total loss resulting into zero value in number of situations.

(e) Customs Act (IV of 1969)‑‑‑--

‑‑‑‑S.84—Expression "entered for warehousing" and "warehoused"‑­Distinction‑‑‑Meanings of both said ‑ expressions were different.

Tata Textile Mills Ltd. v. Assistant Collector (Recovery Officer PLD 2000 Lah. 286 fol.

Salman Akram Raja for Appellant.

Sh. Izhar‑ul‑Haq for Respondents.

Date of hearing: 10th February, 2004

2004 P T D 1949

[Lahore High Court]

Before Muhammad Sair Ali, J

OLYMPIA SYNTHETIC

Versus

SECRETARY, INDUSTRIES DEPARTMENT PUNJAB and others

Writ Petition No. 14029 of 2003, decided on 29th March, 2004.

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

‑‑‑‑S. 14(2)‑‑‑S.R.O. 897(I)/92, dated 15‑9‑1992, Cls. (a)(i)(ii)‑‑­Industrial Policy Circular No.6(100) of 1990, dated 2‑5‑1992, Art. l(i)(b)(c)‑‑‑Constitution of Pakistan (1973), Art. 199‑‑‑Constitutional petition‑‑‑Import of machinery for project located at distance of 13 kilometers from Sheikhupura Municipal limits, but within 30 kilometers limit from Lahore Municipality‑‑‑Entitlement to benefits under Rural Industrial Development Incentives Scheme‑‑Refusal of Authority to issue Rural Area Certificate to petitioner for its project being located outside Sheikhupura Municipal limits‑‑‑Petitioner claimed to be within "Rural Area" taking Sheikhupura Municipal limit as start line‑‑‑Validity‑‑­Project or unit only falling within "Rural Area" could benefit from such scheme‑‑‑Overlapping limits of two prescribed distances from two Municipal limits could be resolved by reference to boundaries of concerned Municipality and Revenue/administration territorial limits of the District in which Municipal Committee/Corporation was located‑‑­Term "concerned" for not being defined in such Policy Circular would be given its ordinary meaning and routine nomenclature‑‑‑"Concerned" Municipal Committee/Corporation could only be the one, where petitioner on basis of its location would normally petition to seek redressal of its ordinary grievances qua enforcement of its rights guaranteed under Municipal laws‑‑‑Municipal Committee of Sheikhupura governed petitioner for purposes of local representation etc. under applicable Municipal and local laws‑‑‑Petitioner did not advert to Lahore Metropolitan Corporation for such purposes‑‑‑Limits of Lahore Metropolitan Corporation and 30 kilometers prescribed distance therefrom could not be taken to be determining zone concerning petitioner‑‑‑Prescribed distance of 10 kilometers around limits or Sheikhupura Municipality was prohibitory zone for petitioner‑‑‑Project of petitioner for being located outside ten kilometers limit of Sheikhupura Municipality would fall in "Rural Area" as per Art. 1(i)(c) of Policy Circular, dated 2‑5‑1992 and Cls. (a)(ii) of S.R.O. 897(I)/92, dated 15‑9‑1992, thus, he would be entitled to benefits and incentives of such Scheme and S.R.O.‑‑‑High Court accepted Constitutional petition and declared impugned order to be without lawful authority and of no legal effect with directions to authority to issue requisite Rural Area Certificate to petitioner within specified time.

(b) Interpretation of statutes‑‑‑

‑‑‑‑Where language of a statute in its ordinary meaning and grammatical constructions leads to a manifest contradiction of apparent purpose of the enactment or to some inconvenience or absurdity, hardship or injustice, then a construction may be put upon the same to modify the meaning of words or even the structure of sentence‑‑‑Such construction must, however, advance purpose of the enactment and should be in accord with the requirements of justice and economic equities.

(c) Words and phrases‑‑‑

‑‑‑‑"Concern"‑‑‑Meaning.

Oxford Advanced Dictionary of Current English by, A. S. Hornby ref.

(d) Interpretation of statutes‑‑‑

‑‑‑‑ Where a statute or legal instrument is open to two interpretations, then one beneficial to citizen would be adopted‑‑‑In case of ambiguity, confusion or absurdity created by authors and framers of law/policy/ notification, then lean would be given in favour of citizen and against those who created confusion or absurdity.

Sh. Shahid Waheed for Petitioners.

Salma Malik A.A.‑G. for Respondents Nos.1 to 3 and Ch. Abdul Wadood for Respondent No. 4.

Date of hearing: 15th January, 2004.

2004 P T D 1973

[Lahore High Court]

Before Ch. Ijaz Ahmad, J

WATER AND POWER DEVELOPMENT AUTHORITY, WAPDA HOUSE, LAHORE through Chaudhry Shamim Anwar

Versus

COMMISSIONER OF INCOME‑TAX, COMPANIES ZONE‑I, LAHORE and 2 others

Writ Petition No. 12709 of 1997, heard on 20th April, 2004.

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

‑‑‑‑Ss.12(5), 78, 80‑AA‑‑‑General Clauses Act (X of 1897), S.24‑A‑‑­Constitution of Pakistan (1973), Art. 199‑‑‑Constitutional petition—­Income tax assessment‑‑‑Decision of matters by public functionaries ‑‑­Principles‑‑‑Grievance of the petitioner was that the income tax authorities under the provisions of S.78 of Income Tax Ordinance, 1979, had wrongly declared him as agent of an international company‑‑‑During the proceedings before High Court in earlier Constitutional petition, the authorities assured the High Court that the grievance of the petitioner would be determined in accordance with law, instead of deciding the revision of the petitioner as assured to the High Court, the Revisional Authority simply endorsed the order passed by the Assessing Authority‑­Validity‑‑‑Revisional Authority had decided the revision petition without application of mind and countersigned the order of the Assessing Authority‑‑‑Such order was not sustainable in the eye of law‑‑‑Public functionaries, in view of S.24‑A of General Clauses Act, 1897, were duty bound to decide the controversy between the parties after application of independent mind with reasons and in accordance with law‑‑‑Order passed by the Revisional Authority was set aside and the case was remanded to the Authority for decision afresh in accordance with law‑‑‑Petition was allowed accordingly.

Co‑op: Insurance Society v. State Life Insurance 1999 SCMR 2799; Commissioner of Income‑tax v. Smith Kline and French 1991 PTD 999 = 1991 SCMR 2374; Messrs Elahi Cotton Mills Ltd. v. Federation of Pakistan and others PLD 1997 SC 582; Hirjina & Company v. Islamic Republic of Pakistan and others 1993 SCMR 1342; Lesser Praxis Depilex v. Customs Central Excise 2002 PTD 549 and Messrs Pfizer Laboratories Ltd. v. Federation of Pakistan and others PLD 1998 SC 64 ref.

Ghulam Mohy‑ud‑Din's case PLD 1964 SC 829; Messrs Airport Support Service v. Airport Manager 1998 SCMR 2268; Zainyar Khan v. Chief Engineer, C.R. & B.C. 1998 SCMR 2419 and Utility Store's case PLD 1987 SC 447 rel.

(b) General Clauses Act (X of 1897)‑‑‑

‑‑‑‑S. 24‑A‑‑‑Section 24‑A of the Act being procedural in nature has retrospective effect.

Messrs Airport Support Service v. Airport Manager. 1998 SCMR 2268 and Zainyar Khan v. Chief Engineer, C.R. & B.C rel.

(c) Constitution of Pakistan (1973)‑‑‑

‑‑‑‑Arts.4 & 199‑‑‑Right of individuals‑‑Enforcement‑‑‑Constitutional jurisdiction of High Court‑‑‑Scope‑‑‑High Court while exercising power under Art.199 of the Constitution, has ample jurisdiction to give direction to public functionaries to act in accordance with law in view of Art.4 of the Constitution.

H.M. Rizvi's case PLD 1981 SC 612 and Gull Muhammad Hajano's case 2003 SCMR 325 rel.

Mian Ashiq Hussain for Appellant.

Sardar Ahmad Jamal Sukhera for Respondent.

Date of hearing: 20th April, 2004.

2004 P T D 1978

[Lahore High Court]

Before Nasim Sikandar and Jawwad S. Khawaja, JJ

Messrs S. M. MOHSIN

Versus

C.I.T. COMPANIES 1, LAHORE

C.T.R. No.48 of 1996, decided on 16th April, 2001.

Income Tax Ordinance (XXXI of 1979)—

­

‑‑‑‑S. 136‑‑‑Reference to High Court‑‑‑Party at whose instance questions of law were referred, if remained absent, then High Court would not be bound to answer such questions‑‑‑Principles.

The obligations of High Court to decide the questions of law referred to it is contingent upon the hearing of the case. Further the hearing of case cannot be made, unless the party at whose instance the questions have been referred to the Court was present and argued its case. Therefore, the High Court is not bound to answer the questions referred to, it, if the party at whose instance the questions have been referred, remained absent.

Dada Bhai H. Mama and Sons Karachi v. Commissioner of Income Tax (1967) 16 Tax 43 and M.M. Ispahani Ltd. v. Commissioner of Excess Profits Tax West Bengal (1955) 27 ITR 188) fol.

Nemo for Petitioner.

Muhammad Ilyas Khan for Respondent

Date of hearing: 16th April, 2001.

2004 P T D 1986

[Lahore High Court]

Before Nasim Sikandar and Jawwad S. Khawaja, JJ

COMMISSIONER OF INCOME‑TAX

Versus

WORLD MASTER GLOVES

C.T.R. No.45 of 1996, decided on 16th April, 2001.

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

‑‑‑‑Ss. 14 & 151‑‑‑Export rebate, claim of‑‑‑Such claim is allowably also to partner of registered firm.

Commissioner of Income Tax v. Nasir Ali and others (1999) 79 Tax 428 fol.

Muhammad Ryas Khan for Petitioner.

Nemo for Respondent.

Date of hearing: 16th April, 2001.

2004 P T D 1987

[Lahore High Court]

Before Maulvi Anwarul Haq, J

Messrs GURGSON DRY CLEANERS through Proprietor Muhammad Ishaq and 3 others

Versus

SALES TAX OFFICER, RAWALPINDI and 3 others

Writ Petition No. 3574 of 2001, decided on 9th April, 2004.

(a) Islamabad Capital Territory (Tax on Services) Ordinance (XLII of 2001)‑‑‑--

‑‑‑‑Ss. 2 & 3‑‑‑Punjab Sales Tax Ordinance, (II of 2000) Preamble‑‑­Constitution of Pakistan (1973), Arts. 1(2), 70(4), 142(d), 199 & Fourth Sched.‑‑‑Constitutional petition‑‑‑Matters not enumerated in Federal and Concurrent Legislative Lists‑‑‑Federal Legislature, powers with respect to such matters‑‑‑Sales tax on services ‑‑‑Legality‑‑­"Territory of Pakistan"‑‑‑Definition‑‑‑Petitioners through Constitutional petition challenged the Punjab Sales Tax Ordinance, 2000 and Islamabad Capital Territory (Tax on Services) Ordinance, 2001 on the ground that the said enactments were un Constitutional‑‑‑One of the contentions of the petitioners was that since no tax on services was envisaged by the Federal and Concurrent Legislative Lists in the Constitution, therefore, said enactments were void, as the Federal Legislature had no lawful authority to make a law taxing the services‑‑‑Validity‑‑‑Examination of Federal and Concurrent Lists with reference to Art. 70(4) of the Constitution revealed that Legislation regarding services or tax on services was not catered for in the said lists‑‑‑Article 142(d) of the Constitution conferred exclusive powers upon the Federal Legislature to make laws with respect of matters not enumerated in either of the said lists for such areas in the Federation as were not included in any Province‑‑‑Article 1(2) of the Constitution that defined the territory of Pakistan, Islamabad Capital Territory was named, but was not included in any Province‑‑‑Both the conditions imposed by Art. 142(d) of the Constitution, firstly, for the exercise of exclusive powers vesting in the Federal Legislature to make laws and secondly, for the area not included in any Province were fulfilled in the present case‑‑‑Constitutional peti­tion was therefore, liable to be dismissed, in circumstances.

(b) Islamabad Capital Territory (Tax on Services) Ordinance (XLII of 2001)‑‑‑

‑‑‑‑Ss. 2, 3(1), 3(2) & Sched., Item No.6‑‑‑Sales Tax Act (VII of 1990), Ss‑3, 3A & 3AA‑‑‑Punjab Sales Tax Ordinance, (II of 2000), Preamble‑­Constitution of Pakistan (1973), Arts. 1(2), 70(4), 142(d) 199 & Fourth Sched.‑‑‑Constitutional petition‑‑‑Sales tax on services‑‑‑Petitioners through Constitutional petition challenged the Punjab Sales Tax Ordinance, 2000 and Islamabad Capital Territory (Tax on Services) Ordinance, 2001 on the ground that the said enactments were un Constitutional‑‑‑One of the contention of the petitioners was that the registration of the petitioners was being sought under the Sales Tax Act, 1990 and this was illegal as the Constitution did not provide for imposition of sales tax on services‑‑‑Validity‑‑‑Tax on sale, in the present case, had not been imposed within the meaning of Sales Tax Act, 1990‑‑‑What had been made chargeable, leviable and payable was a tax on the value of taxable services specified in the Schedule of Islamabad Capital Territory (Tax on Services) Ordinance, 2001‑‑‑Simply stating a tax as a sales tax did not make it a tax on sale‑‑‑Procedure, however, for charging, levying and payment of tax was adopted with reference to the provisions of Sales Tax Act, 1990‑‑‑Federal Legislature through the impugned Ordinance, in exercise of powers under Art. 142(d) of the Constitution, had made taxable the services rendered by the petitioners within the Islamabad Capital Territory‑‑‑Mere adoption of procedure in the Sales Tax Act, 1990, thus would not be derogatory of the scope of tax defined in S.3(1) and 3(2) of the impugned order‑‑‑Constitutional petition was dismissed, in the circumstances.

Shaukat Aziz Siddiqui for Petitioners.

Ch. Muhammad Tariq, D.A.‑G. for Respondents.

Dates of hearing: 30th January, 20th, 27th February, 16th March and 31st March, 2004.

2004 P T D 1993

[Lahore High Court]

Before Nasim Sikandar and Jawwad S. Khawaja, JJ

COMMISSIONER OF INCOME‑TAX

Versus

Messrs FINE MOOT INTERNATIONAL

C.T.R. No.57 of 1996, decided on 17th April, 2001.

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

‑‑‑‑Ss. 32(3) & 136(1)‑‑‑Income Tax Rules, 1982, R.216(3)(a)‑‑­Reference to High Court‑‑‑Question of law‑‑‑Tribunal directed that while computing income of assessee, CIF sales be adopted‑‑‑Contention of assessee was that Tribunal was not justified to give such directions in spite of provisions of S.32(3) of Income Tax Ordinance, 1979 and R.216(3)(a), when assessee's trading results were discarded by Income Tax Officer‑‑‑High Court declined to answer such questions as same were not questions of law.

The Commissioner of Income Tax Zone, Gujranwala v. Messrs Anwar Enterprises, Silakot 1999 PTD 1329 fol.

Muhammad Ilyas Khan for Petitioner.

Nemo for Respondent.

Date of hearing: 17th April, 2001.

2004 P T D 2012

[Lahore High Court]

Before Nasim Sikandar and Jawwad S. Khawaja, JJ

COMMISSIONER OF INCOME‑TAX, ZONE, LAHORE

Versus

Messrs MEHMOOD A. QAZI

P. T. R. No. 13 of 1993, decided on 20th March, 2001.

Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑S. 16(1)(b)‑‑‑Share of super tax payable by registered firm‑‑‑Such share could not be apportioned with reference to share of partner as computed under S.16(1)(b) of Income Tax Ordinance, 1979.

Commissioner of Income‑tax, Central Zone, East Zone and West Zone, Karachi v. Anweraly Haji Noor Muhammad and 4 others (1992) 65 Tax 195 fol.

Muhammad Ilyas Khan for Petitioner.

Zia Haider Rizvi for Respondent.

Date of hearing: 20th March, 2001.

2004 P T D 2176

[Lahore High Court]

Before Maulvi Anwarul Haq, J

BOARD OF INTERMEDIATE AND SECONDARY EDUCATION, RAWALPINDI through Secretary

Versus

ASSISTANT COMMISSIONER OF INCOME‑TAX AND WEALTH TAX, CIRCLE 27, RAWALPINDI and 2 others

Writ Petitions Nos. 1974 of 2001 and 121 of 2004, heard on 7th April, 2004.

Income Tax Ordinance (XXXIX of 1979)‑‑‑

‑‑‑‑S. 14, Sched. II, Item No. 86‑‑‑Income Tax Ordinance (XLIX of 2001) S.53, Sched. II, Item No.86‑‑‑Federal Board of Intermediate and Secondary Education Act, (LXVIII of 1975), Ss. 3 & 8‑‑‑Punjab Board of Intermediate and Secondary Education Act, (XIII of 1976), Ss. 3 & 10‑‑‑Constitution of Pakistan (1973), Art, 199‑‑‑Constitutional petition‑‑­Income Tax, exemption of‑‑‑Respondent Authorities intimated the petitioners of deduction of income‑tax on profits earned by them on their deposits in respective Banks‑‑‑Contention of the petitioners was that they were entitled to income tax exemptions granted under Sched. II of Income Tax (Ordinances of 1979 & 2001)‑‑‑Reply of the respondent Authorities was that the petitioners were not Universities and educational institutions to claim exemptions under Sched. II of said Income Tax Ordinances and that the Constitutional petition was not maintainable as the petitioners should have first availed the remedies provided under the said Ordinances‑‑‑Validity‑‑‑Provisions of Act of 1975 and the Act of 1976 which created the Boards revealed that they had been constituted by the Federal and Provincial Government respectively for the sole purpose of organizing, regulating, developing and controlling intermediate and secondary education in the Islamabad Capital Territory and Rawalpindi Division respectively‑‑‑Income Tax Ordinances had exempted income of a University or an educational institution established solely for educational purposes and not for purposes of profits‑‑‑Contention, of the respondent Authorities was misplaced as the petitioners Boards had been established primarily for educational purposes‑‑‑Persistent conduct of the respondent Authorities showed that the remedies provided for the petitioners under the said Ordinances were illusory‑‑‑Constitutional Petition was allowed, in circumstances, and the act of the respondent Authorities in causing to deduct income‑tax of the petitioners under the Income Tax Ordinances was declared to be void and without lawful authority.

Afnan Karim Kundi and Hafiz Muhammad Idrees for Petitioners.

Arshad Majeed Malik and Malik Muhammad Nawaz for Respondents.

Date of hearing: 7th April, 2004.

