PTD 2005 Judgments

2005 P T D (Trib.) 10

[Customs, Central Excise and Sales Tax Appellate Tribunal]

Before Ali Sain Dino Metlo, Member (Judicial-II)

Customs Appeal No.K-543 of 2001, decided on 12th May, 2004.

Customs Act (IV of 1969)---

----Ss.194, 194-A, 207 & 209---Imposition of penalty upon customs, agent---Appellant, who was customs agent, had challenged order passed by Additional Collector of Customs, Sales Tax and Central Excise imposing penalty upon him for mis-declaring description and value of imported goods---Appellant had claimed that he had no knowledge about the actual description of goods and that he had filed the bill of entry on the basis of customs documents i.e. the invoice and the bill of lading provided to him by the importer---Nothing was available to show that appellant had any knowledge about actual description of the goods so as to say that he had prepared and filed the bill of entry knowingly on the basis of incorrect documents---Indeed, there was no such finding or even allegation against the appellant---Customs agent was required to prepare the bill of entry correctly on the basis of documents provided to him, which had been done in the case---Appellant/customs agent could not be held responsible for any misdeed of the importer, unless he was shown to be in collusion with him, which was not the case here---Imposition of penalty upon appellant was not proper and impugned order to that extent was set aside.

Muhammad Afzal Awan for Appellant.

Nemo for Respondent.

Date of hearing: 16th February, 2004.

2005 P T D (Trib.) 135

[Customs, Central Excise and Sales Tax Appellate Tribunal]

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

Customs Appeal No.K-779 of 2004, decided on 20th,September, 2004.

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

---S.26---Object of S.26 of Customs Act, 1969---Object of said section wag to empower the Authority to ask for information or require the production of documents or inspect the same in order to determine the legality or illegality of importation or exportation of goods which had been imported or exported, the value of such goods, the nature, amount and source of funds or the assets with which goods were acquired and the Customs Duty chargeable thereon or for deciding anything incidental thereto---Authority could only for specific purpose of determining the legality or illegality, call for such information as required by S.26 of Customs Act, 1969---Authorized Officer could call upon any importer or exp6rter to furnish information in case where such determination was required---Such officer could not make a roving inquiry or issue a notice by merely shooting in the dark in the hope that it would enable him to find out some material out of those documents and then charge the party with irregularity or illegality---Authority had to state and disclose in the notice, the purpose for which party was required to produce those documents or supply information---Unless such purpose was specified in the notice, it would be a matter of anybody's guess and it could not permit any Authority to employ provisions of S.26 of Customs Act, 1964 to make indiscriminate roving and fishing inquiry, irrespective of fact whether any determination of legality or illegality in import, export of funds with which goods were acquired, was to be determined---Even in cases of suspicion of commission of illegality, details should be provided to the party to enable him to have an opportunity to produce all the relevant documents and disclose information---Depending on facts and circumstances of a case, any notice without disclosing any fact or particulars for which information or documents were required, would be in violation of principles of natural justice and could be struck down as illegal and without jurisdiction.

Assistant Director, Intelligence and Investigation V. Messrs B.R. Herman PLD 1992 SC 485 ref.

(b) Constitution of Pakistan (1973)---

----Art.4---Right of individuals to be dealt with in accordance with law--­State functionaries had no power and authority to conduct fishing and roving inquiries without possessing any definite and proper information, just in the hope to unravel some concealment and illegality on the part of citizen---State functionaries before embarking upon any inquiry, must already possess some material so as to establish any illegal action having been taken by citizen.

PTD 1995 (Trib.) 580 and Karachi Administration Employee Cooperative Housing Society Limited, v. Government of Sindh 2004 YLR 1070 ref.

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

----Ss.26, 156(1) cl.(89) & 194-A---Confiscation of goods---Appeal to Appellate Tribunal---Respondent Authority raided premises of appellant on specific information that smuggled Betel Nuts had been stored there--­Authority, accordingly seized said Betel Nuts and removed same to their office---Raiding party in said proceedings having spotted certain other goods stored in said premises, Staff of Directorate initiated proceedings under S.26 of Customs Act, 1969 in respect of said other goods for which they had neither any information nor raid was conducted for that purpose---As a consequence of investigation, Directorate made out a contravention report against appellant and on that basis a show-cause notice was issued to appellant whereby appellant was asked to bring on record documentary evidence for legal import of said goods---Validity--­At the time of seizure of said Betel Nuts., no inquiry or information was pending in respect of disputed goods---Detention notice was issued to appellant two days after seizure of Betel Nuts and proceedings under S.26 of Customs Act, 1969 were initiated much after---No reasons for detention of said goods were disclosed and neither any purpose was specified in detention notice nor the bas[s upon which inquiry was initiated, was disclosed to appellant---Even if there was any suspicion of commission of illegality, details should have been provided to enable appellant to have an opportunity to produce all documents and disclose information---Inquiry initiated against appellant was nothing, but a roving inquiry only to net him for .any charge to be, found out from the documents called for---Appellant had successfully met with the burden to prove the legal import and burden to prove smuggling stood shifted to respondent-Directorate which had miserably failed to lead any evidence---Action of Directorate was unwarranted by law---Impugned order which was not a speaking order and also devoid of reasons, was also not maintainable being in contravention of law---Impugned order was set aside, in circumstances.

Kamran Industries v. Collector of Customs PLD 1996 Karl. 68; 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; Muhammad Ibrahim Khan v. Secretary, Ministry of Labour and others 1984 SCMR 1014 and Airport Support Services v. Airport Manager QIA 1998 SCMR 2268 ref.

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

----Ss.80 & 83---Assessment and re-assessment---Goods once assessed by Assessing Officer under S. 80 of Customs Act, 1969 and given out of his charge, could not be re-assessed by any other Authority including the Directorate who was only authorized 'to call for the documents as envisaged under S.83 of Customs Act, 1969, only to the extent of confirming the non-payment or short payment of duty on the Bill of Entry filed for home consumptions or for their verification.

(e) Administration of Justice---

---- Quasi-judicial order---Quasi-judicial order must be a speaking order manifesting by itself that Tribunal had applied its judicial mind to the issues and points of controversy involved in the causes.

Asim Muneer Bajwa for Appellant.

Abdul Rasheed, Appraising Officer for Respondent.

Date of hearing 20th September, 2004.

2005 P T D. (Trib.) 150

[Customs, Central Excise and Sales Tax Appellate Tribunal]

Before Ms. Yasmin Abbasey, Member (Judicial-III) and Zafar Iqbal, Member (Technical-III)

Central Excise Appeal No.K-46 of 2002, decided on 4th May, 2004.

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

----S.35-B---Civil Procedure Code (V of 1908), S.149---Appeal--­Limitation---Appeal against the order of Adjudicating Officer was filed by appellant Department after a lapse of about 5 months without giving explanation for said delay---Appellant. Department had totally ignored said legal aspect of the case as neither any reason of such delay had been explained in the memo. of appeal nor any application under S.5 of Limitation Act, 1908 had been filed along with it---During course of hearing of appeal, on raising point of delay by respondent Assessee appellant Department fled application under S.5 of Limitation Act, 1908 alleging that delay occurred due to procedural matters relating to sanctioning and arranging funds for deposition appeal's fee---Said ground taken by a Government functionary after a lapse of about 2 years was nothing, but a lame excuse as ignorance of law had always been considered as no excuse---Appellant be it a Government or ordinary citizen had always been treated equally---Even if it was taken as correct that due to office correspondence, appellant Department was not able to arrange fee in time, then in such, circumstances a special procedure had been provided in Civil Procedure Code, 1908 which was applicable in the case and could be followed for advancement of justice---By virtue of S.149, C.P.C. opportunity of late payment had been provided to party agitating before legal forum but said procedure was not adopted by the appellant Department in the present case---Appeal being hopelessly time-barred, was dismissed.

(b) Administration of justice---

----No hard and fast rule was required for administration of justice, but applicability of any specific law was dependant on the fact of particular case.

(c) Limitation Act (IX of 1908)---

----S.5---Delay---Condonation---In case of delay each and every date had to be explained.

2002 PTD 549 ref.

Barkat Ali Bukhari, Addl. Coll./D.R. for Appellant.

Siraj-ul-Haq, A.R. for Respondent.

Date of hearing: 4th May, 2004.

2005 P T D (Trib.) 196

[Customs, Central Excise and Sales Tax Appellate Tribunal]

Before Zafar Iqbal, Member (Technical)

Customs Appeal No. K-198 of 2004, decided on 30th August, 2004.

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

----Ss.32, 80, 207 & 194-A---Allegation of misdeclaration---Appeal to Appellate Tribunal---Appellant who was Customs Clearing Agent in terms of S.207 of Customs Act, 1969, was issued a show-cause notice whereby he was charged for mala fides and collusion with importer with intention to defraud Government by misdeclaration---Bill of entry was filed by appellant under first appraisement system and goods were assessed after examination by appropriate officer and were given out of charge---At that stage another branch of Customs House re-examined the goods and found that goods were short assessed and on demand alleged short assessed duty was paid by importer---At a later stage and that too after release of goods show-cause notice for misdeclaration was served on appellant despite fact that clearance entry was assessed under first appraisement system---No untrue statement, in circumstances was made by importer to attract mischief of S.32 of Customs Act, 1969---Issuance of show-cause notice for confiscation of goods, in circumstances was ab initio wrong as within the framework of S.32 of Customs Act, 1969 no untrue statement was ever made either by importer or by appellant agent---Even otherwise if any mischief was done, it was Assessing Officer who should have been found guilty for making a wrong assessment, and agent and importer could not be held responsible.

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

----Ss.32, 194-A, 207, 208 & 209---Liability of agent---Agent represents his principal and unless by direct evidence it could be shown that agent was committing some criminal activity and for that reason there existed mens rea or at least a criminal intent, he could not be penalized under general provisions of Customs Act, 1969---Such an agent, if found violating governing conditions of his licence, he could be proceeded within the framework of licensing rules for the violation he committed--­No duty was cast on an agent to carry out an independent investigation before filing documents with the Customs---Was preposterous to suggest that merely because an agent picked up documents for release of goods, he must have some guilty knowledge; it was the duty of prosecution, if it wanted to rope in the agent, to prove by some cogent reasons that agent was an associate of those who were guilty of making an untrue statement before the Customs---In absence of such evidence, Appellate Tribunal would be unable to agree with prosecution's proposition--Mere filing of release documents, by no means was sufficient to make out a case for imposition of penalty on agent.

Abdul Sattar Silat for Appellant.

Muhammad Farooq, Law Officer/departmental Representative for Respondent.

Date of hearing: 30th August, 2004.

2005 P T D (Trib.) 242

[Customs, Central Excise and Sales Tax Appellate Tribunal]

Before Sultan Ahmed Siddiqui, Member (Judicial) and Mir Faud, Member (Technical)

S.T.A. No.34 of 2001, decided on 3rd December, 2001.

Sales Tax Act (VII of 1990)---

----Ss.9 & 46---Issuance of debit and credit note---Appeal---Provisions of S.9 of Sales Tax Act, 1990 had envisaged five different situations where registered person could issue debit and credit note and make corresponding adjustment against output tax in the, Returns---Said five situations, were; (a) Cancellation of supply; (b) Return of goods; (c) Change in the nature of supply; (d) Change in the value of supply and (e) Some such events--- "Change in value of supply" being one of the situations envisaged by S.9 of Sales Tax Act, 1990, same should be considered a valid ground for issuance of debit and credit note--­Provision in S.9 of Sales Tax Act, 1990 "Subject to such condition and limitation as the Board may impose", would not imply that the Board could restrict the scope of statute---By said clause, the Board was empowered to impose conditions and limitations only for the regulation of statute---Debit and Credit Notes and Destruction of Goods Rules, 1996 concerned themselves only with the return of goods, the other four situations mentioned in S.9 of Sales Tax Act, 1990 would form the basis of issuance of debit and credit note---Omission by Executive Authority would not oust the statute---Other four situations mentioned in S.9 of Sales Tax Act, 1990 would be operative without any condition and limitation as no rule had been framed by the Board in that regard.

M.U.A. Khan v. Rana M. Sultan and others PLD 1974 SC 228 ref.

Javed Umar for Appellant.

Khursheed, Senior Auditor for Respondent.

Date of hearing: 3rd December, 2001.

2005 P T D (Trib.) 601

[Customs, Central Excise and Sales Tax Appellate Tribunal]

Before Mian Muhammad Jahangir, Member (Judicial) and Sarfraz Ahmad Khan, Member (Technical)

Appeals Nos.285/LB and 394/LB to 516/LB of 2004, decided on 29th July, 2004.

(a) Customs Act (IV of 1969)‑‑‑

‑‑‑‑Ss. 179 & 194‑B‑‑‑Re‑adjudication of case of after remand by Appellate Tribunal‑‑‑Scope‑‑‑New charges could not be framed against assessee while re‑adjudicating such case.

(b) Customs Act (IV of 1969)‑‑‑

‑‑‑‑Ss. 19 & 20‑‑‑S.R.O. 502(I)/94, dated 9‑6‑1994‑‑‑Import of deleted agricultural tractors parts in garb of Unit Specific Development Programme (USDP), in violation of Industry Specific Deletion Programme (ISDP) by availing concession in terms of S.R.O. 502(I)/94‑­Validity‑‑‑Importer having both Unit Specific Development Programme (USDP) and Industry Specific Deletion Programme (ISDP)‑‑­Applicability‑‑‑Where both‑ISDP and USDP were laid down, then USDP would be the monitoring document‑‑‑Such principle would apply to all contravention cases, whether adjudicated or under adjudication‑‑­Importer, after surpassing required deleted target, had been allowed by competent authority to have a USDP in presence of ISDP‑‑‑Importer in terms of such S.R.O. had facility of importing even those parts, which had earlier been deleted through ISDP‑‑‑Importer, held, was to have correctly availed concession available under such S.R.O.

Mian Abdul Ghaffar and Malik Muhammad Arshad assisted by Lateef Khalid Hashmi, Deputy Managing Director, Javed Munir, G.M. and Atif Masood Khan, Manager for Appellants.

M.B. Tahir, S.D.R. assisted by Masood Javed Appraiser for Respondent.

Date of hearing: 29th July, 2004.

2005 P T D (Trib.) 617

[Customs, Central Excise and Sales‑Tax Appellate Tribunal]

Before Mian Muhammad Jahangir, Member (Judicial) and Sarfraz Ahmad Khan, Member (Technical)

Customs Appeals Nos. 1668/LB and 1669/1‑13 of 2002, decided on 24th May, 2004.

(a) Customs Act (IV of 1969)‑‑‑

‑‑‑‑S. 25 [as amended by Finance Ordinance, (XXI of 2000))‑‑­Transaction value of similar goods‑‑‑Applicability‑‑‑Essentials‑‑‑Customs Officer having reservations in acceptance of declared transaction value was legally bound to inform importer of reservation in writing and gave him an opportunity to justify price difference‑‑‑On failure of importer to justify price difference, them transaction value of identical goods, transaction value of similar goods, deductive value, computed value and fall back method would be applied in same sequential order‑‑­Compliance of provisions of S.25(10) of Customs Act, 1969 being mandatory could not be deviated from‑‑‑Transaction value of similar goods could not be applied without fulfilling mandatory requirements of S.25(4) of Act, 1969‑‑‑Principles.

(b) Customs Act (IV of 1969)‑‑‑

‑‑‑‑Ss. 25 & 32‑‑‑Assessment of imported goods‑‑‑Grievance of importer against assessment‑‑‑Collector Adjudication was the competent Adjudicating Officer.

M.B. Tahir, S.D.R. for Appellant.

Mian Abdul Ghaffar for Respondents.

Date of hearing: 24th May, 2004.

2005 P T D (Trib.) 712

[Customs, Central Excise and Sales Tax Appellate Tribunal]

Before Mian Muhammad Jahangir, Member Judicial and Sarfraz Ahmad Khan, Member Technical

Customs Appeal No. 108/LB of 2004, decided on 23rd September, 2004.

(a) Customs Act (IV of 1969)‑‑‑

‑‑‑‑Ss. 168, 156(1) & Cls. (89), (90)‑‑‑S.R.O 374(1)/2002, dated 15‑6‑2002‑‑‑Criminal Procedure Code (V of 1898), Ss.471, 420 & 468‑‑­Seizure of things liable to confiscation‑‑‑Outright confiscation of vehicle on the ground that according to Forensic Science Laboratory report, chassis number plate cut and another iron sheet had been welded abnormally‑‑‑Appellant contended that Principal Appraiser of Collectorate of Customs (Appraisement) Customs House had cleared on payment of duty/taxes and on the basis of such confirmation, vehicle in question was registered‑‑‑Adjudicating Officer brushed aside the said evidence and without proving the same false, ordered confiscation of the vehicle which was in violation of law‑‑‑Validity‑‑‑Appellant was not the original importer who got the vehicle cleared on payment of duty/taxes and he could not carry triplicate copy of the bill of entry, being the forth or fifth buyer after the original importer‑‑‑When the bill of entry, cash number and date, IGM number were confirmed by Principal Appraiser to Motor Vehicle Registering Authority and to the detecting agency and those particulars were the same as available on the duplicate copy of the bill of entry and the chassis number remained the same on the bill of entry as well as on the vehicle, when it was subjected to Forensic Science Laboratory test and there being no other digits beneath the chassis plate other than the said number, there was no doubt that the vehicle in question was the same which was got cleared on payment of duty/taxes‑‑‑Detecting agency had failed to prove that either the said bill of entry was false or it was not connected with the present vehicle---­Order was set aside and the appeal was accepted by the Appellate Tribunal vehicle was ordered to be released to the appellant forthwith.

Appeals Nos. 170, 171, 172 of 1999, 89 and 93 of 2000 rel.

Muhammad Aftab Khan v. Assistant Director of Customs Intelligence C.P.L.A. No. 1809‑L of 2002, decided on 25‑6‑2002 distinguished.

(b) Qanun‑e‑Shahadat (10 of 1984)‑‑‑

----‑Art, 73 & 78‑‑‑Customs Act (IV of 1969), Ss. 168 & 156(1), Cls. (89) & (90)‑‑‑Primary evidence‑‑‑Laboratory test report was required to be proved in terms of Arts. 73 and 78 of the Qanun‑e-­Shahadat 1984 by the Customs Agency as primary evidence.

Abdul Razzaq Toor, A.R. for Appellant.

M.B. Tahir, S.D.R. assisted by Ch. Muhammad Akram Deputy Superintendent for Respondents.

2005 P T D (Trib.) 731

[Customs, Central Excise and Sales Tax Appellate Tribunal]

Before Mian Muhammad Jahangir, Member (Judicial) and Sarfraz Ahmad Khan, Member (Technical)

S.T. Appeals Nos.379/LB, 3891LB, 529/LB, 564/LB, 565/LB, 583/LB, 601/LB‑, 617/LB of 2004 and 727/LB of 2003, decided on 8th September, 2004.

(a) Sale Tax Act (VII of 1990)‑‑‑

‑‑‑‑S. 45B‑‑‑Appeal‑‑‑Non‑deposit of 15% of the principal amount of tax‑‑‑Rejection of appeals by the Collector, of Customs, Sales Tax and Central Excise (Appeals) in limine "being infructious ab initio" for non­compliance of subsection (4) of S.45‑B of the Sales Tax Act, 1990 without hearing‑‑‑Validity‑‑‑Appeal preferred in terms of subsection (1) of S.45‑B has to be decided in terms of subsection (2) and if needed, read with subsection (3) of S. 45‑B of the Sales Tax Act, 1990‑‑­Before taking up the appeal for regular hearing, the Collector (Appeals) has to ask the appellant to deposit 15%‑‑‑If appellant expresses that requirement of deposit of 15% of principal amount of tax was going "to cause undue hardship to the appellant", the Collector (Appeals) shall grant opportunity of hearing to the appellant and then decide the issue with a judicious mind and then pass formal, order accordingly‑‑‑Where Collector (Appeals) did not dispense with the deposit of 15 % of the principal amount of tax as adjudged by the Adjudicating Authority, prior to taking up the appeal for regular hearing, there would be no stay against recovery of the adjudged amount of duty/taxes‑‑‑Where Collector (Appeals) had dispensed with the deposit of 15% of the principal amount of tax, in exercise of this powers under the first proviso to sub­ section (4) of S.45‑B of the Sales Tax Act, 1990, then the third proviso to subsection,(4) of S.45‑B of the Sales Tax Act, 1990 would come into operation i.e. the remaining adjudged principal amount of tax, additional tax and‑penalty etc., shall remain stayed till the expiry of six months period, or decision of the appeal, whichever is earlier‑‑‑No statutory provision .was available with the Collector (Appeals) asking the appellant to deposit 1/3rd of the principal amount of tax adjudged vide order‑in­original‑‑‑Orders in appeal were, set aside and all the cases were remanded to the Collector of Customs, Sales Tax and Central Excise (Appeals) by the Appellate Tribunal since the appeals were treated to be pending before him for disposal on merit.

Messrs Maple Leaf Cement Factory Ltd. v. Collector of Central Excise and Sales Tax 1993 MLD 1645 rel.

(b) Sales Tax Act (VII of 1990)‑‑‑

‑‑‑‑Ss. 45B(4) & 45(3)‑‑‑Appeal‑‑‑Comparison between S.45(3) and S.45B(4) of the Sales Tax Act, 1990 revealed that the main provisions of Ss.45B(4) & 45(3), were quite similar to each other except for the absence of provisions of subsection (4) in S.45 of the Sales Tax Act, 1990‑‑‑Main provision of subsection (4) of S.45B of the Sales Tax Act, 1990 was held to be directory and not mandatory in character.

Messrs Maple Leaf Cement Factory Ltd. v.‑ Collector of Central Excise and‑ Sales Tax 1993 MLD 1645 ref.

(c) Sales Tax Act (VII of 1990)‑‑‑

‑‑‑‑S. 45B‑‑‑Appeal‑‑‑Non‑deposit of 15% of the principal amount of tax‑‑‑Effect‑‑‑Right of appeal granted to an aggrieved person from any decision/order passed under the provisions of law and passed by the ­Sales Tax Officer, within thirty days was an inalienable right and could not be made ineffective/redundant, on account of non‑deposit of 15 % of the principal amount of tax, in terms of S.45B(4) of the Sales Tax Act, 1990.

(d) Sales Tax Act (VII of 1990)‑‑‑

‑‑‑S. 45B‑‑‑Appeal‑‑‑Non‑deposit of 15% of the principal amount of Tax‑‑‑Opportunity of being heard‑‑‑Collector (Appeals) was bound to grant opportunity of personal hearing to the parties to the appeal and then to pass an order "as he thinks fit, confirming, varying, altering, setting aside or annulling the decision or order appealed against" in terms of S.45‑B(2) of the Sales Tax Act, 1990‑‑‑Pre‑requisite for passing "such an order as he thinks fit" was "after giving both parties to the appeal an opportunity of being heard", and that "as thinks fit", was restricted to "confirming, varying, altering, setting aside or annulling".

(e) Sales Tax Act (VII of 1990)‑‑‑.

‑‑‑‑S. 45B‑‑‑Appeal‑‑‑Non‑deposit of 15 % of the principal amount of tax‑‑‑By taking plea of non‑deposit of 15% in terms of S.45B(4) of the Sales Tax Act, 1990, right to appeal in terms of S.45B(1) and right to have disposal of appeal in terms of S.45B(2), read with S.45B(3), if needed, could not be allowed to be made ineffective.

(f) Sales Tax Act (VII of 1990)‑‑‑

‑‑‑‑S. 45B‑‑‑Appeal‑‑‑Judicious exercise of power for dispensation from deposit of .15 % of the principal amount of tax‑Opportunity of being heard‑‑‑Allowing dispensation from the deposit of 15% when it was "likely to cause undue hardship to the appellant" in terms of the first proviso to S.45B(4) of the Sales Tax Act, 1990, issuance of direction "that pending decision of the appeal, the tax shall be paid by the appellant in suitable instalments spreading over a period, not exceeding six months, from the date of such direction", was also an exercise of such a power which, had to be used judiciously, and not arbitrarily‑‑‑One of the basic ingredients for judicious exercise of power was grant of opportunity of hearing to the appellant.

Mian Abdul Ghaffar, Rana Farman Ali, Zulfiqar Ali and Muhammad Sarfraz Iqbal for Appellants.

M.B. Tahir, SDR and Saleem Akhtar, Superintendent for Respondents.

2005 P T D (Trib.) 753

[Customs, Central Excise and Sales Tax Appellate Tribunal]

Before Muhammad Sulaiman, Member (Technical) /Chairman, Raj Muhammad Khan Member (Judicial) and Syed Mohsin Asad, Member Technical), Appeal No332 of 2002, decided on 12th August, 2003.

Customs Act (IV of 1969)‑‑‑

‑‑‑‑Ss. 32(2) & 156(1)(14)‑‑‑Qanun‑e‑Shahadat (10 of 1984), Arts: 59 & 63‑‑‑Untrue statement, error, etc. ‑‑‑Refractory Briks‑‑‑PCT headings 6902.1090, 6902.2090 & 6902.1010‑‑‑Appellant declared the PCT classification of "Refractory bricks" as 6902.1090 and 6902.2090 which _. was chargeable to' customs duty Q , 10 % ‑‑‑Such PCT classification was ' meant for the "Refractory Bricks" capable for over and above resisting temperature 1600°C‑‑‑Department, .after obtaining report from two reputed factories/manufacturer and Pakistan Council of Scientific and Industrial Research (PCSIR), concluded that imported Refractory Bricks were exactly classifiable against PCT heading 6902.1010 and were chargeable to customs duty @30%‑‑‑Appellant/ Importer wilfully misdeclared the PCT classification of imported goods against Heading No. 6902.1090 and 6902.2090 and evaded the short paid customs duty and allied taxes‑‑‑Appellant was ordered to pay duty/taxes and a penalty equal to the value of the goods was also imposed‑‑‑Validity‑‑‑Collector of Customs, Central Excise and Sales Tax (Adjudication) had depended on the reports of three organizations and main emphasis had been placed on the report of Pakistan Council of Scientific and Industrial Research (PCSIR)‑‑‑Such report clearly stated that the resisting temperature of all the types of refractory bricks imported were above 1600°C‑‑‑Collector (Adjudication) had misread the report wherein the temperature called actual capable temperature (working temperature range) was shown to be below 1600°C‑‑‑Literature of manufacturer clearly established that it was refractoriness under load (RUL) of the refractory bricks and not the so‑called safe operating temperature as mentioned by Heavy Mechanical Complex and FECTO Cement and the working temperature range mentioned by the PCSIR the correct indicators of the refractoriness of these bricks‑‑‑Collector (Adjudication) had conveniently left out the resisting temperature (refractoriness) and picked up the actual capable temperature, to change the classification of the bricks from 6902.1090 to 6902.2090 and 6902.1010 to 6902.2010 which was misconstrued‑‑­Working in PCT used the words, "capable of resisting temperature up to 1600°C"for 6902.1010 and 6902.2010 had been used‑‑‑Reports had not only been misread but also wrongly prepared by the three laboratories‑‑­What was required to check was whether the bricks could resist temperatures above 1600°C under load‑‑‑No such report was available on record, on top of report of PCSIR it was clearly stated that the bricks could resist temperatures above 1600°C‑‑‑Bricks were classifiable under PCT Heading 6902.1090 and 6902.2090 chargeable to customs duty @10% ad Val.‑‑‑Appeal was accepted and order‑in‑original was set aside by the Appellate Tribunal.

Finest Corporation v. Collector of Customs/Appraisement PLD 1990 Kar. 338 ref.

Sajid A. Qureshi for Appellant.

Muhammad Rashid Superintendent and Zahoor Ahmad Mughal, Deputy Superintendent for Respondent.

2005 P T D (Trib.) 779

[Customs, Central Excise and Sales Tax Appellate Tribunal]

Before Muhammad Sulaiman, Member (Technical)/Chairman and ‑Al‑Haj Firoz‑ud‑Din, Member (Judicial)

Appeal No.55 of 2003, decided on 12th August, 2003.

(a) Customs Act (IV of 1969)‑‑‑

‑‑‑‑S. 168(2)‑‑‑Seizure of things liable to confiscation‑‑‑Show‑cause notice‑‑‑Goods were seized by the Customs authorities formally‑ on 5‑LO‑2002 whereas the show‑cause notice was issued on 16‑12‑2002 i.e. after 2 months and 11 days‑‑‑No extension appearsl to have been accorded to the issuance of the show‑cause notice after ‑the statutory period of 2 months‑‑‑Show‑cause notice was time‑barred and goods were liable to be released to the appellant.

(b) Customs Act (IV of 1969)‑‑‑

‑‑‑‑S. 168‑‑‑Import Policy Order, 2000‑‑‑S.R.,O. 1374(1)/1998, dated 17‑12‑1998‑‑‑S. R. O. 374(1)/2002‑‑‑Seizure of things liable to confiscation‑‑‑Outright confiscation‑‑‑VCRs and VCPs‑‑‑Second hand VCRs, and VCPs were banned for import under Appendix "C" of the Import Policy Order, 2000 and were not covered by S.R.O. 1374(1)/ 1998, dated 17‑12‑1998 and S.R.O. 374(1)/2002‑‑‑Both the S.R,.O.s applied on the basis of being banned for import but these were not liable to outright confiscation‑‑‑Outright confiscation applied only to items covered under Appendix "A" of the Import Policy Order, 2000‑‑­Goods could be released on payment of duties and taxes and on payment of redemption fine to be determined by the Adjudicating Officer.

Judgment No. 7 (68, 80, 81, 83, 84, 92 and 1.03) rel.

(c) Customs Act (IV of 1969)‑‑‑

‑‑‑‑Ss. 2(s), 9, 10, 16 & 156(1)‑‑‑Imports and Exports (Control) Act (XXXIX of 1950), S.3(1)‑‑‑Northern Areas Adaptation of Laws Order, 1981‑‑‑Import Trade and Procedure Order, 2000‑‑‑Smuggling‑‑‑Customs staff ,found non‑importable goods i.e. VCRs and VCPs in terms of negative list of applicable import policy besides the importable items‑‑­Goods were seized and confiscated outrightly deeming to be smuggled goods‑‑‑Validity‑‑‑Goods brought through a route other than a rout declared under S.9 or 10 of the Customs Act, 1969 from any place other than a Customs Station, will be considered as being smuggled‑‑‑If any goods were being brought into country through the notified route and a notified Customs Station, those will not be treated as smuggled simply because these were banned for import‑‑‑Inclusion of an item in the notification issued under S.2(s) of the Customs Act, 1969, did not make an item as smuggled because the notification included a large number of freely importable items‑‑‑Secondhand VCRs and VCPs were not mentioned specifically in the notification and same could not be treated as ‑being smuggled as those were imported through a notified Customs Station‑‑‑Goods were ordered to be released on payment of duties and taxes only, as the show‑cause notice was time barred‑‑Order of confiscation was set aside as these goods could not be treated as smuggled‑‑‑Departmental appeal was dismissed by the Appellate Tribunal.

Judgment No. 7 (68, 80, 81, 83, 84, 92 and 103) ref.

Zahoor Ahmad Mughal, Deputy Superintendent for Appellant.

S.K.M. Kiani for Respondent.

2005 P T D (Trib.) 796

[Customs, Central Excise and Sales Tax Appellate Tribunal]

Before Mian Muhammad Jahangir, Member Judicial and Sarfraz Ahmad Khan, Member Technical

Customs Appeal No.405/LB of 2000, decided 12th August, 2004.