2004 P T D 2180

[Lahore High Court]

Before Nasim Sikandar, J

Messrs INTERNATIONAL TANNERS & INDUSTRIES (PVT.) LTD., LAHORE

Versus

FEDERATION OF PAKISTAN through Secretary Finance, Government of Pakistan, Islamabad and 2 others

Writ Petition No.5246 of 1997, heard on 13th February, 2004

(a) Judgment‑‑‑--

‑‑‑‑ Per incuriam‑‑‑Effect of‑‑‑Challenge to‑‑‑Validity‑‑‑Even all the Judges of the High Court sitting together cannot declare a judgment of the apex Court to be per incuriam.

(b) Words and phrases‑‑­

--‑Per incuriam‑‑‑Meaning of.

Concise Law Dictionary by Osborn, 1964 Edn.; Dictionary of English Law by Earl Jowitt, 1959 Edn. and Halsbursy's Laws of England, Third Edn., Vol.XXII, p.800 ref.

(c) Finance Act (XII of 1991)‑‑‑--

‑‑‑‑S. 12‑‑‑Constitution of Pakistan (1973), Art. 199‑‑‑Constitutional petition‑‑‑Judgment per incuriam, challenge to‑‑‑Petitioners challenged the vires of S.12 of Finance Act, 1991‑‑‑Issues being raised in the petition had already been considered by the Supreme Court in one of the cases‑‑‑Contention of the petitioners was that a number of issues which ought to have been raised before the Supreme Court were not raised and therefore, the judgment passed by the Supreme Court was per incuriam‑‑Validity‑‑‑Petitioners failed to come up with any authority which could directly or indirectly lead to a conclusion that a subordinate Court could hold a judgment of the superior Court to be per incuriam‑‑‑Interference with a judgment per incuriam was only for the author of judgment or for a higher strength in terms of number of Judges in a Bench‑‑‑Author of a judgment of a superior Court could record a finding that his earlier view was wrong on account of its being per incuriam‑‑‑Judgment sought to be declared per incuriam must by itself be under attack before a higher strength of Judges belonging to the same Court or a higher Court‑‑‑All the issues being raised by the petitioners in the Constitutional petition were found to be adequately considered by the Supreme Court, which had found the provisions of Finance Act, 1991 to be intra vires of the Constitution‑‑‑Issues which were decided by the apex Court stood settled once and for all‑‑‑Constitutional petitions were dismissed, in circumstances.

PLD 1997 SC 351; Young v. Bristol Aeroplane Company (1946) 2 All. ELR 293 and Messrs I.C.C. Textile Ltd. v. Federation of Pakistan and others 2001 SCMR 1208 ref.

(d) Wealth Tax Act (XV of 1963)‑‑‑--

‑‑‑‑Ss. 23 & 24‑‑‑Constitution of Pakistan (1973), Art. 199‑‑­Constitutional petition‑‑‑Assessment orders ‑‑‑Legality‑‑‑Jurisdiction‑‑‑Alternate remedy availability of‑‑‑Contention of the petitioners was that the assessment orders framed by the authorities to impose tax upon them were contrary to law‑‑‑Validity‑‑‑Complete hierarchy of forums had been provided in the statute for the petitioners to redress their grievance, therefore, the impugned assessment orders could not be made a subject‑matter of consideration in exercise of Constitutional jurisdiction.

Ashiq Hussain Mian, Muhammad Iqbal Hashmi; Syed Ibrar Hussain Naqvi, Sirajuddin Khalid and Syed Mansoor Ali Shah for Petitioner.

Muhammad Ilyas Khan and Shahid Jamil Khan for Respondents.

Date of hearing: 13th February 2004.

2004 P T D 2199

[Lahore High Court]

Before Muhammad Muzammal Khan, J

E.M.E. COOPERATIVE

Versus

COMMISSIONER OF INCOME‑TAX

Writ Petition No.8178 of 2004, decided on 28th May, 2004.

Income Tax Ordinance (XLIX of 2001)‑‑‑

‑‑‑‑S. 138(2)‑‑‑Constitution of Pakistan (1973), Art.199‑‑‑Constitutional petition‑‑‑Notice of attachment of Bank accounts of the assessee, a Cooperative Society, pending appeals against assessment before the Commissioner‑‑‑Application for ad interim injunction by the assessee before the Commissioner against the notice of attachment was not decided or taken cognizance of‑‑‑Assertions of the petitioner in Constitutional petition revolved around factual disputes, truthfulness or otherwise of which could not be determined without inquiry and such course was not permissible in Constitutional jurisdiction of High Court‑‑­Petitioner was not a private individual who would defy the appellate order if its appeal went against it‑‑‑Minimum what a citizen body corporate expected of a statutory functionary was to decide its matter according to law and the norms applicable, at the earliest‑‑‑Bank account of the petitioner having peen attached the petitioner would not be in a position to even discharge day to day obligations besides paying the salaries to its employees and other utility bills‑‑‑High Court directed the Commissioner of Income Tax to decide appeal of the petitioner or at least its application seeking ad interim injunction immediately preferably within a period of one month.

Rana Hammad Aslam for Petitioner.

2004 P T D 2249

[Lahore High Court]

Before Nasim Sikandar and Muhammad Sair Ali, JJ

PATTOKI SUGAR MILL

Versus

THE COLLECTOR

C. A. No.71 of 2002, decided on 31st July, 2003.

Sales Tax (Recovery) Rules, 1992‑‑‑

‑‑‑‑R.84 & Form IV‑‑‑Payment of defaulted amount‑‑‑According to R.84 and Form‑IV of Sales Tax (Recovery) Rules, 1992, a registered person was required to be allowed at least 15 days time to snake payment of defaulted amount and it was only in case of default after expiry of that period that concerned Authority could impose embargo‑‑­Since said requirement of law and rules had, not been complied with, embargo imposed by way of impugned order, was declared to be illegal.

Ejaz Ahmad Awan for Applicant.

Maqsood Ahmed Butt for Revenue.

2004 P T D 942

[Peshawar High Court]

Before Nasir ul Mulk and Talaat Qayum Qureshi, JJ

Messrs A.G.E. INDUSTRIES (PVT.) LTD. through Director

Versus

ADDITIONAL COLLECTOR SALES TAX, PESHAWAR

First Appeal from Order Nos. 104 and 175 of 2001, decided on 27th December, 2002.

(a) Sales Tax Act (VII of 1990)‑‑‑

‑‑‑‑Ss.3, 2(41), 2(35) & 2(33)‑‑‑Scope of tax‑‑‑Taxable supply‑‑‑Taxable activity‑‑‑Manufacturer had established its own sale points‑‑‑Taxability‑‑­Sales tax becomes payable at the time the manufactured goods leave the factory premises‑‑‑Manufacturing company thus was liable to pay sales tax when its products left the factory premises for further distribution at its sale points‑‑‑Sales tax would be leviable on the value of the supplies the company would receive on delivery of the goods.

F.S. Tobacco v. Superintendent, Central Excise and Sales Tax 1995 PTD 874 and Messrs Ambar Tobacco Company v. Additional Collector, Sales Tax Writ Petition No. 1960 of 1999 ref.

(b) Sales Tax Act (VII of 1990)‑‑‑

‑‑‑‑Ss.3, 2(41), 2(35) & 2(33)‑‑‑Scope of tax‑‑‑Taxable supply‑‑‑Taxable activity‑‑‑Manufacturer company had established its own sale points at different, places in the country‑‑‑Taxability‑‑‑Manufacturer was liable to sales tax though the manufactured item was consumed by itself‑‑‑Not 'essential that two persons be involved in some transaction; tax could still be levied even if one person alone carried out some taxable activity‑‑­Contention that one person could not transact with himself so as to be amenable to sales tax was not in conformity with the law and was repelled‑‑‑Company's supply of its manufactured products to the sale points established by the Company, therefore, was taxable activity and liable to sales tax‑‑‑Distributors, in the present case, at the relevant time, were, however, exempt from the payment of sales tax, the company, therefore, was not liable to pay tax on the value‑added to the products on account of their distribution at the sale points‑‑‑Order of the Collector and the Appellate Tribunal, therefore, was set aside and the show‑cause notice was declared to be illegal, and‑quashed ‑‑‑Company was not held liable to pay tax mentioned in the show‑cause notice and the same, if paid, was ordered to be refunded as at the relevant time the Distributors were exempt from the sales tax.

Commissioner of Sales Tax v. Hunza Central Asian Textile and Woollen Mills Ltd. 1999 SCMR 526; Sheikhoo Sugar Mills Ltd. v, Government of Pakistan 2001 SCMR 1376; F.S. Tobacco v. Superintendent, Central Excise and Sales Tax 1995 PTD 874 and Messrs Ambar Tobacco Company v. Additional Collector, Sales Tax Writ Petition No.1960 of 1999 ref.

Isaac Ali Qazi for Appellant.

Abdur Rauf Rohaila for Respondent.

Date of hearing: 12th September, 2002.

2004 P T D 1940

[Peshawar High Court]

Before Mian Shakirullah Jan, C.J. and Dost Muhammad Khan, J

COMMISSIONER OF INCOME‑TAX/WEALTH TAX, COMPANIES ZONE, PESHAWAR

Versus

Haji ANWAR‑UR‑REHMAN through Universal Tobacco Co. (Pvt.) Ltd., Mardan

F. A. O. No. 135 of 2001, decided on 23rd December, 2003

(a) Words and phrases‑‑‑--

‑‑‑"Bad debt"‑‑‑Meanings.

(b) Wealth Tax Act (XV of 1963)‑‑‑--

‑‑‑‑Ss. 2(5)(ii) & 3‑‑‑Assets‑‑‑Loan advance by assessee alleged to be non‑recoverable and bad debt ‑‑‑Assessee on such ground claimed exemption from tax‑‑‑Order of Assessing Officer allowing exemption was set aside by Appellate Authority, but was restored by Tribunal‑‑­Validity‑‑‑Duty of assessee was to provide proof that loanee had become absolutely insolvent and incapable of paying back loan to assessee‑‑­Fact‑finding inquiry for such purpose would be essential‑‑‑In absence of such proof, any decision in such regard would be one in vacuum‑‑‑No clear picture of loanee's financial position had come on record‑‑­Authority or Tribunal could not record conclusive findings on question of bad debt, as no ample proof had been provided by assessee‑‑­Appellate Authority by remanding case to Assessing Authority had taken correct step for doing complete justice to both parties, resultantly assessee would have an ample opportunity to prove by evidence such debt to be bad one and non‑recoverable due to insolvency or inability of loanee to repay same back‑‑‑High Court accepted appeal and set aside impugned order.

Eid Muhammad Khattak for Appellant.

M. Asif Khan for Respondent.

Date of hearing: 7th October, 2003.

2004 P T D 1994

[Peshawar High Court]

Before Nasir‑ul‑Mulk, J

COMMISSIONER OF INCOME‑TAX

Versus

GHAZI BAROTHA CONSTRUCTION

F.A.O. No.42 of 2000, decided on 14th May, 2004.

(a) Civil Procedure Code (V of 1908)‑‑‑--

‑‑‑‑O. XLI, R. 34, XLVII, R. 1 & S. 114‑‑‑High Court (Lahore) Rules and Order, Vol. V, Chap. IV, Part II, R. 5‑‑‑Difference of opinion between Judges of Division Bench on the point, whether or not there should be re‑hearing of appeal‑‑‑Referee Judge opted for re‑hearing of appeal‑‑‑Validity‑‑‑Such order of Referee Judge was a judicial order, which if not challenged, would attain finality‑‑‑Division Bench while re hearing case would have no authority to review judicial order of Referee Judge.

(b) Civil Procedure Code (V of 1908)‑‑‑--

‑‑‑‑O. XLI, R. 34‑‑‑High Court (Lahore) Rules and Order, Vol. V Chap. IV, Part II, R. 5 ‑‑‑Difference of opinion between Judges of Division Bench‑‑‑Opinion of Referee Judge‑‑‑Validity‑‑‑Where one Judge of Division Bench did not express his opinion on merits, then opinion of Referee judge would not be decision by majority‑‑‑Where Referee differed from opinion of Judge of Division Bench, who had expressed his opinion on merits, then case would be referred to another Referee Judge‑‑‑Difference of opinion between Judges of Division Bench on the point of re‑hearing of appeal‑‑‑If Referee Judge decided that there was a case of re‑hearing, then matter would be referred back to Division Bench‑‑‑Where one Judge of Division Bench had already declined to sit on Bench, if case was to be re‑heard, then proceedings before Division Bench would stand vitiated.

Mubarik Ali Khan v. Anjuman Islamia, Punjab, Lahore PLD 1982 SC 315 and Muhammad Sayyar v. Vice‑Chancellor, University of Peshawar PLD 1974 SC 257 ref.

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

‑‑‑‑Ss. 2(21)(23)(30)(32)(40), 80‑C & 143‑B‑‑‑Registration of foreign company alongwith domestic company as resident AOPs and filing of statement under such status under 5.143‑C of Income Tax Ordinance, 1979‑‑‑Effect‑‑‑Status of foreign company, if considered individually and not as AOPs, would be that of a non‑resident company‑‑‑Non‑Pakistani company, if made arrangement for payment of dividends out of its income within Pakistan, would be included in definition of domestic company‑‑‑Non‑Pakistani company would fall within definition of resident company under S.2(40)(c) of Income Tax Ordinance, 1979, if control and management of its affairs were situated wholly in Pakistan‑‑­Number of persons could register themselves as AOPs to be considered as a single person for tax purposes‑‑‑Such association would not be possible, if its constituent member was subject to different regime of taxation‑‑‑Foreign companies in their individual capacities were bound to be taxed on profits and could not be subjected to presumptive tax regime in view of Cls. 9‑A of Part‑IV of Second Sched. Of Ordinance, 1979‑‑­Foreign companies could not be registered alongwith domestic companies as AOPs, unless they had exercised option in terms of proviso to said Cls. 9‑A‑‑‑Filing of statement by joint venture, under S.143‑B of Ordinance, 1979 and its registration as resident AOP being against the provisions of law would not serve as estoppel against foreign companies‑‑‑Foreign companies would be assessed separately‑ on income derived by them according to .their shares from joint venture.

Messrs Elahi Cotton Mills Limited and others v. Federation of Pakistan PLD 1997 SC 582; Julian Hoshang Dinshaw Trust v. Income Tax Officer and others 1992 PTD 1 and Paper Products Limited v. Commissioner of Central Excise 2001 PTD 2253 ref.

Pir Sabir Shah v. Shad Muhammad Khan PLD 1995 SC 66 rel.

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

‑‑‑‑Ss. 80C, 163 & Second Sched., Part IV, Cl. (9‑A) [as amended by Finance Act (IX of 1996)]‑‑‑S.R.O. 326(I)/92, dated 20‑4‑1992 [effective from 1‑1‑1992], Art. 7‑‑‑S.R.O. 23(I)/96, dated 8‑1‑1996 [effective from on 30‑11‑1995]‑‑‑Convention for Avoidance of Double Taxation between Pakistan and Italy, Art. 7‑‑‑Convention for Avoidance of Double Taxation between Pakistan and Germany‑‑‑Taxation on income of non‑resident companies of such contracting countries ‑‑‑Scope‑‑­According to Art. 7(1)(3) of such conventions, only profits of such non­resident companies carrying business in Pakistan would be taxable after allowing deduction of expenses in determination of profits‑‑‑Under S.80‑C of Income Tax Ordinance, 1979, tax was charged on income and not profits, and deduction of expenses was not permissible‑‑‑Such non­resident companies would not be subjected to presumptive tax regime.

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

‑‑‑‑Ss. 2(24), 15 & 163 & Second Sched., Part IV, Cl. (9‑A)‑‑‑Double taxation treaties‑‑‑Income of non‑resident companies of contracting countries‑‑Chargeability to tax‑‑‑Such treaties would have overriding effect over other laws for the time being in force.

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

‑‑‑‑Ss. 55, 80‑C, 143‑B & Second Sched., Part IV, Cls. 9‑A [as amended by Finance Act (IX of 1996)]‑‑‑Non‑resident companies opting for presumptive tax regime‑‑‑Procedure‑‑‑Amendment brought by Finance Act, 1996 in Cl. 9‑A of Part IV of Second Schedule of Income Tax Ordinance, 1979 excluded non residents from presumptive tax regime, unless they opted for same through a declaration in writing‑‑­Such declaration must state that same was final and irrevocable and must be filed alongwith return of total income under S. 55 of Ordinance, 1979‑‑‑Simply filing of return or a statement under S.143‑B of Ordinance, 1979 without appending thereto a written declaration by non‑resident would not amount to exercise of option under proviso to Cl. 9‑A, Part IV of Second Sched. of Ordinance, 1979‑‑‑Option by non‑resident under Cl. 9‑A, whether opting out of or opting for presumptive tax regime would be exercised at the time of filing of returns.

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

‑‑‑‑S. 55 & Second Sched., Part IV, Cl. 9‑A [as amended by Finance Act (IX of 1996]‑‑‑C.B.R. Circular No.4 of 1964 & 8 of 1986‑‑‑Foreign companies entering into joint venture with Pakistani resident companies‑­Income of such foreign companies ‑‑‑Chargeability of tax‑‑‑Such foreign companies would be taxed separately on the income, they derived from venture‑‑‑Such foreign companies would not be taxed as AOPs together with residents on joint income of venture.

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

‑‑‑‑S. 3(a)‑‑‑Central Board of Revenue‑‑‑Status of‑‑‑C.B.R. is not a judicial forum under Income Tax Ordinance, 1979 to qualify for interpretation of any provision thereof.

Central Insurance Company v. Central Board of Revenue and others 1993 SCMR 1232 and The Central Board of Revenue, Islamabad v. Shiekh Spinning Mills Limited, Lahore 1999 SCMR 1442 ref.

Pir Sabir Shah v. Shad Muhammad Khan PLD 1995 SC 66 fol.

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

‑‑‑‑S. 3‑‑‑Income Tax Officer‑‑‑Duty of Income Tax Officer is to apply law notwithstanding the claim of assessee, even if result would be favourable to assessee, in the same way as he would decline assessee's claim for concession if not admissible under law.

Muhammad Ilyas Khan and Eid Muhammad Khattak for Appellants.

Waseem Sajjad, Ali Sajjad, Barrister Yousaf Khosa and Abdul Latif Yousafzai for Respondents.

Dates of hearing: 10th & 11th February, 2004.

2004 P T D 2267

[Peshawar High Court]

Before Nasir ul Mulk and Talaat Qayum Qureshi, JJ

NORTHERN BOTTLING CO. (PVT.) LTD.

Versus

FEDERATION OF PAKISTAN through Federal Secretary of Finance and Economic Affairs, Islamabad and 2 others

Writ Petition No. 1365 of 1999, decided on 13th May, 2004.

Sales Tax Act (VII of 1990)‑‑‑

‑‑‑‑S.3(2)(c)(1‑A)‑‑Constitution of Pakistan (1973), Arts.18 & 25‑­Constitutional petition ‑‑‑Vires of S. 3(2)(c)(1-A), Sales Tax Act, 1990‑‑­Insertion of. (1‑A) in section 3, Sales Tax Act, 1990 by Finance Act, 1999 was ultra vires the Constitution, being discriminatory and imposing a penalty under the garb of taxation, and further being ultra vires of the very Scheme of taxation laid down in the Sales Tax Act, 1990‑‑‑Insertion in question therefore was not enforceable against the assessee‑‑­Principles.