(a) Customs Act (IV of 1969)‑‑‑

‑‑‑‑Ss. 19,. 18(2), 25/25B, 30 & 31A‑‑‑S.R.O. 279(1)/94, dated 2‑4‑1994‑‑‑S.R.O. 530(1)/94, dated 9‑6‑1994‑‑‑S.R.O. 1050(1)/95, dated 29‑10‑1995‑‑‑General power to exempt from customs duties‑‑‑Regulatory duty‑‑‑Refund‑‑‑Regulatory duty was collected on import of plant and machinery of Thermal Power Station‑‑‑Refund was of such paid regulatory duty on the ground that S.R.O. 279(1)/94, dated 2‑4‑1994 exempted the machinery and equipment from whole of customs duty if imported for setting up or balancing, modernization and extension of power generation‑‑‑Validity‑‑‑Imported goods were exempted under S.19 of the Customs Act, 1969 and were chargeable to "Nil" duty at the time of clearance and were correctly charged to regulatory duty in terms of S. R. O. 1050(1)/95, dated 29‑10‑1995‑‑‑Adjudicating Officer was justified in holding that where the appellants were not charged 65 % duty at the time of clearance, regulatory duty was correctly charged on those consignments under S.R.O. 1050(1)/95, dated 29‑10‑1995‑‑‑No refund was due‑‑‑Appeal was dismissed by the Appellate Tribunal.

Zaman Paper and Board Mills and other's case C. Ps. Nos. 1039‑L, 1040‑L, 1565‑L and 1709‑L of 1999 rel.

1999 SCMR 412; PTCL 1998 CL 354; 1992 SCMR 250; 1990 PTD 768 = PLD 1990 SC 1156; 1996 SCMR 1470; 1997 SCMR 906 distinguished.

(b) Customs Act (IV of 1969)‑‑‑

‑‑‑‑Ss. 18(2), 19, 25/25B, 30 & 31A‑‑‑Goods dutiable ‑‑‑Chargeability of duty in terms of S.18 of the Customs Act, 1969 had to be read with the provisions of Ss.25, 258, 30, 31 & 31A of the Customs Act, 1969 which would mean that in case of exemption in terms of S.19 of the Customs Act, 1969 if a duty is levied under S.18 of the Customs Act, 1969, there would be no duty at the time specified under Ss.30 & 31A of the Customs Act, 1969 which would mean that on account of operation of exemption notification to an item, the rate of duty chargeable would he "Nil"‑‑‑Rate of duty and value were thus linked with the date of filing of bills of entry for its clearance and only that value and rate of duty would be applicable as was in force at the date/time envisaged under Ss.25, 30 and 31A of the Customs Act, 1969.

Mian Ashiq Hussain for Appellant.

M.B. Tahir Senior D.R. for Respondents.

Date of hearing: 25th May, 2004.

2005 P T D (Trib.) 885

[Customs, Central Excise and Sales Tax Appellate Tribunal]

Before Mian Muhammad Jahangier, Judicial Member

Customs Appeal No.714/LB of 2004, decided on 26th October, 2004.

Customs Act (IV of 1969)‑‑‑

‑‑‑‑Ss.156(1)89/90 & 194‑A‑‑‑Confiscation of car on allegation that the same was smuggled one‑‑‑Appeal‑‑‑Car in question was confiscated by order passed by Additional Collector (Adjudication) under S.156(1)89/90 of Customs Act, 1969 alleging that it was smuggled one which had been brought into the country without payment of any taxes‑‑‑Appellant had challenged order of confiscation of car in appeal contending that documents on record had proved that vehicle in question was lawfully owned by appellant as its registration was in his name‑‑‑Appellant had also claimed that nothing was on record to believe that vehicle in question had any other Chassis number‑‑‑If documents of import were not produced at the spot or during investigation, it would be established that vehicle in question being foreign item was a smuggled goods which had been brought from a foreign country in any way or through any route‑‑‑In order to establish a thing to be legally imported the documents of import were the best evidence‑‑‑In case of non‑availability of documents of import from any office, then the report of Forensic Science Laboratory could be sought which would be secondary evidence to assist in the affair‑‑‑Difference detected by Investigating Staff in the present case was that model of car was different‑‑‑Said discrepancy was not sufficient to declare vehicle as smuggled one because said discrepancy itself was not a best evidence‑‑‑Even otherwise sufficient corroboration of claim of appellant had come on record on strength of documents‑‑­Case of appellant having been disposed of without bringing on record best evidence for any penal action, order passed by Additional Collector (Adjudication), was set aside and case was remanded back to dispose of matter afresh in accordance with law after summoning the parties.

Atta‑ul‑Mustafa Shiraz for Appellant.

Gulzar Ali, S.I.O, for Respondent.

Date of hearing: 26th October, 2004.

2005 P T D (Trib.) 1139

[Customs, Central Excise and Sales Tax Appellate Tribunal]

Before Zafar Iqbal, Member Technical

Customs Appeal No.K-793 of 2002, decided on 3rd January, 2005.

Customs Act (IV of 1969)---

----Ss. 156(1)(8), 180, 194-A & 215---Confiscation of goods---Appeal to Appellate Tribunal---Authority seized goods belonging to appellant alleging same as of Korean and Indonesian origin, whereas appellant had claimed that disputed goods were of Pakistani origin---First confiscation of goods which was ex parte, was set aside by Appellate Tribunal---Second adjudication order was also passed ex parte, which had been confirmed by First Appellate Forum---Both orders were silent on merits of case and no evidence was produced by seizing officer to establish foreign origin of seized goods and Adjudication Officer simply confiscated same on assumed grounds---Said goods (cloth) in fact had been seized far away from the borders of Pakistan and such type of cloth was available in open market throughout the country---Act of smuggling or possession of smuggled goods must be proved beyond a reasonable doubt, but in the present case there was an unnecessary haste to dispose of matter and that too by not following established norms---Adjudication Officers were under a duty to examine whether or not service of summons, notices or call up letters were sent in accordance with requirements of S. 215 of Customs Act, 1969 and if a proper service had not been made, passing of ex parte order was not warranted by law; which procedure had not been adopted in the case---Goods confiscated in the case had been auctioned without following legal procedure and appellant was being continuously denied the right of a fair trial---Action of authorities, in circumstances was ab initio wrong and not warranted by law---All said facts clearly established presence of impropriety in the proceedings conducted by authorities---Impugned orders were set aside as being ab initio wrong and not warranted by law---Case was remanded to Adjudication Officer for a decision afresh with certain directions.

Asim Muneer Bajwa for Appellant.

Departmental Representative for Respondent.

Date of hearing: 3rd January, 2005.

2005 P T D (Trib.) 1154

[Customs, Central Excise and Sales Tax Appellate Tribunal]

Before Zafar Iqbal, Member Technical

Sales Tax Appeal No.K-87 of 2004, decided on 6th January, 2005.

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

----Ss. 26, 33 & 46---Non-filing of sales tax return---Imposition of penalty---Appeal to Appellate Tribunal---Collector of Customs & Sales Tax neither had ascertained the facts nor made any inquiry or issued a show-cause notice in order to adjudicate an issue which was not before him as a part of show-cause notice---In absence of notice regarding a disputed issue, Adjudicating Authority was not competent to pass an order---Nobody should be a Judge of his own cause---Said principle was applicable to Court, Tribunals, Authorities having jurisdiction to determine judicially, the rights of citizen---Valuable rights of parties could not be taken away without following legal formalities---Object behind all such formalities was to safeguard the paramount interest of justice---Legal percepts were devised with a view to impart certainty, consistency and uniformity to the administration of justice and to secure same against arbitrariness, errors and failures of individual judgments etc.---Collector had decided an issue which was not sub judice before him as a part of statement of allegations conveyed to appellant and by giving a decision on same, he had acted beyond his jurisdiction to pass a finding on such an issue---Impugned order, in circumstances, suffered from procedural impropriety---Even otherwise for imposition of a penalty, it must also have been shown that offender was committing some criminal activities and for that there existed mens rea or at least a criminal intent---In absence of said factors he could not be penalized---Impugned order had shown that a finding on the guilty mind of appellant was never given by the Collector---Imposition of penalty was not called for as same was not warranted by law and said order was not maintainable.

(b) Administration of justice---

----General principles of adjudication enumenated.

Muhammad Naseem for Appellant.

Muhammad Khurshed, D.R. for Respondent.

Date of hearing: 6th January, 2005.

2005 P T D (Trib.) 1321

[Customs, Central Excise and Sales Tax Appellate Tribunal]

Before Sultan Ahmed Siddiqui, Member (Judicial-I) and Mir Fuad, Member (Technical-I)

Appeal No.849 of 2002, decided on 10th November, 2003.

Customs Act (IV of 1969)---

----Ss.156(9)(14), 16 & 32---S.R.O. 1374(I)/98, dated 17-12-1998---S.R.O. 374(I)/2002, dated 15-6-2002---Punishment for offences---Penalty---BOP plastic films were found as stock lot quality as against declared standard quality---Goods were outright confiscated but their release was allowed on payment of redemption fine equal to 15% of the ascertained value besides payment of duties and taxes---Penalty was also imposed equal to 15% of the ascertained value for violation of Ss.16 & 32 of the Customs Act, 1969 by overlooking the fact that other 11 items were in accordance with declaration---Validity---Appellant opted for First Appraisement for confirmation of all aspects through physical examination, as such he, by this way, got himself exonerated from the clutches of law regarding any alleged act of misdeclaration as his declaration was subject to examination of the goods and under the circumstances he could not be held responsible for an act of mis-declaration in respect of difference of goods in terms of Ss.16 & 32 of the Customs Act, 1969---Imposition of penalty equal to 15% of the ascertained value in de facto terms negated the spirit of the S.R.O. 1374(I)/98, dated 17-12-1998 as well as the S.R.O. 374(I)/2002, dated 15-6-2002---Imposition of penalty was not justified---Order was set aside by the Appellate Tribunal to the extent of imposition of 15% penalty.

Ms. Erum Nazish for Appellant.

None for Respondent.

Date of hearing: 10th November, 2003.

2005 P T D (Trib.) 1331

[Customs, Central Excise and Sales Tax Appellate Tribunal]

Before Zafar Iqbal, Member Technical and Sultan Ahmed Siddiqui, Member Judicial

Customs Appeals Nos.K-342 and K-343 of 2004, decided on 10th January, 2005.

Customs Act (IV of 1969)---

----Ss. 17, 19, 156(1)(8)(89) & 194-A---Import of vehicle by Foreign Diplomat---Sale in open market---Exemption from import levies---Claim for---Confiscation of vehicle---Appeal to Appellate Tribunal---Appellants were purchasers of a vehicle which was imported by Foreign Diplomat and said vehicle was released free of import levies under provisions of Federal Government's Notification No. S.R.O. 506(I)/88 dated 26-6-1988--Diplomat under said Notification, though was entitled to enjoy exemption from import levies on his imports during his stay in Pakistan, but such imported goods were not saleable in open market before passing of five years---Sale of such goods before expiry of said period was permissible only after obtaining necessary permission from competent Authority as envisaged by said Notification---Vehicle in dispute was sold in open market after its import without payment of import levies and without obtaining necessary permission from Federal Government in violation of provisions of said Notification---Said vehicle was also got registered in names of appellants/purchasers by making a false representation and consequently same were confiscated---Appellants had claimed that they were bona fide purchasers of vehicle in question and it was not in their knowledge that same were being sold on a false representation by committing fraud and cheating---Appellants prayed for release of seized vehicle---Authority did not agree with point of view of appellants and confiscated vehicle holding that appellants were part of the affair---First requirement under said Notification was that goods imported and enjoying exemption from import levies were not saleable or disposable otherwise except with prior consent of Federal Government---Other restriction under said Notification was that within two years of importation, goods were not saleable in the open market---None of said conditions were ever met by importer of said vehicles and same were sold in open market by selling vehicles registered through mis-representation---Appellants must have shown due care and vigilance before purchase of said vehicle and where ownership of vehicle happened to be in the name of diplomat, they should have been more vigilant and should have ensured the issuance of all clearance certificates required either from the Government or from Customs Department---No such effort had been made by the appellants---Indolent attitude in law was not acceptable as law would help the diligent and not indolent---Any right obtained, acquired or arising out of a fraud and false representation, would not have any legal value as their attainment was ab initio wrong---No one in the present case had come forward with clean hands---Fraud vitiated everything including contracts made and rights emerging from such contracts which were neither protected nor recognized by law---Appeals, were dismissed, in circumstances.

Derry v. Peek (1889) 14 App. Cas. 337 ref.

Zia-ul-Hassan for Appellant.

Departmental Representative for Respondent.

Date of hearing: 10th January, 2005.

2005 P T D (Trib.) 1341

[Customs, Central Excise and Sales Tax Appellate Tribunal]

Before Ali Sain Dino Metlo, Member (Judicial-II) and S.M. Kazimi, Member (Technical-II)

Sales Tax Appeal No.135 of 2001(K-2), decided on 5th June, 2004.

Per S.M. Kazimi, Member Technical-II

(a) Sales Tax Act (VII of 1990)

----Ss. 3, 6, 7, 16, 22, 23, 26, 33, 34, 49 & 2(33)---Scope of tax---Sale of old and used machinery, air conditioning plant as scrap---Levy of sales tax and imposition of penalties on the ground that such old and used machinery, air conditioning plant had been disposed of without payment of sales tax---Validity---Sale of old and used machinery as "scrap", was taxable supply because sales tax paid on machinery was entitled to input tax adjustment as the goods sold were a new and distinct product i.e. taxable scrap---Both the machinery and its scrap were distinct in description, PCT headings, use, clientele, customer and were two independent goods and the plant and machinery had been converted into a taxable scrap due to the taxable activity by the appellant---Besides the scrap of plant and machinery, the supply of old and used air-conditioners was also taxable if such was of an industrial/commercial size----Demand of sales tax on such goods sold was set aside by the Appellate Tribunal being time-barred.

2001 PTD (Trib.) 2590 and Messrs Sheikhoo Sugar Mills and others v. Government of Pakistan 2001 SCMR 1376 = 2001 PTD 2097 ref.

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

----S.3---Scope of tax---Whether off value of office equipment---By no stretch of imagination, the written off of value of office equipments could be held to be taxable as there was no actual supply or transaction but only an entry for accounting purposes.

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

----S.3---Scope of tax---Receipt of insurance claim for stolen motor-cycle---Receipt of amount of insurance claim on account of settlement claim of theft of an insured motorcycle was not a taxable activity.

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

----S.3---Scope of tax---Sale of old and used furnitures and motor vehicles---Sale of fixed assets were not admissible for input tax adjustment in terms of S.8 of the Sales Tax Act, 1990 or notification issued thereunder, and thus was not a taxable activity.

Per Ali Sain Dino Metlo, Member Judicial-II

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

----S.3---Scope of tax---Sale of old and used machinery, air conditioning plant as scrap---Dissenting view on the point of chargeability of tax on supplies of old and used machinery and air conditioner of commercial size.

Collector of Customs and others v. Novratis Pakistan Ltd. 2002 PTD 976 rel.

Nur Khan and Junaid Ghaffar for Appellant.

Barkat Ali Bukhari, Additional Collector and Mushtaque, Deputy Superintendent Departmental Representatives.

Dates of hearing: 29th April, 13th May an 27th May, 2004.

2005 P T D (Trib.) 1349

[Customs, Central Excise and Sales Tax Appellate Tribunal]

Before Sultan Ahmed Siddiqui, Member (Judicial-I) and Mir Fuad, Member (Technical-I)

S.T.A. No.49 of 2004, decided on 17th June, 2004.

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

---Ss.2(46)(a), 2(41), 2(39), 2(12) & 3---Constitution of Pakistan (1973), Arts.2 & 25---Sales Tax General Order No.4/97, dated 11-10-1997---Value of supply---Mark up on instalment---Levy of sales tax on mark-up charged against instalment sales on the ground that same had not been included in the 'value of supply' for the purpose of assessment of sales tax as required under S.2(46)(a) of the Sales Tax Act, 1990 read with Sales Tax General Order 4 of 1997 relating to Central Board of Revenue's ruling on inclusion of mark-up against credit sales in the value of supply for sales tax---Validity-Money has been excluded from the definition of goods and hence the money supplied in shape of loan would not constitute a taxable supply and similarly mark-up received in respect of supply would not be taxable---Mark-up related to cover the interest of the loan and was not related to the price of the Motorcycle---Sale invoices also showed the value of Motorcycle and mark-up in a distinctive manner---Mark-up was not related to the value of Motorcycle and was not subject to tax.

Mansab Ali v. Amir and others PLD 1971 SC 124; Army Welfare Sugar Mills Ltd. v. Federation of Pakistan 1992 SCMR 1652 and Elhai Cotton Mills Ltd. v. Federation of Pakistan PLD 1997 SC 582 ref.

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

----S. 2(46) (a)(iii)---Finance Ordinance (XXV of 2001), Preamble---Value of supply---Provision of S. 2(46)(a)(iii) Sales Tax Act, 1990 is a beneficial legislation and should be given a retrospective effect.

Commissioner of Income Tax v. Messrs Shahnawaz Ltd. vide 1993 SCMR 73 rel.

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

----S.3---Scope of tax---Supply of spare parts against warranty claim---Non payment of sales tax on the ground that free of tax supply was made as replacement parts to customers during the warranty period and was also included in the value of Motorcycle---Validity---Invoices issued for sale of Motorcycles did not mention that spare parts were included in this value---Spare parts were issued as a separate supply and since these were not exempted, sales tax must be levied on them---Sales tax paid on import of such spare parts had already been claimed/adjusted and this input adjustment is allowed only against the taxable supplies---In absence of any exemption on spare parts and in view of fact that the appellant had already taken input adjustment of sales tax paid on the import of such spare parts, appeal was dismissed by the Appellate Tribunal on this point.

Juanid Ghaffar for Appellant.

Azam Nafees and Ghazi Mehmood, Sr. Auditors for Respondent.

Date of hearing: 17th June, 2004.

2005 P T D (Trib.) 1358

[Customs, Central Excise and Sales Tax Appellate Tribunal]

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

Sales Tax Appeal No.H-255 of 2004, decided on 7th January, 2005.

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

----S.8---S.R.O. 124(I) of 2000, dated 15-3-2000---Tax credit not allowed---Input tax adjustment on electricity bills was disallowed on the ground that electricity consumed in office area and during off season could not be taken as taxable activity---Validity---All factors and items, which are used as integral part of the manufacturing process and could not be separated merely on the ground that it was used in off season because to run a factory in satisfactory and good condition its maintenance and ever grooming was a fundamental aspect, without which, a good production could not be expected---Input adjustment made was in association with S. 8 of the Sales Tax Act, 1990 and consumption of electricity even in off season was an integral process of manufacturing and production of taxable goods---Charge levied was vacated by the Appellate Tribunal.

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

----S. 2(10)---Manufacture---Meanings---Essence of term "manufacture" as used in the Sales Tax Act, 1990 means the changing of one object into another for the purpose of making it marketable.

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

----S. 2(10)---Production---Explanation---Term production appears to contemplate some expenditure of human skill and labour and other connecting aspects and activity spent in bringing the goods to the state in which they may become fit for consumption.

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

----S.33---General penalties---Imposition of penalty just on the ground that taxpayer had failed to provide documents at the time of audit was nothing but a misuse of power---Imposition of penalty was set aside by the Appellate Tribunal.

Muhammad Ali, Consultant A.R. for Appellant.

Tanveer-ul-Siddiq, Auditor/D.R. for Respondent.

Date of hearing: 7th January, 2005.

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2005 P T D 631

[Federal Tax Ombudsman]

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

IRFAN KHAN

versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 1557 of 2003, decided on 11th February, 2004.

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

‑‑‑‑Ss. 96 & 50(7B)‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S. 2(3)‑‑‑Refund‑‑‑Deduction of tax at source‑‑‑Issuance of certificate by the Bank‑‑‑Department did not issue refund on the ground that Bank had not verified the deductions and it was not known whether the tax even if deducted had been deposited to Government account and no challans of tax deposit were furnished‑‑‑Deductions and deposits could not be considered as verified ‑‑‑Validity‑‑‑Complainant/assessee had furnished a certificate from the Bank regarding deductions of tax from the rent payments made to the complainant/assessee and the assumption was in the complainant; assessee's favour unless it was established that it was a fake certificate‑‑­Deduction of tax from the rent paid by Bank to these .complainant/assessee could also be verified from the monthly cheques received by the complainant/assessee which Would show whether the amounts received were the entire rent as per rent agreement or were payments after deduction of rent‑‑‑If tax had been deducted from rent there was no reason to believe that the Bank would not have deposited it in Government account and in any case the complainant/assessee's obligation would have stood fulfilled‑‑‑No justification existed for keeping the petty amount of refund pending on the pretext of verification‑‑‑Federal Tax Ombudsman recommended that the refund of be paid to the complainant/co‑sharers unless it definitely established that the Bank certificate furnished by the complainant was not genuine.

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

‑‑‑S. 9‑‑‑Income Tax Ordinance (XXXI of 1979), S. 96‑‑‑Jurisdiction, functions and powers of the Federal Tax Ombudsman ‑‑‑Maladministra­tion‑‑‑Refund‑‑‑If a refund was withheld without valid reason it would be a case of "maladministration" falling within the competence of the Federal Tax Ombudsman.

Muhammad Aslam Marwat for the Complainant.

Aurangzeb Khattak and Taza Khan, Taxation Officers for Respondent.

Mirza Muhammad Wasim, Advisor Dealing Officer.

2005 P T D 640

[Federal Tax Ombudsman]

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

MEHRBAN KHAN

versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 1162‑P of 2003, decided on 14th February, 2004

Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑S. 62‑‑‑C.B.R. Circular No. 10 of 1975, dated 4‑7‑1975‑‑­Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S. 2(3)‑‑‑Request for adjournment was turned down by writing words, "is rejected" at the end of the order sheet entry in the absence of complainant/assessee and assessment was finalized‑‑‑Validity‑‑‑Words "is rejected" had been written at the end of the order sheet entry and seemed to be in a different ink‑‑‑Said words did not seem to be in consonance with the earlier words‑‑‑No valid reason was available to reject a perfectly legitimate adjournment request and‑the refusal was a mala fide action for which no valid justification was provided‑‑‑Notice issued under S.62 of the Income Tax Ordinance, 1979 had also not given any indication of the Assessing Officer's intention to apply the Dandekar formula with a GP rate of 5% and assessment was framed without adequate opportunity‑‑‑Assessment was found to be based on maladministration arid thus could not be considered as plain assessment‑‑‑Federal Tax Ombudsman recommended that the income tax assessment for the assessment year, 2002‑2003, dated 15‑4‑2003 in the complainant's case be cancelled under S.122A of the Income Tax Ordinance, 2001 and a fresh assessment be made after allowing due opportunity of being heard to the complainant; that fresh assessment be made by an officer other than the officer who made the original assessment; that in the context of the maladministration pointed out a letter of warning be issued to the Income Tax Officer and placed on his personal file; that conduct of the Income Tax Officer in the context of his dealings as a customer with the complainant may also be examined by the relevant authorities.

Sufi M.A. Latif for the Complainant.

Ashraf Ali Marwat and Fayyaz Hussain, Taxation Officers for Respondent.

Mirza Muhammad Wasim, Advisor.

2005 P T D 649

[Federal Tax Ombudsman]

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

Messrs SAHIB JEE through Member

versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 1297‑L of 2003, decided on 24th April, 2004.

Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑Ss. 59(1) & 62‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss. 2(3) & 10(8)‑‑‑Self assessment‑‑‑Return was set apart for total audit‑‑‑Complaint was filed against such setting apart‑‑‑Assessment was finalized under S.62 of the Income Tax Ordinance, 1979 during the pendency of Complaint‑‑‑Department contended that Assessing Officer was under no legal compulsion to wait for Federal Tax Ombudsman's decision nor Federal Tax Ombudsman had issued any stay order‑‑‑Validity‑‑‑Merit of allegation of mala fides lies in the principles governing exercise of administrative discretion by the concerned tax employee‑‑‑Exercise of discretion had to be judicious‑‑­Ordinary demand of administrative justice was that the Assessing Officer should have waited for Federal Tax Ombudsman's decision unless the assessment was getting time barred‑‑‑Injudicious action without any valid reason had created extra administrative and legal obligations in implementing the recommendations of the Federal Tax Ombudsman Department's review application in respect of recommendation had been rejected‑‑‑Section 10(8) of the Establishment of the Office of Federal Tax Ombudsman Ordinance, 2000 though did not bar any action taken by the Revenue Division, during the pendency of investigation but such discretion had to be exercised judiciously‑‑‑As review application was decided in favour of assessee, he would get the benefit/relief allowed by Federal Tax Ombudsman‑‑‑Department should implement the assurance given by its representative.

Muhammad Younis Khalid for the Complainant.

Abdul Rehman Warraich, D.C.I.T. for Respondent.

Muhammad Akbar, Advisor Dealing Officer.

2005 P T D 658

[Federal Tax Ombudsman]

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

AMEER BEGUM

versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 1199‑L of 2003, decided on 18th December, 2004.

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

‑‑‑‑S. 2(5)‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss. 2(3) & 9(2)(b)‑‑‑Cases of assessment found tainted with any of the traits of defined "maladministration‑Effect‑‑‑Bar on jurisdiction envisaged in S. 9(2)(b) of Establishment of Office of Federal Tax Ombudsman Ordinance, 2000 would not apply to such cases.

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

‑‑‑‑S. 85‑‑‑Income Tax Ordinance (XLIX of 2001), S. 122‑A‑‑­Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss. 2(3)(i)(ii), 9 & 11‑‑‑Demand of tax assessed by authority‑‑‑Estimation of sales at 20 times of working capital‑‑‑Plea of complainant was that sales were estimated without any basis, proof, regard to case history and confronting him with proposed figures‑‑­Validity‑‑‑Such estimation would, on its very face, be without valid reason, if not outright malafide‑‑‑Assessment was boldly lacking basis on which sales had been estimated and income worked out‑‑‑Such conduct demonstrated "incompetence, inefficiency and inaptitude in discharge of duties and responsibilities" ‑‑‑Assessment order suffered from serious maladministration ‑‑‑Ombudsman recommended to Commissioner to resort to S. 122‑A of Income Tax Ordinance, 2000 to recall assessment order for fresh decision on merits within specified time.

Muhammad Sadiq for the Complainant.

Anwar Sheikh, A.C.I.T. for Respondents.

Muhammad Akbar, (Advisor) Dealing Officer.

2005 P T D 665

[Federal Tax Ombudsman]

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

CRESCENT ART FABRICS (PVT.) LTD.

versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 1488‑L of 2003, decided on 24th December, 2003.

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

‑‑‑‑Ss. 2(3) & 9‑‑‑Jurisdiction of Ombudsman‑‑‑Scope‑‑‑Ombudsman in order to redress grievances of complainants could take cognizance of and investigate cases involving "maladministration".

(b) Customs Act (IV of 1969)‑‑‑

‑‑‑‑S. 33‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss. 9 & 11‑‑‑Refund of duty; claim for‑‑­Loss of original case file‑‑‑Delay in decision of case ‑‑‑Effect‑‑‑ ‑Department had reconstructed file of case‑‑‑Record showed that complainant had neither produced evidence nor attended hearings before department in spite of getting time to produce evidence‑‑‑Undue delay in settlement of such claim was due to loss of case file‑‑‑Best course for complainant was to attend adjudication proceedings and enter his defence alongwith documentary evidence to enable department to decide case in accordance with law on merits at an early date‑‑‑Ombudsman recommended to C .B.R. to direct department to decide case on merits in accordance with law within specified time after providing complainant opportunity of furnishing evidence and being heard; and to investigate and eliminate causes/factors leading to loss/misplacement of active files to streamline the procedure for their proper maintenance, so as to avoid loss of and damage to case files and inconvenience to dealing public.

(c) Customs Act (IV of 1969)‑‑‑

‑‑‑‑S. 33‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S. 2(3)(ii)‑‑‑Old refund claim‑‑‑Inordinate delay in settling such claim would tantamount to "maladministration.

Anwar Elahi for the Complainant.

Zahra Haider, A.C. for Respondents.

Muhammad Akbar, (Advisor) Dealing Officer.

2005 P T D 673

[Federal Tax Ombudsman]

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

CRESCENT ART FABRICS (PVT.) LTD.

versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 1489‑L of 2003, decided on 23rd December, 2003.

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

‑‑‑‑S. 9‑‑‑Jurisdiction of Federal Tax Ombudsman ‑‑‑Scope‑‑­Ombudsman, in order to redress grievance of complainants, could take cognizance and investigate cases of maladministration ‑‑‑Otherwise purpose of Establishment of Office of Federal Tax Ombudsman, 2000 would be defeated.

(b) Customs Act (IV of 1969)‑‑‑

‑‑‑‑Ss. 33 & 81‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss. 9 & 11‑‑‑Refund of duty, claim for‑‑­Appellate Tribunal directed department to assess Bill of Entry provisionally and refund differential amount of duty and taxes subject to complainant furnishing guarantee/undertaking to secure its recovery, in case final decision of C.B.R. went against complainant‑‑‑Department did no comply with Tribunal's order without any reason inspite of letters written by complainant followed by reminders‑‑‑Validity‑‑‑No proceedings were pending on such issue‑‑‑Entire conduct and treatment suffered from unexplained delay and avoidance of lawful binding order of superior authority‑‑‑Where no valid reason for delay and non‑compliance was furnished, then whole process and action would be tainted with mala fides‑‑‑Ombudsman recommended to department to follow and comply with Tribunal's order within specified time.

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

‑‑‑‑Ss. 2(3) & 9‑‑‑Non‑compliance with lawful binding order of superior authority‑‑‑Effect‑‑‑Where no valid reason for delay and non‑compliance was furnished by department, the whole process and action would be tainted with mala fide.

Anwar Elahi for the Complainant.

Zahra Haider, A.C. for Respondents.

Muhammad Akbar, (Advisor) Dealing Officer.

2005 P T D 693

[Federal Tax Ombudsman]

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

FAISAL SAYID and others

versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaints Nos. 1279‑L to 1281‑L and 1333‑L to 1335‑L of 2003, decided on 24th December, 2003.

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

‑‑‑‑Ss. 65 & 13‑‑‑Wealth Tax Act (XV of 1963), S. 17‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance. (XXXV of 2000), S.2(3)‑‑‑Additional assessment‑‑‑Addition in income and wealth on the basis of information provided by the Informer, without ascertaining the reliability of information about acquisition of assets ‑‑‑Validity‑‑­Department admittedly asked for evidence from the Informer to substantiate the allegation about concealment of assets‑‑‑When the Informer failed to respond, ‑no. independent enquiry was conducted by contacting the Bank with whom the properties were alleged to have been pledged for obtaining loan/advance‑‑‑Little effort could unearth the whole truth and the ownership of the properties could be verified from the Excise and Taxation Department; the Motor Vehicle Registration Authorities and the Stock Exchange‑‑‑Backing out of the Informer should have all the more alerted the Department to proceed in a more sure and conscious manner to assess the properties in the hands of complainant/ assessee‑‑‑Federal Tax Ombudsman recommended that the Commissioner by resort to S.25 of the repealed Wealth Tax Act, 1963 and S. 122 of the Income Tax Ordinance, 2001 cancel the assessments framed for the years, 1996‑97 and 1997‑98 in the case of the four complainants; an enquiry be conducted adhering to law, rules and procedure to determine whether the complainants owned moveable/ immovable assets which were not offered for assessment and further action, if called for, be initiated adhering to relevant law.

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

‑‑‑‑S. 9‑‑‑Jurisdiction, functions and powers of the Federal Tax Ombudsman‑‑‑Every allegation concerning 'maladministration' calls for investigation to determine its truth which brings in the jurisdiction of the Federal Tax Ombudsman.