Writ Petition No. 1713 of 1991 (Messrs Northern Bottling Co. (Pvt.) Ltd. v. Government of Pakistan and others; Assistant Collector Sales Tax Peshawar and 2 others v. Northern Bottling Company (Pvt.) Ltd. 2001 PTD 2636; Muhammad Mumtazul Hasan v. Ata Ullah Mehar 1984 SCMR 1499; Pir Sabir Shah v. Federation of Pakistan and others PLD 1984 SC 738; Devkumarsinghji Kastruchandji v. State of Madhya Pradesh and others AIR 1967 Madhya Pradesh 268; Kunnathat Thathunni Moopii Nair etc. v. State of Kerala and another AIR 1961 SC 552 and Government of Pakistan v. Muhammad Ashraf PLD 1993 SC 176 ref.

Issac Ali Qazi and Yahya Khan Afridi for Petitioner.

Salahuddin, D.A.‑G. and Abdur Rauf Rohaila for Respondents.

Date of hearing: 14th April, 2004.

2004 P T D 741

[Supreme Court of Pakistan]

Present: Sh. Riaz Ahmad, C.J., Qazi Muhammad Farooq and Abdul Hameed Dogar, JJ

Messrs MAKAMA STEEL CRAFTS (PVT.), LTD. through Chief Executive

versus

COLLECTOR OF CUSTOMS, PESHAWAR and another

Civil Petition No.2573 of 2003, decided on 12th November, 2003.

(On appeal from the judgment, dated 25‑6‑2003 of the Peshawar High Court, Peshawar passed in F.A.O. No.63 of 2002).

Customs Act (IV of 1969)‑‑‑

‑‑‑Ss. 16,‑ 18, 19 & 196‑‑‑Imports and Exports (Control) Act (XXXIX of 1950), S. 3(1)‑‑‑Constitution of Pakistan (1973), Art. 185(3)‑‑‑Mis­-declaration by importer at the time of import‑‑‑Levy of duty only to the extent of physically verified‑by Customs Authorities‑‑‑New plea, raising of‑‑‑Tin free steel sheets, CRC steel sheets and tin plates were actually imported but the same were declared as Electro galvanized sheets and accordingly, the import duty was paid‑‑‑Customs Authorities after is‑suing show‑cause notice to the importer, imposed penalty‑‑‑Only 10 % of the goods imported having been inspected at the time of import, therefore, Appellate Tribunal reduced the penalty to the extent of 10%‑‑­Order passed by the Appellate Tribunal was maintained by High Court in exercise of appellate jurisdiction‑‑‑Plea raised by the importer was that his application for amendment of memorandum of appeal was wrongly dismissed by the Appellate Court‑‑‑Validity‑‑‑Record as well as the findings of Tribunal and High Court had established that the importer had mis-declared description of the goods and claimed evasion of tax‑‑­Importer, at appellate stage, sought amendment in memorandum of appeal to the extent that the place of S.R.O. No.602, S.R.O. No.643 be substituted‑‑‑Importer, in reply to the show‑cause notice, had not claimed any concession under S.R.G. No.643, thus the amendment was rightly declined‑‑ ‑Supreme Court declined to interfere with the orders passed by Appellate Tribunal and High Court‑‑‑Leave to appeal was refused.

Muhammad Khalid Mehmood Khan, Advocate Supreme Court for Petitioner.

Raja Muhammad Irshad, D.A.‑G. For Respondents

Date of hearing: 12th November, 2003.

2004 P T D 767

[Supreme Court of Pakistan]

Present: Munir A. Sheikh, Faqir Muhammad Khokhar and Falak Sher, JJ

Messrs MUHAMMAD AMIN BROTHERS (PVT.) LTD. and others

versus

FEDERATION OF PAKISTAN through Secretary (Finance), Islamabad and others

Civil Petitions Nos. 983‑L to 993‑L of 2002, decided on 3rd June, 2003.

(On appeal from the judgment of the Lahore High Court, Lahore, dated 7‑2‑2003 passed in Writ Petitions Nos.21041, 21046, 21790, 21791, 21792, 21801, 21802, 21803, 21844, 21845 and 21846 of 2001).

(a) Sales Tax Act (VII of 1990)‑‑‑

‑‑‑‑S. 3(2)(a)‑‑‑S.R.O. 1032(1)/94, dated 18‑10‑1994‑‑‑Constitution of Pakistan (1973), Fourth Sched., Federal Legislative List, Item 49‑‑­Supply of coal produced by Coal Miner‑‑‑Levy of sales tax on such supply‑‑‑Validity‑: ‑Such levy was Constitutionally justified for not being a kind of tax on any mining activity, rather same was on sale, importation, exportation, production, manufacture and consumption of goods as envisaged by Entry No.49 of Fourth Sched. of the Constitution.

(b) Sales Tax Act (VII of 1990)‑‑‑

‑‑‑‑S. 3(2)(a)‑‑‑S.R.O. 1032(1)/94, dated 18‑10‑1994‑‑‑Constitution of Pakistan (1973), Art. 25‑‑‑Supply of coal produced by Coal Miners‑‑­Levy of sales tax by Federal Government on such supply‑‑‑Recovery of sales tax from Coal Miners in Punjab at ad valorem rate, while in Balochistan at fixed rate‑‑‑Validity‑‑‑Sales tax' was recoverable under S.R.O. 1032(1)/94, at the same rate from Coal Miners in all the four Provinces‑‑‑Such recovery .had been made in different manner in Province of Balochistan on account of circumstances prevailing there as Provincial Government had agreed to contribute towards payment of sales tax on behalf of Coal Miners in its Province, while remaining amount was to be paid by Coal Miners‑‑‑No case of discrimination regarding levy of ‑ tax at same rate had been made out against the Federal Government.‑‑Supreme Court refused leave to appeal.

Mian Ashiq Hussain, Advocate Supreme Court and Tanvir Ahmed, Advocate‑on‑Record for Appellants (in all Petitions).

M. Yawar Ali Khan, Dy. A.‑G., Muhammad Aslam Chaudhry, Advocate‑on‑Record and Manzoor Hussain, Secretary, Sales Tax for Respondents.

Date of hearing: 3rd June, 2003

2004 P T D 1178

[Supreme Court of Pakistan]

Present: Sh. Riaz Ahmad, C.J. and Karamat Nazir Bhandari, J

Messrs ASHRAF SUGAR MILLS LTD. and others

Versus

GOVERNMENT OF PAKISTAN and others

Civil Petitions Nos. 1356-L to 1359-L, 1404-L to 1416-L, 1447-L, 1448-L, 1457-L, 1458-L, -1468-L, 1508-L and 1540-L of 2002, decided on 10th February, 2003.

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

----Ss. 3, 3-C & 12-A---Constitution of Pakistan (1973), Art. 185(3)--­Leave to appeal was granted by Supreme ,Court to consider the effect of its judgments delivered in the cases reported as Messrs Army Welfare Sugar Mills Ltd. v. Federation of Pakistan (1992 SCMR 1652) and Collector Customs/Central Excise, Government of Pakistan v. Bawany Sugar Mills Ltd. (2000 SCMR 1266).

Messrs Army Welfare Sugar Mills Ltd. v. Federation of Pakistan 19-92 SCMR 1652 and Collector Customs/Central Excise, Government of Pakistan v. Bawany Sugar Mills Ltd. 2000 SCMR 1266 ref.

Ali Ahmed Awan, Advocate Supreme Court and Ch. Mehdi Khan Mehtab, Advocate-on-Record for Petitioners (in C. Ps. Nos. 1356-L to 1359-L of 2002).

K.M. Virk, Advocate Supreme Court and M.A. Qureshi, Advocate-on-Record for Petitioners (in C.Ps. Nos. 1404-L to 1416-L of 2002).

Shahid Karim, Advocate Supreme Court and Mahmudul Islam, Advocate-on-Record for Petitioners (in C.Ps. Nos. 1447-L and 1448-L of of 2002).

Izharul Haque, Advocate Supreme Court and Tanvir Ahmed, Advocate-on-Record for Petitioners (in C.Ps. Nos. 1457-L, 1458-L, 1468-L. 1508-L of 2002).

Sheikh Salahuddin, Advocate-on-Record for Petitioner (in C.P. No. 1540-L of 2002).

Sh. Maqbool Ahmad, Advocate Supreme Court and C.M. Latif, Advocate-on-Record for Respondents (In C. Ps. Nos. 1405-L, 1410-L, 1414-L to 1416-L and 1508-L of 2002).

Tariq Aziz, Advocate Supreme Court for Respondent (in C.P. No. 1407-L of 2002).

Date of hearing: 10th February, 2003.

2004 P T D 1179

[Supreme Court of Pakistan]

Present: Munir A. Sheikh, Iftikhar Muhammad Chaudhry and Rana Bhagwandas, JJ

D.G. KHAN CEMENT COMPANY LTD. and others

Versus

FEDERATION OF PAKISTAN and others

Civil Appeals Nos.1866 of 1996, 1262 of 1999, 1288 of 2000, 1293, 1294, 1296 and 1306 of 2001, decided on 11th November, 2003.

(On appeal from the judgments dated 30-5-1995, 8-4-1999, 18-2-1999, 1-3-2000, 12-4-2000 and 20-10-2000 of the Lahore High Court and Peshawar High Court passed in Writ Petitions Nos.2431 of. 1995, 8642 of 1995 and 581 of 1995, 2752 of 2000, 12849 of 1999, 5602 of 2000 and 19213 of 2000 respectively).

(a) Interpretation of statutes---

---- Harmonious construction is to be made keeping in view the different provisions of the statute after fully understanding the intention with which the same had been made and object which was intended to be achieved.

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

----Ss.3, 2(22), (28) & (30)---Scope of tax---Intention behind the promulgation of Ss.3, 2(22), (28) & (30) of the Sales Tax Act, 1990 is clearly manifest that the sales tax should go to the Government treasury within the tax period after the same having become due and should not be retained by the manufacturer---No hard and fast rule is available as to when and at what stage, the transaction shall be deemed to be the transaction of sale of goods---Each case has to be decided according to the facts and circumstances of the case keeping in view, in particular, the practice, usage of a particular nature of business or trade--Manufacturer, in the present case, used to receive amount of consideration in advance for the supply of cement to be made later--­Provisions of S.2(22) & (30) of the Sales Tax Act, 1990 clearly provided that the-time of supply was deemed to be the date on which advance payment was received or the supply made whichever was earlier and in such a case, the amount of consideration received in advance shall be deemed to be the price on that date of the proportionate quantity of cement and the sales tax should be deposited before the 20th of the succeeding month in the Government treasury instead of the date of delivery of the goods at the subsequent stage---Date of receipt of amount of consideration in advance, therefore, could well -be construed to be the date of sale for the purpose of payment of sales tax---Contention of the manufacturer was that in case subsequently on the date of supply of the cement, there was variation in the price of the goods or transaction was cancelled, the right and interest of the manufacturer should be protected---Held, there was no such difficulty in adopting the construction of the relevant provisions as to date of sale of goods for the purpose of payment of sales tax.

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

----S. 34---Recovery of additional tax or imposition of penalty--­Validity---Imposition of penalty or additional tax under S.34, Sales Tax Act, 1990 was mandatory and there was no discretion left with the Authorities to allow any exception---Each and every case, however, had to be decided on its own merits as to whether the evasion or non­payment of tax 'was wilful or mala fide, decision on which would depend upon the question of recovery of additional tax---Where non-payment of the sales tax within period was neither wilful nor it could be construed to be mala fide evasion or payment of duty, recovery of additional tax as penalty or otherwise was not justified in law.

PLD 1991 SC 963; PTCL 1995 CL 415; 2003 PTD (Trib.) 928; 2001 PTD (Trib.) 2888; 2002 PTD (Trib.) 300; GST 2002 CL 280 (Trib.) and 1999 PTD 3907 ref.

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

----Ss.3, 2(22), (28) & (30)---Scope of tax---Payment of sales tax was due within the tax period under the Sales Tax Act, 1990 from the date of receipt of amount of consideration in advance and not from the date of delivery of goods.

Raja Muhammad Akram, Senior Advocate Supreme Court for Appellants (in Civil Appeal No. 1866 of 1996).

Respondent No.1: Ex parte (in Civil Appeal No. 1866 of 1996).

Raja Abdul Ghafoor, Advocate-on-Record for Respondents Nos. 2 to 7 (in Civil Appeal No. 1866 of 1996).

A. Karim Malik, Advocate Supreme Court for Appellants (in Civil Appeal No. 1262 of 1999).

Abdul Latif Yousafzai, Advocate Supreme Court and M. S. Khattak, Advocate-on-Record for Appellant (in Civil Appeal No. 1288 of 2000).

Tasleem Hussain, Advocate-on-Record (absent) for Respondent No. 2 (in Civil Appeal No. 1288 of 2000).

Raja Abdul Ghafoor, Advocate-on-Record for Respondent No.3 (in Civil Appeal No. 1288 of 2000).

Imtiaz Rashid Siddiqui, Advocate Supreme Court for Appellants (in Civil Appeal No. 1293 of 2001).

Sheikh Salah-ud-Din, Advocate-on-Record (absent) for Respondents (in Civil Appeal No. 1293 of-2001).

Ahmar Bilal Sufi Advocate Supreme Court and Imtiaz Rashid Siddiqui, Advocate Supreme Court for, Appellants (in Civil Appeals Nos. 1294 and 1296 of 2001).

Sheikh ' Salah-ud-Din, Advocate-on-Record (absent) for Respondents (in Civil Appeals Nos. 1294 and 1296 of 2001):

Mian Qamar-ud-Din Ahmad, Advocate Supreme Court and Imtiaz Rashid Siddiqui, Advocate Supreme Court for Appellants (in Civil Appeal No. 1306 of 2001).

Sheikh Salah-ud-Din, Advocate-on-Record for Respondent (in Civil Appeal No. 1306 of 2001).

Date of hearing: 11th November, 2003.

2004 P T D 1714

[Supreme Court of Pakistan]

Present: Iftikhar Muhammad Chaudhry and Faqir Muhammad Khokhar, JJ

COLLECTOR OF SALES TAX AND CENTRAL EXCISE, LAHROE

Versus

Messrs MANDIAL PAPER MILLS LTD. and others

Civil Petitions Nos.694‑L to 698‑L of 2002, decided on 19th February, (On appeal from the judgment/order dated 30‑11‑2001 passed by Lahore High Court, Lahore in Writ Petitions Nos. 843, 1454; 8472, 13574 and 14545 of 1994).

(a) Constitution of Pakistan (1973)‑‑‑

‑‑‑‑Art. 185(3)---‑Administration of justice‑‑‑Recalling of order‑‑­Supreme Court after hearing counsel for the parties allowed the petitions by converting them into appeals but when detailed order was checked, it was noticed by the Supreme Court that some of the petitioners were un ­represented‑‑‑Effect‑‑‑Supreme Court, in the interest of justice, recalled its earlier order of allowing petitions by converting them into appeals and leave to appeal was granted.

(b) Sales Tax Act (VII of 1990)‑‑‑--

‑‑‑‑S. 3‑‑S.R.O. No.87711/1994‑‑‑Constitution of Pakistan (1973), Art. 185(3)‑‑‑Leave to appeal was granted by Supreme Court to consider whether High Court had disposed of the Constitutional petitions filed by the respondents after remand, in accordance with the observations made by Supreme Court in its earlier judgment.

A. Karim Malik, Senior Advocate Supreme Court and Muhammad Aslant Chaudhry, Advocate‑on‑Record for Petitioners.

Anwar Kamal, Advocate Supreme Court and Fair‑ur‑Rehman, Advocate‑on‑Record for Respondents (in C.P. 697‑L of 2002).

Nemo for Respondents (in C.Ps. 694‑L to 696‑L and 698‑L of 2002).

Date of hearing: 19th February, 2003.

2004 P T D 1929

[Supreme Court of Pakistan]

Present: Nazim Hussain Siddiqui, CJ., Javed Iqbal and Abdul Hameed Dogar, JJ

COLLECTOR OF CUSTOMS and another

Versus

TARIQ SULTAN AND COMPANY and another

Civil Appeals Nos.1804 and 163/K OF 1997, decided on 1st April, 2004.

(On appeal from the judgment of the High Court of Balochistan, Quetta, dated 8‑5‑1997 passed in C.P. No.290 of 1996).

(a) Customs Act (IV of 1969)‑‑‑

‑‑‑S.30‑‑‑Central Excise Act (I of 1944), S.3(c)‑‑‑Central Excise Rules, 1944, R.96 ZZ‑‑‑Notification S.R.O. No. 457(1)/96, dated 13‑6‑1996‑‑­onstitution of Pakistan (1973), Art. 185(3)‑‑‑Leave to appeal was ranted by Supreme Court to consider; whether central excise duty case of ship breaking was to be recovered as customs duty under S.30 of Customs Act, 1969, with reference to the date of entry was filed and whether benefit of Notification S.R.O. No.457(1)/96, dated 13‑6-1996, could be availed by the respondents, and whether the value was to be determined in the instant case with reference to S. 3(c) of Central Excises Act; 1944, and as such, R. 96 ZZ of Central Excise Rules, 1944, did not apply.

(b) Customs Act ‑(IV of 1969)‑‑‑

‑‑‑‑S. 30‑‑‑Central Excises Act (I of 1944), S.3(c)‑‑‑Central Excise Rules, R.96 ZZ‑‑‑Notification S.R.O. No. 457(1)/96, dated 13‑6‑1996‑‑­Central Excise duty, recovery of‑‑‑Levy of such duty‑‑‑Crucial date‑‑­Bill of entry was filed on 9‑6‑1996 and the Notification S.R.O. No.457(1)/96, dated 13‑6‑1996; was made applicable with effect from 1‑7‑‑1996‑‑‑Plea raised by the authorities was that duty was to be levied on the date on which the bill of entry was filed‑‑‑Validity‑‑­Counsel for the authorities admitted that Notification S.R.O. No.457(1)/96, dated 13‑6‑1996, was never withdrawn‑‑‑In view of such admission, the date of bill of entry would be immaterial‑‑‑Had the S.R.O. in question been withdrawn, only then the date of bill of entry had been material‑‑‑Exemption having been granted by means of S.R.O. No. 457(1)/96, dated 13‑6‑1996, which was intact, same could be availed by the respondents‑‑‑Other duties/taxes which were not included in the S.R.O. in question regarding which no exemption was granted could be recovered from the respondent in accordance with law‑‑‑Judgment passed by High Court being well‑based did not warrant interference by Supreme Court‑‑‑Appeal was dismissed.

Federation of Pakistan, through Ministry of Finance and others v. Noorie Trading Corporation (Pvt.) Limited and others (1992 SCMR 710) and Federation of Pakistan and others v. Amjad Hussain Dilwari and 2 others (1992 SCMR 1270) distinguished.

(c) Constitution of Pakistan (1973)‑‑‑--

‑‑‑‑Art. 185(3)‑‑‑Appeal to Supreme Court ‑‑‑Expunction of remarks‑‑­Misuse of authority‑‑‑High Court, while accepting the Constitutional petition filed by importer had made certain remarks against the Customs official‑‑‑Plea raised by the official was that the remarks were uncalled for‑‑‑Validity‑‑‑Customs official had acted whimsically, arbitrarily and had misused his authority by deducting duties/taxes in a fraudulent manner which was apparent on record and had rightly been taken notice of in the judgment passed by High Court‑‑‑No illegality or irregularity had been committed by passing the remarks which were in consonance with record‑‑‑Supreme Court directed the Central Board of Revenue to take action pursuant to the observations as made by High Court‑‑­Question raised by the official might be a question of personal grievance but no question of law of public importance was involved in matter‑‑‑, Leave to appeal was refused.

Raja M. Irshad, Deputy Attorney General and Ahhlaq Ahmed Siddiqui, Advocate‑on‑Record for Appellants (in Civil Appeal No. 1804 of 1997).

Mirza Muhammad Siddiqui, Advocate Supreme Court and M.S. Khattak, Advocate‑on‑Record for Respondent No.1 (in Civil Appeal No 1804 of 1997).

Muhammad Bilal, Senior Advocate Supreme Court and Akhlaq Ahmed Siddiqui, Advocate‑on‑Record for Petitioner (in Civil Petition No. 163‑K of 1997).

Nemo‑for Respondents.

Date of hearing: 1st April, 2004.

2004 P T D 2187

[Supreme Court of Pakistan]

Present: Sh. Riaz Ahmed, C.J., Mian Muhammad Ajmal and Muhammad Nawaz Abbasi, JJ

ABU BAKAR SIDDIQUE and others

Versus

COLLECTOR OF CUSTOMS, LAHORE and another

Civil Appeals Nos.1574 of 2001 and 921 of 2002, decided on 20th February, 2003.

(On appeal from the judgment of Lahore High Court, Lahore dated 6‑12‑2000 passed in Customs Appeal No. 26 of 1997 and dated 7‑6‑1999 of Lahore High Court, Rawalpindi Bench, passed in Customs Appeal No.51 of 1998).

(a) Customs Act (IV of 1969)‑‑‑

‑‑‑‑S. 181‑‑‑Constitution of Pakistan (1973), Art. 185(3)‑‑‑Leave to appeal was granted by Supreme Court to consider whether in view of S.181 of Customs Act, 1969, the Collector of Customs was not under obligation to give an option to the petitioner to pay fine in lieu of confiscated goods.

(b) Customs Act (IV of 1969)‑‑‑

‑‑‑‑S. 181‑‑‑Central Excises Act (I of 1944), S.34‑‑‑Sea Customs Act (VIII of 1878), S. 183‑‑‑Confiscation of goods‑‑Option to pay fine‑‑­Scope and distinction‑‑‑In case of confiscation of goods under the provisions of Central Excises Act, 1944, it is obligatory for the adjudicating officer to give option to the owner of the goods to day fine in lieu of confiscation and similarly under S.183 of Sea Customs Act, 1878, giving of such option was mandatory but under S.181, of Customs Act, 1969, the option is discretionary and not mandatory‑‑‑Distinction among the provisions of three laws is that Central Excises Act, 1944, deals with the goods which are manufactured in Pakistan and there is no restriction on the sale and purchase of such goods inside the country whereas the Customs Act, 1969, applies to the goods which are imported into Pakistan and exported out of Pakistan under the import and export policy of Government.

Kshetra Nath v. Collector, Land Customs AIR 1959 Cal. 356 ref.

(c) Customs Act (IV of 1969)‑‑‑

‑‑‑‑S. 2(s)‑‑‑Imports and Exports (Control) Act (XXXIX of 1950), Preamble‑‑‑Import of goods in personal baggage‑‑‑Scope‑‑‑Such import is in violation of import policy framed under Imports and Exports (Control) Act, 1950 and is illegal.

(d) Discretion‑‑‑

‑‑‑‑ Exercise of discretion Principles‑‑‑Authority enjoying the discretionary powers, exercise same without any guideline but at the same time such authority must not exercise the discretion in arbitrary and capricious manner‑‑‑It may not be obligatory for the concerned authority to exercise the discretion in a particular manner but exercise of such power in unreasonable manner is not proper and in such a case the order passed in discretionary jurisdiction is not immune from judicial review of superior Courts‑‑‑In a case in which statute authorizes a person for exercise of discretion to advance the cause of justice, the power is not merely optional but it is the duty of such person to, act in the manner it is intended.

(e) Words and phrases‑‑‑--

‑‑‑‑May‑‑‑Connotation and applicability‑‑‑Word 'may' is discretionary and an enabling word and unless the subject‑matter shows that the exercise of power given by the provision using the word 'may' was intended to be imperative for the person to whom the power was given, it might not put him under obligation to necessarily exercise such power but if it is capable of being construed as referring to a statutory duty, it is not entirely for such person to exercise or not to exercise the power given to him under the law‑‑‑Use of word 'may' in statute in plain meanings is to give discretion to public authorities to act in their option in the manner in which such authorities deem proper but if the public authorities are authorized to discharge their functions in their option in a positive sense, the word may' used in the provision can be suggestive of conveying the intention of Legislature of imposing an obligation on them‑‑‑Wordmay' usually and generally does not mean 'must' or 'shall' but it is always capable of meaning 'must' if the discretionary power is conferred upon a public authority with an obligation under law‑‑‑Word 'may' is not always used in statute with the intention and purpose to give uncontrolled powers to an authority rather oftenly it is used to maintain the status of authority on whom the discretionary power is conferred as an obligation and thus the legislative expression in the permissive form sometimes is construed mandatory‑‑‑Such however, is only in exceptional circumstances that a power is conferred on a person by saying that he may do a certain thing in his discretion but from the indication of the relevant provisions and the nature of the duty to be done, it appears that exercise of power is obligatory.

(f) Customs Act (IV of 1969)‑‑‑

‑‑‑‑S. 181‑‑‑Confiscation of goods‑‑‑Option of tine in lieu of confiscation‑‑‑Jurisdiction of adjudicating officer‑‑‑Scope‑‑‑Adjudicating Officer under S.181 of Customs Act, 1969, is not under obligation to give an option to the owner of goods for redemption in lieu of payment of fine and taxes‑‑‑By addition of proviso to S.181 of Customs. Act, 1969, the discretionary power of giving an option to the owner of goods is confined only to the extent of the goods which have not been kept‑ out of the purview of S.181 of Customs Act, 1969‑‑‑Classification of goods for the purpose of exercise of discretion under S.181 of Customs Act, 1969, manifestly indicates that it is not the intention of Legislature that in all circumstances, the giving of option under S.181 of Customs Act, 1969, for redemption of goods in lieu of payment of fine, should be entirely discretionary.

(g) Administration of justice‑‑‑

‑‑‑Exercise of mandatory and discretionary jurisdiction‑‑‑Principle‑‑‑All judicial, quasi‑judicial and administrative authorities while exercising mandatory or discretionary jurisdiction must follow the rule of fair exercise of power in a reasonable manner and must ensure dispensation of justice in the spirit of law.

(h) Customs Act (IV of 1969)‑‑‑--

‑‑‑‑S.181‑‑‑Order for redemption of goods in lieu of payment of fine‑‑‑Scope‑‑‑Use of word may'‑‑‑Effect‑‑‑Use of wordmay' in S.181 of Customs Act, 1969, cannot be read for `shall' but at the same time the concerned officer in absence of any compelling reasons, must not withhold the exercise of the discretion of giving an option to the owner of goods under S.181 of Customs Act, 1969, for redemption of goods in lieu of payment of fine, except in the cases in which goods cannot be allowed to be circulated in the market or the goods which were imported in violation of S.15 or of notification issued under S.16 of Customs Act, 1969.

(i) Customs Act (IV of 1969)‑‑‑--

‑‑‑‑Ss.2(s) & 181‑‑‑Term smuggling'‑‑‑Object and scope‑‑‑Confiscation of goods‑‑‑Option of fine in lieu of confiscation‑‑‑Jurisdiction of adjudicating officer‑‑‑Item not banned under Import Policy‑‑‑Gold imported in personal baggage was confiscated by customs authorities‑‑­Plea raised by the appellant was that the adjudicating officer should have given option to him to pay fine in lieu of confiscation‑‑‑Validity‑‑­Smuggling is nothing but importation or exportation of goods intentionally or clandestinely without payment of customs duties or taxes payable or to bring into or take out of Pakistan the goods in breach of any prohibition or restriction imposed by law‑‑‑Bringing of gold in personal baggage, in violation of import policy was illegal but it being not a banned item was not included in the list of items specified by Central Board of Revenue, in which the option under S.181 of Customs Act, 1969, could not be given‑‑Import of gold under the Import Policy, 1995/96, was restricted to registered person or a company with a purpose to regulate its import and business‑ in local market but its import by unregistered person neither debarred the customs authorities from using the discretionary power under S.181 of Customs Act, 1969, nor the Legislature by using the wordmay' in the section intended to give unbridled power to the Customs authorities to act entirely in their own wisdom‑‑‑Imperative for the Customs authorities to consider the provisions of S.181 of Customs Act, 1969, at the time of passing the confiscation, order in tire cases in which the provisions of the section could be invoked and passed an appropriate order for grant or refusal of option for redemption of goods in lieu of payment of fine and takes‑‑­Judgment passed by High Court was set aside and the matter was remanded to Collector for consideration of question of redemption of goods in lieu of payment of fine under S‑181 of Customs Act, 1969‑‑­Appeal was allowed.

Kshetra Nath v. Collector, Land Customs AIR 1959 Cal. 356 ref.

(j) Interpretation of statute‑‑‑--

‑‑‑‑Special provision relating to discretionary jurisdiction, interpretation of‑‑‑Principles‑‑‑Narrow interpretation of such provision may defeat the purpose of the provision‑‑‑Discretion must not be exercised to curtail the purpose of law and offend the statute, rather the discretion must be exercised to advance the cause of justice in just, fair ‑and reasonable manner‑‑‑Failure to exercise discretionary power under the statute without any legal justification amounts to refusal to use such power in an arbitrary and capricious manner.

Izharul Haque, Advocate Supreme Court for Appellants (in both cases).

A. Karim Malik, Advocate Supreme Court for Respondents (in both cases).

Date of hearing: 20th February, 2003.

2004 P T D 2201

[Supreme Court of Pakistan]

Present: Munir A. Sheikh and Faqir Muhammad Khokhar, JJ

Messrs FLYING BOARD AND PAPER PRODUCTS

Versus

DEPUTY COLLECTOR, CUSTOMS

Civil Petition No.718‑L of 2003, decided on 27th March, 2003.

(On Appeal from the judgment of the Lahore High Court, Lahore, dated 10‑3‑2003 passed in Customs Appeal No. 428 of 2002).

(a) Customs Act (IV of 1969)‑‑‑

‑‑‑Ss. 25 & 25‑B‑‑‑Interpretation of S. 25, Customs Act, 1969‑‑­Section 25 of Customs Act, 1969 is a charging section vesting power with Customs authorities to determine value of goods for purpose of charging customs duty‑‑‑Federal Government under S.25‑B of the Act is empowered to issue notification providing minimum value of goods at which same should be assessed for purpose of payment of customs duty in a case where its value cannot be determined or assessed.

(b) Customs Act (IV of 1969)‑‑‑

‑‑‑‑Ss.25 & 25‑B‑‑‑Acceptance of value of imported goods declared in Bill of Entry for purpose of charging customs duty‑‑‑Plea of importer was that value of goods shown in Bill of Entry had gone down in country of origin on account of fluctuation in market price, thus, customs duty should have been charged on basis of minimum value entered in notification issued under S.25‑B of Customs Act, 1969‑‑‑Validity‑‑‑Onus was on importer to prove by evidence as to what extent, value of ‑goods had decreased‑‑‑In absence of any such evidence, Customs Authorities were justified in law to accept value of goods declared in Bill of Entry as value for purpose of charging customs duty‑‑‑Value entered in such notification would not be relevant as evidence in nature of declaration by importer about actual value of goods in Bill of Entry was available which could legally be made basis for assessing goods at such value‑‑‑No exception could legally be taken to impugned judgment‑‑‑Supreme Court dismissed petition and refused leave to appeal.

(c) Customs Act (IV of 1969)‑‑‑

‑‑‑‑S.25‑B‑‑‑Minimum value of imported goods entered in notification issued under S.25‑B of Customs Act, 1969‑‑‑Validity‑‑‑Such value would not be relevant, Where evidence as to declaration by importer about actual value of goods in Bill of Entry was available; which could be made basis for assessing goods at such value.

Irfan Qadir, Advocate Supreme Court and Ch. Mehdi. Khan Mehtab, Advocate‑on‑Record for Petitioner.

M. Karim Malik, Advocate Supreme Court for Respondent.

Date of hearing: 27th March, 2003.

2004 P T D 2211

[Supreme Court of Pakistan]

Present: Iftikhar Muhammad Chaudhry, Rana Bhagwandas and Syed Deedar Hussain Shah, JJ

COLLECTOR OF CUSTOMS, CUSTOMS HOUSE, PESHAWAR and others

Versus

ZARSHAD and others

Civil Petition No. 17‑P of 2003, decided on 8th April, 2003.

(On appeal from the order/judgment dated 2‑12‑2002 passed by Peshawar High Court, Peshawar, in F.A.O. No.5 of 2001).

Customs Act (IV of 1969)‑‑‑--

‑‑‑‑Ss. 157 & 196‑‑‑Constitution of Pakistan (1973), Art. 185(3)‑‑‑Confiscation of vehicle‑‑‑Authority found vehicle to be smuggled one on basis of report of Forensic Science Laboratory verifying replacement of plate of its chassis number‑‑‑Such report was signed after 34 days of its preparation‑‑‑Original order upheld by Tribunal was set aside by High Court on the ground that such report was not admissible‑‑‑Validity‑‑‑If such report was not admissible without recording evidence, then High Court instead of substituting findings of fact recorded by forums below should have remanded case to Tribunal for recording evidence‑‑‑High Court by deciding appeal on facts had exceeded its jurisdiction‑‑Supreme Court accepted appeal, set aside impugned judgment and remanded case to Tribunal with direction to record evidence of representative of Laboratory to prove contents of such report and then decide appeal afresh.

Hamid Farooq Durrani, Dy. A.‑G. and Tasleem Hussain Advocate‑on‑Record (Absent) for Petitioners.

Abdul Rashid Awan. Advocate Supreme Court and M.A. Zaidi Advocate‑on‑Record for Respondents.

Nemo for Respondents No.3.

Date of hearing: 8th April, 2003.

2004 P T D 2214

[Supreme Court of Pakistan]

Present: Falak Sher and Karamat Nazir Bhandari, JJ

COLLECTOR OF CUSTOMS (APPRAISEMENT) CUSTOM HOUSE, LAHORE and others

Versus

Messrs M. RAMZAN SEWING MACHINES COMPANY and others

Civil Petitions Nos.4255‑L to 4258‑L of 2002, decided on 4th March, 2003.

(On Appeal from the judgment dated 24‑10‑2002 passed by the Lahore High Court, Lahore in C.A. Nos.319 to 322 of 2001).

Sales Tax Act (VII of 1990)‑‑‑

‑‑‑‑S. 13 & Sixth Sched., Item No. 44‑‑‑S.R.O. 582(I)/98, dated 12‑6‑1998, para. (a)‑‑‑S.R.O. 987(I)/99, dated 30‑8‑1999, para. (a)‑‑­Exemption from sales tax on plant and machinery ‑‑‑S.R.O. 582(I)/98, para. (a) and S.R.O. 987(I)/99, para. (a) ‑‑‑ Distinction ‑‑‑ S.R.O. 582(I)/98, para. (a) did not make any distinction qua commercial and industrial importer envisaging three qualifying riders for availing exemption; goods should be a plant and machinery; operatable by power of any description; and to be used for manufacture of taxable goods by registered persons (who need not be importer thereof)‑‑‑S. R. O. 987(I)/99 in para. (a) substituted expression "the" by "that" restricting exemption to imported or locally purchased plant and machinery to be used by manufacture of taxable goods by that registered person.

A. Karim Malik, Senior Advocate Supreme Court and M.A. Qureshi, Advocate‑on‑Record for Petitioners.

Ahmer Bilal Sufi, Advocate Supreme Court and Faiz‑ur-­Rehman, Advocate‑on‑Record for Respondents.

Date of hearing: 4th March, 2003.

2004 P T D 2217

[Supreme Court of Pakistan]

Present: Javed Iqbal, Tanvir Ahmed Khan and Faqir Muhammad Khokhar, JJ

COLLECTOR OF SALES TAX

Versus

MUHAMMAD TAHIR and others

Civil Petitions Nos.2951, 2952 and 3006‑L of 2002, decided on 4th February, 2003.

(On appeal from the judgment/order dated 5‑4‑2002 of the Lahore High Court, Lahore, passed in Writ Petitions Nos.346 of 2002, 14403 of 2000 and 4857 of 2002).

Pakistan Water and Power Development Authority Act (XXXI of 1958)‑‑‑

‑‑‑‑Ss. 12, 13 & 25‑‑‑Levy and collection of sales tax by WAPDA on energy consumed by petitioner‑‑‑Constitutional petition under Art. 199 of the Constitution before High Court challenging such levy without impleading concerned Collector of Sales Tax as party‑‑­Maintainability‑‑Collector was a necessary party without whose implead­ment controversy could not be resolved properly and effectively.

Izharul Haq, Advocate Supreme Court and Tanvir Ahmad, Advocate‑on‑Record for Petitioner.

Zia Haider Rizvi, Advocate Supreme Court and Ch. Mehdi Khan Mehtab, Advocate‑on‑Record (absent) for Respondents.

Date of hearing: 4th February, 2003.

2004 P T D 2243

[Supreme Court of Pakistan]

Present: Munir A. Sheikh, Iftikhar Muhammad Chaudhry and Rana Bhagwandas, JJ

Messrs PAK FOREST INDUSTRIES (PVT.) LTD.

Versus

FEDERATION OF PAKISTAN and another

Civil Appeal No.511 of 1998, decided on 4th December, 2003.

(On appeal from the judgment/order dated 13‑11‑1996 passed by Sindh High Court in C.P. No.723 of 1995).