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

‑‑‑‑S. 2(3)(i)(a)‑‑‑Maladministration‑‑‑Burden to prove bona fides‑‑‑To justify action/order which is contrary to law; arbitrary or biased it is the duty of the Department to show that it acted, bona fide ‑‑‑Burden'is upon the Department to prove bona fides as envisaged by clause (i)(a) of S.2(3) of the Establishment of Office of Federal Tax Ombudsman Ordinance, 2000.

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

‑‑‑S. 9(2)(b)‑‑‑Jurisdiction, functions and powers of the Federal Tax Ombudsman‑‑‑Matters, which relate to assessment of income or wealth must be according to law but where it is contrary to law, arbitrary, baseless, biased, subsections (2)(b) of S. 9 of the Establishment of Office of Federal Tax Ombudsman Ordinance, 2000 will not apply.

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

‑‑‑‑S. 2(3)‑‑‑Maladministration‑‑‑Federal Tax Ombudsman as a general rule may not interfere with the merits of a decision though unmeritorious without maladministration in the exercise of discretion vested in the authority ‑‑‑Process/order or decision tainted with maladministration can be questioned by the Federal Tax Ombudsman even if appeal is provided.

(f) Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000)‑‑‑ , ‑‑‑‑S.2(3)‑‑‑Maladministration‑‑‑Reliance on half‑backed information furnished by an inimical person, without attempting confirmation or verification as to the credibility of information, rendered the conduct of public functionary arbitrary and contrary to law and fell in the realm of maladministration.

Javed Iqbal Khan, F.C.A. for the Complainants.

M. Asadullah, D.‑C.I.T. and Shah Khan, D.‑C.I.T. for Respondent.

A.A. Zuberi, Advisor Dealing Officer.

2005 P T D 707

[Federal Tax Ombudsman]

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

ABDUL RAHEEM

versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 1531 of 2003, decided on 31st January, 2004.

Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑Ss. 63 & 19‑‑‑Income Tax Ordinance (XLIX of 2001), S. 122‑A‑‑­Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S. 2(3)‑‑‑Best judgment assessment‑‑‑Assessment was made in respect of property on which no rent was earned by the complainant/ assessee during his stay out of country for treatment of his fractured legs and was treated as non‑resident‑‑‑Validity‑‑‑Assessments had already been set aside under S. 122‑A of the Income Tax Ordinance, 2001‑‑­Assessing Officer had been dismissed from service on the charges of inefficiency and misconduct‑‑‑Notice under 5.122‑A of the Income Tax Ordinance, 2001 was initiated when the complaint was filed in the Office of Federal Tax Ombudsman‑‑‑Federal Tax Ombudsman recommended that the proceedings under S.122‑A, Income Tax Ordinance, 2000 be completed within 30 days since all the relevant documents have already been provided by the complainant.

S. Amer Ahmad for the Complainant.

Altaf Mohammad Khan, D.C.I.T. for Respondent.

Shahida Taj, Director Dealing Officer.

2005 P T D 929

[Federal Tax Ombudsman]

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

IQBAL PYAR ALI

versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 87-K of 2004, decided on 7th August, 2004.

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

----S. 9---Jurisdiction, functions and powers of the Federal Tax Ombudsman---Matter sub judice before Supreme Court---Plea that matter pertaining to complaint was sub judice was not accepted by the Federal Tax Ombudsman as the complainant/assessee was not a party to the case wherein the Department’s appeal was pending before the Supreme Court.

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

----S.9---Jurisdiction, functions and powers of the Federal Tax Ombudsman---Implementation of orders of appropriate authorities and the superior Court---Office of the Federal Tax Ombudsman is empowered to investigate into the cases of maladministration involving, inter alia, the manner in which the assessment and clearance of goods under the orders of the appropriate authorities and the superior Courts are implemented---Ombudsman has jurisdiction to investigate into the acts contrary to law, the decisions manifestly perverse, arbitrary, unjust, oppressive, including cases of administrative excesses, neglect, inattention, delay, incompetence, inefficiency and inaptitude of tax officials in the discharge of duties.

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

----S.18---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Goods dutiable---Release of goods---Goods were not released after adjudication despite High Court’s order---Even after High Court’s order, the goods were released three months after filing the complaint before Federal Tax Ombudsman---Validity---Customs authorities had blamed the importer for delay although circumstances clearly established that at every step the Customs officials were bent upon not to release the goods and it was established that they did not comply with the orders of the Collector (Adjudication), Appellate Tribunal and the High Court---Customs blocked clearance at every step, the bill of entry was filed on 15-11-2002 and the goods were eventually released on 4-3-2004---No justification existed for such inordinate delay in taking a decision and finalizing action in accordance with law---Extraordinary delay had taken place entirely on account of the failure of the Customs authorities to act with equity, fairplay and efficiency in performance of their duties---Gross maladministration against the Customs Department had been established---In view of order of Appellate Tribunal against which no stay order had been produced by the department, the delay and detention certificate should be issued by the Customs and remission of container and detention charges should be allowed---Federal Tax Ombudsman recommended that Central Board of Revenue to direct the Collector of Customs to issue a delay and detention certificate for waiver of the Port Trust charges and taken necessary action for remission of container charges within fifteen days.

Ataur Rahman for the Complainant.

Saeed Akram, Deputy Collector of Customs, AIB.

Farooq Khan and Zahid Ahmad, Appraisers.

2005 P T D 952

[Federal Tax Ombudsman]

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

MUHAMMAD MUJIB SIDDIQUI

versus

SECRETARY, REVENUE DIVISION, CENTRAL BOARD OF REVENUE, ISLAMABAD

Complaint No.C-319-K of 2004, decided on 2nd August, 2004.

Income Tax Ordinance (XXXI of 1979)---

----S. 50(2A)---C.B.R.’s U.O. No.4(32)TP-I/90-Pt-I, dated 28-9-2000---Establishment of the Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Deduction of tax at source---Exemption---Investment in Flexi deposit certificates from encashed foreign currency account with the understanding that same was exempt from withholding tax---Exemption from withholding tax was not allowed on the ground that it was allowed only to first investment and since the amount was invested after eight months’ delay from the date of encashment, the same could not necessarily be out of foreign currency account encashed and profit on such deposit would be subjected to withholding tax---Validity---Revenue was not sure in its findings regarding applicability of relevant provisions of Income Tax Ordinance, 1979 for deduction of withholding tax but only expressed its apprehension that deposit might not be out of foreign currency accounts encashed---Bank had certified that complainant/assessee deposited amount of investment through cheque---Observations of revenue, that clarification sought by the Central Directorate of National Savings vide letter No. U.O. No.4(32)TP-I/90-Pt-I, dated 28-9-2000 was not applicable to the case of complainant/ assessee were absolutely misconceived as the issue involved was identical and Central Board of Revenue’s decision was applicable to the case of complainant/assessee---Federal Tax Ombudsman recommended that Central Board of Revenue should direct the Taxation Officer concerned to decide the case of the complainant/assessee regarding his claim of refund of withholding tax deducted under S. 50(2A) of the Income Tax Ordinance, 1979 in the light of Central Board of Revenue’s clarification, dated 28-9-2000 and resultant refund, if any, be issued within 30 days of the receipt of order of Federal Tax Ombudsman.

Muhammad Mujib Siddiqui for the Complainant.

Haseeb-ul-Haq for Respondent.

2005 P T D 1022

[Federal Tax Ombudsman]

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

MANZOOR AHMAD DHOBI

versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 449-L of 2004, decided on 21st July, 2004.

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

----Ss.59(1) & 50(7E)---Income Tax Ordinance (XLIX of 2001), Ss.170(2) & 221---Establishment of Office of the Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Self Assessment---Deduction of tax at source---Refund---Rectification---Maladministration--Complainant claimed refund on account of excess deduction of tax---Department, in reply took the plea that complainant’s case was rectified under section 221 of the Income Tax Ordinance, 2001 creating refunds which was adjusted against outstanding tax demand---Assessments for the subject assessment year under section 59(1) of the Income Tax Ordinance, 1979 was with “no demand”---Failure to issue refund voucher when refunds became due for payment and causing delay in payment were acts which qualify as maladministration within the meaning of section 2(3) of Establishment of Office of Federal Tax Ombudsman Ordinance, 2000---Refund voucher claimed to have been issued was never issued---Demand notices were not issued to the assessee---Demand was shown in IT-30S and was adjusted by the department---Department still owed a refund---Federal Tax Ombudsman recommended the payment of balance amount of refund and compensation.

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

----S.170---Application for refund---Proper form---Complainant had filed application for rectification and refund which was never responded by the department---Department had not advised him to submit application on proper form and had unjustly held back the amount of refund that became due on completion of assessment---Objection that no compensation was due because the complainant had not applied for refund on proper form as prescribed under section 170 of the Income Tax Ordinance, 2001 had no force.

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

----S.2(3)---Jurisdiction---Maladministration---Refunds were due to be paid within three months of the dates on which these became due---Refunds were arbitrarily held back---Such was a case of obvious “maladministration”.

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

----S.85---Demand notice---Copies of IT-30S showed demand---No demand notices were issued---Federal Tax Ombudsman recommended that demand notices invariably be issued, so that taxpayers do not remain in dark about the demand/refund due.

Muhammad Asif for the Complainant.

Muzammil Hussain, DCIT for Respondent.

2005 P T D 1033

[Federal Tax Ombudsman]

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

Messrs HOTUMAL, COMMISSION AGENT AND FERTILIZER AGENCY, JHOL DISTRICT SANGHAR

versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. C-339-K of 2004, decided on 10th July, 2004.

Income Tax Ordinance (XLIX of 2001)---

----Ss.122(1) & 122-A---Income Tax Ordinance (XXXI of 1979), Ss.13(1)(aa) & 59(1)---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Amendment of assessment---Revision by Commissioner---Unexplained investment---Self-assessment---Complainant was aggrieved of amendment of assessment---Self-assessment return included agricultural income of Rs.1,00,000 declared for the rate purpose---Such return was accepted---Additional Commissioner Income Tax issued show-cause notice confronted the complainant with discrepancy in the wealth statement as it did not include agricultural land, he therefore intended to amend the assessment under section 122 and make addition under section 13(aa) of the Income Tax Ordinance, 1979---Complainant’s explanation of acquiring agricultural land on “Muqatta” (lease) was not accepted and addition of Rs.4,00,000 was made---Complainant feeling aggrieved filed revision petition before the Commissioner of Income Tax under section 122-A of the Income Tax Ordinance, 2001 which was turned down---Validity---“Muqatta” agreement was not in the name of complainant---Affidavit of “Muqattidar” was not admissible as proof of oral transaction---Evidence of “Muqatta”/lease was found false the addition of Rs.4,00,000 as unexplained investment on lease was self-contradictory---Complainant had not explained source of income of Rs.1,00,000 declared in the return---Complainant’s revision application was turned down by the Zonal Commissioner without examining the facts of the case else he could have redressed the genuine grievance of the complainant---Maladministration was established---Federal Tax Ombudsman therefore recommended the Central Board of Revenue to direct the Commissioner of Income Tax to set aside the order passed under section 122(1) by Additional Commissioner of Income Tax under section 122-A of Income Tax Ordinance, 2001 with the direction to pass a fresh order.

Khursheed Ali Khan for the Complainant.

Taj Muhammad Jonejo, DCIT for Respondents.

2005 P T D 1042

[Federal Tax Ombudsman]

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

Mrs. RAZIA AHMED LALIWALA

versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 428-K of 2004, decided on 5th July, 2004.

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

----Ss. 2(6) & 9(2)(b)---Prevention of Smuggling Act (XII of 1977), S.31--- Jurisdiction--- Show-cause notice--- Relevant legislation---Complainant was aggrieved of notice issued by Special Judge under section 31 of Prevention of Smuggling Act, 1977---Anti-Narcotic Force did not fall under the jurisdiction of Federal Tax Ombudsman Ordinance, 2000---“Prevention of Smuggling Act, 1977” became a relevant legislation under section 9(2)(b) of the Federal Tax Ombudsman Ordinance, 2000 only when Revenue Division or any Tax employee working under the said Division had invoked the same---Grievance of the complainant held did not lie within the jurisdiction of Federal Tax Ombudsman.

A.M. Laliwala for the Complainant

2005 P T D 1052

[Federal Tax Ombudsman]

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

FEDERAL CHEMICAL CERAMICS CORPORATION (PVT.) LTD., LAHORE

versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 296-K of 2004, decided on 2nd July, 2004.

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

----Ss.114, 122, 170, 171, 141(1) & Second Sched., Cl. 73---S.R.O. No.1012(I)/99 dated 3-9-1999---Income Tax Rules, 2002, R.71---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss.2(3) & 10(3)---Notices to file return and amendment of assessment---Refund---Additional payment for delayed refund---Liquidator---Maladministration---Limitation---Complainant was appointed as liquidator of corporation placed under voluntary winding up---Complainant alleged that claims for determined refund had been unlawfully withheld---Department alleged that complaint was time-barred and notices were issued to determine tax liability and notices were also issued to file return and also for amendment of assessment as exemption on deposits with the National Saving Centre under clause 73 of the Second Schedule annexed to the Income Tax Ordinance, 1979---Since the clause was omitted by S.R.O. No.1012(I)/99 dated 3-9-1999 the chargeability of the said income for the assessment years 2000-2001 & 2001-2002 was established and the exemption was wrongly allowed---Contention was that anticipated liability exceeded the claim of refund---Notice under section 141(1) of the Ordinance was not given and return was not filed---Validity---Clause 73 of the Second Schedule was inserted by clause 77(D) vide S.R.O. 1343(I)/99 dated 16-12-1999 which again provided exemption of the withdrawn clause 73---Continuity to exemption was provided---Taxation Officer was duty bound to issue refund as soon as it was determined---Complainant was neither required to file any application nor to issue reminders in this behalf---Objection regarding limitation of time in terms of section 10(3) of the Federal Tax Ombudsman Ordinance, 2000 was rejected--Notices under section 122 of the Ordinance were issued in utter disregard of rules and clarifications---Federal Tax Ombudsman recommended the Central Board of Revenue to direct the Taxation Officer to withdraw and cancel notices under section 122 of Income Tax Ordinance, 2001 and issue the determined refund and to admonish the Taxation Officer to be careful in future.

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

----S. 122---Civil Procedure Code (V of 1908), O.V, Rr.17 & 20---Amendment of assessment---Notice---Service of notice---Corporation was placed under voluntary winding up---Liquidator was appointed---Liquidation notice was served on the department which contained the identifiable address of the liquidator---Alleged service by affixture was not in accordance with rules 17 and 20 of Order V, C.P.C.

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

----S.170---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.10(3)---Refund---Limitation---Taxation Officer was duty bound to issue the refund as soon as it was determined--Complainant was neither required to file application for refund nor issue reminders and it was futile attempt to justify the unlawful delay in issuing the determined refund---Applications for refund were not responded---Objection regarding limitation of time in terms of section 10(3) of the Federal Tax Ombudsman Ordinance, 2000 was rejected.

Muhammad Aslam, Director (F&A) Liquidator for the Complainant.

Nadeem Ahmed Farooqi, IAC and Dr. Muhammad Abbas, DCIT for Respondent.

2005 P T D 1066

[Federal Tax Ombudsman]

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

Mir AURANGZEB ALAM

versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 255-L of 2004, decided on 21st July, 2004.

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

----Ss.100 & 102---C.B.R. Circular No.ITB (3)(5)86 dated 3-7-1994---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Refund---Appeal effect order---Additional payment for delayed refund---Maladministration---Complainant had filed application for refund due to deceased assessee---Refund had resulted from decision of the Appellate Tribunal---Department should have issued refund voucher within three months of the date of receipt of Appellate Tribunal’s order---Formal application was not required according to Central Board of Revenue Circular No.ITB(3)(5)/86 dated 3-7-1994---Failure to adhere to the provisions of law, inattention and delay amounted to maladministration---Federal Tax Ombudsman recommend compensation at provided rate from three months after the Appellate order till the date of payment.

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

----S.2(3)---Maladministration---Failure to adhere to the provisions of law and non-issuance of refund voucher within period prescribed by law and inattention and delay to which refund applications were subjected, amounted to maladministration.

Ahmad Shujah Khan for the Complainant.

Ghulam Nabi Tahir for Respondent.

2005 P T D 1095

[Federal Tax Ombudsman]

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

Messrs WELFARE TRADING COMPANY

versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 1316-K of 2002, decided on 17th July, 2004.

Sales Tax Act (III of 1951)---

----Ss.10(4), 37, 37(a) & 73---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)(ii)---Refund---Notice---Transaction through Banking channel---Complainant filed sales tax refund claim on April 2, 2002 supported by four input tax invoices issued by supplier with Sales Tax Registration Number---Same was handwritten---Payment was shown to have been made by Pay Order of a Bank---Bank statement showed that pay orders were credited to Supplier’s Account in the same Branch of the Bank on the same dates---There was heavy credit balance in that account of the supplier from 6-5-2002 up to 29-11-2002 amounting to Rs.39,00,848.700---On the same day Rs.39,00,000 were withdrawn---Department had asserted that no physical transfer of goods had taken place---Invoices submitted by the complainant were fake and he claimed bogus refund which was liable to be rejected under section 10(4) of the Sales Tax Act, 1990---Validity---Officers of the Collectorates were negligent in pursuing the matter during April to August, 2002 when the heavy transactions in the Bank Accounts were made---No serious effort was made either to serve the summons properly or to enforce compliance---Acts of omission and commission reflect delay, negligence, incompetence and inaptitude of the concerned officer in discharge of his duties which was maladministration---Federal Tax Ombudsman recommended that the Member Sales Tax, Central Board of Revenue to assign the case to at least two competent Assistant Collectors in the Collectorates with the sole assignment of taking all legal steps and appropriate action according to law---Department will be free to make investi-gations in respect of dealings and transactions relating to the case.

Muhammad Naseem for the Complainant.

Farrukh Sajjad, Dy. Collector for Respondent.

2005 P T D 1109

[Federal Tax Ombudsman]

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

Messrs T.M. TEXTILE (PVT.) LTD.

versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 325-K of 2004, decided on 10th July, 2004.

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

----S.59(1)---Income Tax Ordinance (XLIX of 2001), S.122(9)---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Self-Assessment---Total Audit---Discrepancies---Amendment of assessment---Profit---Maladministration---Complainant, a private limited company, filed return of income under Self-Assessment Scheme year 2001-2002 which was accepted by the Income Tax panel under section 59(1) of Self-Assessment Scheme---Show-cause notice under section 122(9) of the Income Tax Ordinance, 2001 was issued by Income Tax Additional Commissioner/Taxation Officer--Complainant was confronted with the discrepancies that previous year's assessment was completed at loss and tax was levied under section 80-D of the Income Tax Ordinance, 1979---By virtue of Circular No.7 of 1999 the return filed did not qualify under Self-Assessment Scheme---Validity---Central Board of Revenue was empowered to announce the Scheme for Self-Assessment for every year and formulate terms and conditions for acceptance of the return under the Scheme---Conditions laid down by the Central Board of Revenue for one particular year would not be applicable to any succeeding or preceding year---Reliance by the taxation officer on Board's clarification issued for the year 1999-2000 was absolutely misplaced while considering the return for the year 2001-2002---Notice was unlawful---Federal Tax Ombudsman recommended the Central Board of Revenue to direct the Taxation Officer concerned to withdraw and cancel the notice issued under section 122 of the Income Tax Ordinance.

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

----Ss. 2(24)b & 59---Circular letter No. 7(55)S. Asstt/99 dated 27-9-1999---Self Assessment---Income---Clarification--- Complainant private limited company was assessed under section 80-D of the Income Tax Ordinance, 1979 being at loss under Self-Assessment Scheme in 2000-2001---Return of income for assessment year 2001-2002 at 10% increase was accepted by the Income Tax panel---Subsequent show-cause notice was issued on the ground that Central Board of Revenue had clarified that in the case of the complainant company since no tax was payable or paid on income last declared or due to loss, tax cannot be made the basis for turnover comparison for purposes of paras of the Self-Assessment Scheme---Complainant had pleaded that loss was included in the definition of income as provided in subsection (24) of section 2 of Income Tax Ordinance, 1979---Central Board of Revenue had no authority to interpret law---Interpretation relied upon by the department had no binding effect---Section 59(1) clearly envisaged for formulation of Self-Assessment Scheme for each year separately---Assessment Order was neither erroneous nor prejudicial to the interest of revenue as full tax was paid on the declared income---Provisions of section 122(5-A) of the Income Tax Ordinance, 2001 were not applicable---Argument of the Authorised Representative of the complainant was found to be based upon relevant provisions of law by the Federal Tax Ombudsman and view taken by department was rejected.

Qazi Anwar Kamal for Complainant.

Mushtaq Hussain Qazi, IAC for Respondent.

2005 P T D 1120

[Federal Tax Ombudsman]

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

MUHAMMAD SHUJAH

versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 380-L of 2004, decided on 5th July, 2004.

Customs Act (IV of 1969)---

----S.33---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Refund---Maladministration---Auction purchaser---Complainant had purchased a car from Customs Dryport in open auction and no objection certificate was issued by the department---Police Anti-Car Lifting Cell seized complainant's car as it was booked in a case as a stolen vehicle---Refund of sale price paid by complainant was delayed---Validity---Complainant had offered bid successfully without being aware that the car was stolen---Complainant was not to be blamed for anything---Unreasonable delay to pay the refund due tantamounted to maladministration---Federal Tax Ombudsman recommended that the Revenue Division should direct competent customs authority to refund the sale price.

Fayyaz Athar Siddiquie for the Complainant.

Ms. Munazza Majeed, D.C. Customs (Law) for Respondent.

2005 P T D 1390

[Federal Tax Ombudsman)

Before Justice (Retd.) Munir A. Sheikh, Federal Tax Ombudsman

SOHAIL BIN RASHID

versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 732 of 2004, decided on 11th December, 2004.

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

----S. 73---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Certain transactions not admissible---Entire payments to suppliers were in order and in accordance with provisions of S.73 of the Sales Tax Act, 1990---Contrary to factual position available on record, an adverse finding had been recorded on the ground that mere production of tax invoice was not enough to prove that goods were actually received---Such was falsification of record and amounted to gross maladministration as complainant produced complete documentary evidence as prescribed by law---Department deliberately ignored the complainant's tax record available with it and explanation submitted by the complainant.

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

----S. 2(3)---Mal-administration---Deliberately ignoring and violating the finding recorded by Federal Tax Ombudsman is a gross mal-administration committed by the Deputy Collector (Adjudication).

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

----S.2(3)---Sales Tax Act (VII of 1990), S.33(4)---Mal-administration---Imposition of penalty without issuing any show-cause notice and completely ignoring the explanation of complainant amounted to mal-administration on account of making a decision contrary to law, perverse, arbitrary, without valid reasons, involving exercise of powers for administrative excesses, incompetence and inaptitude in discharge of duties and responsibility.

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

----Ss. 10, 7(2)(1), 8(1)(a) & 33(4)---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Excess amount to be carried forward or refunded---Complainant was an exporter---Refund was not allowed on the grounds that complainant had failed to submit any proof in support of claim that they physically and actually received goods and bank statement did not show exact amount transferred against each invoice; that amount was not transferred in the account shown by the suppliers in their registration documents; that invoices of the units should not be entertained for input tax adjustment/refund purposes as these persons got registration fraudulently and issued fake sales tax invoices either without having any manufacturing facilities or the matching manufacturing facilities---Validity---Held, it was a matter purely between the Department and the registered contraveners/suppliers and did not have any bearing on complainant's obligations in law, rules and regulations as in force during the relevant tax period---List of suspected units circulated much after the relevant tax period had no sanctity in any law, rules or regulations---Only obligation of the complainant/buyer under the law was to ensure and prove that the supplier was a registered person, that the payment against the tax invoices was made through cross cheques issued in the name of such suppliers collectable in payees account only and that the quantity of goods recorded in such invoices were consumed in manufacturing for export/domestic sale or exported in same state---Department was totally oblivious of the fact that the buyer/ complainant neither had nor could ever be saddled with any obligation under the law to know the source wherefrom the said registered vendor was supplying the goods---Since rules in force during the relevant period did not prescribe any specific documents to be kept in respect of delivery of goods, any reasonable documentary evidence of procurement of such goods recorded in stocks and consumption/export thereof should be sufficient---Denying input tax adjustment against taxable/zero rated suppliers/exports instead of pursuing registered vendors involved in the deals through their bankers and identifying the ultimate registered person who had embezzled the amount of tax collected on behalf of the State was mal-administration of worst order---Such were acts of omission contrary to law, rules and regulations involving exercise of powers or failure or refusal to do so for administrative excess or reflecting neglect, inattention, incompetence and inaptitude in performance of duties by the Department---Federal Tax Ombudsman recommended that the Collector of Sales Tax or Central Board of Revenue as the law requires set aside the Order-in-Original, for reasons found supra, by invoking jurisdiction under S.45A of the Sales Tax Act, 1990; that the Collector of Sales Tax ensures that the competent officer conducts verification of relevant facts in accordance with law and rules in the light of observations and findings recorded in the present order and the matter is re-adjudicated within a reasonable time not exceeding 70 days and that in case the complainant is found to have fulfilled his obligations under the law, the refund claims of the complainant are allowed within 15 days of such finding.

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

----Ss.10, 7(2)(1), 8(1)(a) & 33(4)---Establishment of Office of Federal Tax Ombudsman Ordinance (XXV of 2000), S.2(3)---Excess amount to be carried forward or refunded---Refund---Basic factors on which the merits of the complaint could be determined by the Federal Tax Ombudsman.

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

----Ss. 10, 7(2)(1), 8(1)(a) & 33(4)---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S. 2(3)---Excess amount to be carried forward or refunded---Refund---Neither adjustment/ refund of input tax could be denied nor any penal action could be taken unless it was conclusively proved through due process of law that such tax invoices were not issued by such registered units and payment was not collected by the vendor in his bank account or no goods had been procured by the buyer/complainant against such tax invoices from the vendor and used as input against taxable or zero rated output/export.

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

----Ss. 10, 7(2)(1), 8(1)(a) & 33(4)---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Excess amount to be carried forward or refunded---Refund---Department under the law to ensure collection of the amount of sales tax from the vendor whom the buyer had paid such amount---Department was bound to honour the statutory commitment of the State to the registered buyer/exporter/ manufacturer etc.

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

----Ss. 10, 7(2)(1), 8(1)(a) & 33(4)---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Excess amount to be carried forward or refunded---Refund---Contraventions like false declaration in application for registration, suppression of capital employed in business, suppression of element of profit/value addition in output by manipulating cost of inputs and false claims of input tax etc. by complainant's suppliers duly registered under Sales Tax Act, 1990 had no nexus with complainant's refund claim of sales tax paid by them on their input if there was no conclusive finding that the transactions between the complainant and their alleged suppliers were manipulated and fake---Unless it was so proved within a reasonable time, no adverse inference could be drawn against the complainant and no penal action could be initiated against them---Test for reasonability of time was in the promptness of sequence of process under the law ever since the alleged prima facie evidence was placed on record---Long gaps, inattention, inordinate inaction or misdirected action, would render the time consumed to be unreasonable warranting a finding of mal-administration against the concerned functionary, entitling the complainant to the refund claimed even at the expense of the State.

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

----S. 2(3)---Maladministration ordinarily means and includes whatever is enumerated in clauses (i), (ii), (iii), (iv), (v), (vi) and (vii) of subsection (3) of section 2 of the Establishment of the Office of Federal Tax Ombudsman Ordinance, 2000.

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

----S.2(3)---Maladministration---Definition of term maladministration, inter alia, covers a decision, process, recommendation, act of omission or commission, which is contrary to law, rules or regulations---Where decision, process, recommendation, act of omission or commission which is contrary to law, rules or regulations, bona fides has no part to play---To justify a decision, process, recommendation, act of omission or commission which is "contrary to law", as settled by the binding decisions of judicial forums or where the language of law does not beg any interpretation, on grounds of bona fide is inconceivable---Sub-clause (a) of clause (I) of subsection (3) of S. 2 of the Establishment of the Office of Federal Tax Ombudsman Ordinance, 2000 includes in "maladministration" a decision, process, recommendation, act of omission or commission, which is contrary to law, rules or regulations or is a departure from established practice or procedure, unless it is bona fide and for valid reasons.

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

----S.2(3)(i)(a)---Maladministration---Rider "unless it is bona fide and for valid reason" governs the second part of sub-clause (a) of clause (i) of subsection (3) of S.2 of the Establishment of Office of Federal Tax Ombudsman Ordinance, 2000 and is no exception to the common dictionary meanings of the word "maladministration"---Use of conjunction "and" in the rider requires the functionary administrating tax law to prove that departure from established practice or procedure was both bona fide as well as for valid reasons---Burden is squarely on the department and failure to discharge the onus on anyone of the two counts or both shall not absolve it of maladministration---Where a decision, process, recommendation, act of omission or commission which is contrary to law, rules or regulations settled by the binding decisions of judicial forums or where the language of law does not beg any interpretation, the Federal Tax Ombudsman had jurisdiction to investigate and recommend remedial measures.

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

----S. 2(3)---Maladministration---Definition of term maladministration, inter alia, covers a decision, process, recommendation, act of omission or commission, which is contrary to law, rules or regulations---Where decision, process, recommendation, act of omission or commission which is contrary to law, rules or regulations, bona fide has no part to play---To justify a decision, process, recommendation, act of omission or commission which is "contrary to law", as settled by the binding decisions of judicial forums or where the language of law does not beg any interpretation, on grounds of bona fide is inconceivable.

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

----S.2(3)---Maladministration---Dictionary meaning of mal-administration is "to manage (e.g. public affairs) badly, dishonestly or incompetently or in other words poor management or regulation, esp. in an official capacity and at times also termed misadministration"---Dishonesty in making decision, adopting a process, making a recommendation, performing an act of omission or commission or making a departure from the established practice or procedure is only one of the several specified/unspecified traits of maladministration mentioned in its inclusive definition.

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

----S.9(2)(b)---Jurisdiction, functions and powers of the Federal Tax Ombudsman---Bar---Natural construction of S.9(2)(b) of the Establishment of Office of Federal Tax Ombudsman Ordinance, 2000 would be that the bar is restricted to adjudication on actual assessment of income or wealth, determination of liability of tax or duty, classification or valuation of goods and interpretation of unsettled law in respect of which legal remedies of appeal, review or revision are available under the relevant legislation---Provided that even such assessment of income or wealth, determination of liability of tax or duty, classification or valuation of goods is not tainted with any of the following traits of maladministration (i) decision is perverse, arbitrary contrary to law, without jurisdiction or unreasonable, unjust, biased, oppressive, or discriminatory (ii) decision is based on irrelevant grounds; or decision involves the exercise of powers, or the failure or refusal to do so, for corrupt or improper motives, such as bribery, jobbery, favoritism, nepotism, and administrative excesses---Traits envisaged under sub-clauses of clause (i) as well as clauses (ii), (iii), (iv), (v), (vi) and (vii) had been specifically included in the definition of maladministration per se because those had impaired the very credibility of Central Board of Revenue.

Syed Saghir Tirmizey for the Complainant.

Nemo for Respondent.

2005 P T D 1415

[Federal Tax Ombudsman)

Before Justice (Retd.) Munir A. Sheikh, Federal Tax Ombudsman

Messrs VITA (PAKISTAN LIMITED), LAHORE and others

versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaints Nos. 846-L, 817-L and 825-L of 2004, decided on 19th January, 2005.