Customs Act (IV of 1969)‑‑‑

‑‑‑‑S. 33‑‑‑S.R.O. 50(I)/1992, dated 28‑1‑1992‑‑‑S.R.O. 484(I)/1992, dated 14‑5‑1992‑‑‑Refund of customs duty, claim for‑‑‑Importer sold, goods through agreement, under which purchaser was liable to pay customs duty‑‑‑Importer executed power of attorney in favour of purchaser to act on his behalf for purpose of receiving any amount due on import of goods‑‑‑Purchaser cleared goods by paying customs duty in the name of importer‑‑‑Goods were exempt from payment of customs duty under S.R.Os. 50(I)/1992 & 484(I)/1992, thus, purchaser claimed its refund in his own right, but not as attorney of importer ‑‑‑Validity‑‑­Refund of customs duty could be claimed under law by importer of goods‑‑‑If customs duty was paid by purchaser on behalf of importer as his attorney under sale, agreement, then he might have a right to recover the same from importer by filing suit on its‑ refund to importer‑‑­Purchaser had not got himself acknowledged as importer before Customs Authority for purpose of claiming refund in his own right—­Importer had not claimed refund or he was made party in proceedings before authority‑‑‑If purchaser had suffered any loss on account of inaction of importer in matter of claiming refund, he might sue him, if law provided any remedy‑‑‑Purchaser in his own right, could not maintain such claim.

Tariq Khokhar, Advocate Supreme Court for Appellant.

Raja Abdul Ghafoor, Advocate‑on‑Record for Respondents Nos.3 and 4.

Remaining Respondents Ex parte

Date of hearing: 4th December, 2003.

2004 P T D 2255

[Supreme Court of Pakistan]

Present: Iftikhar Muhammad Chaudhry, Rana Bhagwandas and Khalil‑ur‑Rehman Ramday, JJ

GENERTECH PAKISTAN LTD. and others

Versus

INCOME TAX APPELLATE TRIBUNAL OF PAKISTAN, LAHORE and others

Civil Appeal No. 1357 of 1999 alongwith Civil Appeals Nos.916‑918, 1069, 1070 of 2000 and Civil Appeal No. 1295 of 2001, decided on 18th May, 2004.

(On appeal from the judgments/order, dated 14‑1‑1999, 11‑4‑2000, 26‑6‑2000, 7‑6‑2000 passed by Lahore High Court; Lahore in I.T.A. No.1 of 1999, Writ Petition No.4847 of 1998, 8907 of 1998, 12249 of 2000, 10727 of 2000, 10718 of 2000 and I.T.A. No.493 of 2000).

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

‑‑‑‑Second Sched., Item 176 & S.80‑B(2)(b)‑‑‑Constitution of Pakistan (1973), Art. 185(3)‑‑‑Leave to appeal was granted by the Supreme Court to consider as to whether the High Court had not correctly construed the scope of Item 176, Second Schedule and S.80‑B(2)(b) of the Income Tax Ordinance, 1979 in accordance with the law laid down by Supreme Court in Messrs ‑Packages Ltd. v. Commissioner of Income‑tax 1993 SCMR 1224.

Messrs Packages Ltd. v. The Commissioner of Income Tax 1993 SCMR 1224 ref.

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

‑‑‑‑Ss. 30, 80‑B & Second Sched., Item 176‑‑‑Income from other sources‑‑‑Electric Power Generation Project‑‑‑Exemption‑‑‑Interest earned by the assessee from the Share Capital deposited in the Banks whether fell within the scope of "income from other sources" under S.30, Income Tax Ordinance, 1979‑Principles.

Item 176 of Second Schedule of the Income Tax Ordinance 1979 provides in clear terms that "profits and gains derived by an assessee from Electric Power Generation Project, set up in Pakistan on or after 1st of July, 1998 shall be exempted from total income tax." Essentially, profits and gains from the Electric Power Generation Project is distinct and different from the interest being obtained by the Company on the deposit of share capital in the Banks, during the financial years for which the return of income under the relevant provision of Ordinance is filed and the exemption is claimed from the payment of income tax under 'Item 176 of second Schedule of the Ordinance. Electric Generating Plants of companies had started functioning in 1994‑95 but they instead of claiming exemption on the profits/gains from Power Generation, claimed it from the deposit of the share capital lying in the Banks. It is to be seen that as soon as a Company goes in production it cannot claim exemption of income tax on the interest of share capital` deposited in Banks because on commencement of the production, profits and gains are to be earned out of the income of Electric Generation independently.

The share capital deposits in the Banks by the assessees provide a separate income to them after post‑production stage of the Power Generating activity, therefore, on the income of interest no exemption can be claimed by under item 176 Second Schedule of the Ordinance as it is a different income from the profits/gains being earned from post production activity of power generation.

Under section 80‑B of the Ordinance such concession is not available to Public Limited Companies as its subsection (1) in categorical terms has extended its benefits to an individual, unregistered firm, association of persons, Hindu undivided family or artificial juridical person.

Messrs Packages Ltd. v. The Commissioner of Income Tax 1993 SCMR 1224 distinguished.

Raja Muhammad Akram, Senior Advocate Supreme Court, Ejaz Muhammad Khan Advocate‑on‑Record (absent) and M.A. Qureshi, Advocate‑on‑Record (absent) for Appellants (in Civil Appeals Nos. 1357, 916 of 1999, 9.17, 918, 1069, 1070 of 2000 and 1205 of 2001).

Muhammad Ilyas Khan, Senior Advocate Supreme Court, Mahmood‑ul‑Islam, Advocate‑on‑Record (absent) and Muhammad Aslam Chatha, Advocate‑on‑Record for Respondents (in Civil Appeals Nos. 1357, 916 of 1999, 917, 1069, 1070 of 2000 and 1295 of 2001).

Malik Muhammad Nawaz, Advocate Supreme Court and Raja Abdul Ghafoor, Advocate‑on‑Record for Respondents (in Civil Appeal No.918 of 2000).

Dates of hearing: 17th and 18th May, 2004.

2004 P T D 2105

[254 I T R 210]

[Supreme Court of India]

Present: B. N. Kirpal, K. G. Balakrishnan and P. Venkatarama Reddi, JJ

INDO ASAHI GLASS ‑CO. LTD. and another

Versus

INCOME TAX OFFICER and others

Civil Appeal No. 2040 of 1997, decided on 11th September, 2001

(Appeal by special leave from the judgment and order, dated September 17, 1996 of the Calcutta High Court in F.M.A.T. No.2278 of 1996).

Income tax---------

‑‑‑‑Deduction of tax at source‑‑‑Salary‑‑‑Foreigner working in India with assessee under collaboration agreement‑‑‑Payment by foreign company of salary‑‑Failure to deduct tax at source‑‑‑Notice to assessed show cause why penalty and interest should not be levied‑‑‑High Court‑‑‑Writ petition‑‑‑No absence of jurisdiction‑‑‑Dismissal of petition ‑‑‑Proper‑‑­Indian Income Tax Act, 1961, S.201(1), (1‑A)‑‑‑Constitution of India, Art. 226.

On coming to know that salary had been paid to four Japanese employees, who were working under a collaboration agreement with the appellants in India, by a Japanese Company, the Income Tax Officer issued notice under sections 201(1) and 201(1‑A) of the Income Tax Act 1961, to show cause why penalty and interest should not be levied for failure to deduct tax at source from the salary so paid. The appellants filed a writ petition under Article 226 of the Constitution of India challenging the legality and validity of the show‑cause notice on the ground that they were not liable to deduct tax at source: in relation to payments received by foreign national in Yen in Japan. The High Court dismissed the writ petition holding that the Court would not invoke the writ jurisdiction at the stage of notice and directed the appellants to file their reply to the show‑cause notice and the Income Tax Officer to pass a final order after giving a hearing to the appellants. On appeal to the Supreme Court, it was stated that the Japanese Company had, during the pendency of the appeal before the Supreme Court, taken advantage of the Voluntary Disclosure Scheme and filed returns of income in respect of the four employees and also paid the entire amount of tax payable by them:‑‑

Held, affirming the decision of the High Court, (i) that the Supreme Court could not take up for consideration the facts for the first time;

(ii) that the High Court was right in coming to the conclusion that it was appropriate for the appellants to file their reply to the notice and take whatever defence were open to them.

(The Supreme Court, accordingly, granted ten weeks' time to the appellants to file their reply to the show‑cause notice, it being open to the appellants to place on record the subsequent facts, and directed that on the reply being filed the Income Tax Officer would take his decision after giving the appellants and opportunity of being heard).

Indo Asahi Glass Co. v. I.T.O, (1996) 222 ITR 534 affirmed.

Debi Pal, Senior Advocate Rahul Dave Anant Kumar, Ms. Priya Hingorani, and Pradeep Kumar Bakhsi, Advocates with him for Appellants.

Dr. V. Gauri Shankar, Senior Advocate, Ms. Lakhsmi Iyengar, B.V. Balaram Das and Ms. Sushma Suri. Advocates with him for Respondent.

2004 P T D 2107

[254 I T R 212]

[Supreme Court of India]

Present: S. P. Bharucha, Y. K. Sabharwal and Brijesh Kumar, JJ

COMMISSIONER OF INCOME‑TAX

Versus

PALGHAT SHADI MAHAL TRUST

Civil Appeals Nos.4294 to 4303 of 2000 with Civil Appeal No.5021 of 2000, decided on 19th July, 2001.

(Civil Appeals Nos.4294 to 4303 of 2000 are by certificate from the judgment and order, dated October 24, 1998 of the Kerala High Court in I.T.R. Nos.27 to 35 of 1996 and 139 of 1996 and Civil Appeal No.5021 of 2000 is from the judgment and order, dated September 20 1999 in I. T. R. No. 11 of 1997).

Income‑tax‑--

‑‑‑‑Charitable trust‑‑‑Trust for construction of a Shadi Mahal and establishing other institutions for educational, social and economic advancement of Muslims‑‑‑General body meeting clarifying that the income and the Mahal shall be made available to all communities‑‑­Clarification clause of trust deed enabling trustees to decide meaning and scope of clauses of trust deed‑‑‑Amendment by general body not permissible‑‑‑Benefit tinder trust available to all Muslims‑‑‑Not limited to Muslims of Kerala who alone are of backward classes‑‑‑Trust not covered by Expln. 2 to S.13‑‑‑Trust not exempt from tax‑‑‑Indian Income Tax Act, 1961, Ss.11, 13(1)(b) & Expln.2.‑‑‑[CIT v. Palghat Shadi Mahal Trust (1999) 236 ITR 722 reversed].

The assessee, a public charitable trust, was constituted under a trust deed‑dated April 14, 1975, by certain settlers who were Muslims residents, of Kerala. The trust was constituted for the purpose of constructing and establishing a Shadi Mahal and other institutions "for the educational, social and economic advancement of the Muslims‑ and for religious and charitable objects recognized by Muslim law... "within a few days of the creation of the trust, on April 20, 1975, a special general body meeting was held, in which it was resolved that it was decided to clarify the clause in the deed regarding, the object of the trust, to the effect that "the income of the trust as well as the Shadi Mahal shall be made available to all communities irrespective of religion, caste or creed." The trust claimed exemption from tax under section 11 of the Income Tax Act, 1961. The Appellate Tribunal held that the trust was entitled to exemption by virtue of Explanation 2 to section 13, since the Muslim community was a backward class in Kerala, and therefore, section 13(1)(6) did not apply to it. On a reference, the High Court affirmed the decision of the Appellate Tribunal. On appeal to the Supreme Court:

Held, reversing the decision of the High Court, (i) that the resolution, dated April 20, 1975, did not decide the meaning and scope of a clause of the trust deed but had the effect of altering the object of the trust deed, which could be done only by means of an amendment of the trust deed by the settlers;

(ii) that there was no limitation in the trust deed in regard to which Muslim could avail of the benefit of the trust. The benefit was available to Muslims all over the world, none of whom, except in Kerala, were of backward classes. The trust was not covered by section 13(1)(6) and was therefore, not entitled to exemption from tax.

CIT v. Palghat Shadi Mahal Trust (1999) 236 ITR 722 reversed.

Dr. Gauri Shankar, Senior Advocate, Rajiv Tyagi, B.V.B. Das and Ms. Sushma Suri. Advocates with him for Appellant.

E.M.S. Anam, Advocate for Respondent.

2004 P T D 2111

[254 I T R 216]

[Supreme Court of India]

Present: S. P. Bharucha and Y. K. Sabharwal, JJ

J. J. ENTERPRISES

Versus

COMMISSIONER OF INCOME‑TAX

Civil Appeal No.6384 of 2001, decided on 14th September, 2001.

(Appeal by Special Leave from the order, dated August 16, 2000 of the Allahabad High Court in I.T.A. No.35 of 1999).

Income‑tax‑‑‑

‑‑‑‑Reference‑‑‑Question of law‑‑‑Appellate Tribunal‑‑‑Finding that addition made to income was on pure guess work‑‑‑Finding of fact‑‑‑No question of law 'arises‑‑‑Tribunal's conclusion final‑‑‑No question of remanding matter for re‑determination‑‑‑Indian Income Tax Act, 1961, S.256(2).

Where the Appellate Tribunal had held that an addition to the income of the assessee was unsustainable because it had been made "on the basis of pure guess work": Held, that no question of law arose out of the order of the Tribunal. The finding of the Tribunal was one of fact in respect of which the Tribunal's conclusion was final and there was no question of remanding the matter to the, Assessing Officer for re­examination of the same question.

The order of the Allahabad High Court (M. Katju and D.R. Chaudhary JJ.) dated August 16th, 2000, was as follows:‑‑

Heard counsel for the parties.

This is an application under section 256(2) of the. Income Tax Act, 1961. On the facts of the case we are of the opinion that the following question of law arises out of the order of the Tribunal.

"Whether, on the facts and in the circumstances of the case, the Income‑tax Appellate Tribunal was legally correct in upholding the deletion of Rs.19,66,550 instead of setting aside the same to the file of "the Assessing Officer for re‑examination and opportunity to the assessee?"

We, therefore, direct the Tribunal to state a case and refer the above questions for our opinion, The assessee preferred an appeal to the Supreme Court by special leave.

G.C. Sharma, Senior Advocate (R.K. Raghavan, Ms. Kamini Jaiswal, Mrs. Shomita Bakhsi and Ms. Aishwarya Rao for Appellant.

Ranbir Chandra and B.V. Balram Das for Respondent.

2004 P T D 2113

[254 I T R 230]

[Supreme Court of India]

Present: S. P. Bharucha, U. C. Banerjee and N. Santosh Hegde, JJ

COMMISSIONER OF INCOME‑TAX

Versus

RANGILA RAM and others

Civil Appeal No. 150 of 1998, decided on 3rd August, 2000.

(Appeal by special, leave from the judgment and order dated April 1, 1997 of the Himachal Pradesh High Court in I.T.R. No.3 of 1988).

Income‑tax‑‑‑--

---Firm‑‑‑Registration‑‑‑Liquor Business‑‑‑Only some partners holding liquor licence‑‑‑Contrary to basic principle and not legal‑‑‑Firm not entitled to be registered‑‑‑Indian Income Tax Act, 1961, S.185.

The basic principle is that liquor business is res extra commercium. No one may deal in liquor without express permission. It is only the licensee who is granted such permission. If he enters into a partnership to deal in liquor, all the other partners would, as partners, also be dealing in liquor and holding the same. This would be contrary to the basic principle and illegal.

Held accordingly, that the assessee firm, which dealt in liquor, was not entitled to registration under section 185 of the Income Tax Act, 1961, as only some of its partners held the liquor licence.

CIT (Addl.) v. Degaon Ganga Reddy G. Ramkrishna & Co. (1995) 214 ITR 650 (SC) distinguished.

Bihari Lal Jaiswal v. CIT (1996) 217 ITR 746 (SC) and CIT v. Hardit Singh Pal Chand & Co.(1979) 120 ITR 289 (P&H) fol.

Harish N. Salve, Solicitor‑General of India (Nikhil Sakhardande and Ms. Sushma Suri, Advocates with him) for Appellant.

Jamshed Bey, Ravi Shakkar Kumar and Permanand Gaur for Respondent.

2004 P T D 2116

[254 I T R 259]

[Supreme Court of India]

Present: S. P. Bharucha, C.J.I. , K. T. Thomas and Shivaraj V. Patil, JJ

SARASWATHI OIL TRADERS

Versus

COMMISSIONER OF INCOME‑TAX

Civil Appeals Nos. 823 and 824 of 2002, decided on 29th January, 2002.

(Appeals by special leave from the order, dated February 28, 2001 of the Karnataka High Court in Civil Petitions Nos. 132 and 132‑A of 1999).

Income‑tax‑‑‑--

‑‑‑‑Reference‑‑‑Question of law‑‑‑Additions made on account of bogus purchases and unaccounted income from sales‑‑‑Appellate Tribunal‑­Deleting additions‑‑ ‑Does not give rise to question of law‑‑‑Indian Income Tax Act, 1961, S.256(2).

Whether the Appellate Tribunal was right in deleting additions made on account of bogus purchases of ground nut cakes as well as additions made on account of unaccounted income from sale of ground nut oil does not involve a question of law.

The order of the Karnataka High Court (M.F. Saldanha and D.V. Shylendra Kumar, JJ.), dated February 28th, 2001, delivered by Saldanha, J., was as follows:‑‑‑

We have heard the petitioner's learned counsel and the respondent's learned counsel at considerable length in this civil petition. Whereas it is the case of the Revenue that a reference is not only justified but is necessary on the record of the present case, principally on the ground that the circumstances under which the original assessment order was set aside and the appellate order was confirmed, are vulnerable in law, the respondent's learned counsel has vehemently submitted that a careful scrutiny of the record will indicate that this is a case in which the authorities at each level were concerned only with a pure appreciation of evidence. It was also our view with a certain degree of force, that the conclusions that were' arrived at by the original assessing authority were virtually run away conclusions in so far as these findings cannot be justified on the basis of whatever materials are on record and that consequently, where the authority had rightly interfered, the present attempt is to reopen the issue relating to the appreciation of evidence. Our attention has been drawn to a long list of judgments wherein the Courts have unequivocally held that if the issue is confined to a pure appreciation of evidence or pure question of fact that it is totally beyond the scope of a reference to the High Court. We are in respectful agreement with this proposition, but what we need to record at this stage is that, a careful assessment of the present record will indicate that there is a definite point of law involved in the present proceedings and that consequently, the conclusion arrived at by the Tribunal that it is not a case where a reference was competent, was incorrect.

In this view of the matter, the civil petition succeeds. We direct the Tribunal to drew up a statement of case and make a reference to the High Court within a period of three months from today. The civil petition is accordingly allowed. No order as to costs.

Officer to take note of the fact that since there are two assessment orders involved and since separate Court‑fee has been paid, this civil petition will have to be separately numbered as 132 of 1999 and 132‑A of 1999. They shall be reflected in the title of the order and the Tribunal shall also take note of the fact that two references will have to be made.

The assessee preferred appeals to the Supreme Court by special leave.

Ms. S.R. Anuradha Pradeep, Ms. Kavitha Wadra Mahinder Singh and Mrs. Pratibha M. Singh Advocates for Appellant.