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

----S. 4(2)---Sales Tax Act (VII of 1990), S.2(27)---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Central Excise General Order No.1 of 1990, dated 11-1-1999---Central Excise General Order No.10 of 1975, dated 15-8-1975---Determination of value for the purpose of duty---Issuance of show-cause notices alleging evasion of central excise duty and sales tax declaring and printing retail prices on juice packs less than the actual retail prices prevailing in the market in contravention of the provisions of S.4(2) of the Central Excises Act, 1944 and S.2(27) of the Sales Tax Act, 1990 on the presumption that subject goods must necessarily be available in the open market at retail prices fixed by the manufacturers and printed on packs/containers---Validity---Department tried to make out a case that the retailers could not charge prices higher than declared prices except with the approval of manufacturers whose products they were selling and that the complainants to evade central excise duty and sales tax had not included the due portion of profit margin of the retailers/others allowing the retailers to sell their products at a higher rate to cover up their profit margin---Contravention reports or the adjudication orders could not make it clear as to whether the detecting agency had examined both the purchase and sale documents through which the goods reached the retailers and other records to determine whether or not the manufacturers had indeed not left any margin of profit to the wholesaler/retailers or to determine whether or not the manufacturers had under declared/printed the retail prices by not including retailer's margin in the prices---Prosecuting agency did obtain a few sale invoices issued by the retailers but what about the purchase documents and other records that were required to be properly examined and analyzed in terms of the provisions of General Order No.10 of 1975 dated 15-8-1975 to determine the fact of inclusion or exclusion of retailers or wholesaler's margin in the declared/printed prices---In addition to considering the retailer's cash memos the adjudication authority should have inquired of the prosecution to disclose their definitive findings based on examination of both purchase/sales documents and other records---Complainants were also not supplied all the documents asked for to enable them to prepare their defence, their point of view was not properly considered; they were also not shown as to how various judgments cited by them were not relevant nor, for that matter, it was shown on the basis of examination of purchases and sales and other records whether or not the manufacturers had passed the retailers margin---Adjudication authority did not pass speaking orders distinguishing them from Federal Tax Ombudsman's decisions---Maladministration was established---Federal Tax Ombudsman recommended that Central Board of Revenue to reopen the Order-in-Original in all the three cases under the provisions of S.35E of the Central Excises Act, 1944 read with S.45A of the Sales Tax Act, 1990 and set aside the impugned orders and to direct the competent adjudication authority to revisit the cases for de novo consideration and fresh adjudication on merit in accordance with the provisions of law by taking into consideration all the pleas of the complainants after providing them with all the necessary documents to enable them to enter their defence and extending them the opportunity of hearings.

2000 PTD 353 and PLD 1984 SC 86 rel.

Complaint No.1044-L of 2002 and 431-L of 2003 distinguished.

Complainant No.877-L of 2003; Complaint No.591 of 2002; Complaint No.846-L of 2004 and Complaints Nos. 817 and 825-L of 2004 ref.

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

----S.4(2)---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Determination of value for the purpose of duty---Issuance of show-cause notices alleging evasion of central excise duty and sales tax---Non-supply of certified copies documents relied upon by the Department---Validity---Department should have supplied certified copies of the relevant documents to enable the complainant to prepare their defence---Complainant asked, in addition to various documents for the copies of surveys/inquiry reports---Even if no formal survey reports were issued, the Department could have supplied certified copies of the market inquiry reports or of the contravention reports containing the findings to enable the complainants to enter their reaction to the findings---It appeared that while some documents may have been supplied by way of unattested, uncertified and unauthenticated copies, the other documents were supplied incomplete and a few more were not at all supplied---Adjudication Authority was to ensure before deciding the cases that requisite documents/information asked for by the complainants were supplied to them, especially when the complainants had pointedly requested the Authority to direct the detecting agency to supply the same.

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

----S. 4(2)---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Determination of value for the purpose of duty---Issuance of show-cause notices alleging evasion of central excise duty and sales tax---Non-consideration of complainant's view point, departmental orders and Court's judgments during the proceedings---Validity---Departmental orders and Court's judgments were not dealt with by the Adjudicating Authority during the proceedings to determine whether any of those decisions/judgments had any bearing on the case and it was not enough to say that the decisions/judgments were not relevant---Impact/bearing or otherwise of such orders/ judgments on complainants cases should have been discussed in detail with by the Adjudicating Authority in the order-in-original---If the orders/judgments cited by the complainants involved issues other than the issues in hand, it should have been shown as to how the decisions/Court's judgments were different by discussing their relevancy or irrelevancy---Failure to provide necessary documents to enable the complainant to prepare their defence, non-consideration of complainants viewpoint/evidence, the failure to discuss and deal with departmental orders/Courts judgments were arbitrary and unjust acts militating against the principles of natural justice amounting to 'maladministration' within the meaning of S.2(3) of the Establishment of Office of Federal Tax Ombudsman Ordinance, 2000.

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

----S.9---Jurisdiction, functions and powers of the Federal Tax Ombudsman---Where the omissions and commissions on the part of department militated against the interest of the complainant and the department resorted to questionable processes (omissions and commissions) to the detriment of the complainant, the provisions of S.9(2) of the Establishment of the Office of Federal Tax Ombudsman Ordinance, 2000 did not stand in the way of investigation of complaints by the Federal Tax Ombudsman---Appeals were filed subsequent to filing the complaints in the Federal Tax Ombudsman Secretariat.

Umar Arshad Hakeem and Akhtar Javed for the Complainant.

Rukhsana Yasmeen, Additional Collector (Adjudication) and Zulifqar Ali Choudhry, Additional Director, Customs Intelligence for Respondents.

2005 P T D 1431

[Federal Tax Ombudsman)

Before Justice (Retd.) Munir A. Sheikh, Federal Tax Ombudsman

PAKASIA MILLS STORE, LAHORE CANTT.

versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 613-L of 2004, decided on 13th December, 2004.

Income Tax Ordinance (XXXI of 1979)---

----Ss. 96, 50(5), 50(4), 100, 132, 135(9), 136(2) & Second Sched., Part-IV, Cl. (9-B)---Income Tax Ordinance (XLIX of 2001), S.132(10)--Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---C.B.R. Circular No.4 of 1979, dated 23-9-1979---C.B.R. Circular No.5 of 2002, dated 11-4-2002---Refund was created by giving appeal effect but no voucher was issued---Department contended that taxpayer when supplying goods had to satisfy purchaser-cum-withholding agent that the goods had already suffered tax at import stage whereafter no value addition had been made---Refund was created as a consequence of appeal order without any prior verification and without conscious application of mind and there was need to ascertain the genuineness of the claim---Validity---Refund created had already been intimated to the complainant/assessee---No order existed authorizing withholding refund nor there was any stay order by the High Court where Reference had been filed---Order of Tribunal which ruled the field being 'final' was binding on the Department---Federal Tax Ombudsman recommended that Central Board of Revenue should direct the concerned tax functionaries to issue refund aggregating at Rs.4,505,662 under S.170 together with additional payment of refund under S.171 of the Income Tax Ordinance, 2001; that the dealing Taxation Officer be reminded of Central Board of Revenue Circulars, and appellate decisions emphasizing that verification of all payments or validity of all claims as respect deductions or payments of tax, has to be carried out before signing the IT-30 and its intimation to the concerned taxpayers and that the field officers be apprized that delay in issuance of refunds involves additional burden on the Exchequer by way of compensation due to delay hence the need for urgent handling of these matters.

1999 PTD (Trib.) 1143; 1995 PTD 749 and 1989 PTD 876 rel.

Suhail Muttee Babri, ITP for the Complainant.

Samra Ashraf, D-CIT and Ms Mufeeza Iqbal, A-CIT for Respondents.

2005 P T D 1451

[Federal Tax Ombudsman)

Before Justice (Retd.) Munir A. Sheikh, Federal Tax Ombudsman

Messrs SKY STAR TRAVELS, LAHORE

versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 421-L of 2004, decided on 14th December, 2004.

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

----Ss. 170 & 164---Income Tax Ordinance (XXXI of 1979) Ss. 59A & 50(4)---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Refund---Assessment was finalized under Self-Assessment Scheme by operation of law---IT-30 and demand notice were issued showing refund---Refund was not issued despite reminder and furnishing of challans/certificate on the ground that 'withholding agents' had not responded to the communications by the Assessing Officer seeking verification of payment---Validity---Admittedly neither notices under S.161/205(3) of the Income Tax Ordinance, 2001 were issued nor any action was contemplated against withholding agents---Department made no meaningful effort to verify the genuineness of the certificates---Simple belated enquiry by the Department could not be made an excuse to withhold issuance of refund, moreso when the Refund Voucher should had accompanied the IT-30 and the Demand Notice---Maladministration was proved---Federal Tax Ombudsman recommended that rectification as sought by the complainant may be carried out and refund issued along with additional payment for delay in issuing refund as per S.171 of the Income Tax Ordinance, 2001; that all Regional Commissioners of Income Tax and Commissioners of Income Tax be instructed to ensure compliance by the withholding agents, of the provisions of Chapter X in the Income Tax Ordinance, 2001 particularly sections 160,161,164(1), 165 and 182(2) and that the Assessing Officer who signed the IT-30 be issued a warning (and placed in PER) for not having verified the payment before preparing IT-30 and entering the same in the DCR.

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

----Ss.164(2) & 170---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Certificate of collection or deduction of tax---Refund---Department refused to allow refund on the basis of photocopies of non-prescribed tax deduction certificate---Validity---Law did not require a taxpayer to furnish a "prescribed tax deduction certificate", the absence of which had been made an excuse for non-issuance of refund by the Regional Commissioner of Income Tax---Responsibility to provide "a certificate setting out the amount of tax collected or deducted and other particular as may be prescribed" was cast on "the very person collecting or deducting tax" under S.164(1) of the Income Tax Ordinance, 2001---If withholding agent failed to provide to the taxpayer the 'prescribed certificate' the taxpayer could annex to the return "any certificate" provided to him by the collecting/deducting agency---To call upon taxpayer to furnish a certificate from the withholding agent on the prescribed form was glaring "maladministration" especially when it was mandatory for the Assessing Officer to accept "any certificate" in terms of compelling provisions of S.164(2) of the Income Tax Ordinance, 2001 whereby "such certificate shall be treated as sufficient evidence of the collection or deduction for the purpose of S.168 of the Income Tax Ordinance, 2001.

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

----S.59A---Income Tax Ordinance (XLIX of 1979), S. 170---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Self-Assessment---Refund---If the claim for refund was not properly documented with the Return, a 'short document' notice was necessary.

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

----Ss. 164(2) & 170---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Certificate of collection or deduction tax---Refund---Issuance of refund is delayed on the pretext that certificate of deductions filed by the taxpayer is being referred to the 'withholding agent' or to the DPC, for verification---Such practice is contrary to the requirements of law as per provisions of S.164(2) of the Income Tax Ordinance, 2001.

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

----Ss.170, 160, 161(1), 165 & 182(2)---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Refund---Verification of payments---Department's insistence to furnish proof about the deducted amount having been deposited by the withholding agent in the Treasury, betrays shirking of its own responsibility for initiating action under S.160 of the Income Tax Ordinance, 2001 of mandatory deposit by the withholding agent of tax collected or deducted and action under S.161(1) of the Income Tax Ordinance, 2001 for failure of the withholding agent to pay tax collected or deducted (iii) under Ss.165/182(2) of the Income Tax Ordinance, 2001 for mandatory filing of statement by the withholding agent of tax collected or deducted---Failure of the Department in fulfilling the responsibility entrusted to it by law could not be an excuse to compel taxpayers to run from pillar to post begging for refund, which was theirs as a lawful right.

Jamil Akhtar Baig (FCA) for the Complainant.

S.A. Masood Raza (IAC) and Muzammil Hussain, D-CIT for Respondent.

2005 P T D 1460

[Federal Tax Ombudsman)

Before Justice (Retd.) Munir A. Sheikh, Federal Tax Ombudsman

Messrs MUHAMMAD TRADING CO., LAHORE

versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 796-L of 2004, decided on 18th December, 2004.

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

----Ss.154 & 59(1)---General Clauses Act (X of 1897), S.27---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---Service of notice---Self-Assessment Scheme---Service of short document notice on employee---Assessee contended that service of notice of short document on employee was not correct because service of any notice had to be made keeping in view the provisions of S.154 of the Income Tax Ordinance, 1979 read with S.27 of the General Clauses Act, 1897 which provisions did not envisage service of notices on an employee---Department pleaded that notice was served on an employee who received notices on the earlier occasions---Validity---Service of any notice had to be made according to the provisions of S.154 of the Income Tax Ordinance, 1979 which provisions did not allow service of notices on a person not authorized by an assessee to receive any notice---Department failed to produce any evidence that the said employee was authorized to receive notices on behalf of the complainant/assessee---Service of short document notice was void and superstructure built on defective service of notice and order of exclusion of the return from Self-Assessment Scheme without any jurisdiction must crumble down---Maladministration falling within the provisions of Ss.2(3)(i)(a), 2(3)(i)(b) and 2(3)(ii) of the Establishment of Office of Federal Tax Ombudsman Ordinance, 2000 was proved beyond any shadow of doubt on account of incompetence, inefficiency and inaptitude, in performance of duty---Department failed to prove the actions of the Taxation Officer were bona fide and for valid reasons---Federal Tax Ombudsman recommended that the Commissioner of Income Tax takes suo motu action under S.122A of the Income Tax Ordinance, 2001 to revise the above two assessments according to law and the Commissioner of Income Tax institutes an enquiry against the Taxation Officer concerned for mishandling the assessment as above and takes necessary action against the officer concerned.

2004 PTD 758 rel.

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

----S.9(2)(b)---Jurisdiction, functions and powers of the Federal Tax Ombudsman---Complaint was not only against assessments completed by the Taxation Officer in violation of the provisions of law but the procedure adopted in completion of the assessments was also not supported by any provisions of Self-Assessment Scheme resulting in arbitrary conduct of the Taxation Officer---Preliminary objection raised by the Revenue in respect of jurisdiction of Federal Tax Ombudsman was overruled in circumstances.

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

----S.59(1)---C.B.R. Circular No.7 of 2002, dated 15-6-2002, para.8(c)--Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Self-assessment---Order of exclusion of return from Self-Assessment Scheme after statutory period---Validity---Taxation Officer was required to issue a short document notice keeping in view the provisions of para. 8 of the Self-Assessment Scheme for the assessment year 2002-2003---If the taxpayer did not comply with the short document notice within 15 days of the last date of compliance of such notice the Taxation Officer was required to exclude the return from Self-Assessment Scheme within fifteen (15) days of the above date---Taxation Officer could not issue any order of the exclusion of return from Self-Assessment Scheme after the above statutory period.

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

----S.59(1)---C.B.R. Circular No.7 of 2002, dated 15-6-2002, para.8(c)--Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Self-assessment---Order of exclusion of return from Self-Assessment Scheme after statutory period was an order without any jurisdiction---Short document notice was issued on 29-1-2003 and served on an employee who was not authorized to receive the notices on behalf of the complainant/assessee---Such notice was served on 1-2-2003 and was to be complied within 15 days i.e. by 16-2-2003 but allegedly there was no compliance---Taxation Officer had to issue an order under para.8(c) of the Self-Assessment Scheme for the assessment year 2002-2003 by 2-3-2003 to exclude the return from Self-Assessment Scheme but not later than 2-3-2003---No such order was issued by the said date---Order for exclusion of return from Self-Assessment Scheme was made on 14-3-2003, which was an order without any jurisdiction.

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

----Ss. 59(1), 61 & 62---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Self-Assessment---Assessment year 2001-2002---Return was filed under Self-Assessment Scheme---Assessment was completed under normal law on the ground that return did not qualify for Self-Assessment Scheme as income declared was less than the income declared for last year without conducting any proceedings---Validity---No proceedings for assessment were conducted but still assessment was made---Taxation Officer was bound to inform the complainant/assessee that his return could not be accepted under Self-Assessment Scheme and that normal assessment will be made---Most serious objection was that no notice under S.61 or 62 of the Income Tax Ordinance, 1979 was issued but assessment was completed---Law did not provide completion of assessment without issuance of notice under S. 61 or 62 of the Income Tax Ordinance, 1979---Non-issuance of notices implies completion of assessment without allowing the complainant/assessee an opportunity of being heard which rendered the assessment illegal.

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

----S.24A---Income Tax Ordinance (XXXI of 1979), preamble---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2002), S.2(3)---Estimation of income without any basis---Objection that income estimated was without any basis, which militates against the provisions of S.24A of the General Clause Act, 1897 was upheld.

2004 YLR 3100 rel.

Ch. Muhammad Aslam for the Complainant.

Malik Ghulam Rasul. D-CIT for Revenue.

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2005 P T D 1908

[Federal Tax Ombudsman]

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

Messrs MALIK MANZOOR HUSSAIN & CO. (PVT.) LTD., LAHORE

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 1429-L of 2003, decided on 10th January, 2004.

Income Tax Ordinance (XXXI of 1979)---

----S. 96---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S. 2(3)---Refund---Refund was not issued in spite of repeated applications---Department contended that refund could not be paid because of the verification of challans for payment of tax--­Assessee pleaded refund once determined as per demand notice implied that necessary verification had been completed---Validity---Refund due to the complainant/assessee had been admitted by the department---Tax employee generally disregard the law, rules, regulation and administrative instructions of Central Board of Revenue as well as the recommendations of Federal Tax Ombudsman regarding proper accounting of tax withheld and collected from tax payers---Credit claimed on account of tax paid by and withheld or collected from the assessee was not being allowed promptly after determining tax payable Assessees were unnecessary harassed when they sought such credit--­Often it was allowed at the time of assessment to the extent of determined liability---Credit for tax paid in excess of liability was allowed several years after the assessment and refund of such excess payment was not allowed even after it was so determined--­Maladministration of neglect and inattention on the part of Regional Commissioner of Income Tax, being so glaring he would ensure medial measures against rampant maladministration at the lower veils---Was necessary for the benefit of tax employees at all levels reiterate that neglect, inattention, delay, incompetence, inefficiency and inaptitude in the administration or discharge of duties and department's unnecessary attendance for settlement of claims of refund, willful errors in the determination of refunds, deliberate withholding or non payment of refunds already determined fall under the definition of maladministration ---Federal Tax Ombudsman recommended that Secretary, Revenue Division takes serious cognizance of the negligence and inattention of the officers at the level of Regional Heads and emphasize upon them that beside becoming role models of vigilance, attentiveness, promptness, efficiency, competence and aptitude in the administration and discharge of their duties and responsibilities they are supposed to bear in mind that avoidance of disciplinary action against a delinquent officer or official is also maladministration; and the Commissioner concerned ensures that determined tax liabilities are correctly ascertained year wise, credit of tax claimed to be paid by or deducted or collected from the complainant is fully allowed without any further delay or harassment of the complainant and contradictions in adjustments are resolved within 15 days and the entire amount of refund due is paid within 30 days.

Muhammad Iqbal Hashmi for the Complainant.

Muhammad Jamil Bhatti, DCIT for Respondent.

2005 P T D 1915

[Federal Tax Ombudsman]

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

ARTEX INTERNATIONAL (LAHORE)

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 857-L of 2003, decided on 27th January, 2004.

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

--Ss. 154 & 59(1)---General Clauses Act (X of 1897), S.57---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S. 2(3)---Service of notice---Short document notice was sent through UPC---Notice was not received back undelivered to the department---Non compliance of---Assessment was finalized under normal law for non compliance of such short document notice on the presumption that notice was served on the assessee as the same had not been received back undelivered---Validity---Dispatch of short document notice through under postal certificate which did not require signature of the addressee for receipt of the post did not provide any evidence that short document notice was served on the complainant---Department failed to produce any valid evidence that case was excluded from Self Assessment Scheme by Taxation Officer by passing a speaking order--Maladministration of incompetence was evident from the invalid service of the mandatory notice and the arbitrary conduct was evident from paying no attention to the objection of the complainant to initiate assessment proceedings under S.61 of the Income Tax Ordinance, 1979 on the ground that it had no notice of exclusion of the return from Self-Assessment Scheme---Onus to prove that there was no maladministration was required to be discharged by the department which it had failed to discharge because no valid reason had been offered for the failure to serve the notice as required under the law---Action of Taxation Officer was contrary to law, arbitrary, unjust and involved exercise of power for administrative excess---Federal Tax Ombudsman recommended that the concerned Taxation Officer accepts the return of the complainant for the assessment year 2002-2003 under S.59A of the Income Tax Ordinance, 1979 after obtaining receipt and expenditure statement.

CTR No.11/2002, dated 19-12-2002 rel.

Tipu Sultan ITP for the Complainant.

Muzammal Hussain Butt, DCIT and Anwar Ali, DCIT for Respondent.

2005 P T D (Trib.) 168

[Income-tax Appellate Tribunal Pakistan]

Before S. Hasan Imam, Judicial Member and S.A. Minam Jafri, Accountant Member

I.T.As. Nos. 2147 to 2149/KB of 2002, decided on 6th March, 2004.

Income Tax Ordinance (XXXI of 1979)---

----Ss.108(b), 143-B & 134---Imposition of penalty for late filing of statements-- Statements under S. 143-B of Income Tax Ordinance, 1979 which were required to be filed on or before 30th September for the relevant assessment years, were filed by assessee with delay of 90 days on 31st December in each year---Penalty having been imposed upon assessee under S.108(b) of Income Tax Ordinance, 1979 for late filing of statements under S. 143-B of the Ordinance, assessee had challenged said order in appeal---Only plea taken by assessee was that his income being covered under Ss.62 & 80-C of Income Tax Ordinance, 1979, time limit was automatically extended till the date of filing of normal return, which was filed on 31st December in each assessment year---Reason advanced by assessee, apparently was presumptive possessing on sound legal footings as law did not provide flexibility in time except when a reasonable cause was shown ---Assessee had not been able to make out a case that law had permitted to file statements even after 30th September-­No provision of law existed in relevant Income Tax law allocating different dates for filing statements along with return for income covered under S.62 of Income Tax Ordinance, 1979---Cause of delay as explained by assessee itself had reflected wilful and deliberate default as self and concocted interpretation of law to gain time for filing statement under S.143-B of Income Tax Ordinance, 1979, amounted to wilful default---Such conduct was nothing more than mere non­compliance and imported an element of negligence .or fault---Since other grounds, relating to no loss of revenue, filing of returns together under confusion and service of notice requiring assessee to furnish statement, also had no substance, appeals filed by assessee, stood dismissed.

2003 PTD (Trib.) 1698 and PLD 1967 (SC Pak) 53 ref.

Syed Kaleem Kazmi for Appellant.

Abdul Hameed Sangi, D.R. for Respondent.

Date of hearing: 19th February, 2004.

2005 P T D (Trib.) 203

[Income-tax Appellate Tribunal Pakistan]

Before Muhammad Munir Qureshi, Accountant Member

I.T.As. Nos. 1209/LB and 1210/LB of 2004, decided on 16th September, 2004.

Income Tax Ordinance (XXXI of 1979)---

----Ss. 19, 50(5-A), 80-C, 80-CC, 134 & Second Sched., Part I Clauses 110, 111-A---Share income of assessee from Association of Persons (AOP)---Department had contended that Commissioner Income Tax (Ay had unjustifiably directed the share income of assessee (an individual) from AOP in which he was member, not to be clubbed with assessee's share income from property for rate purposes on the ground that income of AOP in question was covered by provisions of S.80-CC (Presumptive regime) and tax withheld under S.50(5-A) of Income Tax Ordinance, 1979 constituted its final discharge from income tax liability---Contention of department was that view of Commissioner Income Tax regarding assessee's share from AOP was misconceived for the reason that assessee besides enjoying share income from said AOP, was also in receipt of rental income from property which income was taxable under S.19 of Income Tax Ordinance, 1979---No exception could be taken to the relief accorded to the assessee by Commissioner Income Tax (A) as it was consistent with express statutory stipulation--­AOP in question enjoying income exclusively as exporter was placed in presumptive tax regime within purview of provisions of S.80-CC of Income Tax Ordinance 1979---Tax and Income tax withheld under S.50(5-A) of Income Tax Ordinance, 1979 amounted to final discharge of AOP's tax liability and AOP could not be burdened, directly or indirectly with any additional taxation in any guise or manner so that it would be burdened if part of its income were included in total income of one of its members even for rate purpose---One exception, however, would be when such assessee had income it,' excess of imputed presumptive income (arrived at on work back basis) and was not able to satisfactorily explain the same, then excess income over presumptive income was indeed liable to levy of income tax.

2000 PTD 2173; 2003 PTD (Trib.) 1228 and 2004 PTD (Trib.) 2400 ref.

Abdul Sattar Abbasi, D.R. for Appellant.

Ahmad Shuja Khan for Respondent.

Date of hearing: 16th September, 2004.

2005 P T D (Trib.) 206

[Income-tax Appellate Tribunal Pakistan]

Before Zafar Ali Thaheem, Judicial Member and Raja Sikandar Khan, Accountant Member

M. A. Stay No. 205/LB of 2004, decided on 11th June, 2004.

Income Tax Ordinance (XLIX of 2001)---

----Ss.131 & 133---Reference to High Court---Powers of Appellate Tribunal to grant stay of recovery proceedings---When certain questions of law arising out of the order of Appellate Tribunal had been referred to High Court for its determination, appellate jurisdiction of Appellate Tribunal would not cease in that case as the proceedings of that appeal were under the law still pending before Appellate Tribunal until order was passed by Appellate Tribunal in appeal conformably to decision of such questions of law by High Court---Since Appellate Tribunal was not divested of its appellate jurisdiction in such cases, it had authority to grant stay of recovery proceedings.

1988 PTD 907 ref.

Shahbaz Butt for Appellant.

Ahmad Khan Kamal, D.R. for Respondent.

Date of hearing: 3rd June, 2004.

2005 P T D (Trib.) 211

[Income-tax Appellate Tribunal Pakistan]

Before Muhammad Munir Qureshi, Accountant Member

I.T.As. Nos. 4666/LB and 4667/LB of 2003, decided on 14th September, 2004.

Income Tax Ordinance (XXXI of 1979)--­

----Ss.61, 62, 63 & 134---Non-compliance of notice---Ex parte assessment ---Validity---Assessee repeatedly defaulted in the compliance of terms of notices under S.61 of Income Tax Ordinance, 1979---Earlier a show-cause notice under S.62 of Income Tax Ordinance, 1979 had also been issued to assessee indicating to finalize net income for relevant assessment years and that notice too remained un-complied with--­Assessing Officer in circumstances finalized assessments ex parte at the figure for total income confronted to the assessee---Default under S.61 of Income Tax Ordinance, 1979 was patent, persistent and appeared to be deliberately contrived to force Assessing Officer's hand and gain un-warranted benefit in appeal---Assessee had defaulted not only in the case of notices issued under S.61 of Income Tax Ordinance, 1979 on as many as six occasions, but had also failed to respond to notice under S.62 of the Ordinance---Ambient circumstances, were very compelling and led to inescapable conclusion that assessee had deliberately avoided appearance before Assessing Officer---Finalization of ex parte assessment on a date later than date for which final notice for appearance had been issued, was not illegal provided default on due date was established---Ex parte assessments finalized for relevant assessment years as against notice under S.61 of Income Tax Ordinance, 1979, were in order---Order of Commissioner Income Tax was vacated and assessments made by Taxation Officers were reinstated.

1996 PTD 1125 and PLD 1975 Lah. 893 ref.

Abdul Sattar Abbasi, D.R. for Appellant.

Qari Habib-ur-Rehman Zubari for Respondent.

Date of hearing 9th September, 2004.

2005 P T D (Trib.) 214

[Income-tax Appellate Tribunal Pakistan]

Before Syed Nadeem Saqlain, Judicial Member and Javed Tahir Butt, Accountant Member

I. T. A. No. 1658/LB of 2003, decided on 11th December, 2003.

Income Tax Ordinance (XXXI of 1979)---

----Ss.17, 18, 22, 23, 24, 27 & 134---Adjudication of issues---Appeal to Appellate Tribunal---Department in its appeal had challenged findings of Commissioner Income Tax (Appeal) on the grounds that Commissioner was not justified to delete addition of amount made on account of "Interest on Securities" on accrual basis; that Commissioner was not justified to delete additions of amount made by disallowing non-­performing advance which was allowed in view of provisions of S.23(1)(x) of Income Tax Ordinance, 1979; that Commissioner was not justified to delete addition of amount made an account of interest on Suspense account; that Commissioner was not justified to delete addition made on Federal Investment Bonds in view of Special Provisions of S.18 of Income Tax Ordinance, 1979; that Commissioner was not justified to delete addition of amount made under the head of cost of funds utilized in earning the exempt income as per rated cost of funds deployed in earning of exempt income was rightly added; that Commissioner was not justified to reduce disallowance from 20% to 10% of the claim of expenses on account of free furnished accommodation; and that Commissioner was not justified to delete penalties imposed by State Bank of Pakistan as said expense was inadmissible as per provisions of S.24 of Income Tax Ordinance, 1979---Held, issue of Interest of Securities had already been settled by order of Appellate Tribunal whereby it was adjudicated that interest of Government Securities should be taxed on receipt basis instead of accrual basis, order of Commissioner in that respect could not be interfered with and was upheld; Appellate Tribunal in its earlier judgments had held that provision for bad debts was an allowable expenditure, no interference was warranted in the impugned order of Commissioner on that issue; issue of addition had already been decided in favour of assessee by Appellate Tribunal, said order was maintained and assertion of Department stood rejected; process of allocating premium on Federal Investment Bonds was in consonance with International Accounting Standards, any amount exceeding the face value of stock, shares or securities paid by a Bank at the time of their purchases was a revenue expenditure and was to be allowed, premium paid by Bank on purchase of Federal Investment Bonds from the open market, represented the qualification of interest accrued to the seller till the date of transaction when sale was effected, same could not be termed as part of capital cost of Bank for which investment in Federal Investment Bank was on revenue account, banking business was a composite activity and rule of apportionment would not apply for the purpose of taxation of composite income, premium paid on purchase of Federal Investment Bonds, was a cost incurred by assessee for the purpose of business of Bank and had to be allowed during the period in which it was incurred, that was in form of a prepaid expense which was spread over the period to which it related; First Appellate Authority had deleted additions under the head "addition on account of cost of funds available for earning income" through, well-reasoned order on the basis of law laid down by Appellate Tribunal as well High Court, findings recorded by Commissioner Income Tax on said issue being unexceptionable, could not be disturbed; relief provided by Commissioner of Income Tax (Appeal) appeared to be excessive in case of reduction in disallowance from 20% to 10% on account of free furnished accommodation; and in that view of the fact, order passed by Commissioner on said issue was vacated and 20% disallowance as made by Assessing Officer was restored and in the matter of deletion of addition on account of penalties imposed by State Bank Pakistan law regarding disallowance of penalties vide Cl. (i) of S. 24 of Income Tax Ordinance, 1979 had been introduced vide Finance Ordinance, 2000 which was applicable from Assessment year 2001-2002 whereas assessment in the present case Assessment year 2000-2001 and same could not be applied retrospectively --- Order passed by Commissioner not warranting interference, was upheld.

2003 PTD (Trib.) 1146; 1991 PTD 569; CIT Central Karachi v. Habib Bank Executors and Trustees Co., Karachi 1985 SCMR 284; 15 Tax 145 (H.C. Kar.); (1987) 50 Tax 196 (H.C. Kar.); 1993 PTD (Trib.) 472; 1980 PTD (Trib.) 68; 1975 PTD (Trib.) 63; I.T.A. No. 2060/LB of 1993; (1993) 67 Tax 125 (Trib.); 1992 PTD (Trib.) 1141; 1984 PTD 341; 1984 PTD 390; 1998 PTD 626; 1980 PTD (Trib.) 68 and 1975 PTD (Trib:) 63 ref.

Dr. Ajmad Iqbal, D.R. for Appellant.

Ghulam Abbas, F.C.A. for Respondent.

Date of hearing: 11th December, 2003.

2005 P T D (Trib.) 224

[Income-tax Appellate Tribunal Pakistan]

Before Khawaja Farooq Saeed, Judicial Member and Muhammad Munir Qureshi, Accountant Member

I.T.As. Nos.2789/LB, 4491/LB and 5269/LB of 1999, decided on 28th July, 2004.

Income Tax Ordinance (XXXI of 1979)---

----Ss.2(29), 23(1)(viii)(xviii) & 134---Deductions---Department had assailed in appeal order passed by Commissioner Income Tax with regard to deletion of add-back made by Assessing Officer on account of payment of service charges' by assessee to Federal Bank on account of use of credit line extended by said Bank to assesses---Department also had contested deletion of addition made by DCIT on account of amount realized by assesses from sale of various immovable properties of loan defaulters---In case of service charges' Department had emphasized that amount in question was notexpenditure' at all, but was part of income earned by assessee from its member Banks and was Federal Bank's share in such income---Service charges' were the same asinterest' as defined in S.2(29) of Income Tax Ordinance, 1979, if so, the service charges would qualify to be treated as admissible expenditure there placement in S.23(l)(viii) of Income Tax Ordinance, 1979 could conceivably pose problems but provisions of S.23(1)(XVIII) of the Ordinance, appeared to come to assessee's rescue as payment did appear. to have been made wholly and exclusively for the purpose of business---No justification existed to treat payment of service charges as inadmissible more so on technicalities---With regard to gain from disposal of defaulter's immovable properties held by assesses as collateral, assessee's case was less than convincing---No evidence had been produced by assessee at any stage of proceedings to establish that a genuine effort had been made to dispose of properties by way of auction at the time of default---Facts had shown that assessee held the properties for a considerable length of time before finally selling them and making a significant gain on the transaction---In the interregnum no capital investment was made in the commercial development' of those properties and the gain on their disposition could not be described as aCapital gain'---Said properties came into assessee's possession .as collateral for loan advanced and title passed on to assesses when the debtors defaulted---No capital outlay, in circumstances was involved for their acquisition by assesses---Assesses had held on to said properties with deliberate design and it was assessee's intention to make a profit from their sale in the market over and above the amount actually owed to assessee by debtors---Said gain, in circumstances could not be treated as .accidental windfall gain, but instead it was a gain contrived by deliberate design---Order of Commis­sioner Income Tax in that regard was vacated and findings as recorded by Assessing Officer were reinstated.

Mehmood Jaffery, D.R. for Appellant.

Iqbal Hashmi and Abdul Hameed Khan, F.C.A for Respondent.

Date of hearing: 25th May, 2004.

2005 P T D (Trib.) 229

[Income-tax Appellate Tribunal Pakistan]

Before Khawaja Farooq Saeed, Chairman, Zafar Ali Thaheem, Judicial Member and Muhammad Sharif Chaudhry, Accountant Member

M. A. No. 427/LB of 2004, decided on 21st August, 2004.

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

----Ss.14, 16 & Second Sched., Part II, R.2-A---Commission income of employee derived from employer---Applicability of special rates--­Scope---Assessee had claimed that commission income being a special income, it was subject to special charge under Rr.2-A of Part II of Second Sched. of Income Tax Ordinance, 1979---Validity---No substance was found in the argument that commission income was parallel to dividend income---Commission received by an employee from its employer having clearly been defined as salary in S.16 of Income Tax Ordinance, 1979, was to be treated as- such and rates applicable in respect of salary income were chargeable thereon---Reduced rates were not in supersession of the main charges created and the same would apply on those amounts which otherwise were not covered under some other charging provision of Income Tax Ordinance, 1979---No question of any exceptional treatment thus arose, in circumstances---giving relief to a taxpayer if due, was the duty of the Court, however if someone would make an attempt to cover his transaction by, interpreting a provision in his, favour under, the garb of a particular exemption, it would not be appreciated. Commission having been held as salary, it would not be given treatment similar to that commission which was not covered within the definition of "salary".

2000 PTD (Trib.) 457 and (2000) 82 Tax 36 (Trib.) ref.

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

----S.14---Exemption---Scope---Exemption provisions were a facility and were made available to only those who would come within the language of the law without any further argument or interpretation.

(c) Interpretation of Statutes---

---- Law should be applied as it is and nothing' should be imported.

1993 SCMR 1635 ref.

Naveed Andarabi for Applicant.

Sheraz Mirza, D.R. for Respondent.

Date of hearing: 21st August, 2004.

2005 P T D (Trib.) 231

[Income-tax Appellate Tribunal Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member and Mazhar Farooq Sherazi, Accountant Member

I.T.A. No.2086/LB of 2002, decided on 21st August, 2004.

Income Tax Ordinance (XXXI of 1979)---

----Ss.23(1)(VII), 34, 62 & 134---Allowing financial expenses against total receipt---Department through appeal had objected to order of Commissioner Income Tax (A) whereby financial expenses were allowed to assessee against total receipts ---Assessee was a Private Limited Company, which derived income from dividends, providing lift services, security services and maintenance of premises---Assessment for the year under appeal was finalized by Assessing Officer under S.62 of Income Tax Ordinance, 1979 accepting declared receipts---Commissioner Income Tax (A) had rightly directed to allow financial expenses against total receipts as financial expenses were incurred wholly and exclusively for the purpose of business and were not to be separated from other business expenses---Said expenses must be set off against total receipts of assessee instead of dividend income---Resultant loss should be set off against income from business or profession---Impugned order warranted no interference in appeal.

1991 PTD (Trib.) 531 ref.

Abdul Rasheed, D.R. for Appellant.

Ch. Abdul Hamed, F.C.A. for Respondent.

Date of hearing: 21st August, 2004.

2005 P T D (Trib.) 234

[Income-tax Appellate Tribunal Pakistan]

Before Jhawaja Farooq Saeed, Judicial Member and Muhammad Munir Qureshi, Accountant Member

R.A. Nos. 153/LB to 160/LB of 2003, decided on 4th May, 2004.

Income Tax Ordinance (XXXI of 1979)---

----Ss.56, 61, 65 & 136---Issuance of combined for multiple assessment years---Annulment of assessment---Reference to High Court-­-Where assessee was required to file returns of income of eight years, assessee could not disclose lump sum income for eight years, but had to bifurcate his income for each year separately and file separate returns of income on yearly basis---Law as well propriety required that Assessing Officer should compute income separately for each year even when a consolidated' order of assessment was passed---By calling an assessee to file returns for eight years through a single notice followed by notice under S.61 of Income Tax Ordinance, 1979 for a similar period, assessee was caused prejudice insofar as assessee could feel constrained to explain the income arising in said eight years in a single appearance before Assessing Officer---Assessee's discomfiture could be imagined in an "accounts case" where accounts and supporting documentation for many years had to be produced before Assessing Officer on a single date for which a combined notice had been issued---Such was certainly not what the statute contemplated---Multiple assessment made in the present case was held by the Tribunal to suffer from grave infirmity as strong indications of `tampering' had been pointed out ---If such findings had not been contested by the Department, same would be considered to have been accepted by the department---Assessments, in circumstances, were incurably defective and merited .annulment---Reference of Department to High Court was rejected, in circumstances.

1998 SCMR 91 ref.

Muhammad Asif, D.R. for Appellant.

Nemo for Respondent.

Date of hearing: 4th May, 2004.

2005 P T D (Trib.) 237

[Income-tax Appellate Tribunal Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member and Raja Sikandar Khan, Accountant Member

I.T.As. Nos. 1101/LB of 2001 and 1102/LB of 1997, decided on 24th June, 2004.

Income Tax Act (XXXI of 1979)---

---Ss.62, 65, 66-A, 134 & 156---Income Tax Rules, 1982, R.94(2)---Re-opening of assessment---Amortization of expenses---Original assessment for the assessment year 1992-93 was set aside on 3-3-1996, re-assessment was completed and Assessing Officer had re-opened case under S.65 of Income Tax Ordinance; 1979 by issuing notice to assessee---Original assessment was framed under S.62 of Income Tax Ordinance, 1979 after examining and considering all facts of the case and explanation offered by assessee and no omission or suppression of material evidence regarding gratuity payment was .found by Assessing Officer---In computation of income, assessee had claimed expenses under the head "gratuity payment" which assessee had in fact paid to the trustees of Employees Gratuity Fund Trust---Assessing Officer could rectify and disallow claim by an order under S.156 of Income Tax Ordinance, 1979, if there was any excessive claim by assessee, as matter was a simple issue of admissibility or inadmissibility of expense and did not call for resorting to action under S.65 of Income Tax Ordinance, 1979---Material available on record could not be used for-re-opening of assessment as same would amount to change of opinion which was not permitted under law---Once assessment was completed and had attained finality, Assessing Officer could not exercise jurisdiction to revise assessment in the garb of re-opening of assessment under S.65 of Income Tax Ordinance, 1979---Assessing Officer had re-opened case on basis of record which was already available and no definite information was available on basis of which already completed assessment could be re­opened---Impugned order of Commissioner Income Tax (A) and order passed by Assessing Officer under S.65 of Income Tax Ordinance, 1979 were vacated in appeal filed by assessee---Department in its appeal had objected to direction of Commissioner Income Tax (A) allowing in toto the expense on account of Golden Shake Hand without its spreading over a period of three years under process of amortization---Commissioner Income Tax (A) had made directions, as there was no concept of amortization of expenses in Income Tax Law---Appellate Tribunal having found no warrant for interference in that respect appeal filed by Department, was dismissed.

1999 PTD (Trib.) 3901; 1999 PTD (Trib.) 2946; 2000 PTD (Trib.) 329; 1993 SCMR 1232 = 1993 PTD 766 and 2002 PTD (Trib.) 257 ref.

M. Iqbal Hashmi for Appellant (in I. T. A. No. 1101/LB of 2001).

Sabiha Mujahid, D.R. and Shahid Jamil, L.A. for Respondent (in I.T.A. No.1101/LB of 2001).

Sabiha Mujahid, D.R. and Shahid Jamil, L.A. for Appellant (in I. T. A. No. 1102/LB of 1997).

M. Iqbal Hashmi for Respondent (in I.T.A. No.1102/LB of 1997).

Date of hearing: 5th May, 2004.

2005 P T D (Trib.) 270

[Income-tax Appellate Tribunal Pakistan]

Before Inam Ellahi Sheikh, Chairman and Muhammad Jahandar, Judicial Member

I.T.A. No. 116/IB of 2003, decided on 12th March, 2004.

Income Tax Ordinance (XXXI of 1979)---

----Ss.62, 80-D & 134---Filing return declaring loss---Appeal to Appellate Tribunal ---Assessee, who filed return declaring loss, had claimed during assessment proceedings that as he had filed return under S.80-D of Income Tax Ordinance, 1979, his case could not be processed under normal law, but that plea of assessee was not accepted by Assessing Officer who processed the case under normal law and determined net income by making certain additions under S. 12(18) and S. 13(1)(aa) of Income Tax Ordinance, 1979 including some add-backs under different heads of Profit and Loss account---Appellate Authority maintained other additions---Plea of assessee was that any provision of Income Tax Ordinance, 1979 which was in conflict with S.80-D of said Ordinance could not be applied in a case where assessee had declared his returned version and paid tax under S.80-D of said Ordinance ---Assessee further contended that payment of Tax under S.80-D was in full and final discharge of his liability and his case could not be opened for assessment under S.62 of Income Tax Ordinance, 1979---Validity---Section 80-D of Income Tax Ordinance, 1979 stipulated payment of minimum tax in certain given cases and appeared to be a charging section whereas S.62 of said Ordinance was a machinery Section dealing with the quantification and adjustment of computation furnished---In case of assessee, Assessing Officer, while rejecting claim of assessee for not opening case, had observed that provisions of S.62 of Income Tax Ordinance, 1979 were not in conflict with S.80-D of said Ordinance which observation had been upheld by Appellate Authority---Contention of assessee was groundless and could not be accepted---No prejudice seemed to have been caused to assessee---No intervention was required regarding add backs which had been found by first Appellate Authority to be reasonable and well justified.

Ellahi Cotton Mill's case 1997 PTD 1555 = PLD 1997 SC 582 and Pakistan Burma Shell v. Federation of Pakistan 1998 PTD 1804 ref.

Ilyas Khan, Legal Advisor for Income-tax Department.

Noushad Ali Khan, D.R. for Respondent.

Date of hearing: 10th December, 2003.

2005 P T D (Trib.) 277

[Income-tax Appellate Tribunal Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member and Mazhar Farooq Shirazi, Accountant Member

I.T.A. No. 2304/LB of 2003, decided on 26th July, 2004.

Income Tax Ordinance (XXXI of 1979)---

----Ss. 59(1), 62 & 143B---C.B.R. Circular No. 12 of 1991, dated 30-6-1991-- Self-assessment---Proceedings were initiated under normal law on the ground that assessee was under obligation to proportionate the Profit and Loss expenses among the income declared in IT-11B as well as statement under S. 143B of the Income Tax Ordinance, 1979 and Assessing Officer worked out according to Circular No. 12 of 1991---Assessee contended that case was neither selected for "total audit" through the computer ballot nor it was earmarked by the Regional Commissioner of Income Tax for normal law proceedings and there was no other criteria to proceed under normal law---Expenses had been fully prorated and only those expenses were claimed which related to other sales---Validity---Treatment given by the Assessing Officer was not based on legal grounds---Assessing Officer, was not justified in observing that on the basis of pro rata expenses the assessee was required to declare net income in IT-11B at Rs.5,87,400 whereas the income was declared by the assessee at. Rs.4,05,000---Assessee duly fulfilled all the requirements of Self-Assessment Scheme---Appellate Tribunal directed to accept the case under Self-Assessment Scheme and annulled the order passed by the authorities below.

Shafqat Mehmood Chohan for Appellant.

Anwar Ali Shah D.R. for Respondent.

Date of hearing: 24th July, 2004.

2005 P T D (Trib.) 280

[Income-tax Appellate Tribunal Pakistan]

Before Khawaja Farooq Saeed, Jawaid Masood Tahir Bhatti, Judicial Members and Raja Sikandar Khan, Accountant Member

I.T.A. No.3861/LB of 2001, decided on 22nd March, 2004.

Per Khawaja Farooq Saeed, Judicial Member and Jawaid Masood Tahir Bhatti Judicial Member agreeing; Raja Sikandar Khan, Accountant Member. [Contra]---

Income Tax Ordinance (XXXI of 1979)---

----Ss. 50(5) & 80-C---Amount paid as Sales Tax and Customs Duty could not be termed as `income' while assessing income of assessee--­While charging income tax under S.80-C of Income Tax Ordinance, 1979 the amount paid as Sales Tax would not be deemed to be the "income" ---Amount of Sales Tax should be ignored while calculating withholding tax chargeable under S.80-C of Income Tax Ordinance, 1979---For the purpose of calculation of tax under S.50(5) of Income Tax Ordinance, 1979, only the value of goods imported should be considered the value ignoring Customs Duty and Sales Tax; if any, levied thereon.

1994 PTD 848; 2003 PTD (Trib.) 735; (1997) 76 Tax 5 (SC); 1994 PTD 842 and (2002) 86 Tax 91 (Trib.) ref.

Per Raja Sikandar Khan, Accountant Member. [Contra].--

Muhammad Shahid Baig for Appellant.

Nemo for Respondent.

Date of hearing: 16th January, 2004.

2005 P T D (Trib.) 288

[Income-tax Appellate Tribunal Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member and Agha Kafeel Barik, Accountant Member

M.a. (Rect.) No. 274/KB of 2003, decided on 31st July, 2003.

Income Tax Ordinance (XXXI of 1979)---

----Ss.13(1)(c), 62, 63, 132 & 134---Rectification of mistake--­Department had filed application requiring Appellate Tribunal to rectify alleged mistake arising out of order of Tribunal---Deputy Commissioner of Income Tax vide its ex parte order passed under S.63 of Income Tax Ordinance, 1979 estimated sale of assessee at Rs.7.2 millions and made an addition of Rs.1,40,000 under S.13(1)(e) of Income Tax Ordinance, 1979---On assessee's appeal Commissioner of Income Tax reduced estimate of sales from Rs.7.2 millions to Rs.2,860,000 whereas he set aside the issue of addition of Rs.1,40,000---Aggrieved of order of Commissioner, Department filed appeal before Appellate Tribunal on both issues i.e. reduction in sales as well as setting aside of addition--­Before hearing of said appeal Deputy Commissioner of Income Tax passed order which was bearing S. 132 of Income Tax Ordinance, 1979 to give effect to Appellate Order of Commissioner---Deputy Commissioner of Income Tax by its order reduced sales as directed by the Commissioner but on issue of addition under S.13(1)(e) of Income Tax Ordinance, 1979 passed order to the effect that assessee did appear and explained reasons for low drawings of assessee and Deputy Commissioner accepted said explanation as being forceful---Department had alleged that DCIT had not passed de novo assessment as there Was no mention of S.62 of Income Tax Ordinance, 1979 on the said order which was bearing S.132 of Income Tax Ordinance. 1979 on it--­Arguments taken by Department and the basis on which application for rectification of order was filed, were not based on proper appreciation of facts as; effect to order of CIT could be justified only to the extent of reduction of sales as directed by CIT though Department was in appeal before Tribunal on said issue; and issue regarding addition under S.13(1)(e) of Income Tax Ordinance, 1979 was set aside by CIT---Since Department was in appeal before Tribunal, it was quite unjustified and in fact illegal to delete said addition, unless Departmental appeal on said issue was withdrawn---If Department was of the view that Assessing Officer was not empowered to make any assessment under S.132 of Income Tax Ordinance, 1979, then concerned Authority should have taken corrective measures to nullify order passed by DCIT transgressing his powers---Order passed by DCIT in all its ingredients was a de novo assessment order and it was immaterial that S.62 of Ordinance was not mentioned in the order and notice under S.61 of the Ordinance was not issued---An assessment/re-assessment order need not to be spread over several pages, but it could be as precise as one recorded in one sen­tence ---DCIT having made elaborate discussion on issue; it was totally incorrect view of Department that it was not de novo assessment on the issue of addition.

1987 PTD (Trib.) 36 and (1992) 66 Tax p.53 ref.

Rajabuddin D.R. for Appellant.

Doulatram Manager for Respondent.

Date of hearing: 31st July, 2003.

2005 P T D (Trib.) 296

[Income-tax Appellate Tribunal Pakistan]

Before Khawaja Farooq Saeed, Chairman

I. T. A. No. 180/KB of 2004, decided on 29th July, 2004.

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

----S.14 & Second Sched., Cl. (176)---Exemption---Claim for----Income from power plant installed by assessee four years prior to assessment year under consideration was exempt under Cl.176 of Second Sched. of Income Tax Ordinance, 1979---Assessee for the relevant year in addition to the income earned by him on account of generating power, declared interest earned from the security deposit with Gas Company---Said amount was also claimed by assessee as exempt contending that it was a composite business income and was not chargeable to tax ---Validity--­Only the profits and gains from electric power generation were exempt from total income and any other income, be that from interest of any kind of deposit, was not covered by provisions of Cl.176 of Second Sched. of Income Tax Ordinance, 1979---Interest income being not a composite income claim of assessee that it should have been deleted, was not within the language of law as prescribed in Cl.176 and same could not be accepted.

2004 SCMR 1319 and 2002 PTD (Trib.) 783 ref.

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

----S.14---Exemption---Common rule of interpretation of a fiscal statute which applied on all kinds of provisions was- that the law should be applied as it was---Language should not be expanded to go beyond the purpose of Legislation or to deceive the intendment ---If in a charging provision two interpretations were equally possible then one favourable to assessee should be adopted---Such rule, however, was not applicable in the case of exemption provisions---Golden rule of interpretation of provisions granting exemption was the same as in the case of charging provision i.e. to remain within the language of law---Where two constructions were possible, one favourable to the Department should be adopted.

(c) Interpretation of statutes---

---- Common rule of interpretation of a fiscal statute which applied on all kinds of provisions was that the law should be applied as it was--­Language should not be expanded to go beyond the purpose of Legislation or to deceive the intendment ---If in a charging provision two interpretations were equally possible then one favourable to assessee should be adopted---Such rule, however, was not applicable in the case of exemption provisions---Golden rule of interpretation of provisions granting exemption was the same as in the case of charging provision i.e. to remain within the language of law---Where two constructions were possible, one favourable to the assessee should be adopted.

Salman Pasha for Appellant.

Sikendar Aslam, D.R. for Respondent.

Date of hearing: 29th July, 2004.

2005 P T D (Trib.) 301

[Income-tax Appellate Tribunal Pakistan]

Before Rasheed Ahmed Sheikh, Judicial Member and Muhammad Munir Qureshi, Accountant Member

M.A. No. 10/LB of 2004, decided on 11th August, 2004.

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

----S. 221---Rectification of mistake---Applicant/assessee had requested that order rendered by Appellate Tribunal be rectified as same suffered from factual as well as legal mistakes falling within the ambit and scope of rectification---Reasons advanced for seeking rectification of order of Appellate Tribunal were that inordinate delay in recording said order had caused prejudice to applicant/assessee, not only in terms of delay in deciding issues, but also on merits---Order sought to be rectified was passed within seven months from date of hearing---Rectification of order could not be sought on that ground---Scope of rectification/amendment in Tribunal's order within the meanings S.221 of Income Tax Ordinance, 2001 revolved around the mistake if brought in its notice either by any Income Tax Authority/Commissioner (Appeals) or Appellate Tribunal which should be apparent from record---No such mistake apparent from the record could be pointed out by applicant---Application for rectification of mistake was misplaced as no mistake or error from record had been pointed out---Even otherwise same judicial forum was not vested with the powers to review its own order specially when issues involved had been discussed therein---Since Tribunal in its order had elaborately discussed issues and had made a considered decision in that behalf, no justification existed on the part of applicant to seek review of decision already made by Tribunal--­Application for rectification of order being not maintainable was rejected:

PLD 1966 SC 828; PLD 1960 (SC) (AJK) 11; 1996 SCMR 669 and 1940 MLD 1012 ref.

Shahbaz Butt for Applicant.

Muhammad Arshad, D.R. for Respondent.

Date of hearing: 5th August, 2004.

2005 P T D (Trib.) 307

[Income-tax Appellate Tribunal Pakistan]

Before Inam Ellahi Sheikh, Chairman and Muhammad Jahandar, Judicial Member

W.T.A. No.14/IB of 2004, decided on 16th March, 2004.

Finance Act (XXII of 1997)---

----S.7---Income Tax Ordinance (XXXI of 1979), S.134---Capital Value Tax ---Adjustability against wealth tax---Appeal to Appellate Tribunal--­Respondent/Assessee was an Association of Persons' and its net wealth was assessed giving rise to demand of Tax---Such assessment was set aside by First Appellate Authority with the directions to Assessing Officerto allow the credit of capital value Tax against Wealth Tax demand in accordance with provisions of law and after verification of Capital Value Tax paid'-- -Assessing Officer in the re-assessment proceedings advised assessee that the payment of Capital Value Tax was final discharge of liability and no credit could be allowed---Assessing Officer, in circumstances concluded that Capital Value Tax was not adjustable against wealth demand for the assessment year 1997-98 and refused to allow the credit---Commissioner of Wealth Tax (A), however accepted assessee's argument that First Appellate Authority had ordered to allow Capital Value Tax vide its order and directed Assessing Officer to allow Capital Value Tax---Validity---Tax paid by assessee as Capital Value Tax was not adjustable as no tax was payable in the period prior to 1-7-1997---In the first order Commissioner of Wealth Tax (A) had directed to allow adjustment of tax in accordance with provisions of law after verification---In the absence of fulfillment of said conditions Commissioner was not justified to allow credit of Capital Value Tax--­Appeal was accepted and treatment given by Assessing Officer was restored.

Dr. Tariq Mehmood, D.R. for Appellant.

Abdul Basit, F.C.A. for Respondent.

Date of hearing: 16th March, 2004.

2005 P T D (Trib.) 311

[Income-tax Appellate Tribunal Pakistan]

Before Khawaja Farooq Saeed, Judicial Member and Muhammad Munir Qureshi, Accountant Member

I.T.A. No. 3857/LB of 2001, decided on 26th July, 2004.

Income Tax Ordinance (XXXI of 1979)---

----Ss.55(1), 59(1), 59-A, 66-A & 134---Filing of return of income voluntarily---Assessment on basis of return--Powers of Inspecting Assistant Commissioner to revise Income Tax Officer's order ---Self­ Assessment Scheme---Assessment in the case was finalized under S.59-A of Income Tax Ordinance, 1979 for assessment year 2000-01 when assessee filed Return of income voluntarily under S.55(1) of said Ordinance---Total income and capital as declared by assessee as a new assessee' was accepted by Assessing Officer accepting assessee's Return under S.59-A of Income Tax Ordinance, 1979 and a 'No demand' notice was issued accordingly, however no separatewritten order' of assessment under S.59-A of Ordinance was issued---On inspection of assessment order, Inspecting Assistant Commissioner found that Return did not qualify to be accepted as total income declared was less than 1/3rd the capital declared for the year---Show-cause notice was issued to assessee calling upon him to explain why assessment should not be cancelled under S.66-A of Income Tax Ordinance, 1979---Assessee in his reply to show-cause notice explained that as assessment had been made under S.59-A and not under S.59(1) of Income Tax Ordinance, 1979, Inspecting Assistant Commissioner did not have jurisdiction to invoke provisions of S.66-A of Ordinance as those provisions could only be invoked in cases of assessments which had been finalized under S.59(1) of Ordinance/Self-Assessment Scheme while assessment in assessee's case had been finalized under S.59-A of the Ordinance ---Validity--­Section 59-A of Income Tax Ordinance, 1979 was not concerned with the processing of Self-Assessment Returns at all---When .a Return was qualified under Self-Assessment Law, it was bound to be processed under S.59(1) of Income Tax Ordinance, 1979---When the Return did not so qualify, it was to be taken up for assessment under normal law and such a return was not to be processed under S.59-A of Income Tax Ordinance, 1979---Only such Returns as had not been filed under Self ­Assessment Law could be taken up for assessment under S-59-A of Income Tax Ordinance, 1979---As return filed by assessee to all intents and purposes was a Self-Assessment Return, order passed under S.59-A of Income Tax Ordinance, 1979 was required to be treated as an order under S.59(1) of Ordinance as Income Tax officer had accepted a self ­assessment return which he could only have done if the Return was duly qualified under Self-Assessment Scheme, in other words as Income Tax Officer considered assessee's Return to be free from all disqualifications listed in Self-Assessment Scheme for 2000-01 his `acceptance' of such a return could only have been made under S.59(1) and not under S.59-A of Income Tax Ordinance, 1979---No exception could be taken to exercise of revisionary jurisdiction by Investigating Assistant Commissioner.

2003 PTD (Trib.) 2276; 2001 PTD (Trib.) 2902; 2003 PTD 1530; 1987 PTD 249 and 1991 PTD (Trib.) 812 ref.

Shahbaz Butt for Appellant.

Mehmood Jaffery, D.R. for Respondent.

Date of hearing: 19th May, 2004.

2005 P T D (Trib.) 318

[Income-tax Appellate Tribunal Pakistan]

Before Rasheed Ahmed Sheikh, Judicial Member and Muhammad Munir Qureshi, Accountant Member

M.A. No.338/LB of 2003, decided on 30th July, 2004.

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

----Ss. 156 & 136---Rectification of mistake---Miscellaneous application seeking rectification for the reason that there was inordinate delay in recording the order and receiving the same which had caused prejudice to the Revenue not only in terms of delay in deciding the issues but also on merits, as the arguments made at the time of hearing in defence, both on factual as well as legal issues had not been addressed properly in the order due to afflux of material time---Validity---Valid order had been passed within a period of six months from the date of concluding the .arguments---Department under the garb of miscellaneous application wanted to acquire another round of hearing of appeal which was not permissible under the Income Tax Ordinance, 1979 particularly, when the Appellate Tribunal had already refused to refer the question (s) of law proposed by the Department by exercising powers under S.136(1) of the income Tax Ordinance, 1979---Appropriate course available with the Department was to file the reference application to High Court in terms of S.136(2) of the Income Tax Ordinance, 1979 instead of resorting to file the miscellaneous application---Appellate Tribunal in its order had elaborately discussed the issues and had made a considered decision in this behalf---Was hardly a room or justification on the part of Department to seek review of the decision---Miscellaneous application having been found to be totally bereft of any merits, was rejected by the Appellate Tribunal.

2003 PTD 575; PLD 2003 SC 823 and PLD 1985 Kar. 95 distinguished.

(b) Income-tax-----

----Procedure---Procedure prescribed in Civil Procedure Code, 1908 was not generally applicable to the matters relating to the fiscal law while delivering the judgment---Civil Procedure Code (V of 1908), Preamble.

(c) Income-tax---

-----Judgments---Judgment could not become invalid merely for the reason that the same was given after the expiry of several months from the date of hearing of the arguments.

(d) Civil Procedure Code (V of 1908)-----

----O. XX, R.1---High Court Rules and Orders (Lahore), Vol. V, Chap. IV, R.5---Time for pronouncement of judgment---Not only the Order XX, R.1, C.P.C. or R. 5 of Chapter-IV of the High Court Rules and Orders Volume-V but also the fiscal statutes had not prescribed time for pronouncement of judgment; nevertheless, it was desirable to deliver the judgment without inordinate delay so that the justice must not only be done but manifestly appear to be done.

(e) Income-tax---

----Superior Courts are competent to declare any order passed by the subordinate Court/authority to be invalid provided it is noticed by them that certain grounds of appeal have been left undecided or the documents so furnished remained unnoticed or the order so passed was without lawful jurisdiction and not otherwise.

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

----S. 156---Income Tax Ordinance (XLIX of 2001), S. 221--­Rectification of mistakes---Scope---Scope of rectification/amendments in the Tribunal's order under S.156 of the Income Tax Ordinance, 1979 read with S.221 of the Income Tax Ordinance, 2001 revolved around the mistake if brought to its notice either by any income-tax authority, the Commissioner (Appeals) or the Appellate Tribunal which should be apparent from the record.

(g) Income-tax---

----Review---Same judicial forum is not vested with the powers to review its own order specially when the issues involved had been discussed threadbare.

Nemo for Applicant.

Ahmad Nauman Sh., I.T.P. for Respondent.

Date of hearing: 27th July, 2004.

2005 P T D (Trib.) 323

[Income-tax Appellate Tribunal Pakistan]

Before Muhammad Tauqir Afzal Malik, Judicial Member and Muhammad Munir Qureshi, Accountant Member

R. A. No. 100/LB of 2004, decided on 11th May, 2004.

Income Tax Ordinance (XXXI of 1979)---

----S. 136---Reference to High Court---Excise duty---Profit & loss expenses--Question Was whether Appellate Tribunal was right to hold that excise duty was to be debited to profit and loss account and not to manufacturing and trading account---Held; if excise duty was indeed passed on in full to the purchaser and was not relatable to inputs at all then it had no bearing on product cost and it could not be charged to the manufacturing/trading account but was required to be charged to Profit & Loss Account and if, on the other hand, excise duty was relatable to inputs /production then to the extent that it entered into product cost, it was required to be charged to the manufacturing account---Reference was refused by the Appellate Tribunal as the question formulated was not fit for reference -to High Court.