Soli J. Sorabjee, Attorney‑General of India (Ranbir Chandra and B.V. Balram Das, Advocates for Respondent.

2004 P T D 2118

[254 I T R 434]

[Supreme Court of India]

Present: S. Rajendra Babu, K. G. Balakrishnan and P. Venkatarama Reddi, JJ

CHIEF COMMISSIONER OF INCOME‑TAX

Versus

KESARIA TEA CO. LTD.

Civil Appeal No. 1581 of 2001, decided on 19th March, 2002.

(Appeal by special leave from the judgment and order, dated November 19, 1999 of the Kerala High Curt in I.T.R. No. 16 of 1997).

Income‑tax‑‑‑

‑‑‑Deemed profits‑‑‑Remission or cessation of trading liability‑‑­Provision made towards purchase tax liability in earlier year‑‑‑Written back in accounts‑‑‑Sales Tax Department pursuing claim‑‑‑Amount written back cannot be taxed as deemed profit‑‑‑Unilateral action of assessee not conclusive‑‑‑Indian Income Tax Act, 1961, S.41(1) (before introduction of Expln. 1).

During 1978‑1981, the assessee, engaged in the business of tea, spices, etc., had made provision for purchase tax liability. The liability to purchase tax was in dispute and the Sales Tax Department persisted in its claim for purchase tax. During the previous year relevant to the assessment year 1985‑86, the assessee‑‑‑apparently for the reasons that the decision of the Supreme Court had dismissed the State's special leave petition to appeal from the decision of the High Court in Neroth‑Oil Mills (1982) 49 STC 249 (Ker.)‑‑‑wrote back in its accounts the sum of Rs.14,65,997 out of the provisions for purchase tax liability, which sum the Assessing Officer brought to tax under section 41(1) of the Income Tax Act, 1961, as deemed profit. On appeal, the Commissioner (Appeals) held that out of the sum of Rs.14,65,997, two amounts, viz., of Rs.6,61,413 and Rs.5;10,826, had already been brought to tax in the assessment years 1980‑81 and 1981‑82 and only the balance of Rs.3,02,758 could be brought to tax. On appeal, the Appellate Tribunal held that the sum of Rs.3,02,758 could not be brought to tax, since the sales tax department was pursuing the matter in respect of the purchase tax liability of the assessee as .late of 1993 and the cases were still pending decision before the Sales Tax Authorities and the judgment of the Kerala High Court was concerned with only one of two aspects relating to exemption from purchase tax, and the other aspect was still involved in the assessee's case, there was no cessation of liability and the unilateral action on the part of the assessee in writing back the amounts could not have the effect of extinguishing the statutory liability. On a reference, the High Court affirmed the decision of the Appellate Tribunal. On appeal to the Supreme Court:

Held, affirming the decision of the High Court, that the Appellate Tribunal as well as the High Court were justified in coming to the conclusion that the purchase tax liability of the assessee had not ceased finally during the year in question: despite the finality attained by the judgment in Neroth Oil Mills' case (1982) 49 STC 249 (Ker.), the other issues having bearing on the exigibility of purchase tax still remained and the dispute between the assessee and the Sales Tax Department continued. The unilateral act on the part of the assessee by way of writing off the liability in its accounts did not necessarily mean that the liability had ceased in the eye of law.

CIT v. Sugauli Sugar Works (P.) Ltd. (1999) 236 ITR 518 (SC) fol.

CIT v. T.V. Sundaram Iyengar & Sons Ltd. (1996) 222 ITR 344 (SC) distinguished.

CIT v. Kesaria Tea Co. Ltd. (2000) 243 ITR 362 affirmed.

Deputy CST v. Neroth Oil Mills Co. Ltd. (1982) 49 STC 249 (Ker) ref.

R.P. Bhatt, Senior Advocate (Rajiv Tyagi and B.V. Balram Das, Advocates for Appellant.

Ms. Asha Gopalan Nair, Advocate for Respondent.

2004 P T D 2123

[254 I T R 487]

[Supreme Court of India]

Present: B.N. Kirpal and Shivaraj V. Patil, JJ

COMMISSIONER OF WEALTH TAX

Versus

A.A. PATEL through Legal Representative

Civil Appeals Nos. 4620 to 4629 of 1994, decided on 9th August, 2001.

(Appeals from the judgment and order, dated October 3, 1989, of the Madhya Pradesh High Court in M.C.C. Nos. 131 to 134, 135 and 146 to 150 of 1988. The judgment of the High Court in M.C.C. No. 135 of 1988 (which was to govern M.C.C. Nos, 131 to 134 and 146 to 150 of 1988 also) is reported as CWT v. A.A. Patel (1990; .181 ITR 543 (MP).

Wealth tax‑‑‑

‑‑‑‑Reference‑‑‑Question of law‑‑‑Wealth tax‑‑‑‑Valuation of assets‑‑Valuation Officer's Report ‑‑‑Appellate Assistant Commissioner directing Wealth Tax Officer to refer matter to Valuation Officer and adopt Valuation Officer's Report‑‑‑Questions whether such reference would be valid, whether report of Valuation Officer is not binding on Wealth tax Officer and whether Wealth Tax Officer bound to adopt Valuation Officer's Report‑‑‑Are questions of law‑‑‑Indian Wealth Tax Act, 1957, Ss. 16‑A & 27‑‑‑[CWT v. A.A. Patel (1990) 181 ITR 543 reversed].

The questions (i) whether a reference made to the Valuation Officer in compliance with the direction of the Appellate Assistant Commissioner cannot be a reference under section 16‑A of the Wealth tax Act, 1957, (ii) whether the report made by the Valuation Officer obtained on the basis of the direction of the Appellate Assistant Commissioner is not binding on the Wealth Tax Officer and (iii) whether the Wealth Tax Officer is bound to accept the valuation in the Valuation Officer's Report, are question of law.

Dr. Gauri Shankar, Senior Advocate (Mrs. Lakhsmi Iyengar, B.V. Balaram Das and Ms. Sushma Sui, Advocate for Appellant.

Sushil Kumar Jain and Pradeep Agarwal, Advocates for Respondents.

2004 P T D 2125

[254 I T R 553]

[Supreme Court of India]

Present: B.N. Kirpal and S. Santosh Hegde, JJ

COMMISSIONER OF INCOME‑TAX

Versus

BALAJI ENTERPRISES

Civil Appeals No. 4413 of 2001, decided on 20th July, 2001.

(Appeal by special leave from the order, dated February 8, 1999 of the Madras High Court in T.C.P. No.820 of 1997).

Income‑tax‑‑‑

‑‑‑‑Reference‑‑‑Business expenditure‑‑‑Service charges paid‑‑‑Whether allowable‑‑‑Question of law‑‑‑Indian Income Tax Act, 1961, Ss. 37 & 256.

The Supreme Court directed the question whether the Appellate Tribunal was right in directing the Assessing Officer to allow deduction of service charges amounting to Rs.1,82,03,470 or any part thereof in computing the profits of the assessee, to be referred to the High Court in view of the decision of the High Court in CIT v. Balaji Enterprises (1999) 236 ITR 589 (Mad.) calling for a reference on a similar claim for deduction by the assessee for another period.

CIT v. Balaji Enterprises (1999) 236 ITR 589 (Mad.) ref.

The order of the High Court (R. Jayasimha Babu and Mrs. A. Subbulakshmy, JJ.), dated February 8, 1999, delivered by R. Jayasimha Babu, J was as follows:‑‑

Though we have a suspicion that all is not well in these transactions, that by itself does not warrant a reference, which involves primarily reassessment of question of facts which have been considered by the Tribunal in great detail and, found against the Revenue. The Tribunal, after looking into the agreement between the assessee and the other persons to‑ whom the payments were made as also the correspondence and others surrounding circumstances, has held that the agreements were genuine and that the payments in fact were made for the services rendered. The Revenue does not dispute the fact that payments were made as the recipients of these payments were assessees under the Income Tax Act, 1961, and the recipients had also shown the receipts in their books. The Tribunal has disallowed a part of the expenditure as stated to have been incurred by the assessee for sales promotion expenses paid to one of the respondents.

The facts have been investigated by the Tribunal and the findings of the facts must be accepted, the Tribunal being the final fact ­finding authority.

The case petition is, therefore, dismissed.

Ms. A. Subhashini and B, V.B. Das, Advocates, for the Appellant.

V. Ramchandran, Senior Advocate (P.Venugopal, P. S. Sudheer and Ms. Surekhan Raman, for K.J. John, Advocate) for Respondent.

2004 P T D 2127

[254 I T R 561]

[Supreme Court of India]

Present: S. P. Bharucha and D.P. Mohapatra, JJ

INCOME TAX OFFICER and another

Versus

S. RADHA KRISHNAN and another

Civil Appeals Nos.6050 to 6052 of 1990, decided on 10th December, 1998.

(Appeals by special leave from the judgment and order, dated September 9, 1982 of the Madras High Court in C. R. Ps. Nos. 129 to 131 of 1980).

Income‑tax‑‑‑

-----General principles‑‑‑Rule against double taxation ‑‑‑Company‑‑­Company in which public not substantially interested‑‑‑Additional tax paid on undistributed profits‑‑‑Shareholder‑‑‑Dividend received‑‑‑Tax payable by shareholder‑‑‑No doubt taxation‑‑‑Indian Income Tax Act, 1961, S. 104.‑‑‑[S. Radhakrishnan v. I.T.O. (1985) 156 ITR 538 reversed].

The question of double taxation must be decided having regard to who the assessee is if the assessee is different, the question of double taxation does not arise. The fact that a company, being one in which the public is not substantially interested, pays tax on its undistributed profits under section 104 of the Income Tax Act, 1961, does not mean that that amount of profits when paid as income to its shareholder cannot be taxed in the hands of the shareholders. The character of the amount changes: it being now the income of the shareholder.

S. Radhakrishnan v. ITO (1985) 156 ITR 538 reversed.

K.N. Shukla, Senior Advocate (C.V.S. Rao and B.K. Prasad, Advocates with him) for Appellants.

Nemo for Respondents.

2004 P T D 2128

[254 I T R 606]

[Supreme Court of India]

Present: S. P. Bharucha, Y. K. Sabharival and Brijesh Kumar, JJ

COMMISSIONER OF INCOME‑TAX

Versus

NARENDRA DOSHI

Civil Appeal No.2053 of 2000, decided on 26th July, 2001.

(Appeal from the judgment and order, dated May 3, 1999 of the Madhya Pradesh High Court (Indore Bench) in I.T.R. No. 5 of 1996).

Income‑tax‑‑‑

‑‑‑‑Advance tax‑‑‑Refund of excess paid‑‑‑Interest‑‑‑Government liable to pay interest on interest on advance tax wrongfully withheld‑‑‑Indian Income Tax Act, 1961, S.214(1).

Held, that, since the Appellate Tribunal, whose decision the High Court had affirmed, had relied upon the decision of the Gujarat High Court in D.J. Works v. Deputy CIT (1992) 195 ITR 227, to the effect that the Revenue was liable to pay interest on the amount of interest on advance tax which it should have paid to the assessee but has unjustifiably failed to do so, and that decision was followed by the Gujarat High Court in Chimanlal S. Patel v. CIT (1994) 210 ITR 419, and the Department had not challenged the correctness of those two decisions of the Gujarat High Court, the Revenue was bound by the principle laid down therein.

D.J. Works v. Deputy CIT (1992) 195 ITR 227 (Guj.) and Chimanlal S. Patel v. CIT (1994) 210 ITR 419 (Guj.) impliedly approved.

R.P. Bhatt, Senior Advocate Lakhsmi Iyengar, B.V. Balaram Das and Ms. Sushma Suri, Advocates for Appellant.

Krishnanand Pandey, Advocate for Respondent.

2004 P T D 2130

[254 I T R 785]

[Supreme Court of India]

Present: S. P. Bharucha and S. Rajendra Babu, JJ

KANTHIMATHI PLANTATIONS LTD.

Versus

STATE OF TAMIL NADU

Civil Appeals Nos. 1763 to 1765 of 1987, decided on 3rd December, 1998.

(Appeals from the judgment and order, dated January 4, 1984 of the Madras High Court in T.C. Nos. 1602 of 1981 and 392 and 393 of 1982).

Agricultural Income‑tax‑‑‑‑

‑‑‑‑Income or capital‑‑‑Sales of unyielding rubber trees‑‑‑Agreement specifying part of consideration towards value of latex‑‑‑Part of consideration for latex is income and part for fuel value is capital‑‑­Agreement not bifurcating consideration‑‑‑No recital or factor indicating that latex was present‑‑‑No presumption for similar bifurcation permissible‑‑‑Enter consideration capital in. nature‑‑‑Tamil Nadu Agricultural Income‑tax Act, 1955.

The appellant sold unyielding rubber trees under two agreements. One agreement expressly split the consideration thereunder between that for latex and that for fuel value of the trees. The High Court held that, view of the specific recital, only that part of the consideration relatable to the fuel value of the rubber trees was a capital receipt and that relatable to latex was agricultural income. In the second agreement the consideration was not split up; but the High, Court held that it could be presumed that consideration was to be similarly split up. On appeal to the Supreme Court:

Held, (i) affirming the decision of the High Court, that in regard to the first agreement where the consideration was split up between that for latex and that for fuel value, the consideration for latex was income and that for fuel value was a capital receipt;

(ii) Reverting the decision of the High Court, that in regard to the second agreement, in the absence of any recital in the agreement or any other factor which indicated that latex was present and recoverable from the unyielding tree, no presumption could be raised that part of the consideration was for latex and taxed as a revenue receipt.

The judgment dated January, 4, 1984, of the High Court (Ramanjam and Rantam, JJ.), delivered by Ramanujam, J., to the extent relevant, was as follows:

Learned counsel for the assessee does not dispute the position that, if any portion of the receipts related to the sale value of latex, then it could be assessed at the hand of the assessee as agricultural income. Thus, the substantial question for consideration in this case is whether any portion of the amount paid under the two agreements relates to the sale value of the latex. As already observed, the realization of the amounts by the assessee for the assessment years in question was on the basis of the two agreements referred to above.

The first agreement, dated March 30, 1974, is between the assessee and one father Antony Puthur. Under that agreement, the sum of Rs.5,56,900 had to be paid by the contracting party to the assessee. Though the said sum has been taken to be the value of 6150 old rubber trees in an area of 77.50 acres, on the agreement the said amount has been shown as consisting of Rs.3,07,500 on representing the fuel value of the rubber trees and Rs.2,49,400 as representing the value of rubber latex and scrap that may be collected from the rubber trees during the years 1974‑75 and 1976. The agreement further provided that the operation of the cutting and removal of the trees could be extended up to March 31, 1977, which means that the contracting party would be in a position to collect whatever rubber latex and scrap that would be yielded during the years. Having regard to the fact that the parties themselves had agreed the out of the amount of Rs.5,56,900 which was the amount bargained for between the parties, as payable under the agreement, a sum of Rs,.2,49,400 was treated as the value of the rubber latex and scrap that could be collected from the trees by the contracting party during the years in questions. In the face of the said specific recital in the agreement, it is not open to the assessee to contend that the entire amount of Rs.5,56,900 payable under the agreement related only to the fuel value of the rubber trees and not to the value of rubber latex or scrap that could be realized from the trees before they were actually cut and removed.

The second agreement, dated February 17, 1975, is between the assessee and one Union Traders. Under that agreement, a total amount of Rs. 18,25,000 was payable in respect of 13,640 old rubber trees. This agreement, however, does not give the breakup figures for the amount of 18,25,000, as has been done in the earlier agreement; but the other features present in the earlier agreement are also present in the instant case. The time for the cutting and removing of the trees is more than three years from the date of the agreement. Thus, the contracting party is in a position to realize whatever latex or scrap may be available from the standing rubber trees till they were cut and removed. The agreement does not proceed on the basis that the fuel value alone of the trees which were to be cut and removed was taken. Though the preamble of the agreement also proceeds on the basis that the trees have become old and uneconomical on account of intensive tapping, there is no reference to trees having become incapable of yielding any latex at all.

Thus, having regard to the terms of the agreement, it can be presumed that the contracting parties were expected to realize rubber latex and scrap from the standing rubber trees before they were actually cut and removed. Though the second agreement does not specifically refer to any yield by way of latex and scrap from the standing rubber trees, from the fact that the earlier agreement has treated practically 2/5th of the amount payable under the agreement as representing the value of latex yielded from the trees, it can be easily presumed that at least a part of the sum of Rs.18,25,000 payable under the second agreement should relate to the value of the latex and scrap that could be realised from the standing rubber trees before they could be actually cut and removed, for which more than three years time had been provided from the date of the agreement. In this light, the view taken by the Commissioner of Agricultural Income‑tax, that a portion of the amounts realized under the two agreements by the assessee should relate, in some measure, to the value of latex and scrap realized from the standing rubber trees, appears to be tenable. In this case the Commissioner has remitted the matter to the assessing authority for the purpose of determining the value of the latex and scrap and for assessing such value as agricultural income, Since the quantum has not been determined by the Commissioner, the assessee as got an opportunity to put forward his case as regards the quantum before the Agricultural Income‑tax Officer. The Agricultural Income‑tax Officer will naturally give sufficient opportunity to the assessee to put forward the necessary materials, which may be in his possession for the determination of the actual value of he latex and scrap from the standing rubber trees. In this view of the matter, we see no justification for interfering with the order of the Commissioner. The tax cases are accordingly dismissed. There will be no order as to costs.

The assessee preferred appeals to the Supreme Court.

D.A Dave, Senior, Advocate K.J. John for Appellant.

R. Mohan, Senior Advocate Mariarputham for Respondent.

2004 P T D 2134

[254 I T R 791]

[Supreme Court of India]

Present: M. Srinivasan and Umesh C. Banerjee, JJ

COMMISSIONER OF INCOME‑TAX

Versus

CORPORATION BANK LTD.

Civil Appeals Nos.4733 of 1991 and 4584 to 4590 of 1990, decided on 3rd February, 1999.

(Appeal by special leave from the judgments and orders dated September 20, 1983, October 28, 1983 October, 21, 1983, October 25, 1983, November 2, 1983, November 8, 1983 and November 10, 1983, of the Karnataka High Court in I.T.R.C. Nos. 175, 176, 177, 179, 298 and 99 of 1982 and 137 of 1983).

Income‑tax‑‑‑

‑‑‑‑Reassessment‑‑‑Failure to disclose fully and truly material facts‑‑­Banking Company‑‑‑Loans and advances‑‑‑Recovery doubtful‑‑‑ Interest credited to interest suspense account‑‑‑Amount disclosed in balance‑sheet filed alongwith return‑‑‑Original assessment excluding such interest‑‑‑No failure to disclose material facts‑‑‑Notice for reassessment‑‑‑Not valid‑‑­Indian Income Tax Act, 1961, S.147(a).

For the previous year ending December 31, 1968, the assessee, a Banking Company, had taken the sum of Rs.54,485, which represented interest on loans recovery of which, was doubtful, to the interest suspense account. The assessee had disclosed this sum as unrealized amount of interest in the balance‑sheet filed by it alongwith the return. In the original assessment, the Income‑tax Officer accepted the return and had excluded this amount in his assessment order. Thereafter, the assessment was reopened by a notice issued under section 147(a) of the Income Tax Act, 1961, and the sum of Rs.54,485 was brought to tax. The Appellate Tribunal held that the reopening of the original assessment was not justified, and on a reference, the High Court held that the reopening of the assessment under section 147(a) was not valid. On appeal to the Supreme Court:

Held, affirming the decision of the High Court, that since the assessee had furnished particular pertaining to the sum of Rs.54,485, as not recoverable and had filed statements alongwith the original return disclosing full details of the interest suspense account, there was no failure on the part of the assessee to disclose fully and truly material facts necessary for the assessment and section 147(a) had no manner of application and was not attracted to the fact of the case.

State Bank of Travancore v. CIT (1986) 158 ITR 102 (SC) ref.

CIT v., Corporation Bank Ltd. (1986) 157 ITR 509 affirmed on this point.

Dr. V. Gaurishankar, Senior Advocate, S. Rajappa and B.K. Prasad Advocates with him for Appellant.

S.N. Bhatt, Advocate for Respondent (in C.A. No. 4733 of 1991).

Mrs. Janki Ramchandran, Advocate for Respondent (in C.As. Nos.4584 to 4590 of 1990).

2004 P T D 2137

[254 I T R 799]

[Supreme Court of India]

Present: S. C. Agrawal and G. T. Nanavati, JJ

LACHMANDAS MATHURADAS

Versus

COMMISSIONER OF INCOME‑TAX

Civil Appeal No.3645 of 1983, decided on 16th January, 1999.

(Appeal by special leave from the judgment and order, dated January 28, 1980, the Allahabad High Court in I.T.R. No.54 of 1978.)

Income‑tax‑‑‑

‑‑‑‑Business expenditure‑‑‑Interest on arrears or on outstanding balance of sales‑tax‑‑‑Not penal‑‑‑Compensatory in nature‑‑‑Allowable as deduction‑‑‑Indian Income Tax Act, 1961, S.37‑‑‑[CIT v. Lachhman Das Mathura Das (1980) 124 ITR 411 reversed on this point].

CIT v. Lachhman Das Mathura Das (1980) 124 ITR 411 reversed on this point.

Interest on arrears of sales tax or on the outstanding balance of sales tax is not penal: it is compensatory in nature‑and is an allowable deduction in computing the profits of a business.

Triveni Engineering Works Ltd. v. CIT (1983) 144 ITR 732 (All.) approved.

Saraya Sugar Mills (P.) Ltd. v. CIT (1979) 116 ITR 387 (All.) ref.

Raja Ram Aggarwal, Senior Advocate (Ms. Aparna Rohatgi, K.B. Rohatgi and Bharat Aggarwal, Advocates) for Appellant.

A. Raghuvir, Senior Advocate, Ms. Lakshmi Iyengar and B. Krishna Prasad, Advocates for Respondent.

2004 P T D 2138

[254 I T R 772]

[Supreme Court of India]

Present: S.P. Bharucha, C.J.I., N.Santosh Hegde and D. M. Dharmadhikari, JJ

K. M. SHARMA

Versus

INCOME TAX OFFICER

Civil Appeal No. 7742 of 1997, decided on 11th April, 2002.

(Appeal by special leave from the judgment and order, dated May 24, 1996, of the Delhi High Court in C. W. P. No. 1152 of 1996).

(a) Income‑tax‑‑‑

‑‑‑‑Reassessment‑‑‑Limitation‑‑‑Exception .to bar of limitation‑‑­Reassessment on basis of order under Income‑tax Act‑‑‑Amendment with effect from April 1, 1989, extending exception to reassessment on basis of order passed by a Court in any other proceeding under any other law‑­Excluding Assessments already barred before April 1, 1989‑‑­Amendment prospective‑‑‑Bar of limitation continues in cases which are already barred before April 1, 1989‑‑‑Indian Income Tax Act, 1961, Ss. 149 & 150(1), (2) (as amended with effect from April 1, 1989):

(b) Interpretation of Statutes‑‑‑

‑‑‑ Strict interpretation applies also to provisions regulating limitation

(c) Income‑tax‑‑‑‑

‑‑‑‑General principles‑‑‑Provisions imposing liability‑‑‑Not retrospective‑‑‑Law applicable‑‑‑Law in force in assessment years‑‑­Procedural provisions‑‑‑Not retrospective so as to affect finality of assessment unless there is clear contrary intendment. ‑‑‑[K. M. Sharma v. ITO (1996) 221 ITR 202 reversed].

The amendment to subsection (1) of section 150 of the Income Tax Act, 1961, extending the bar of limitation in cases of orders passed by a Court in proceedings under any other law is not expressed to be retrospective and, therefore, has to be held to be only prospective. The amendment to section 150(1), which intends to lift the embargo of the period of limitation under section 149 to enable the authorities to reopen assessments not only on the basis of orders passed in proceedings under the Income‑tax Act, but also on the basis of an order of a Court in any proceedings under any law has to be applied prospectively on or after April 1, 1989, when the amendment was introduced. The provisions of subsection (1), therefore, can have only prospective operation to assessments which have not become final due to the expiry of the period of limitation prescribed for assessments under section 149.

The plain language of subsection (2) of section 150 clearly restricts the application of subsection (1) to enable the authorities to reopen assessments which have not already become final on the expiry bf the period of limitation prescribed under section 149. Subsection (2), in placing an embargo on reopening of assessments which have attained finality on the expiry of the period of limitation prescribed under section 149, refers to the whole of subsection (1), intending thereby to insulate all assessments which have become final and may have been found liable to reassessment or re computation on the basis of either orders in proceedings under the Income‑tax Act or orders of Courts passed under any other law.

The appellant's agricultural lands were compulsorily acquired under sections 6 of the Land Acquisition Act, 1894, on December 2, 1967, granting compensation. On a reference under sections 18 of that Act, by his judgment dated July 31, 1991, the District Judge awarded Rs.1,10,20,624, of which the sum of Rs.41,96,496 .represented compensation for the lands and the balance of Rs.76,84,829 was towards interest on the compensation. Since the agricultural lands were acquired before April 1, 1970, capital gains tax was not leviable in relation to the acquisition, but income‑tax was leviable on the interest awarded on a year to year basis. The appellant informed the Income‑tax Officer that he had received Rs.76,84,829 as interest accruing year to year and assessable as such. The Income‑tax Officer served notices under section 148 of the Income Tax Act, 1961, for 16 assessment years 1968‑69 to 1971‑72 and 1981‑82 to 1992‑93, for bringing to tax the interest which had escaped assessment in those years. The appellant filed a writ petition challenging the notice for the assessment years 1968‑69 to 1971‑72 and 1982‑83 on the ground that the proposed reassessment had already become barred under section 149 on April 1, 1989, for which the relevant period of limitation was four years or seven years depending on the quantum of liability to tax. The High Court dismissed the writ petition rejecting the contention of the appellant that under section 150(2) the reassessments had already become barred under section 149 before section 150(1) was amended with effect from April 1, 1989, and holding that the bar of limitation under section 149 was not attracted by virtue of section 150(1) because the notices of reassessment were based upon awards passed by the Court of the District Judge on a reference under the Land Acquisition Act. On appeal to the Supreme Court:

Held, reversing the decision of the High Court, that the provisions of section 1500), as amended with effect from April 1, 1989, did not enable the authorities to reopen assessments which had become final due to the bar of limitation prior to April 1, 1989, and this position was equally applicable to reassessments proposed on the basis of orders passed under the Income‑tax Actor under any other law.

The provisions of a fiscal statute, more particularly one regulating the period of limitation, must receive a strict construction. The law of limitation is intended to give certainty and finality to legal proceedings and to avoid exposure to risk of litigation of litigants for an indefinite period on future unforeseen events. Proceedings which had attained finality under existing law due to bar of limitation cannot be held to open for revival unless the amended provisions are clearly given retrospective operation so as to allow upsetting of proceedings which had already concluded and attained finality.

A taxing provision imposing liability is governed by the normal presumption that it is not retrospective and the settled principle of law is that the law to be applied is that which is in force in the assessment year unless otherwise provided expressly or by necessary implication. Even a procedural provision cannot, in the absence of clear contrary intendment expressed therein, be given greater retrospectivity than is expressly mentioned so as to enable the authorities to affect finality of tax assessments or to reopen liabilities which have become barred by lapse of time.

Gadgil (S.S.) v. Lal & Co. (1964) 53. ITR 231 (SC) applied.

K.M. Sharma v. ITO (1996) 221 ITR 202 reversed.

B.B. Ahuja, Senior Advocate (R.R. Dwivedi, Durgainder Singh and Ramdhir Singh Jain, Advocates) for Appellant.

R.P. Bhatt, Senior Advocate, Ms. Lakhsmi Iyengar, B.V.B. Das and Ms. Sushma Suri, Advocates with him for Respondent.

2004 P T D 2147

[253 I T R 445]

[Supreme Court of India]

Present: S. P. Bharucha, Y. K. Sabharwal and Brijesh Kumar, JJ

COMMISSIONER OF INCOME‑TAX

Versus

KODAK INDIA LTD.

Civil Appeal No. 6853 of 1999, decided on 17th September, 2001

(Appeal by special leave from the judgment and order, dated March 20, 1997 of the Bombay High Court in I. T. R. No. 97 of 1988).

Income‑tax‑‑‑

‑‑‑‑Capital or Revenue expenditure‑‑‑Company‑‑‑Increase of Capital pursuant to direction of Reserve Bank to reduce non‑residential holding to 40 per cent.‑‑‑Is capital expenditure.

Where the assessee‑Company incurred expenditure for the public issue of shares to increase its share capital pursuant to a direction of the Reserve Bank to do so to reduce its non‑residential holding to 40 per cent.: Held, that the expenditure was capital expenditure.

Punjab State Industrial Development Corporation Ltd. v. CIT (1997) 225 ITR 792 (SC) fol.

Soli J. Sorabji, Attorney‑General of India (Pritesh Kapur, B.V.B. Das and Ms. Susma Suri, Advocates with him) for Appellant.

F.V.Irani, Senior Advocate (S. Balakrishnan, Atul Y. Chitale and Mrs. Suchitra Atul Chitale, Advocates with him) for Respondent.

2004 P T D 2149

[253 I T R 800]

[Supreme Court of India]

Present: B.N. Kirpal and S. Rajendra Babu, JJ

COMMISSIONER OF INCOME‑TAX

Versus

GOGINENI TOBACCO LTD.

Civil Appeal No.3790 of 1999, decided on 15th July, 1999.

(Appeal by special leave from the judgment and order, dated October 16, 1998 of the Andhra Pradesh High Court in Income‑tax Case No.45 of 1998).

Income‑tax‑‑‑‑

‑‑‑‑Reference‑‑‑Export business‑‑‑Special deduction‑‑‑Whether to be claimed on total income after deduction of unabsorbed losses and unabsorbed depreciation or otherwise‑‑‑Question of law‑‑‑Indian Income Tax Act, 1961, Ss.80HHC & 256‑‑‑[CIT v. Gogineni Tobacco Ltd. (1999) 238 ITR 970 reversed].

The question whether the benefit under section 80HHC of the Income Tax Act, 1961, can be claimed on the total income after deduction of unabsorbed loss and unabsorbed depreciation or otherwise is a question of law.

(The Supreme Court accordingly directed the Appellate Tribunal to state a case on this question of law to the High Court).

CIT v. Gogineni Tobacco Ltd. (1999) 238 ITR 970 reversed.

R. N. Trivedi, Additional Solicitor General of India (Tara Chand Sharma and S. K. Dwivedi, Advocates with him) for Appellant.

A. Subba Rao, Advocate for Respondent.

2004 P T D 2150

[253 I T R 782]

[Supreme Court of India]

Present: Syed Shah Mohammed Quadri and S. N. Variava, JJ

COMMISSIONER OF INCOME‑TAX

Versus

KISAN SEHKARI CHINI MILL LTD.

Civil Appeal No.545 of 2002, decided on 18th January, 2002.

(Appeal by special leave from the judgment and order, dated October 15, 1999 of the Allahabad High Court in I.T. Application No. 155 of 1997).

Income‑tax‑‑‑‑

‑‑‑‑Reference‑‑‑Business expenditure‑‑‑Incentive bonus‑‑‑Not admissible under specific provision in S.36(1)(ii)‑‑‑Whether allowable under General Provision in S.37‑‑‑Question of law‑‑‑Indian Income Tax Act. 1961, Ss.36(1)(ii), 37 & 256.

The question whether incentive bonus paid by the assessee is allowable under section 37 of the Income Tax Act, 1961, if it is not admissible under specific section 36(1)(ii) is a question of law.

[The Supreme Court, accordingly, directed the Appellate Tribunal to State a case to the High Court on this question].

Altaf Ahmad, Additional Solicitor General of India (Rajiv Tyagi and B.V. Balaram Das, Advocates with him) for Appellant.

Rakesh Dwivedi, Senior Advocate (Vishwajit Singh and Ravi Kumar Verma, Advocates with him) for Respondent.

2004 P T D 2152

[255 I T R 45]

[Supreme Court of India]

Present: S.P. Bharucha, C.J.L. Shivaraj V. Patil and Arijit Pasayat, JJ

COMMISSIONER OF INCOME‑TAX

Versus

ABHISHEK CORPORATION

Civil Appeal No.8176 of 2001, decided on 29th November, 2001.

(Appeal by special leave from the judgment and order, dated. October 25, 1999, of the Gujarat High Court in I.T.A. No. 272 of 1999).

Income‑tax‑‑‑

‑‑‑‑Reference‑‑‑Question of law‑‑‑Unaccounted receipts‑‑‑Onus in respect of on‑money to show investment of funds‑‑‑Question of law‑‑‑Indian Income Tax Act, 1961, Ss.68 & 256(2).

The respondent‑firm undertook supervision work of two cooperative societies and also booking of flats. Pursuant .to search conducted of the premises of an architect and the two cooperative societies, a paper was seized showing purchase of flat at Rs.455 per sq. ft. though the document in fact indicated the price of Rs.265 per sq. ft. On the basis of this information the Assessing Officer arrived at an investment of Rs.1,58,59,400 as having been made by the firm from unaccounted receipts. Pursuant to a notice from the Assessing Officer the respondent declared undisclosed income of Rs.30 lakhs. The Appellate Tribunal, considering the fact that the respondent was earning only supervision charges and taking into consideration the expenses, etc., arrived at a rate of 1.31 per cent. of undisclosed receipts as net profit; that the undisclosed income was not less than the net profit calculated at 1.31 per cent and that there was no material placed on record to indicate huge investment by the respondent and held that the Department had failed to prove that the claim of the respondent regarding extra expenditure was incorrect. The Tribunal and the 'High Court rejected the Department's application for a reference, inter alia, for the question: "Whether the Tribunal, having held that the assessee had received unaccounted receipts, was justified in holding that the Assessing Officer had to discharge the onus in respect of on‑money by showing that the assessee had invested Rs.1,58,59,400 out of such receipts, whereas the claim of the assessee for extra expenditure was found to be incorrect? "On appeal to the Supreme Court:

Held, reversing the decision of the High Court on that question, that the question of law arose out of the order of the Appellate Tribunal and the Tribunal had to state a case to the High Court on that question.

Being aggrieved by the order passed by the Income‑tax Appellate Tribunal, Ahmedabad Bench "C", Ahmedabad (hereinafter referred to as "the Tribunal"), in R.A. No.869/And of 1997 the Commissioner of Income‑tax, Surat ("the CIT" for short) has filed this application before this Court under section 256(2) of the Income Tax Act, 1961 (hereinafter referred to as "the Act"), for referring the following questions of law:

(1) Whether on the facts and in the circumstances of the case, the Income‑tax Appellate Tribunal was justified in law in admitting a new plea contrary to the facts on record that the net profit in respect of the supervision charges should be linked to the receipts of booking of flats to the tune of Rs.2.63 crores contrary to the provisions of rule 29 read with rule 10 of the Appellate Tribunal Rules and to base its finding thereon?

(2) Whether, on the facts and circumstances of the case, the Income‑tax Appellate Tribunal having held that the assessee has received unaccounted receipts, was justified in law in holding that the Assessing Officer has to discharge the onus in respect of on‑money by showing that the assessee has invested Rs.1,58,59,400 out of such receipts whereas the claim of the assessee for extra expenditure was found to be incorrect?

So far as Question No. 1 is concerned the Tribunal in para. 8 has recorded as under:

"As regards Question No. 1 raised by the Revenue, it is seen that the question talks about acceptance of new plea contrary to the provisions of rule 29 read with rule 10 of the Appellate Tribunal Rules. However, neither any fact contrary to record was stated by the assessee nor it has been noted by the Tribunal in its order and as such rule 10 is not applicable. Similarly; no additional evidence was produced by the assessee. As such rule 29 is also not applicable because a new plea cannot be equated with the new evidence."

So far as Question No.2 is concerned it may be stated that the same has been raised on the premise that the claim for extra expenditure having been incurred by the assessee for earning on‑money was found to be incorrect. The Tribunal has expressed the view that this premise itself is incorrect because the Department has failed to prove that the claim. of the assessee regarding extra expenditure as incorrect. On the other hand, as a result of search by the Department, no unaccounted assets/ investments exceeding Rs.30 lakhs were found by the Department. Before us it was submitted that one Uttamchand Jain who purchased two flats entered into an agreement. The said document was signed by Uttamchand Jain, M.D. Patel and Udai Tejani. It seems that on the top of the page "465 per sq. ft." was mentioned and the sale price of each flat has been calculated accordingly for arriving at a conclusion. The agreement does not refer to the said price. Mr. Naik submitted that the statement of the architect was recorded. Uttamchand Jain has come out with the version that no premium was paid. Except the paper found from Madhavji nothing is placed on record to draw an inference against the assessee. No statement of other flat owner is recorded.

Mr. Soparkar, for the respondent‑assessee, has relied upon a decision of the Division Bench of this Court (Coram: R. Balia and A.R. Dave, JJ.) rendered in Income‑tax Application No 53 of 1999 on April 20, 1999, in the case of CIT v. President Industries. In this case, the Division Bench has observed as under:

"It cannot be matter of an argument that the amount of sales by itself cannot represent the income of the assessee who has not disclosed the sales. The sales only represented the price received by the seller of the goods for the acquisition of which it has already incurred the cost. It is the realization of excess over the cost incurred that only forms part of the profit included in the consideration of sales. Therefore, unless there is a finding to the effect that investment by way of incurring cost in acquiring goods which have been sold have been made by the assessee and that has also not been disclosed. In the absence of such finding of fact the question whether the entire sum of undisclosed sale proceeds can be treated as income of the relevant assessment year answers by itself in the negative."