"Carter's Advanced Accounts, (p.31); (1960) 2 Tax (V-4) and I.T.A. No. 7428/LB of 1996 rel.

Bashir Ahmad Shad, D.R. for Applicant.

Nemo for Respondent.

Date of hearing: 11th May, 2004.

2005 P T D (Trib.) 326

[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. 423/IB to 429/IB of 2002, decided on 17th September, 2003.

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

----Ss.13(1)(aa), 59(1), 59-A, 61, 62, 63 & 65---Re-opening of case--­Assessments for relevant assessment years were finalized, but later on when informations with regard to certain inaccurate particulars of business and concealment/suppression of expenses were received, Assessing Officer issued show-cause notice to assessee for re-opening assessment under S.65 of Income Tax Ordinance, 1979 and sent the case to Investigating Assistant Commissioner to obtain statutory permission for re-opening of assessments which permission was accorded--­Assessing Officer on basis of such permission completed assessment ex parte under Ss.63/65 of Income Tax Ordinance, 1979---Assessee challenged re-opening of case on ground that mandatory provision in S.65(2) of .Income Tax Ordinance, 1979 whereby approval of Investigating Assistant Commissioner was required to be obtained for re­opening of case, had not been complied with ---Assessee had contended that permission' which was stated to have been obtained by Assessing Officer from investigating Assistant Commissioner could not be equated with approval, which was mandatory requirement for re-opening of case---Validity---Distinction existed between the wordspermission' and approval'---Wordsapproval' and permission' had different meanings and their impact was also quite different---In the present casepermission' only having been allowed, addition made by Assessing Officer, after seeking said permission, was not tenable in the eye of law---Very re-opening of case under S.65 of Income Tax Ordinance, 1979 by Assessing Officer fell short of mandatory requirement of law and an action of Assessing Officer was illegal and as a whole void resulting in canceling or annulling of assessment instead of setting aside case for filling up legal lacunas to remove such defects---Whole edifice of assessment order would fall to the ground due to said lacunas in processing the case and in making additions and estimation of sales--­Assessments as a whole as framed by Assessing Officer would not stand the test of law and would become liable to be annulled--­Order of first Appellate forum as well as order under Ss. 63 & 65 of income Tax Ordinance, 1979 of Assessing Officer were vacated and assessment framed by Assessing Officer would stand annulled.

(2003) 87 Tax 3 (Trib.); 2003 PTD (Trib.) 1238; Syed Mehmood Shah v. CIT 2000 PTD 3788; 1993 PTD (Trib.) 1172; 1987 PTD (Trib.) 424; 1985 PTD (Trib.)178; 1999 PTD .(Trib.) 3892; 2003 PTD (Trib.) 1121; 2003 PTD 1238 (Trib.) and (1994) 70 Tax 90 (Trib.) ref.

Mian Nadeem Ahmad for Appellant.

Qasier Iqbal, D.R. for Respondent.

Date of hearing: 17th September, 2003.

2005 P T D (Trib.) 338

[Income-tax Appellate Tribunal. Pakistan]

Before Khalid Waheed Ahmad Judicial Member and Mazhar Faruoq Shirazi, Accountant Member, R.A. No.668/LB of 2003, decided on 20th May, 2004.

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

----Ss. 136 & 156---Reference to High Court---Miscellaneous application---Reference application had become infructuous because of the reason that the Appellate Tribunal had already accepted the miscellaneous application of the assessee for the same assessment year and the same would be disposed of accordingly as per merits of the case---Reference, application was rejected by the Appellate circumstances.

Abdul Qudus for Applicant.

S. Nadeem Hassan, D.A. for Respondent.

Date of hearing: 19th May, 2004.

2005 P T D (Trib.) 339

[Income-tax Appellate Tribunal Pakistan]

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

M.A. No.209/LB of 2004, decided on 3rd August, 2004.

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

----Ss. 156 & 66-A---Rectification of mistake---Application for rectification on the ground that Appellate Tribunal did not adjudicate upon the arguments advanced which drew the force from a judgment of Appellate Tribunal---By exercising the powers of modifying the assessment order the Inspecting Additional Commissioner had passed the order---After revising the order the Inspecting Additional Commissioner could not subsequently invoke S.66-A of the Income Tax Ordinance, 1979 against its own assessment---Inspecting Additional Commissioner had become functus officio with no jurisdiction to cancel the assessment by setting aside the same---Validity--Matter referred was rectifiable under S.156 of the Income Tax Ordinance, 1979---Order was rectified by holding that order was beyond the jurisdiction of the Inspecting Additional Commissioner and thus was illegal, void ab initio which merited cancellation, thus, modifying earlier findings when the matter was remitted back to Inspecting Additional Commissioner---Assessment as finalized prior to invoking of S.66-A of the Income Tax Ordinance, 1979 was restored by the Appellate Tribunal.

2000 PTD (Trib.) 332 and 1997 PTD (Trib.) 879 rel.

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

----S. 66-A---Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order---Setting aside of assessments already modified by the Inspecting Additional Commissioner himself was definitely illegal and had no legs to stand upon in the eye of law--­Inspecting Additional Commissioner, after firstly modifying the assessment had lost the authority as well as jurisdiction under S.66-A of the Income Tax Ordinance, 1979.

2000 PTD (Trib.) 332 rel.

Shafqat Mehmood Chohan for Applicant.

Zulfiqar Ali, D.R. for Respondent.

Date of hearing: 3rd August, 2004.

2005 P T D (Trib.) 342

[Income-tax Appellate Tribunal Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member and Mazhar Farooq Sherazi, Accountant Member

I.T.A. No.2499/LB of 2004, decided on 21st July, 2004.

Income Tax Ordinance (XXXI of 1979)---

----S. 59(1)---C.B.R. Circular No.7 of 2002, dated 15-6-2002---Self­Assessment Scheme para. 9(a)(ii)---CBR Letter C. No. 7(7)/S.Asstt/ 2002, dated 17-12-2002---Self-assessment---Setting apart---Selection of case for total audit was not justified, when the High Court declared the guidelines as ultra vires on the basis of which, the Assessing Officer had selected the case and assessed the income of the assessee under normal law---Returns filed by the assessee under Self-Assessment Scheme were restored and all the subsequent proceedings by the department were vacated by the Appellate Tribunal.

2004 PTD 1 rel.

Ilyas Zafar for Appellant.

Anwar Ali Shah, DR for Respondent.

Date of hearing: 20th July, 2004.

2005 P T D (Trio.) 344

[Income-tax Appellate Tribunal Pakistan]

Before Jawaid Masood Tahir Bhatti and Rasheed Ahmed Sheikh, Judicial Members and Agha Kafeel Barik, Accountant Member

I.T.As. Nos. 1730/KB to 1733/KB of 2001, decided on 1st January, 2004.

Per Rasheed Ahmed Sheikh, Judicial Member, agreeing with Jawaid Masood Tahir Bhatti, Judicial Member. [Majority view]—

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

----S.66-A---Powers of Inspecting Assistant Commissioner to revise Income Tax Officer's order---Scope and extent---Powers of Inspecting Assistant Commissioner are quasi judicial hedged with limitation and has to be exercised subject to the same and within its scope and ambit--­Inspecting Assistant Commissioner's powers to modify/cancel or set aside the already completed assessment are circumscribed around himself and not on the basis of any information and material supplied or directions given by some other authority otherwise the sanctity accorded to the already completed assessment would smash --- Principles.

Bare reading of section 66-A; Income Tax Ordinance, 1979 clearly spells out that the powers of the IAC to invoke the provisions of this section are wholly, solely and exclusively dependent upon consideration by himself which must be based on objective basis. Criterion of reasonableness to invoke the provisions of section 66-A is not subjective but objective. Administrative decision in exercise of powers even if conferred in subjective term are to be made in good faith on relevant considerations and must be based on reasonable material evidence. The order which is sought to be revised must be erroneous, also by virtue of its being erroneous and prejudice must have been caused to the interest of Revenue. In no way section 66-A empowers the IAC to substitute his own judgment for that of the assessing officer unless the decision is held to be erroneous. Error and prejudice must manifest in the show-cause notice to be issued under section 66-A and not to establish by conducting fishing and roving enquiries subsequently. Findings of the IAC should not be merely charge-sheet of the Assessing Officer showing his incompetency and inefficiency and ought not to be in the nature of further enquiry.

The IAC cannot travel beyond and the record of the proceedings in which the order has been made. The expression "record" as has been used in section 66-A denotes record of proceedings of that particular year and not the record related to the subsequent year or any other year. If any event/material/information/report/proceeding comes into possession of the department subsequent to passing the order by the assessing officer that cannot form part of the record of that assessment proceedings to be examined by the IAC. The error as is envisaged in section 66-A is not the one which is dependent on possibility or whims or guess work but it should be actually sonic grievous error. To check quality of assessment is also not a valid reason for considering the order as erroneous and prejudicial to the interest of Revenue. The suspicion and presumption and to conduct a detailed enquiry with the motives that more revenue would be generated is, in fact, no basis to cancel or modify or set aside the already completed assessment and is against the spirit of law. This section also does not permit the IAC to assume powers on the command and dictation of any other authority including the appellate authorities. The order which is perfectly legal ought not to be disturbed under the umbrella of section 66-A. In a nutshell the IAC's powers are quasi judicial hedged with limitations and has to be exercised subject to those limitations and has to be exercised subject to the same and within its scope and ambit. Meaning thereby the IAC's powers to modify/cancel or set aside the already completed assessment are circumscribed around himself and not on the basis of any information and material supplied or directions given by some other, authority otherwise the sanctity accorded to the already completed, assessment would smash.

If assessment order had been finalized in consultation with and approval of the CIT or IAC thus both the CIT as well as IAC, in circumstances, were stripped of the powers to exercise jurisdiction under S.66A of Income Tax Ordinance, 1979.

If the assessment in a particular case is made under the supervision and with consultation of the Inspecting Assistant Commissioner (predecessor-in-office) then the successor I.A.C. is, ipso facto, debarred to revise such assessment.

Where the IAC, in a case, was involved at the time of formulating the assessment, the IAC successor in office is not at all competent to invoke the provisions of section 66-A of the Repealed Income Tax Ordinance, in such eventuality the higher officer than the IAC in the Income Tax hierarchy can step into the shoes of the IAC for the purpose of invoking section 66-A. If an assessment order is approved by the IAC, then he becomes functus officio to exercise powers under S.66A.

Initiation of proceedings under section 66A of the Income Tax Ordinance, 1979 based upon a report of any other authority negates the whole scheme of section 66A.

Involvement of IAC at the assessment stage and ultimately invocation of section 66-A by the IAC, successor-in-office was without lawful authority.

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

----S.66-A---Powers of Inspecting Assistant Commissioner to revise Income Tax Officer's order---Scope---If the Inspecting Assistant Commissioner, in a case, was involved at the time of formulating the assessment, the IAC, successor in office, was not at all competent to invoke the provisions of S.66-A of the Income Tax Ordinance, 1979 and in such and eventuality, the higher officer than the IAC in the Income Tax hierarchy, could step into the shoes of the IAC for the purpose of invoking S.66-A---Such a situation having not been catered for in S.66-A, Tribunal desired that Legislature should ponder to make suitable amendment in this behalf.

Where the IAC, in a case, was involved at the time of formulating the assessment, the IAC successor in office is not all competent to invoke the provisions of section 66-A of the Repealed Income Tax Ordinance, in such eventuality the higher officer than the IAC in the Income Tax hierarchy can step into the shoes of the IAC for the purpose of invoking section 66-A. If an assessment order is approved by the IAC, then he becomes functus officio to exercise powers under S.66A.

In the present case since the IAC was all along involved and associated in the assessment proceedings, therefore, the IAC, whether the same or the successor in office was debarred to invoke the provisions of section 66-A. This is mistaken view that only those assessments can be cancelled or modified or set aside wherein statutory approval was granted by the IAC. This point of view negates whole philosophy of section 66-A it is so because the IAC's role under this section is merely supervisory and if the supervisor is involved or associated in the finalization of assessment and he subsequently cancels or modifies or set aside that assessment order, this act of his would certainly aggravate the assessee's miseries which is not the intention of the Legislature. In such eventuality the higher authority in the Income Tax hierarchy should invoke the provisions of section 66-A rather the IAC concerned. Since, this situation is not catered for in section 66-A, the Legislature should ponder to make suitable amendment in this section.

If the IAC was involved in a case at the assessment stage, he becomes functus officio to invoke S.65 or S.66A of the Income Tax Ordinance, 1979 in that case.

If such eventuality goes on occurring then no order of the subordinate officer would attain finality. It would not only aggravate the miseries of the taxpayer but also lead to multiple series of assessments which is not the intention of the Legislature and there will be no end of litigation. The IAC has not been given free hand to invoke the provisions of section 66-A of the Income Tax Ordinance in each and every assessment/order made by the Assessing Officer. The very purport and tenor of the said section is to safeguard the interest of Revenue and for that purpose the IAC is vested with the power to revise the order of the subordinate officer where he has acted with flagrant violation of law and fact. Merely disagreeing by the IAC with the conclusion of the Assessing officer arrived at by him in the assessment order of a particular case is not warranted by law. It would also frustrate the very purpose of the said section where the successor IAC, after assuming charge, calls and examines the record of a particular case and on similar set of facts, which have already been considered by the earlier IAC and with his involvement/consultation a conscious assessment has been framed by the Deputy Commissioner of Income Tax cancels that assessment and directs fresh assessment to be made or enhances or modifies the assessment. Undoubtedly, it amounts to excess of jurisdiction which is not tenable in law and the successor IAC should refrain from invoking the provisions of section 66-A of the Income Tax Ordinance, 1979.

In a case where the IAC was associated and had supervised the assessment proceedings, that order of the DCIT cannot be termed to have been erroneously made.

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

----S.66-A---Powers of Inspecting Assistant Commissioner to revise Income Tax Officer's order---Scope--Where the IAC was associated and had supervised the assessment proceedings, that order of the Assessing Officer could not be termed to have been erroneously made.

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

----S.66-A---Powers of Inspecting Assistant Commissioner to revise Income .Tax Officer's Order---Scope---Expression "record" used in S.66-A, Income Tax Ordinance, 1979---Connotation---Inspecting Assistant Commissioner was under legal obligation to call for and examine the record of the proceedings made available at the time of finalizing the assessment and not the one which was subsequently made available---Inspecting Assistant Commissioner under S.66-A, Income Tax Ordinance, 1979 could not rely on any extraneous matter/material or could not travel beyond the record of proceedings in which the order had been made, for the purposes of canceling, modifying or setting aside-the already completed assessment---Principles.

The IAC is under legal obligation to call for and examine the record of the proceedings made available at the time of finalizing the assessment and not the one which was subsequently made available. This is a well-established practice that judgment/information/report/event/ proceeding subsequent in time cannot be made basis for invoking section 66-A---Had such practice of using subsequent judgment/ information/report is in vogue for initiating proceeding under section 66-A, then no order of the Assessing Officer would attain finality. The revisional authority/IAC under section 66-A of Income Tax Ordinance, 1979 cannot rely on any extraneous matter/material or cannot travel beyond the record of the proceeding in which the order has been made for the purposes of canceling, modifying or setting aside the already completed assessment. The expression "record" as used in section 66-A certainly denotes record of proceedings of that particular assessment year and not the record of a subsequent assessment year. In no way any other material/event/information/report/ judgment subsequent in time or proceeding subsequent to passing of the order by the assessing authority can form part of the record of that assessment proceedings to be examined by the IAC.

(e) Income-tax---

----Maxim: Audi alteram partem---Applicability---No evidence can be used against the assessee at his back.

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

----S.66-A---Powers of Inspecting Assistant Commissioner to revise Income Tax Officer's order---Scope---Where the assessment orders had been passed by the Assessing Officer after conscious application of mind and after calling various details and examination thereof; invocation of S.66-A, Income Tax Ordinance; 1979, was absolutely uncalled for--­Where the notice under S.66-A and order thereunder by the IAC were based on mere possibilities, probabilities, presumptions surmises and conjectures and without any iota of evidence while all the material and facts were duly considered by the Assessing Officer at the time of original assessment and all the relevant material and facts had been discussed and mentioned either in notices issued by the Assessing Officer during the course of proceedings under S.62 of the Ordinance or in the original assessment orders under S.62---Inspecting Assistant Commissioner had failed to appreciate such aspects and facts and circumstances of the case---Entire superstructure which had been raised in show-cause notice under S.66-A on an illegal premises and also contrary to the facts of the case must fall to the ground--Orders of the IAC in circumstances, by .no means could be considered as a correct appreciation of facts and circumstances of the case and jurisdiction under S.66-A of the Income Tax Ordinance, 1979---Such orders of the IAC had no legs to stand upon.

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

----S.66-A---Powers of Inspecting Assistant commissioner to revise Income Tax Officer's order---Scope---Assessment order passed after following case-law of the Superior Courts could not be reopened by the IAC on the basis of "solid reasons"---Principles.

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

----Ss.66-A, 23 & 28--Powers of Inspecting Assistant Commissioner to revise Income Tax Officer's Order---Scope---Capital gain---Once the Assessing Officer, after considering the relevant material available on record, and also the correct statutory law and following case-law of Superior Courts had passed the assessment order, such order could not be called erroneous---Principles.

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

---Ss.23, 27, 28 & 66-A--Capital gain---Computation---Deduction of expenses---Action under S.66-A, Income Tax Ordinance, 1979 by the IAC---Assessing Officer had considered the issue of proration of expenses and had applied his conscious mind to the issue and after considering and relying/following the judgments of Superior Courts had not prorated the expenses---Assessing Officer had disallowed certain expenses which were not related to business income---Inspecting Assistant Commissioner while taking action under S.66-A, Income Tax Ordinance, 1979 had failed to point out as to which specific expenses and to what extent had been claimed against business income under S.23, which were relate to capital gain under S.28 of the Income Tax Ordinance, 1979---Inspecting Assistant Commissioner thus had failed to discharge his onus with proof that expenses incurred in connection with capital gains had been deducted from operational business income--­No part of expenditure having been proved to have been incurred in earning capital, action of IAC could not be maintained---Principles.

(j) Income-tax---

----Exempt income and taxable income ---Proration of expenses, doctrine of---Applicability---Principles.

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

----Ss.66-A, 23, 27 & 28---Powers of Inspecting Assistant Commissioner to revise Income Tax Officer's Order-Scope ---Assessee carrying on indivisible business ---Procation of expenses---No part of the administrative and general expenses having been proved by the IAC, action in this regard by IAC under S.66-A could not be maintained--­Principles.

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

----Ss.27, 28 & Second Sched. Cl. (116)---No provision existed in the Income Tax Ordinance, 1979 or rules thereunder regarding proration of administrative selling and general expenses between the operational taxable income and exempted capital gain under Cl. 116, Second Schedule and Ss.27 & 28 of the Income Tax Ordinance, 1979--­Principles.

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

----Ss. 66-A, 23, 27 & 28---Expenses relating to capital gain or otherwise---Burden of proof---On revising/reopening the case under S.66-A, Income Tax Ordinance, 1979 heavy burden was on the IAC who alleged that the order of Assessing Officer was erroneous to establish as to which expenses and to what extent had been claimed by the assessee against normal business income which were in fact related to the capital gain---Principles.

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

----S.66-A---Powers of Inspecting Assistant Commissioner of Income Tax to revise Income Tax Officer's order---Scope---Provision of S.66A, could be invoked only when an order passed by the Assessing Officer was found to have been erroneously made and that was also prejudicial to the interest of Revenue---Error and the prejudice should manifest in the show-cause notice and not subsequently by conducting a fishing inquiry---Reasons advanced by the IAC for canceling/modifying the already completed assessment in terms of S.66-A should not be different from those given in the show-cause notice and if such occasion arose the IAC's order would have no legs to stand upon---Principles.

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

----Ss.20 & 23--Deductions---Expenditures incurred by assessee--­Reasonableness of expenditures to be judged from the point of view of the businessman and not that of revenue---Department has no business to know as to whether the assessee acted diligently or carelessly in incurring expenditures---Department or the appellate authority could not prescribe as to what expenditures the assessee should incur and under what circumstances he should incur the same---Principles.

This is none of the departmental business to know as to whether the assessee acted diligently or carelessly in incurring the expenditure. It is also not open for the department or the appellate authority to prescribe what expenditure the assessee should incur and under what circumstances he should incur the expenditure. Every businessman knows his interest best. Although motive to earn profit is an essential factor but it is not necessary that from day first the assessee should start earning profit. The expenditure is usually incurred with a view to earn profit and if extraordinary expenditure is incurred at a certain point of time that should be allowed in toto provided that is laid out wholly and exclusively' for the purpose of business. There is no ambiguity to this proportion that the expenditure, even though not directly related to earning of income, may be still admissible as deduction. The reasonableness of the expenditure has to be judged from the point of view of the businessman and not that of the Revenue.

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

----S.66-A---Powers of Inspecting Assistant Commissioner to revise Income Tax Officers Order---Initiation of provisions of S.66-A, Income Tax Ordinance, 1979 is suo motu by the IAC and not on the direction, report, information, instruction etc. of some other authority including the appellate authorities or the agency---Initiation of proceedings under S.66-A, Income Tax Ordinance 1979 at the behest of the audit party/audit note, was not maintainable---Initiation of proceedings under S.66-A, in the present case at the instance of Additional Director (Inspection) wherein the IAC was all along associated and involved in the assessment proceedings in all the years under appeal and using subsequent case-law or information which was not part of the record of those assessment years in presence of a conscious order passed by the Assessing Officer after application of mind and also after following the binding precedents, was not at all sustainable in the eye of law being merely based on presumption, surmises and conjecture---Orders by the Assessing Officer could not be branded as erroneous---Principles.

[Case Law referred].

Per Jawaid Masood Tahir Bhatti, Judicial Member; Rasheed Ahmad Shaikh Judicial Member, agreeing. [Majority view]-- [pp. 375, 377, 378, 379, 380, 381, 382, 383, 385, 386, 389, 388, 3891 Y, Z, AA, BB, CC, DD, EE; FF, GG, HH, II, JJ, KK, LL, MM, NN.

Per Agha Kafeel Barik Accountant Member Contra. [Minority view]-- [pp. 391, 392, 393] OO, PP, QQ, RR, SS, TT

M. Jawed Zakaria for Appellant.

Aqeel Ahmed Abbasi, Legal Advisor, Javed Iqbal Rana, D.R. and Ali Hasnain, D.R. for Respondent.

Date of hearing: 1st November, 2003.

2005 P T D (Trib.) 454

[Income‑tax Appellate Tribunal Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member and Raja Sikandar Khan, Accountant Member

W.T.A. No.270/LB of 2003, decided on 17th July, 2004.

Wealth Tax Act (XV of 1963)‑‑‑

‑‑‑‑Ss.2(1)(16)(24), 16(3) & 17‑‑‑Date of making valuation of assets‑‑­Re‑opening of case‑‑‑Valuation date had direct nexus with valuation of property in the Wealth Tax matter and Assessing Officer had to take the net wealth on valuation date‑‑‑Net wealth had to be determined on the valuation date and Authority could not stretch the date to fetch valuation date on the basis of assumption and presumption‑‑‑Date of valuation in the case was 30‑6‑1998, but Assessing Officer had taken valuation of stock in trade as on 15‑6‑1998‑‑‑No definite information was available with the Department that stocks were hypothecated by Assessee on valuation date i.e. 30‑6-1998 and were suppressed or concealed‑‑­Assessing Officer for forming reason to believe that Assessee had escaped assessment or had declared too low rate, must have definite information‑‑‑If Assessee had not filed return or in the return filed by him, certain' assets had been omitted or inaccurate particulars of net wealth had been submitted, even then Assessing Officer could proceed, but in such like cases also there must be definite information in possession of Assessing Officer and he should also obtain approval from I.A.C. before any assessment was reopened under S.17 of Wealth Tax Act, 1963‑‑‑For forming reason to believe regarding escaped assessment or in consequence of any information in his possession, there must be some material with the Assessing Officer and not mere ‑fancy, imagination, speculation or suspicion‑‑‑There must be nexus between that material and belief of escapement of income or wealth from assessment, there should be application of mind by Assessing Officer to such material and an inference should be based on reason drawn tentatively for escapement of assessment‑‑‑`Reason to believe' must be honest and not based on gossip, rumour or conjectures and should be on reason to believe and not on reason to suspect‑‑‑Assessing Officer in the case had not considered fact that valuation date was important in wealth tax matter which had direct nexus with valuation of property and which in the case was 30‑6‑1998, but he had re‑opened assessment on the basis of valuation of stock as on 15‑6‑1998 and had stretched his jurisdiction to fetch valuation date which could not be justified‑‑­Impugned order was vacated and original assessment was restored.

Mst. Shagufta Begum's case PLD 1989 SC 360; Messrs. Data Distributors v. D.C. PTCL 2001 CL 13; Muhammad Muzaffar Khan's case PLD 1959 SC 9; PTCL 1996 (CL) 622; 1992 PTD 739; 1990 PTD (Trib.) 1069; (2000) 82 Tax 282; (1961) 41 ITR 191; 1993 PTD 804; 1990 PTD 389; 1993 PTD 1108 = 1993 SCMR 1108; 1997 PTD 1693; and PLD 1990 SC 399 ref.

Shahbaz Butt for Appellant.

Dr. Samra Ashraf, D.R. for Respondent.

Date of hearing: 15th April, 2004.

2005 P T D (Trib.) 474

[Income‑tax Appellate Tribunal Pakistan]

Before Syed Nadeem Saqlain, Judicial Member and Javed Tahir Butt, Accountant Member

I.T.A. No.4828/LB of 2002, decided on 4th October, 2004.

Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑S.134, Fourth Sched., R.5(c)‑‑‑General Clauses Act (X of 1897), S.8(2)‑‑‑Insurance Ordinance (XXXIX of 2000), Preamble‑‑‑Addition‑‑­Confirmation of addition of excess management expenses‑‑‑Insurance Act, 1938 which imposed restriction of incurring management expenses to a limit had been repealed by new Insurance Ordinance, 2000 and said new Insurance Ordinance did not impose any such restriction‑‑­As per S.8(2) of General Clauses Act, 1897, reference in R.5(c) of Fourth Sched. to Income Tax Ordinance, 1979 with effect from assess­ment year 2000‑2001, would be construed to be Insurance Ordinance, 2000‑‑‑Since newly promulgated Insurance Ordinance, 2000 contained no saving vis‑a‑vis S.26(2) of repealed Insurance Act, 1938, R.5(c) of Fourth Sched. to Income Tax Ordinance, 1979 was not applicable for assessment year under review‑‑‑Addition made under R.5(c) of Fourth Sched. to Income Tax Ordinance, 1979 was not maintainable which was ordered to be deleted.

PTD 1985 (Trib.) 255 and Mocsa Kazimi v. K.M. Sheriff AIR 1959 Mad. 542 ref.

Dr. Ikram‑ul‑Haq for Appellant.

Sardar Jamal Ahmad Sukhera, L.A. and Dr. Amjad Iqbal, D.R. for Respondent.

Date of hearing: 9th April, 2004.

2005 P T D (Trib.) 490

[Income‑tax Appellate Tribunal Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member and Mazhar Farooq Shirazi, Accountant Member

I.T.A. No.3081/LB of 2004, decided on 9th September, 2004.

Income Tax Ordinance (XLIX of 2001)‑‑‑

‑‑‑‑Ss.114(4) & 131‑‑‑Issuance of notice to file income tax return Appeal to Appellate Tribunal‑‑‑Notice under S.114(4) of Income Tax Ordinance, 2001 was issued calling for return of income for the assessment year 1999‑2000‑‑‑Later on Assessing Officer issued notices under Ss.58 & 61 of Income Tax Ordinance, 1979‑‑‑Such was a serious contradiction which was not curable as Assessing Officer had initiated proceedings under Income Tax Ordinance, 2001, while subsequent proceedings were completed under repealed Income Tax Ordinance, 1979‑‑‑Assessing Officer would not draw powers from two different Legislations i.e. Income Tax Ordinance, 2001 and Income Tax Ordinance, 1979‑‑‑Assessing Officer having made assessment slipshod manner, assessment in a proceedings for assessment year 1999-2000 were annulled.

Muhammad Shahid Abbas for Appellant.

Syed Nadeem Hassan Shah, D.R. for Respondent.

Date of hearing: 8th September, 2004.

2005 P T D (Trib.) 504

[Income‑tax Appellate Tribunal Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member and Muhammad Akhtar Nazar Mian, Accountant Member

I.T.A. No.986/KB of 2002, decided on 3rd June, 2003.

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

‑‑‑‑Ss. 12(9), 66‑A & Second Sched., Part I, Cl. (108)‑‑‑Companies Ordinance (XLVI of 1984), Ss.235, 241, 248 & 251‑‑‑Finance Act (XXII of 1997), Preamble‑‑‑Finance Act (I of 1995), Preamble‑‑‑Income deemed to accrue or arise in Pakistan‑‑‑Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order‑‑‑‑Assessee transferred an amount to reserve for issuance of bonus shares during the year ending on 30‑6‑1997‑‑‑Inspecting Additional commissioner found that assessee was liable to tax under S.12(9) of the Income Tax Ordinance, 1979 on the reserve for bonus shares created in the balance sheet which according to him amounted to declaration of bonus shares liable to tax as on 30‑6‑1997 and enhanced/modified the assessment made by the Assessing Officer under S.62 of the Income Tax Ordinance, 1979‑‑‑Assessee pleaded that he had only transferred reserve for issue of bonus shares, from the general reserves account and it was merely a transfer entry and no bonus shares were declared, issued or paid during the period relevant to assessment year, 1997‑98‑‑‑Said bonus shares were paid in assessment year 1998‑99 in which year the exemption under Cl. 108 of Part‑I of the Second Schedule of Income Tax Ordinance, 1979 was reinserted by Finance Act, 1997 and the said provision of Cl. 108 of Part‑I of the Second Schedule of Income Tax‑ Ordinance, 1979 had exempted bonus shares from tax: which were between 1‑7‑1997 and 30‑6‑2000‑‑‑Validity‑‑‑Declaration of bonus shares took place on 21‑11‑1997 when the Annual General Meeting of the Company approved the issue of bonus shares and were issued within period of 30 days provided under S.251 of the Companies Ordinance, 1984‑‑‑Bonus shares issued between 1st day of December, 1997 to 30th June, 1995 were exempt‑‑‑Exemption was withdrawn vide Finance Act, 1995 but the exemption was again granted to bonus shares issued between 1st day of July, 1997 and 30th June, 2002 vide Finance Act, 1997‑‑­Bonus shares were issued during the period of exemption and had wrongly been subjected to tax under S.66‑A of the Income Tax Ordinance, 1979‑‑‑Declaration of bonus shares was also within period of exemption i.e. 21‑11‑1997‑‑‑Order passed under S.66‑A of the Income Tax Ordinance, 1979 was vacated and the tax levied under S.12(9) of the Income Tax Ordinance, 1979 was deleted by the Appellate Tribunal.

(1969) 20 Tax 51 (Trib.); High, Court Azad Jammu Kashmir (1984) 49 Tax 34; 1980 PTD (Trib.) 914; (1995) 72 Tax 63; (1995) 72 Tax 93 (Trib.); (1998) 977 Tax 280 (Trib.) and (1999) 79 Tax 273 (Trib.) ref.

Messrs Abbott Laboratories (Pvt.) Limited, Karachi in I.T.A. No. 573/KB of 1998‑99 rel.