The assessee, a partnership firm comprising of Udai Tejani and Arvind Patel having equal shares undertook the supervision work of two cooperative societies and also of booking the flats. One Madhavji Patel, architect and builder of the said two cooperative societies was subjected to search and seizure proceedings under section 132(1) of the Act. From the possession of the said Madhavji Patel a paper was seized from which an inference was drawn that one Uttamchand Jain purchased two flats at the rate of Rs.455 per sq., ft. The document in fact was suggesting the price at Rs.265 per sq. ft. The Assessing Officer on the basis of this piece of evidence arrived at a conclusion of addition of income of Rs.1,58,59,400. The paper relied upon was not found from the possession of the assessee or its partners. Extra work was to be carried out by Madhavji Patel for which amount was charged. Uttamchand Jain denied having paid any premium in respect of the flats purchased. If a document is found from the possession of a person, section 132(4A) can be invoked.

In response to a notice the assessee declared undisclosed income of Rs.30 lakhs. In para. 6 and concluding para. of the judgment of the Tribunal it is pointed out that considering the fact that the assessee was entitled to supervision charges taking into consideration depreciation, salary, etc. profit rate will come to 1.31 per cent. Considering the rate at Rs.265 per sq. ft. total receipt would be 2.65 crores on which the profit earned was Rs.3,43,672 (after deducting all expenses). The profit at the rate of 1.31 per cent was not disputed by the Revenue at the time of hearing as observed by the Tribunal. One has to bear in mind that the assessee was engaged as a supervisor. Investment in land, investment in construction work which would be of huge amount is not shown to have been made by the assessee. The Tribunal opined that the undisclosed income of Rs.30 lakhs declared by the assessee is not less than the net profit calculated at 1.31 per cent. The Tribunal also considered the fact that no material on record has been placed to indicate the investment of huge amount by the assessee. Considering all these facts, the Tribunal has rendered its decision on appreciation of material placed on record.

Thus, the Tribunal on appreciation of evidence has found that no referable question of law has arisen. After going through the decision rendered by the Tribunal we are also of the view that no referable question of law arises in this matter. Hence, the application is rejected. Rule discharged. No order as to costs.

The Department preferred an appeal to the Supreme Court.

Mukul Rohtagi, Additional Solicitor General of India (Ms.Neera Gupta and B.V. Balaram Das, Advocates with him) for Appellant.

H.A. Raichura, Ms. S.H. Raichura and Shailendra Singh, Advocates for Respondent.

2004 P T D 2156

[255 I T R 258]

[Supreme Court of India]

Present: R. P. Sethi and K. G. Balakrishnan, JJ

Criminal Appeal No.601 of 1992

ASSISTANT DIRECTOR OF INSPECTION (INVESTIGATION)

Versus

KUM. A.B. SHANTHI

(Criminal Appeal No. 601 of 1992 is from the judgment and order, dated April 21, 1992, of the Madras High Court in Crl. M.P. No.2854 of 1988).

Civil Appeal No. 4478 of 2001

CHAMUNDI GRANITES (PV0T.) Ltd.

Versus

DEPUTY COMMISSIONER OF INCOME‑TAX and another

(Civil Appeal No.4478 of 2000 is from the judgment and order, dated March 25, 2000, of the Karnataka High Court in Writ Appeal No.5447 of 1999).

Criminal Appeal No. 601 of 1992 with Civil Appeal No.4478 of 2000, decided on 3rd May, 2002.

(a) Income‑tax‑‑‑--

‑‑‑‑Loans or deposits‑‑‑Provision requiring receipt by account payee cheque or bank draft‑‑‑Valid‑‑‑Within legislative competence of Parliament‑‑‑‑Not discriminatory‑‑‑Provisions for punishment for failure to do so‑‑‑Not expropriatory‑‑‑Indian Income Tax Act, 1961, Ss.269SS, 271D, 273B & 276DD.

(b) Income‑tax‑‑‑

‑‑‑‑Parliament‑‑‑Legislative powers‑‑‑Legislative entry‑‑‑"Taxes on income other than agricultural income"‑‑‑Scope of‑‑‑Of wide amplitude‑­Extends to all ancillary and subsidiary matters‑‑‑Constitution of India, Art. 246 & Sched. VII, List I, Entry 82.

(c) Income‑tax‑‑‑

‑‑‑‑Colourable legislation‑‑‑Not unless Legislature has no power but camouflages in away as to appear within its competence ‑‑‑[Kumari A.B. Shanthi v. Assistant Director of Inspection (1992) 197 ITR 330 reversed].

Section 269SS of the Income Tax Act, 1961, prescribing the mode of taking or accepting certain loans or deposits, is not discriminatory and is not violative of Article 14 of the Constitution of India; nor was it enacted by Parliament without legislative competence. It cannot be said that section 269SS deals with a subject outside the scope of the Income‑tax Act or that it relates to a topic not within the competence of Parliament. Nor are the provisions of section 269SS or section 271D or section 276DD unconstitutional on the ground that the provisions are draconion or expropriatory.

The object of introducing section 269SS is to ensure that a taxpayer is not allowed to give false explanation for his unaccounted money, or if he makes some false entries, he shall not escape by giving false explanation for the same. During search and seizures, unaccounted money is unearthed and the taxpayer would usually give the explanation that he had borrowed or received deposits from his relatives or friends and it is easy for the so‑called lender also to manipulate his records to suit the plea of the taxpayer. The main object of section 269SS was to curb this menace of making false entries in the account books and later giving an explanation for the same.

The undue hardship of the provisions of section 271D, which replaced section 276DD providing for a penalty, is substantially mitigated by the inclusion of section 273B providing that if there was a genuine and bona fide transaction and the taxpayer could not get a loan or deposit by account‑payee cheque or demand draft for some bona fide reason, the authority vested with the power to impose penalty has a discretionary power not to levy the penalty.

It is settled law that the heads of legislation given in the Lists in the Seventh Schedule to the Constitution should not be construed in a narrow or pedantic way. If any Legislature makes an ancillary or subsidiary provision which incidentally transgresses its jurisdiction for achieving the object of such legislation, it would be a valid piece of legislation. The entries in a legislative list should be given their fullest meaning and widest amplitude and be held to extend to all ancillary and subsidiary matters which can fairly and reasonably be said to be comprehended in them. It is only when a Legislature which has no power to legislate, or the legislation is camouflaged in such a as to appear to be within its competence when it knows that it is not, that it can be said that the legislation so enacted is a colourable legislation and that there is no legislative competence. If any legislation which is intended to achieve the collection of Income‑tax and to make it easier and systematic is enacted, such legislation would certainly be within the competence of Parliament.

When a provision in a statute is challenged on the ground of colourable legislation, what has to be proved to the satisfaction of the Court is that though the statute ostensibly is within the legislative competence of the Legislature in question, in substance and in reality, it covers a field which is outside its legislative competence.

S.K. Dutta, ITO v. Lawrence Singh Ingty (1968) 68 ITR 272 (SC) applied.

Sukhdev Rathi v. Union of India (1995) 211 ITR 157 (Guj.) approved.

Union of India v. A. Sanyasi Rao (1996) 219 ITR 330 (SC,); Jaora Sugar Mills (P.) Ltd. v. State of M.P. (1966) AIR 1966 SC 416 and P. N. Krishna Lal v. Government of Kerala (1995) Suppl. 2 SCC 187. rel.

K.R.M.V. Ponnuswamy Nadar Sons (Firm) v. Union of India (1992) 196 ITR 431 (Mad) impliedly approved.

Chamundi Granites (P.) Ltd. v. Deputy CIT (2000) 245 ITR 661 affirmed.

Kumari A.B. Shanthi v. Assistant Director of Inspection (1992) 197 ITR 330 reversed

Chamundi Granites (P.) Ltd. v. Deputy CIT (1999) 239 ITR 694 (Karn); East India Tobacco Co. v. State of Andhra Pradesh (1962) AIR 1 1962 SC 1733; (1963) SCR 404; Kunnathat Thanthunni Moopil Nair v. State of Kerala (1961 AIR 1961 SC 552 and (1961) 3 SCR 77 ref.

Attorney‑General of India; Soli J. Sorabjee.

Senior Advocates: S. Ganesh and T.L.V. Iyer.

Other Advocates; Rajiv Nanda, B.V.B. Das, Manish Singhvi, P. Parameshwaran, Dhruv Mehta, Ms. Shobha, Ms. Anu Mehta, K.L. Mehta and R.A. Preumal.

2004 P T D 2166

[255 I T R 272]

[Supreme Court of India]

Present: S. P. Bharucha, N. Santosh Hegde and Y. K. Sabharwal, JJ

COMMISSIONER OF INCOME‑TAX

Versus

M.L. MAHAJAN

Transferred Cases Nos. 19 to 24 of 1990, decided on 21st March, 2001.

(Cases arising out of I. T. R. Nos. 123 of 125 of 1986 and 30 to 32 of 1987 on the file of the Punjab and Haryana High Court withdrawn to the Supreme Court by order, dated September 8, 1989, under Article 139A(1) of the Constitution of India in Transfer Petitions (Civil) Nos.322 :o 327 of 1989).

Income‑tax‑‑‑

‑‑‑‑Capital gains‑‑‑Agricultural land situate within municipal limits‑‑­Capital gains arising from sale‑‑‑Taxable‑‑‑Indian Income Tax Act, 1961, Ss.2(14)(iii)(a) & 45.

Held, that capital gains arising from the sale of agricultural land situate in the municipal limits of Pathankot were taxable under the Income‑tax Act.

Singhal Rakesh Kumar v. Union of India (2001) 247 ITR 150 (SC) applied.

T.L.V. Iyer, Senior Advocate (Rajiv Nada, Ajay Sharma, B.V.B. Balaram Das and P. Parameshwaran, Advocates, with him) for the Commissioner.

Ms. Geetanjali Mohan, Advocate for the Assessee.

2004 P T D 2168

[255 I T R 647]

[Supreme Court of India]

Present: B. P. Jeevan Reddy and Suhas C. Sen, JJ

Smt. P. MAHALAKSHMI and others

Versus

COMMISSIONER OF INCOME‑TAX

Civil Appeals Nos.3468 to 3476 of 1984, decided on 3rd April, 1996.

(Appeals by special leave from the judgment and order, dated October, 13 and 14, 1981, of the Karnataka High Court in I.T.R. Nos.83, 101 to 105, 113, 114 and 118 of 1978).

Income‑tax‑‑‑--

‑‑‑‑Capital gains‑‑‑Portion of property belonging to assessee acquired‑‑­Statutory compensation for injury to un acquired portion‑‑‑Part of full value of consideration for portion acquired‑‑‑Land Acquisition Act, 1894, S.23(1)‑‑‑Indian, Income Tax Act, 1961, Ss.45 & 48.

From the decision of the High Court (see (1982) 134 ITR 428) that where, in computing the compensation for acquisition of a portion of land the injurious effect on the unacquired portion is taken into account as specified under the head "Fourthly" in section 23(1) of the Land Acquisition Act, 1894, what is awarded is the full consideration of the portion of land acquired and has to be taken into account for the purpose of arriving at the capital gains, the assessees preferred appeals to the Supreme Court:

Held, affirming the decision of the High Court, that the amount awarded under the head "Fourthly" stood on the same footing as the amount awarded under any other head and no distinction was permissible as between them: all of them represented the compensation awarded for the land acquired under the Land Acquisition Act.

CIT v. Smt. P. Mahalakshmi (1982) 134 ITR 428 affirmed.

Gopal Jain, Advocate, for Mukul Mudgal, Advocate for Appellant.

Manoj Arora, Advocate for Respondent.

2004 P T D 2170

[255 I T R 508]

[Supreme Court of India]

Present: B. N. Kirpal and Arijit Pasayat, JJ

KARNATAKA BANK LTD. and others

Versus

SECRETARY, GOVENRMENT OF INDIA arid others

Petitions for Special Leave to Appeal (Civil) Nos. 3804, 3898, 4076 and 4074 of 2002, decided on 25th February, 2002.

(Petitions for special leave to appeal against the judgment and order, dated December 7, 2001, of the Karnataka High Court in W.A. Nos. 1133, 1145, 1189 and 1144. of 2001).

Income‑tax‑‑

‑‑‑‑Power to call for information‑‑‑Information on points or matter's useful for proceedings‑‑‑Scope of provisions‑‑‑Pending proceedings not necessary before issuing notice calling for information‑‑‑Approval of Director, or Commissioner sufficient if no proceeding pending‑‑‑Indian Income Tax Act, 1961, S.133(6), second proviso.

It is not necessary that any inquiry should have commenced with the issuance of notice or otherwise before section 133(6) of the Income Tax Act, 1961, can be invoked calling for information in relation to useful or relevant points or matters. It. is with a view to collecting information that power is given under section 133(6) toy issue notice, requiring a banking company to furnish information in respect of such points or matters as may be useful or relevant. The second proviso to section 133(6) makes it clear that such information can be sought for even when no proceeding under' the Act is pending; the only safeguard being that before this power can be invoked the approval of the Director or the Commissioner, as the case may be, has to be obtained.

Held, accordingly, on the facts, that since the notice under section 133(6) seeking information was issued at the instance of the Director of Income‑tax (Investigation), it was valid.

U.G. Upadhya v. Director of Income‑tax (2002) 255 ITR 502 affirmed.

K. Sarangan, Senior Advocate (Sanjay Kunur and N.N. Keshwani, Advocates with him) for Petitioners.

2004 P T D 2172

[255 I T R 423]

[Supreme Court of Indiq]

Present: S. P. Bharucha, Y. K. Sabharwal and Brijesh Kumar, JJ

COMMISSIONER OF INCOME‑TAX

Versus

RAMANATHAPURAM DISTRICT COOPERATIVE CENTRAL BANK LTD.

Civil Appeals Nos.4477 to 4479 of 1998, decided on 30th October 2001.

(Appeals by special leave from the judgment and order. dated February 21, 1997, of the Madras High Court in‑Tax Cases Nos. 1813 to 1815 of 1984).

Income‑tax‑--------

‑‑‑‑Special deduction‑‑Cooperative‑Society—Banking business‑‑‑Interest on securities‑‑‑Subsidies from Government‑‑‑Dividend‑‑‑Are business income‑‑‑Deduction available‑‑‑Supreme Court‑‑‑Earlier decisions on these points‑‑‑Do not require reconsideration‑‑Indian Income Tax Act, 1961, S.80P(2)(a)(i).

Held, that (i) interest on securities, (ii) subsidies from the Government, and (iii) dividend received by the assessee, a cooperative society carrying on banking business, were business income of the assessee, and the assessee was entitled to deduction under section 80P(2)(a)(i) of the Income Tax Act, 19.61, in respect thereof.

CIT v. Karnataka State Cooperative Apex Bank (2001) 251 ITR 194 (SC) and Mehsana District Central Cooperative Bank Ltd. v. ITO (2001) 251 ITR 522 (SC) fol.

Held also, that CIT v. Karnataka State Cooperative Apex Bank (2001) 251 ITR 194 (SC) and Mehsana District Central Cooperative Bank Ltd. v. ITO (2001) 251 ITR 522 (SC) are correctly decided.

United Commercial Bank Ltd. v. CIT (1957) 32 ITR 688 (SC) ref.

At the instance of the Revenue, the Appellate Tribunal has stated a case and referred the following common question of law under section 256(1) of the Income Tax Act, 1961, for the assessment years 1977‑78, 1978‑79 and 1979‑80 for the opinion of this Court:

"Whether, on the facts and in the, circumstances of, the case, the Appellate Tribunal was correct in law in. holding that the interest on securities, subsidies received from the Government and dividend business income of the assessee entitled to deduction under section 80P(2)(a)(i) of the Income Tax Act, 1961?"

Three assessment years are involved in these cases. The common question that arises is whether (i) interest on securities, (ii) subsidies received from Government; and (iii) dividend income received should be regarded as business income and whether the assessee is entitled to deduction under section 80P(2)(a)(i) of the Act. A similar question came tip for consideration before this Court in the case of another cooperative society in the case of CIT v. Madurai District Central Cooperative Bank Ltd. (1984) 148 ITR 196, wherein this Court has held that the assessee would be entitled to exemption under section 80P(2)(a)(i) of the Act in respect of the Interest on securities as well as subsidies. Insofar as the dividend is concerned, this Court has followed the decision of this Court in Madurai District Central Cooperative Bank's case (1984) 148 ITR 196 (Mad.) in the judgment in T.C. Nos.1153 and 1154 of 1982; dated January 10, 1996, (CIT v. Ramanathapuram District Central Cooperative Bank Ltd. (1997) 224 ITR 226) and this Court in the said unreported judgment since reported in (1997) 224 ITR 226‑‑‑held that the principle laid down in Madurai District Central Cooperative Bank's case (1994) 148 ITR 196 (Mad) would apply to the dividend income also. Following the above decision of this Court, we answer the question referred to us in the affirmative and against the Department. No cots.

R.P. Bhatt, Senior Advocate (Preetesh Kapur, B. V. Balram Das and Ms. Sushma Suri, Advocates with him) for Appellant.

R. Venkataraman, Senior Advocate (V. Prabhakar and. Ms Revathy Raghavan, Advocates with him) for Respondent.

2004 P T D 2174

[255 I T R 268]

[Supreme Court of India]

Present: S. P. Bharucha, Y. K. Sabharwal and Brijesh Kumar, JJ

LIVING MEDIA LTD.

Versus

COMMISSIONER OF INCOME‑TAX and another

Civil Appeal No.4582 of 1999, decided on 8th August, 2001.

(Appeal by special leave against the judgment and order, dated March 3 1999, of the Delhi High Court in C.W.P. No. 1198 of 1999).

Income‑tax‑‑‑

‑‑‑‑Assessment proceedings‑‑‑Enquiry‑‑‑Special Audit‑‑‑Voluminous details to answer questions raised by assessing authority‑‑‑Assessing authority directing special audit of accounts to be carried out‑‑‑On basis of nature and complexity of accounts‑‑‑Valid‑‑‑Indian Income Tax Act, 1961, S.142(2A).

The High Court dismissed a writ petition filed by the assessee against an order under section 142 (2A) of the Income Tax Act, 1961, directing special audit of its accounts to be carried out, because, on its own showing, the assessee had filed voluminous details running into about 500 pages to explain the questions raised by the assessing authority and further details running into 1,000 pages, and this prima facie supported the formation of the opinion by the assessing authority for conducting special audit under section 142(2A). On appeal to the Supreme Court:

Held, affirming the decision of the High Court, that there was no reason to conclude that the order directing special audit was for any reason other than the complexity of the assessee's accounts.

M.L. Verma and Kailash Vasudev, Senior Advocates (Ms. V.D. Khanna, Advocate with them) for Appellant.

B.B. Ahjua, Senior Advocate (Pritesh Kapur, B.V. Balram Das and Ms. Sushma Suri, Advocates with him) for Respondents.