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

‑‑‑‑S. 12(9)‑‑‑Income deemed to,, accrue or arise in Pakistan---Interpretation of S.12(9), Income Tax Ordinance, 1979‑‑‑Words "declared, issued or paid"‑‑‑Explanation‑‑‑Comma after the word "declared" and the word "or" between "issued and paid" means that bonus shares could not be issued unless they were declared‑‑‑Declaration of bonus shares will always be a preceding step‑‑‑If the view that "income is deemed to accrue on mere declaration" then subsequent issuance is totally immaterial for taxation‑‑‑Use of words "issued" or "paid" after declaration in S.12(9), of the income Tax Ordinance, 1979 were not meaningless‑‑‑Word "issued" had been‑used for bonus shares and "paid" had been .used for cash payment of bonus and both these words were preceded by word declaration as neither could be issued or paid without declaration.

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

‑‑‑‑Ss. 2(20)(a) & 12(9)‑‑‑Dividend‑‑‑Bonus share‑‑‑Bonus shares are dividend as defined in S.2(20)(a) of the Income Tax Ordinance, 1979 and the word mentioned there is "distribution" and not "declaration"‑‑­income on bonus shares arises when the same are distributed and distribution has the same meaning as the issuance.

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

‑‑‑‑Ss. 50(7) & 12(9)‑‑‑Deduction of tax at source‑‑‑Bonus shares‑‑­Deduction of tax on bonus shares is to be made before the issue to the shareholders and such deduction of tax is not linked with the declaration of bonus share.

Jan‑e‑Alam, I.T.P. for Appellant.

Inayatullah Kashani, D.R. for Respondent.

Date of hearing: 7th May, 2003.

2005 P T D (Trib.) 517

[Income‑tax Appellate Tribunal Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member and Mazhar Farooq Shirazi, Accountant Member

W.T.As. Nos.236/LB to 242/LB and 248/LB to 254/LB of 2004, decided on 1st November, 2004.

(a) Wealth Tax Act (XV of 1963)‑‑‑

‑‑‑‑Ss. 17A(1)(b) & 14(2)‑‑‑Time limit for completion of assessment and re‑assessment‑‑‑Notice under S. 14(2) of the Wealth Tax Act, 1963 was issued, on 5‑11‑1998 and the asses4ment order was made on 30‑6‑2003 while the Assessing Officer should have completed the assessment on or before 30‑6‑2001 as in S.17(1)(b) of the Wealth Tax Act, 1963, the time limit for completion of assessment had been provided as two years from the date of furnishing a return or a revised return‑‑‑Validity‑‑‑Returns had been filed by the assessee as on 30‑6‑2001 and assessment order had been passed on 30‑6‑2003‑‑­Under S.17(1)(b) of the Wealth Tax Act, 1963, the time limit for completion of assessment had been provided as two years from the date of furnishing of a return‑‑‑Contention of the assessee that period of two years would be counted from the date of issuing of notice or the start of proceedings, had no force, as the provision of law had, clearly mentioned that the period will start from the date of furnishing of a return‑‑‑Assessing Officer had tried to cover up the period of limitation and had passed the order on 30‑6‑2003.

(2004) 89 Tax 309 (Trib.) distinguished.

(b) Wealth Tax Act (XV of 1963)‑‑‑

‑‑‑‑Ss. 14(2) & 17(1)(a)‑‑‑Return of wealth‑‑‑Assumption of jurisdiction in different periods of time by issuing notice under S.14(2) of the Wealth Tax Act, 1963 instead of by issuing notice under S.17(1)(a) of the Wealth Tax Act, 1963‑‑‑Validity‑‑Initiation of proceedings by issuing notice under S.14(2) of the Wealth Tax Act, 1963 beyond the relevant assessment year was not valid, as assessment proceedings could not be initiated beyond the assessment year by issuing, a notice under S.14(2) of the Wealth Tax Act, 1963‑‑‑When the relevant financial year expired and no notice under S.17 of the Wealth Tax Act, 1963 was served on the assessee after the end of the assessment year, the Assessing Officer had no jurisdiction to proceed by issuing notice under S.14(2) of the Wealth Tax Act, 1963 and in consequence of that notice, the order passed was ab initio void‑‑‑Assessing Officer had no jurisdiction to pass the assessment order after issuing notice under S.14(2) and the returns filed by the assessee could not be treated as a return under S.15 of the Wealth Tax Act, 1963, but these were the returns which were not filed by the assessee suo motu or voluntarily, but were within extended time given for the compliance of notice under S.14(2) of the Wealth Tax Act, 1963 which had been held as invalid notice‑‑‑Whole superstructure built on such mistaken view would fall because basic notice under S.14(2) of the Wealth Tax Act, 1963, was illegal, invalid and void‑‑‑Assessments were annulled by the Appellate Tribunal and departmental Appeals were dismissed.

2002 PTD (Trib.) 2512 rel.

(c) Wealth Tax Act (XV of 1963)‑‑‑

‑‑‑‑S. 14(2)‑‑‑Return of wealth‑‑‑Jurisdiction‑‑‑Filing of return in response to a invalid notice did not debar the assessee from challenging jurisdiction because even consent of the assessee could not give jurisdiction to an authority which did not legally vest in it and the order passed by the said authority was void and nullity in the eye of law‑‑­Even if both the sides had agreed to wave portion of a statutory provision, the same could not confer jurisdiction, which according to the statute was not there.

2002 PTD (Trib.) 2512 rel.

Anwar Ali Shah, D.R. for Appellant (in W.T.As. Nos.236/LB to 242/LB of 2004).

Muhammad Shahid Abbas for Respondent (in W.T.As. Nos.236/LB to 242/LB of 2004).

Muhammad Shahid Abbas for Appellant (in W.T.As. Nos.248/LB to 254/LB of 2004).

Anwar Ali Shah, D.R. for Respondent (in W.T.As. Nos. 248/LB to 254/LB of 2004).

Date of hearing: 28th October, 2004.

2005 P T D (Trib.) 523

[Income‑tax Appellate Tribunal Pakistan]

Before S. Hasan Imam, Judicial Member and Imam S.A. Minam Jafri, Accountant Member

W. T. As. Nos. 15 to 17/KB of 2003, decided on 19th January, 2004.

(a) Wealth Tax Rules, 1963‑‑‑

‑‑‑‑S. 8(3)‑‑‑Wealth Tax Act (XV of 1963), Ss. 16(5) & 17‑‑‑C.B.R. Circular C. 14 (7)/IT‑6/WT‑79, dated 21‑8‑1979‑‑‑Sindh Rented Premises Ordinance (XVII of 1979), Preamble‑‑‑West Pakistan Urban Rent Restriction Ordinance (VI of 1959), Preamble‑‑‑Valuation of rented out building‑‑‑Hire‑ charges of neon sign boards included in the annual rental value for the purpose of valuation of property by the Assessing Officer was confirmed by the First Appellate Authority‑‑‑Validity‑‑­Various enactments give the expression "building" specific connotation and visualize full building let out for any purpose and includes fittings and fixtures let therewith or separately through independent agreement‑‑­While working the‑total Gross Annual Recital Value of the property the rent of the building and fixtures should be taken into consideration---­Orders of the authorities below were confirmed by the Appellate Tribunal.

(b) Wealth Tax Act (XV of 1963)‑‑‑

‑‑‑‑Ss. 16(5) & 17‑‑‑Ex parte assessment‑‑‑Service of notice‑‑‑Assessee had not denied the 'service of notices and also did not possess any reason for not filing the return of wealth in time‑‑‑Ex parte decision was correctly recorded in the case which did not warrant interference.

CIT v. M.B. Engineering (1975) 32 Tax 219 rel.

(c) Wealth Tax Act (XV of 1963)‑‑‑

‑‑‑‑Ss. 16(5) & 17‑‑‑Assessment‑‑‑Delay in assessment‑‑‑Argument pertaining to delay in assessment order which had been passed on 30‑6‑2002 instead of 25‑6‑2002 was rejected by the First Appellate Authority and the same was confirmed by the Appellate Tribunal.

(d) Wealth Tax Act (XV of 1963)‑‑‑

‑‑‑‑Ss. 3, 16(5) & 17‑‑‑Finance Act (IX of 1996), Preamble‑‑‑Charge of wealth tax‑‑‑Assessment year, 1996‑97‑‑‑Association of Persons‑‑­Finance Act, 1996 omitting the words "Association of Persons" from S.3 of the Wealth Tax Act, 1963 was in respect of income year, 1996‑97‑‑­Assessee was not liable for furnishing wealth tax return for the assessment year, 1997‑98‑‑‑In absence of specific directions regarding application of the amended provision in Finance Act, 1996, amendment would affect the assessment year 1997‑98‑‑‑Appeal for the assessment year 1997‑98 was allowed by the Appellate Tribunal as appellant was not chargeable vide S.3 of the Wealth Tax Act, 1963 for the assessment year, 1997‑98.

Athar Saeed for Appellant.

Lubna Ayub Asif, D.R. for Respondent.

Date of hearing: 17th January, 2004.

2005 P T D (Trib.) 529

[Income‑tax Appellate Tribunal Pakistan]

Before Ehsan ur Rehman, Judicial Member and Mazhar Farooq Shirazi, Accountant Member

I.T.As. Nos. 1586/LB and 1587/LB of 2002, decided on 22‑4‑2004.

Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑Ss. 66‑A & 59(1)‑‑‑Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order‑‑‑Cancellation of assessment on the ground that assessee had filed return in a circle having no territorial jurisdiction of the case and order passed under Self‑Assessment Scheme by the Assessing Officer of that circle was without jurisdiction‑‑­Validity‑‑‑Revenue once having accepted that the assessee, was entitled to the concession on fulfilling of legal requirements, the same could not be withdrawn for the only reason that the return had been filed in the previous circle‑‑‑Proceedings initiated for framing of regular assessments were declared to be without lawful authority‑‑‑Order passed under S.66A of the Income Tax Ordinance, 1979 were cancelled by the Appellate Tribunal and Assessing, Officer was directed to accept the returns under Self‑Assessment Scheme.

2003 PTD 1795 rel.

Khurshid Ahmad for Appellant.

Syed Nadeem Hassan, D. R. for Respondent.

Date of hearing: 15th April, 2004.

2005 P T D (Trib.) 534

[Income‑tax Appellate Tribunal Pakistan]

Before S. Hassan Imam, Judicial Member and S. A. M. Inam Jafri, Accountant Member

I.T.As. Nos. 1291/KB, 941/KB, 1626/KB and 914/KB of 2003, decided on 10th September, 2004.

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

‑‑‑‑Ss. 59(1), 59‑A & 65‑‑‑Issuance of IT‑30 and demand notice in absence of order in writing of original assessment under S.59‑A of Income Tax Ordinance, 1979‑‑‑Validity‑‑‑Discretion of ITO to accept return under S.59‑A-‑‑Order in writing of assessment of total income and determination of tax were requirements of S.59‑A‑‑‑No provision of deemed assessment exists in S. 59‑A as in case of S. 59(1) thereof‑‑­Assessment could be re‑opened under S.65(1)(c) of Income Tax Ordinance, 1979 on basis of deemed assessment under S.59‑A thereof relating to presumptive tax regime‑‑‑In absence of such written order under S.59‑A, additional assessment proceedings would be void ab intio and of no legal effect.

(1989) 78 Tax 205 (Trib.); 2003 PTD 1530; 2002 PTD 541 and CIT v. National Food Laboratories (1991) H.C. 869 ref.

2003 PTD 1530; 1998 PTD (Trib.) 3718; (2004) 89 Tax 533 (Trib.); 2001 PTD 1998; 2002 PTD 998 and Muhammad Siddiq v. CIT Zone‑A, Lahore 2001 PTD 1998 rel.

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

‑‑‑‑Ss. 13(a)(aa), 57 & 65‑‑‑Additional income declared in revised return filed after completion of assessment‑‑‑Initiation of additional assessment proceedings on basis of additional declared income‑‑‑Re‑assessment made on basis of income from un‑explained sources‑‑‑Validity‑‑‑Basis of re‑opening was different from original/initial basis taken for additional assessment‑‑‑Such re‑opening would be invalid as no definite information was available at the time of re‑assessment with regard to income from unexplained sources warranting addition under S.13(1)(aa) of Ordinance, 1979, which had nothing to do with facts taken as basis for a re‑opening.

1993 PTD 1108; 76 Tax 131 and 79 Tax 62 (Trib.) rel.

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

‑‑‑‑S. 65‑‑‑C.B.R.'s Circular No. 20(33)IT-3/73, dated 5‑5‑1973‑‑­C.B.R.'s Circular No.7(S)S.Asst/96, dated 21‑11‑1996‑‑‑Civil Procedure Code (V of 1908), O. V, Rr. 10, 12, 16, 17, 19 & 20‑‑‑Sindh Chief Court Rules (O.S.), Rr. 105, 107, 108, 109, 110 & 111‑‑‑Re‑opening of assessment‑‑‑Service of notice upon assessee by substituted mode (affixture) in absence of mandatory order of Assessing Officer to such effect‑‑‑No steps, taken by process‑server to effect actual service of notice on assessee or any other, person competent to receive notice on his behalf‑‑‑Report was silent with regard to place at which notice has been, affixed; persons before whom assessee had refused to receive notice; names and addresses of witnesses, who recognized place and in whose presence notice was affixed; and affixation of copy of notice on Income Tax Building‑‑‑Report not supported by affidavit nor Assessing Officer examined the process‑server‑‑‑ Validity‑‑‑Proper service of notice under S.65 of Income Tax, Ordinance, 1979 conferring jurisdiction to make additional assessment was mandatory in nature‑‑‑Mere presumption in this regard could not be made basis of service, unless service of notice was proved in accordance with S. 154 of the Income Tax Ordinance, 1979 providing for service of notice by post or in manner provided in O. V, Rr. 17, 19 & 20, C.P.C.‑‑‑Obligatory upon process‑server to serve process in a manner insuring proper and effective service of process‑‑‑No report of process‑server existed that effective service under O. V. Rr. 10, 12 & 16, C.P.C. was not possible after using all due and reasonable diligence‑‑‑Process‑server had not made effort to find out assessee by going again and again, where he was likely to be present and making enquiries about his whereabouts and follow him‑‑‑Efforts so made by process server should be stated in his report‑‑‑Temporary absence of assessee would not entitle affixation of summons‑‑‑Mandatory for the Assessing Officer to record declaration of a due service, but order sheet did not find mention of same‑‑‑Proper service of basic statutory notice under S.65 of Income Tax Ordinance, 1979 was not proved in circumstances‑‑‑Subsequent proceedings and re-assessment order were annulled for being invalid having been passed on wrongful exercise of jurisdiction.

P 1968 U 639; P 1962 Q 130; 1976 SC 422; 1979 SCMR 183; P 1967 U 1138 and P 1976 U 1521; P 1970 D 483; P 1963 Lah. 364; A 1970 M 271; P 1972 Page 133; 1971 SCMR 681; 1988 PTD 117; 1990 PTD 705; 1997 PTD 2065; 1967 PTD 189; 10 Tax 7 (Trib.); 1981 PTD 40; 1987 PTD 355 and 1995 PTD 1100 rel.

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

‑‑‑‑Ss. 61, 65 & 154(6)‑‑‑Civil Procedure Code (V of 1908), O. V. Rr.17, 19 & 20‑‑‑Service of notice on assessee under Ss. 61 & 65 of Income Tax Ordinance, 1979‑‑‑Distinction‑‑‑Service of notice under S.61 (which was restricted to filing of return only and nothing else) could not be equated with compliance of notice under S.65 as contemplated under S.154(6) of the Ordinance.

A 1970 M 271 ref.

(e) Civil Procedure Code (V of 1908)‑‑‑

‑‑‑‑O. V, R. 20‑‑‑Substituted service‑‑‑Temporary absence of person would not entitle affixation of summons.

P 1968 U 639 P 1962 Q 130; 1976 SC 422; 1979 SCMR 183 and P 1967 U 1138 ref.

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

‑‑‑‑Ss. 65, 129 & 134‑‑‑Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss. 2(3), 9 & 29‑‑‑Re‑­assessment order‑‑‑Complaint by assessee‑‑‑Federal Tax Ombudsman found no maladministration‑‑‑Appeal before Income Tax Appellate Authority and Tribunal against re‑assessment order, but not against such findings of Ombudsman‑‑‑Validity‑‑‑Appellate Authority and Tribunal were not debarred from exercising appellate jurisdiction as said powers had not been taken away under S.29 of Establishment of Office of Federal Tax Ombudsman Ordinance, 2000‑‑‑Tribunal in exercise of appellate jurisdiction could give findings as to whether conditions laid down for invoking S.65 of Income Tax Ordinance, 1979 had been fulfilled and requirements of law had been properly taken care of by department.

Shahid Pervez Jami and Muhammad Raza Merchant for Appellant (in I. T. As. Nos. 1291/KB and 941/KB of 2003).

Aqeel Ahmad Abbasi for Respondent (in I.T.As. Nos. 1291/KB and 941/KB of 2003).

Aqeel Ahmad Abbasi for Appellant (in I.T.As. Nos.1626/KB and 914/KB of 2003).

Shahid Pervez Jami and Muhammad Raza Merchant for Respondent (in I. T. As. Nos. 1626/KB and 914/KB of 2003).

Date of hearing: 21st February, 2004.

2005 P T D (Trib.) 563

[Income‑tax Appellate Tribunal Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member and Agha Kafeel Barik, Accountant Member

I.T.A. No.2327/KB of 2001, decided on 17th March, 2003.

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

‑‑‑‑Ss.13(1)(d), 13(1)(aa), 63, 62 & 132‑‑‑Income Tax Rules, 1982, R.207A‑‑‑ Constitution of Pakistan (1973), Art. 201‑‑‑Unexplained investment etc., deemed to be income‑‑‑Co‑owner/co‑sharer‑‑‑Addition made under S.13(1)(aa) of the Income Tax Ordinance, 1979 being unexplained investment was set aside by the First Appellate Authority‑‑­In second round, source of investment explained by the assessee was accepted but addition was made under S.13(1)(d) of the Income Tax Ordinance, 1979 on the ground that the declared value of the property was low, keeping in view some parallel cases ignoring the fact that department had accepted the same value declared by the other co-­owner/co‑sharer of the property‑‑‑Validity‑‑‑Not open to the Department to discriminately adopt varying valuations for distinct portions of the same plot in the hands of the different assessees when ex facie there was no disparity between the two portions‑‑‑First Appellate Authority had not followed the binding judgment of High Court‑‑‑Such tendency of ignoring or by‑passing the decisions of Superior Courts on the part of Revenue Authorities was deprecated by the Appellate Tribunal with the observation that such tendency needs to be curbed for the better administration of justice, observing discipline and maintaining the rule of consistency‑‑‑No justification existed for the addition made under S.13(1)(d) of the Income Tax Ordinance, 1979, same was deleted and both the orders of the two officers below were vacated by the Appellate Tribunal.

(2001) 83 Tax 564 rel.

Nishat Talkies v. CIT 1989 PTD 591; Rajput Metal Works v. CIT 33 Tax 1; Jaswant Rai v. CIT(A) (1978) 38 Tax 106; I.T.A. No. 3034/KB of 1993‑94; 1997 PTD (Trib.) 2383; 1988 PTD (Trib.) 494; 1997 PTD 2383 (Trib.); Jaswant Rai P. CIT(A) (1978) 30 Tax" 106; 1996 PTD 338 (Trib.); 2002 PTD 654; I.T. As. Nos. 119, 120 and 121/KB of 1999‑2000; 2001 PTD 1386; (1999) 79 Tax 35 (Trib.); 2001 PTD 1387; 1995 PTD 1170; 1995 NTR 100; 1993 PTD 952; 1986 PTD 855; PTCL 1990 CL 539; (1977) 107 ITR 477 (PB & HR); (2001) 83 Tax 132; 1996 MD 327; 1996 PTD 1088 (T); NTR 1995 Trib. 11; (1994) 69 Tax 167; 1994 PTD 371; 1989 PTD 311; PTCL 1989 CL 9 and PTCL 1997 CL 129 ref.

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

‑‑‑‑S.13(1)(d)‑‑‑Unexplained investment etc., deemed to be income---Parallel cases‑‑‑Parallel cases should be from the same locality for making addition under S.13(1)(d) of the Income Tax Ordinance, 1979.

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

‑‑‑‑S.13(1)(d)‑‑-Constitution of Pakistan (1973), Art. 201‑‑‑Uncxplained investment etc., deemed to be income‑‑‑Adoption of higher value of same property than the accepted value in the case of other co‑owner was not only against the canon of equality but also against the principles of natural justice.

(d) Income‑tax‑‑‑

‑‑‑‑Valuation of property‑‑‑Principle that the valuation of the property for wealth tax and the income‑tax purpose should be the same.

M. Jawed Zakaria for Appellant.

Inayatullah Kashani, D.R. for Respondent.

Date of hearing: 27th February, 2003.

2005 P T D (Trib.) 588

[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, decided on 28th October, 2003.

Income Tax Appellate Tribunal Rules, 1981‑‑‑

‑‑‑‑R. 34‑‑‑Same Bench to hear the application for reference‑‑­Miscellaneous application‑‑‑Limitation‑‑‑Department argued that copy of order was erroneously delivered by the Appellate Tribunal to the Commissioner of Income Tax other than the respondent‑Commissioner of Income Tax mentioned in the memo. of appeal and period of limitation would start from the date on which the copy of order was received by the respondent‑Commissioner of Income Tax‑‑‑Assessee contended that Appellate Tribunal directed the Department, to file the condonation application but when the department failed to file the condonation application, the Departmental reference application was liable to be dismissed as time‑barred‑‑‑Validity‑‑‑Copy of order was admittedly delivered in the office of the Commissioner of Income Tax other than the respondent‑Commissioner of Income Tax‑‑‑Before the expiry of limitation period, from the date of receipt of copy of order by the respondent‑Commissioner of Income Tax, application was filed‑‑‑As it was admitted position that copy of order was not properly served by the Appellate Tribunal on the respondent‑Department, therefore, the limitation started from the date when the copy of order was received by the respondent‑‑‑Order was recalled by the Appellate Tribunal and Roster Section was directed to re‑fix the reference application for re­hearing.

CIT v. Maqsood A. Razzak 2000 PTD 344 rel.

Javed Iqbal Rana, D. R. for Appellant.

Yasmeen Ajani, F.C.A. for Respondent.

Date of hearing: 28th October, 2003.

2005 P T D (Trib.) 591

[Income‑tax Appellate Tribunal Pakistan]

Before Muhammad Tauqir Afzal Malik, Judicial Member, Muhammad Munir Qureshi and Muhammad Sharif Chaudhry, Accountant Members

W.T.As. Nos. 754/LB, 1123/LB and 969/LB of 2002, decided on 17th December, 2003.

Per Muhammad Sharif Chaudhry, Accountant Member agreeing with Muhammad Tauqir Afzal Malik, Judicial Member.

Wealth Tax Act (XV of 1963)‑‑‑

‑‑‑‑S.35‑‑‑Rectification of mistake‑‑‑Stare decisis, principle of‑‑­Applicability‑‑‑Assessee, in the present case filed nil return for the purpose of Corporate Assets Tax which was accepted by the Deputy Commissioner of Wealth Tax‑‑‑Capital work in progress was not included by the assessee in the assets held liable to Capital Assets Tax and the Assessing officer had accepted the assessee's contention‑‑­Assessing Officer subsequently relying on a Full Bench decision of Income Tax Appellate Tribunal rectified his previous assessment and Capital work in progress was included in the value of the assets for charge of Capital Assets Tax; penalty and additional tax was also charged‑‑‑Validity‑‑‑Rectification action taken by the Assessing Officer on the basis of Full Bench decision of the Tribunal was illegal and therefore no Capital Assets Tax, additional tax and penalty was leviable-‑­Rectification order passed by the Assessing Officer was annulled meaning thereby that the levy of Capital Assets Tax as well as penalty and additional tax stood deleted.

PLD 1969 SC 322 fol.

1982 Tax (Trib.) 155; 2002 PTD (Trib.) 946; Income Tax Officer Central Circle‑II Karachi and another v. Cement Agencies Ltd. PLJ 1969 SC 322 and 2001 PTD (Trib.) 1052 ref.

Per Muhammad Tauqir Afzal Malik Judicial Member‑‑‑[Majority view].

1982 Tax (Trib.) 155; 2002 PTD (Trib.) 946 and Income Tax Officer Central Circle‑II Karachi and another v. Cement Agencies Ltd. PLJ 1969 SC 322 ref.

Per. Muhammad Munir Qureshi, Accountant Member‑‑‑[Minority view].

1982 Tax (Trib.) 155; (1976) 34 Tax 133 (SC. Ind); 2003 PTD (Trib.) 260; 1993 PTD 766; 2003 PTD (Trib.) 2683; 1990 PTD (Trib.) 844; 1990 PTD 868 and 1997 PTD (Trib.) 146 ref.

Nasim Akbar, F.C.A. and Haroon Ahmad, A.C.A. for Appellant (in W.T.As. Nos.754/LB and 1123/LB of 2002).

Waqar Mehmood Khilji, D.R. for Respondent (in W.T.As. Nos.754/LB and 1123/LB of 2002).

Waqar Mehmood Khilji, D.R. for Appellant (in W.T.A. No.969/LB of 2002).

Nasim Akbar, F.C.A. and Haroon Ahmad, A.C.A. for Respondent (in W.T.A. No.969/LB of 2002).

Date of hearing: 17th December, 2003.

2005 P T D (Trib.) 598

[Income‑tax Appellate Tribunal Pakistan]

Before Inam Ellahi Sheikh, Chairman and Muhammad Jahandar, Judicial Member

I.T.As. Nos.688/IB to 690/IB, 720/IB to 722/IB of 2003, decided on 8th March, 2004.

(a) Income tax‑‑‑

‑‑‑‑Trading account‑‑‑Rejection of declared trading results and fixation of sale rate higher than declared sale rate without pointing out any defects by the Assessing Officer on the plea that assessee had a history of rejection of declared trading results‑‑‑Validity‑‑‑If such a plea was accepted, then the assessee would have a claim of acceptance of declared trading results in every year once accounts were accepted in one year‑‑­In each year, the Assessing Officer had to give his reasons and confront the assessee with the defects before the results could be rejected as this was not a no account case and was the case of a limited company whose accounts were audited by a Chartered Accountant‑‑‑Only table exercise had been carried out and no effort had been made to verify the production or the sale rates available in the market or the quality of coal produced by the assessee‑‑‑Since no defect had been pointed out nor was assessee confronted on the issue, Appellate Tribunal directed to accept the declared trading results in all the years under consideration.

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

‑‑‑S. 12(18)‑‑‑Addition‑‑‑Cash credit‑‑‑Credits, though in cash, were in respect of sales subsequently made and had been received from the customers‑‑‑Addition‑‑‑Validity‑‑‑On the surface of facts, it appeared that balances had been adjusted by the close of the year and none of these transactions appeared in the balance sheet‑‑‑Assessees were also showing certain balances in the balance sheet as `advances from contractors/customers' which had not been explained and which were changing over the years and not the same in all the three years‑‑‑Appellate Tribunal set aside the issues in all the years and remanded the matter back to Assessing Officer for de novo consideration with the direction that Assessing Officer should provide the assessee another opportunity to explain and substantiate all these balances and transactions‑‑‑If necessary, the Assessing, Officer may make direct verification from the concerned parties and/or with the assessment records as the situation warranted.

Muhammad Iqbal Ahmad, D.R. for Appellant/ Department.

Anwar Ali, I.T.P. for Respondent/Assessee.

Date of hearing: 5th March, 2004.

2005 P T D (Trib.) 611

[Income‑tax Appellate Tribunal Pakistan]

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

I.T.As. Nos.2899/LB, 2900/LB, 2901/LB of 2002, decided on 21st June, 2003.

Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑S. 66‑A‑‑‑Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order‑‑‑Assessment was cancelled by the Inspecting Additional Commissioner on the ground that business was being run by the real brothers in the status of an Association of Persons but to avoid proper incidence of taxation returns were being filed separately as the assessees were utilizing sui‑gas jointly for his business and paying monthly bills collectively; they were conducting business in one premises, they were paying electricity and telephone bills jointly and employees engaged were being paid salary jointly‑‑‑Validity‑‑‑Fact that the two persons were doing business in two separate names in itself was pointer of the independence‑‑‑It was not the case of the department that both of them were partner in each business but it was that they were sharing building and expenses‑‑Two separate individuals not related to each other could have separate business at one place with sharing of electricity, telephone and employees etc. ‑‑‑Determination of Association of Persons status was only possible where one was in a position to hold in unequivocal terms, that the members were jointly sharing profit and loss of the business‑‑‑In absence of any such evidence and ultimate finding holding that two persons were doing business in the status of an Association of Persons could not be supported by the Appellate Tribunal‑‑‑Even otherwise return filed in individual status could not be converted into the status of an Association of Person‑‑‑No provision of law existed in the Income Tax under the garb of which one could hold a person doing business at one place as an Association of Persons unless one was in a position to hold that said persons were doing business jointly for the purpose of sharing profit and loss of the business‑‑‑Such factor was totally missing in the case‑‑‑Cancellation of order under S.66‑A of the Income Tax Ordinance, 1979 was highly unjustified and cancellation of order finalized earlier was disapproved by the Appellate Tribunal.

2002 PTD 1428; 1968 PTD 93; 1968 PTD 78 and 1967 PTD 160 ref.

M. Shahid Baig for Appellant.

Muhammad Asif, D.R. for Respondent.

Date of hearing: 11th June, 2003.

2005 P T D (Trib.) 615

[Income‑tax Appellate Tribunal Pakistan]

Before Muhammad Ashfaq Balouch, Judicial Member and Shaheen Iqbal, Accountant Member

I.T.A. No. 1601/KB of 2001, decided on 31st January, 2002.

Income Tax Ordinance (XXXI of 1979)‑‑‑

-‑‑Ss. 23(1)(xviii), 28 & Second Sched., Cl. (116)‑‑‑Deductions‑--computation of capital gains‑‑‑Remuneration paid to investment advisor as disallowed by the Assessing Officer‑‑‑First Appellate Authority directed to allow the same‑‑‑Department contended that First Appellate Authority was not justified in directing to allow the remuneration paid to investment advisor despite the fact that the said expenditure was also utilized on investment of capital nature and fair proportion had to be allowed‑‑‑Validity‑‑‑First Appellate Authority had given the direction after proper verification because the Assessing Officer had failed to establish nexus between the expenditure to the income from capital gain‑‑‑Order passed by the First Appellate Authority was proper and did not require any interference‑‑‑Department appeal was dismissed by the Appellate Tribunal.

I.T.A. No. 62/HQ of 1988‑89; I.T.A. No. 852/HQ of 1989‑90; I.T.A. No. 788/HQ of 1990‑91 and I.T.A. No. 1769/KB of 1991-92 rel.

Mushtaq Ahmad, D.R. for Appellant.

Syed Shabbir Ahmed Hashmi, ITP and Irshad Rizwan Siddiqui, ITP for Respondent.

Date of hearing: 29th January, 2002.

2005 P T D (Trib.) 621

[Income‑tax Appellate Tribunal Pakistan]

Before S. Hasan Imam, Judicial Member and Shaheen Iqbal, Accountant Member

I.T.As. Nos. 19721KB and 1973/KB of 2002, decided on 5th September, 2003.

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

‑‑‑‑Ss. 34, 35, 156 & Second Sched., Cl. (118‑D)‑‑‑Set‑off of losses‑‑­Exemption ‑‑‑Assessee a public limited company was enjoying exemption from tax‑‑‑Losses were declared and accepted by the department‑‑­Assessing Officer, while carrying forward brought forward losses of the preceding years in an order passed under S.156 of the Income Tax Ordinance, 1979 adjusted such brought forward losses against the exempt profit and gains ‑derived for the succeeding assessment years‑‑‑Such action of the Assessing Officer was confirmed by the First Appellate Authority ‑‑‑Assessee contended that since he had no assessable income in respect of succeeding assessment years, as the related profit and gains of these years were exempt under C1. (118‑D) of the Second Schedule of the Income Tax Ordinance, 1979, the brought forward losses could not be set off against this exempt income, which was not assessable under the provisions of the Income Tax Ordinance, 1979‑‑‑Validity‑‑‑Since the income of the assessee enjoyed exemption, such income was not to be included in assessee's assessable income‑‑‑Assessing Officer clearly fell in error in adjusting brought forward business losses against the exempt income of the subsequent assessment years as the provisions of S.35 of the Income Tax Ordinance, 1979 read with S. 34 of the Income Tax Ordinance, 1979, laid down that the brought forward losses could only be assessable income for the succeeding assessment years‑‑‑Assessing Officer and First Appellate Authority were not justified in holding the view that brought forward business losses of the assessee could be set off against its income of the succeeding assessment years which was otherwise exempt under Cl. (118‑D) of the Income Tax Ordinance, 1979‑‑‑Order of First Appellate Authority was vacated by the Appellate Tribunal and Assessing Officer was directed to rectify his assessment orders and not to set off the business losses against the assessee's exempt income.

Civil Petitions Nos.38, 156 to 180, 199 to 276, 278 to 283, 285 to 320, 323 to 411 and 518 to 524 of 2000 rel.

(1962) 46 ITR 1135 and 1999 PTD (Trib.) 1528 ref

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

‑‑‑‑Ss. 34 & 15‑‑‑Set‑off of losses‑‑‑Provision of S.34 of the Income Tax Ordinance, 1979 are 'very explicit and refer to the adjustment of the business losses assessed under one head of income against the income assessable under the‑ other heads specified in S.15 of the Income Tax Ordinance, 1979.

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

‑‑‑‑Ss. 34 & 35‑‑‑Set‑off of losses‑‑‑Assessable income‑‑‑Term "assessable income" relates only to such income, which was chargeable to tax for the year in accordance with the provisions of Income Tax Ordinance, 1979.

Jawaid Zakaria and Jan‑e‑Alam, I.T.P. for Appellant.

Zaki Ahmed, D.R. for Respondent.

Date of hearing: 4th September, 2003.

2005 P T D (Trib.) 652

[Income‑tax Appellate Tribunal Pakistan]

Before Syed Masood‑ul‑Hassan Shah, Judicial Member and Syed Aqeel Zafar‑ul‑Hassan, Accountant Member

M.As. (R) Nos.33/113 and 34/113 of 2004, decided on 17th August 2004.

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

‑‑‑‑S. 221‑‑‑Income Tax Ordinance (XXXI of 1979) S. 156, Second Sched., Part IV, Cls. (9A) and (913)‑‑Rectification of mistake‑‑­Miscellaneous application seeking rectification of the Appellate Tribunal's order on the ground that the Appellate Tribunal erred in upholding the departmental view that the assessee was obliged under the law to file an option to be assessed under the Presumptive Tax Regime and failure to file such an option rendered the assessee liable to be assessed under the normal law‑‑‑Validity‑‑‑Issue raised by the assessee did not qualify for rectification under S.221 of the Income Tax Ordinance, 2001 as no error floating on the face of the record had been identified‑‑‑Appellate Tribunal could not review or otherwise sit in judg­ment over its own orders, in the garb of rectification‑‑‑Application of the assessee was rejected by the Appellate Tribunal.

2000 PTD (Trib.) 2853; 1999 PTD (Trib.) 2289 and I.T.A. No. 4095/LB of 1994 distinguished.

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

‑‑‑S. 55 & Second Sched., Part IV, Cl. (9A)‑‑‑Return of total income‑‑­Argument that option was to be exercised at the time of filing a return under S.55 of the Income Tax Ordinance, 1979 while the assessee never had to file such a return and could not, therefore, file the said option, was fallacious‑‑‑Provision of Cl. (9A) of Part IV of the Second Schedule of the Income Tax Ordinance, 1979 made no mention of the filing of a return under S.55 of the Income Tax Ordinance, 1979 nor linked the filing of the option with the filing of a return of income‑‑‑Proviso to Cl. (9A) of Part IV of the Second Schedule of the Income Tax Ordinance, 1979 clearly stated that a declaration of option was to be furnished in writing within three months of the commencement of the income year‑‑‑Such argument was rejected by the Appellate Tribunal.

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

‑‑‑‑Second Sched., Part IV, Cl. (9A) & S. 80C‑‑‑Exemption from specific provisions‑‑‑Proviso to Cl. (9A) of Part IV of the Second Schedule of the Income Tax Ordinance, 1979 merely sets out the timing and procedure to be followed for invoking or availing the provisions of S.80C of the Income Tax Ordinance, 1979‑‑‑Failure to comply with said provisions did not negate the validity of S.80.C of the Income Tax Ordinance, 1979 itself as such it was wrong to suggest that Cl. (9A) of Part IV of the Second Schedule of the Income Tax Ordinance, 1979 was contradictory to its S. 80C and should therefore, be struck down‑‑‑No provision of law was held to be ultra. vires by the Appellate Tribunal.

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

‑‑‑‑Ss. 56 & 65‑‑‑Notice for furnishing return of total income‑‑‑Notice under S.56 of the Income Tax Ordinance, 1979 could be issued for current as well as any previous assessment year falling after the enactment of the Income Tax Ordinance, 1979‑‑‑Where an assessee had failed to file a return 'of total income in the current as well as in the previous year, the issuance of a notice under S.65 of the Income Tax Ordinance, 1979 was not required.

(2001) PTD 998 rel.

1998 PTD (Trib.) 1250 overruled.

Naveed Andarabi and Anjum Sheikh, FCA for Applicant.

Muhammad Tahir Khan, D.R. for Respondent.

Date of hearing: 17th August, 2004.

2005 P T D (Trib.) 668

[Income‑tax Appellate Tribunal Pakistan]

Before Khawaja Farooq Saeed, Chairperson

I.T.A. No.632/IB of 2004, decided on 20th October, 2004.

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

‑‑‑‑Ss. 80C(2)(a)(i), 14313s & 50(4)‑‑‑C. B. R. Circular No. 11 of 1991, dated 30‑6‑1991‑‑‑Tax on income of certain contractors and importers‑‑­Service rendered‑‑‑Washing contract (Dhobi)‑‑‑Washing contract of the assessee was proposed to be assessed under S.80C of the Income Tax Ordinance, 1979 and tax deducted thereon was proposed as final discharge ‑‑‑Assessee's claim that he was covered within the definition of services rendered' was not accepted by the Assessing Officer of definition given by the Central Board of Revenue in its Circular No. 11 of 1991, dated 30‑6‑1991‑‑‑First Appellate Authority confirmed the order of Assessing Officer by observing that assessee did not fall within the category of professionals mentioned in CI (ii) of the Para. 6 of the Central Board of Revenue's Circular No.11 of 1991, dated 30‑6‑1991 and income was to be assessed under the presumptive tax regime‑‑­Validity‑‑‑Central Board of Revenue defined the termservices rendered' by holding that it includes the services of professionals like doctors and engineers‑‑‑Definition was not restrictive and it had given a wider meaning to the connotation‑‑‑Definition of the words services rendered' included aDhobi' service; barber service etc. were also covered within said definition‑‑‑Word services rendered' having not been defined in the Income Tax Ordinance, 1979, the safe course was to adopt the normal dictionary meaning ‑‑‑Assessee was very well covered within the definition of the words'services rendered' and assessment under S.SOC of the Income Tax Ordinance, 1979 was not justified‑‑‑Assessing Officer was directed to assess the return filed by the agsessee under normal law after issuance 6f a notice under S.61 of the Income Tax Ordinance, 1979.

Black's Law Dictionary, Fifth Edition (1979) and 2001 PTD (Trib.) 2969 ref.

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

‑‑‑‑Ss. 80C(2)(a)(i), 143B & 50(4)‑‑‑C.B.R: Circular No. 11 of 1991, dated 30‑6‑1991‑‑‑Tax on income of certain contractors and importers‑‑­Service rendered‑‑‑Services include carpenter services, motor mechanic services, engineering services, hiring services, plumber, electrician etc.

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

‑‑‑‑S. 80C(2)(a)(i),‑‑‑Tax on income of certain contractors and importers‑‑‑Service rendered‑‑‑Contract‑‑‑Word `contract' is a wider connotation and services is only a part of it‑‑‑All services are a contract but every contract cannot be with regard to providing of services.

Abdul Basit, FCA for Appellant.

Tauqueer Aslam, D.R. for Respondent.

Date of hearing: 20th October, 2004.

2005 P T D (Trib.) 678

[Income‑tax Appellate Tribunal Pakistan]

Before Khalid Waheed Ahmed, Judicial Member and Mahmood Ahmad Malik, Accountant Member

I.T.As. Nos.581/IB to 583/IB of 2003, decided on 7th August, 2004

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

‑‑‑‑Ss. 66(1)(c) & 138‑‑‑Limitation for assessment in certain cases‑‑­Provision contained in Cl.(c) of S.66(1) of the Income Tax Ordinance, 1979 specifically refers to assessments having been set aside in full or in part by an order of Appellate Additional Commissioner passed under 5.132 of the Income Tax Ordinance, 1979 or an order of Appellate Tribunal passed under S.135 of the Income Tax Ordinance, 1979‑‑‑No other section dealing with appeals or revision had been mentioned in Cl. (c) of S.66(1) of the Income Tax Ordinance, 1979‑‑‑Clause (c) of S.66(1) exclusively covers the assessments which had been set aside by the First Appellate Authority or the Appellate Tribunal‑‑‑Order set aside by any other authority having appellate or revisional jurisdiction had not been specifically mentioned in Cl. (c) of S.66(1) of the Ordinance was incorrect to say that the period of limitation in case of an order of member, C.B.R. will be worked out with reference to Cl.(c) of 66(1) of the Income Tax Ordinance, 1979 simply because said clause did not refer to an order passed by Member (Judicial) Central Board of Revenue.

(b) Interpretation of statutes‑‑‑

‑‑‑‑ Plain words and patent meanings of law are to be applied and interpreted as they are, and no latent meanings are to be attached to the patent words which convey the plain and obvious meaning.

2002 PTD 388 rel.

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

‑‑‑Ss. 66(1)(b) & 138‑‑‑Limitation for assessment in certain cases‑‑­Section 138 of the Income Tax Ordinance, 1979 fell in Chapter XIII, thus provisions in respect of limitation contained in Cl. (b) of S.66(1) of the Income Tax Ordinance, 1979 would apply to order passed by the Member (Judicial) of Central Board of Revenue.

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

‑‑‑‑S. 138(5)(b)‑‑‑Revision by Commissioner‑‑‑Merger of order ‑‑‑For purpose of revisional jurisdiction under S.138 of the Ordinance Appellate. Additional Commissioner/Commissioner of Income Tax Appeals) was an authority subordinate to Central Board of Revenue‑‑­Order of revision passed by the Member (Judicial) of the Board was an order passed by an authority higher than the Appellate Additional Commissioner‑‑‑Order of Appellate Additional Commissioner got merged in the order of Member (Judicial) Central Board of Revenue.

Glaxo Laboratories Ltd. v. I.A.C. and others 1992 SCC 910 rel

(e) Merger‑‑‑

‑‑‑‑Concept‑‑‑Thing of lesser importance merges into a thing of a greater importance‑‑‑Order of higher authority absorbs or swallows up the order of a subordinate authority‑‑‑On appeal the original order merges in the appellate order.

Glaxo Laboratories Ltd. v. I.A.C. and others 1992 SCC 910 and Commissioner of Income‑tax v. Farrukh Chemical Industries 1992 SCMR 523 rel.

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

‑‑‑Ss. 66(1) & 138‑‑‑Limitation for assessment in certain cases‑‑‑ Contention of the assessee was that Member (Judicial), Central Board of Revenue had confirmed the order of Appellate Additional Commissioner and limitation would start from the date of service of order of Appellate Additional Commissioner and not the date of service of order of Member (Judicial)‑‑‑Validity‑‑‑Under S.138 of the Income Tax Ordinance, 1979 Appellate Additional Commissioner is an authority subordinate to Central Board of Revenue and order of subordinate authority got merged in the order of Member (Judicial) Central Board of Revenue‑‑­Period of limitation will be counted from the date of service of the order of the Member (Judicial), Central Board of Revenue and not from the date of service of the Appellate Additional Commissioner's order because this order got merged in the order of the higher authority.

1969 SCMR 708 distinguished.

(g) Income‑tax‑‑‑

‑‑‑‑Revision‑‑‑Merger‑‑‑Appellate order did not always merge into an order of a revision which would mean that though it was not always the case but in certain circumstances the appellate order did not get merge into an order of revision.

(h) Income‑tax‑‑­

‑‑‑‑Setting aside of an order/assessment‑‑‑When an order of assessment is set aside in appeal by an authority and a further appeal is filed against such setting aside of the order before a higher authority then the Assessing Officer should not frame re‑assessment and he should wait for the decision of the higher forum.

2002 PTD 1195 rel.

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

‑‑‑‑Ss.66(1)(c), 132 & 138‑‑‑Limitation for assessment in certain cases‑‑­Assessments framed under Ss.62/132/138 of the Income Tax Ordinance, 1979 were cancelled by the First Appellate Authority being hit by limitation on the ground that revisional order of Member (Judicial), C.B.R. under S.138 of the Income Tax Ordinance, 1979 upholding the Appellate Additional Commissioner's order was received in the office of Assessing Officer on 10‑6‑1999‑‑‑Limitation for compliance of Appellate Additional Commissioner order would be taken from the date of Member (Judicial)'s order in view of S.66(1)(c) of the Income Tax Ordinance, 1979‑‑‑Limitation for re‑assessment expired on 30‑6‑2000 whereas order had been passed on 30‑11‑2000‑‑‑Validity‑‑‑Limitation period will be considered from the date when the order of the Member (Judicial) was received by the Assessing Officer and the provisions of C1. (b) of S.66(1)of the Income Tax Ordinance, 1979 will accordingly apply‑‑­Period provided to make assessment under this clause was two years‑‑­Orders of Assessing Officer passed under Ss.62/132/138 of the Income Tax Ordinance, 1979 were within time and were not hit by period of limitation‑‑‑First Appellate Authority was not justified to cancel the assessments‑‑‑First Appellate Authority decided the appeals on the point of limitation only and had not given any finding on the facts and merits‑­Appellate Tribunal remanded the appeal to the First Appellate Authority and directed it to give findings on merits.

Dr. Muhammad Iqbal, D.R. for Appellant.

M.M. Akram for Respondent.

Date of hearing: 7th August, 2004.

2005 P T D (Trib.) 720

[Income‑tax Appellate Tribunal Pakistan]

Before Muhammad Tauqir Afzal Malik, Judicial Member and Mazhar Farooq Shirazi, Accountant Member

I.T.As. Nos.4121/LB and 4125/LB of 2004, decided on 15th October, 2004.

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

‑‑‑‑Ss. 12(12), 29(3)(b) & 66A‑‑‑C.B.R. Circular No. 14 of 1992, dated 4‑5‑1992‑‑‑Income deemed to accrue or arise in Pakistan‑‑‑Cost of acquisition, and consideration for transfer, how determined‑‑‑Value of shares‑‑‑No addition could be made in the income of the assessee on account of the alleged fair market value of the shares being higher than the' actual value of transaction as declared without first establishing that the declared value was "extremely low" as compared with the actual fair market value then getting the shares evaluated through an independent valuer appointed in terms of S.4 of the Income Tax Ordinance, 1979.

Central Insurance Company v. C.B.R. 1993 SCMR 1232; Commissioner of Income‑tax v. Muslim Commercial Bank Ltd. 2002 PTD 720 and I.T.A. No. 2138/LB of 2002 ref.

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

‑‑‑‑Ss.29(3)(b), 12(12) & 66A‑‑‑Income Tax Ordinance (XLIX of 2001), S.210‑‑‑C.B.R. Circular ‑ No.14 of 1992, dated 4‑5‑1992‑‑‑Cost of acquisition, and consideration for transfer, how determined‑‑‑Income deemed to accrue or arise in Pakistan‑‑‑Approval for determination of fair market value of shares‑‑‑Fair market value of shares was determined with the approval of Inspecting Additional Commissioner of Income Tax instead of Commissioner of Income Tax‑‑‑Validity‑‑‑Approval in terms of S.29 of the Income Tax Ordinance, 197 was given by the Additional Commissioner o€ Income Tax without any delegation of specific power under S.210 of the Income Tax Ordinance, 2001‑‑‑Fair market value of shares had been determined without mandatory approval by the Inspecting Additional Commissioner, which rendered the estimation without jurisdiction and unlawful‑‑‑Addition made under S.12(12) of the Income Tax Ordinance, 1979 by the Assessing Officer was deleted by the Appellate Tribunal.

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

‑‑‑‑Ss. 210, 239(1), 239(2), .2(13) & 2(65)-‑‑Delegation‑‑‑Under the Income Tax Ordinance, 2001, the power of Inspecting Additional Commissioner in terms of the Income Tax Ordinance, 1979 lies with the Commissioner of Income Tax who may specifically delegate this power to the Additional Commissioner under S.210 of the Income Tax Ordinance, 2001 or exercise the same himself.

Allied Motors Ltd. v. Commissioner of Income‑tax 2004 PTD 1173 rel.

Bashir Ahmad Shad, DR for Appellant.

Sajid Ijaz Hotiana for Respondent.

Date of hearing: 18th September, 2004.

2005 P T D (Trib.) 745

[Income‑tax Appellate Tribunal Pakistan]

Before Khawaja Farooq Saeed, Muhammad Tauqir Afzal Malik, Judicial Members and Amjad Ali Ranjha, Accountant Member

I.T.As. Nos. 3087/LB of 2001 and 284/LB of 2002, decided on 8th November, 2003.

Per Khawaja Farooq Saeed, Judicial Member and Muhammad Tauqir Afzal Malik, Judicial Member‑‑[Agreeing]‑‑

Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑S. 62‑‑‑Assessment on production of accounts, evidence etc.‑‑‑Sales-­Estimation of sales‑‑‑Audit of sales by Sales Tax Department ‑‑‑Assessee claimed that sales should have been accepted for the reason that same were cross checked and audited by the Sales Tax Department‑‑­Department contended that assessee's non maintenance of accounts deprived him of the right of acceptance of declared sales and Gross Profit even otherwise assessee's claim of verifiability of purchase side was not supported by other facts ‑‑‑Assessee had a history of rejection and could not be given margin of the acceptance of the sales by the Sales Tax . Department ‑‑‑Validity‑‑‑Assessee was a no account' case but it could not be said that only those sales could be ‑accepted which were supported by the books of accounts‑‑‑Audit by Sales Tax Department had some sanctity; it was a Government department, the decision of which should be respected by other Government institutions‑‑-Certain business had been subjected to sales tax on sales declared and assessed by a Government agency, and it should be given respect unless otherwise proved by the Department‑‑‑Government had decided to develop a culture of mutual trust by accepting each and every declaration of income‑‑‑Sales Tax assessment should .also be given proper respect while making income tax assessments‑‑‑Application of law through mutual trust and respect always bring happy and positive change in society, while the laws, implemented through baton or hammer create hatred and unhealthy atmosphere‑‑‑Any power granted to a person without strings leads to damage to system‑‑‑Maxim;that power corrupts and absolute power corrupts absolutely' was fully applicable on such situations‑‑‑Sales pitched by a Government agency i.e. the Sales Tax Department should be accepted without any exception; it was a Government department, which had determined the sales after going into various factors connected therein‑‑‑Sales tax had come as an additional burden but this was going ‑to help in documentation of the economy, it obviously was a progressive step‑‑‑Estimates of Sales Tax Department might not be a true picture of the actual affairs of the business, however, unless it was proved otherwise Appellate Tribunal shall go with the figure determined by the Sales Tax Department‑‑‑No reason was available for pitching the sales to a figure other than what had been determined by the Sales Tax Department without any other substantial or objective reason or proof‑­‑Since such a proof was' missing, Appellate Tribunal directed for acceptance of the declared sales being supported by the Sales Tax Audit.

M/s. Siemens A.G.'s case 1991 PTD 488 and I.T.A. No. 5100/LB of 2002 rel.

Per Amjad Ali Ranjha, Accountant Member‑‑‑[Minority view].

Muhammad Bashir Malik for Appellant., Muhammad Asif, D.R. for Respondent.

Date of hearing: 5th November, 2003.

2005 P T D (Trib.) 762

[Income‑tax Appellate Tribunal Pakistan]

Before Rasheed Ahmed Sheikh, Jawaid Masood Tahir Bhatti, Judicial Members and Amjad Ali Ranjha, Accountant Member

W.T.As. Nos. 1517/LB to 1519/LB of 2001, decided on 10th September, 2002.

Per Amjad Ali Ranjha, Accountant Member [Minority view]‑‑‑

Wealth Tax Act (XV of 1963)‑‑‑

‑‑‑‑S. 17‑B‑‑‑C.B.R. Circular No. 11 of 1994, dated 17‑7‑1994‑‑‑Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order‑‑‑Agricultural land‑‑‑Assessments were cancelled by the Inspecting Additional Commissioner on the ground that land falling within the municipal limits could not be treated as "agricultural" and directed the Assessing Officer to make proper inquiries and apply proper Deputy Collector Rates for evaluating the properties claimed by the assessee as "agricultural"‑‑‑Validity‑‑‑Assessments had been completed without proper inquiries‑‑‑Definite inquiries were required to be conducted to ascertain whether a particular piece of land in a particular Chak was to be treated as agricultural, commercial or residential‑‑‑Case needed proper inquiries and did not show any reason for interference in the order of the Inspecting Additional Commissioner‑‑‑Enquiries be made to arrive at a proper conclusion as to whether disputed part of the land would be treated as "agricultural" and if so why, and what parts were to be treated as commercial or residential for application of commercial/ residential rates‑‑‑Appeal was dismissed.

Wealth tax‑‑‑

‑‑‑‑Land‑‑‑Determination of status‑‑‑Principles‑‑‑General character of the land, has to determine whether it is agricultural or not, and the actual use to which it is put at a particular point of time is of importance only, insofar as it throws light on the general nature or character of land‑‑­Capacity of the land for being put to agricultural use must be. regarded as the sole exclusive test for deciding the general nature or character of land namely whether it is "agricultural" or not.

Per Rasheed Ahmed Sheikh, Judicial Member; Jawaid Masood Tahir Bhatti, Judicial Member, agreeing [Majority view]‑‑‑

(a) Wealth Tax Act (XV of 1963)‑----

‑‑‑‑S. 17‑B‑‑‑C.B.R. Circular No.11 of 1994, dated 17‑7‑1994‑‑‑Powers of Inspecting Additional Commissioner to revise Deputy. Commissioner's order‑‑‑Agricultural land‑‑‑Assessments were cancelled by the Inspecting Additional Commissioner on the ground that land falling within the municipal limits could not be treated as "agricultural" and directed the Assessing Officer to make proper inquiries and apply proper Deputy Collector rates for evaluating the properties claimed by the assessee as "agricultural"‑‑‑Validity‑‑‑Nothing was available on record wherefrom it could be suggested that invocation of S. 17‑B of the Wealth Tax Act, 1963 was justified‑‑‑Facts vividly spelled out that the Inspecting Additional Commissioner had resorted to check quality of the order passed under SAW) of the Wealth Tax Act, 1963‑‑‑Status of land was held by the Assessing Officer to be agricultural after appraisal of "Farad Jamma Bandi and Khasra Girdowari"‑‑‑Assertion of Inspecting Additional Commissioner that the land was situated within the Municipal Corporation limits and had been transformed into urban residential area and the Assessing Officer could not make any effort whatsoever to physical ascertain that the land was non‑agricultural, would not change the character of the land of being agricultural unless otherwise provided‑‑‑Inspecting Additional Commissioner exercised the jurisdiction under S: 17‑B of the Wealth Tax Act, 1963 without bringing home the precise erroneousness in the assessment order rather the entire structure for cancellation of already completed assessment had been built up without quantifying the exact erroneousness which resulted into loss of revenue‑‑‑Inspecting Additional Commissioner had exercised jurisdiction under S. 17‑B of the Wealth Tax Act, 1963 on mere probabilities and supposed erroneousness in assessment order that land owned by the assessee, being situated in municipal limits had been developed into residential area and ultimately Assessing Officer was directed to make an enquiry and to apply D.C. rate for evaluating the land claimed by the assessee co‑agricultural‑‑‑Such observation lacked objective basis to exercise revisional powers by revising authority, reason being that Inspecting Additional Commissioner himself was not definite that status of the ‑land was agricultural or non‑agricultural‑‑‑Had it been so the Inspecting Additional Commissioner would have certainly directed the Assessing Officer to apply residential or commercial rate of law notified for the class in which the assessee's land was falling‑‑‑Conducting enquiry to ascertain status of land meant that issue .in hand was in the fluid form and also suffered from substantial material to hold the land to be non‑agricultural‑‑‑Provisions of S.17‑B of the Wealth Tax Act, 1963 had not been lawfully exercised by the Inspecting Additional Commissioner.

(b) Wealth Tax Act (XV of 1963)‑‑‑

‑‑‑‑S. 17‑B‑‑‑Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order‑‑‑Mere disagreement by the Inspecting Additional Commissioner with the Assessing Officer at the result of assessment was not at all a genuine reason for invoking the provisions of S. 17‑B of the Wealth Tax Act, 1963.

1997 PTD (Trib.) 902 rel.

(c) Wealth Tax Act (XV of 1963)‑‑‑

‑‑‑‑S. 17‑B‑‑‑Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order‑‑‑Assumed facts‑‑‑Objective basis‑‑‑ Provision of S.17‑B of the Wealth Tax Act, 1963 in no way could be invoked on assumed facts unless objective basis were not brought on record which condition was sine qua non for doing so.

(d) Wealth Tax Act (XV of 1963)‑‑‑

‑‑‑‑S. 17-B‑‑‑Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order‑‑‑Jurisdiction‑‑‑Assessment order pre­ judicial to the interest of revenue itself would not be enough, to vest the Inspecting Additional Commissioner with the powers of suo motu revision in the absence of requirement of erroneousness of assessment‑‑­ If an order is erroneous but not prejudicial to the interest of Revenue even then the powers of suo motu revision of the order cannot be exercised.

(e) Wealth Tax Act (XV of 1963)‑‑‑

‑‑‑‑S. 17‑B‑‑‑Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order‑‑‑Jurisdiction-‑‑Every erroneous order could not be the subject‑matter of revision because the second ingredient i.e. prejudicial to the interest of Revenue must exist while exercising the powers under S. 17‑B of the Wealth Tax Act, 1963‑‑‑Simultaneous existence of the two conditions precedent for exercising the revisional powers by the Inspecting Additional Commissioner must exist to enable him to initiate proceedings under S.17‑B. of the Wealth Tax Act, 1963‑‑­Existence of certain objective basis/facts must be satisfied prior to exercising such powers‑‑‑Some prima facie material must exist on record to show that the tax which was lawfully exigible had not been imposed or that by the application of the relevant statute, on an incorrect or incomplete interpretation, a lesser tax than what was just had been imposed‑‑‑Assessment made by the Assessing Officer, acting in accordance with law, in no way, could be branded to be erroneous by the Inspecting Additional Commissioner simply because according to him the order should have been written more elaborately.

(f) Wealth Tax Act (XV of 1963)‑‑‑

‑‑‑‑S. 17‑B‑‑‑Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order‑‑‑Jurisdiction‑‑‑Where an order was only erroneous but not prejudicial to the interest of Revenue or was prejudicial to the interest of Revenue but not erroneous, the revisional jurisdiction in S.17‑B of the‑ Wealth Tax Act, 1963, could not be invoked.

(1989) 21 Tax 51 (Trib); (1984) PTO 137 (AJK H.C.); 1994 PTD 659 (Bombay H.C.)‑and WTA No.767/LB/1996, dated 22‑2‑1997 rel.

(g) Wealth Tax Act (XV of 1963)‑‑‑

‑‑‑‑S.17‑B‑‑‑Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order‑‑‑Jurisdiction‑‑Cancellation of assessment on surmises and conjectures‑‑‑Inspecting Additional Commissioner had cancelled the assessment by holding the same to be erroneous and prejudicial to the interest of Revenue but on the other hand simply proceeded to ask the Assessing Officer to make proper enquiries to ascertain as to whether the land owned by the assessee was agricultural or otherwise and proper D:C. rates should be applied thereafter‑‑­Inspecting Additional Commissioner, was himself not sure that the assessment order was erroneous which would mean that cancellation thereof was a result of surmises and conjectures.

(h) Wealth Tax Act (XV of 1963)‑‑‑

‑‑‑‑S. 17‑B‑‑‑C.B.R. Circular No.11 of 1994, dated 17‑7‑1994‑‑‑Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order‑‑‑Status of "agricultural land" was determined by the Assessing Officer after obtaining "Fard Malkiat and Khasra Girdawari"‑‑­Assessments were cancelled by the Inspecting Additional Commissioner on the ground that land‑ fell within the municipal limits could not be treated as "agricultural" and directed the Assessing Officer to make proper inquiries and apply proper Deputy Collector rates for evaluating the 'properties claimed by the assessee as "agricultural"‑‑‑Validity‑‑‑List of rates of land notified by the Deputy Collector categorized the area, in which the asses see's land fell in the three separate and distinct nomenclature i.e. residential, commercial and agricultural‑‑‑Such factum clearly suggested that part of the land falling in those Chaks was still under cultivation‑‑‑Observation of Inspecting Additional Commissioner that all Chaks were situated within municipal limits and had been transformed into urban residential areas and D.C. had fixed per Marla rate of land of those Chaks for stamp duty purposes, therefore, value of land be valued on the basis of D.C. rates was self belied by the fact that separate rate of agricultural land falling in municipal limits had been notified by the Deputy Collector‑‑‑" Fard Malkiat and Khasra Girdawari" showed that the assessee's land was under cultivation anal was holding .the status of "agricultural" land‑‑‑Inspecting Additional Commissioner's action in cancelling the assessment in terms of S. 17‑B of .the Wealth Tax Act, 1963 could not be held to be legally sustainable‑‑‑Sufficient material was available before the Assessing Officer to hold that the assessee's land was agricultural while the Inspecting Additional Commissioner had acted in flagrant violation of law in cancelling the assessment for the reasons that the provisions of S. 17‑B had been invoked in the case only to check quality of the assessment order‑‑‑Inspecting Additional Commissioner's action, in fact, sounded based on his personal dissatisfaction of the manner in which the assessment was framed which did not provide any justification for exercising jurisdiction under this section, hence, cancellation of the already completed assessment in such circumstances was neither permissible nor tenable in law‑‑‑Simultaneous existence of the two conditions precedent for invoking the provisions of S.17‑B of the Wealth Tax Act, 1963 were missing‑in the case which were sine qua non to do so, thus exercising of revisional jurisdiction by the Inspecting Additional Commissioner was nullity in the eye of law‑‑­Exercise of statutory powers under S.17‑B of the Wealth Tax Act, 1963 was dependent upon availability of objective basis on record as well as quantifying loss of revenue which raked in the case‑‑‑Initiation of proceedings under S.17‑B without presence of objective basis was void ab initio illegal‑‑‑Assessee's appeal was accepted by the Appellate Tribunal.

2002 PTD (Trib.). 1192; I.T.As. Nos. 553/KB & 554/KB of 1999‑2000; (1975) 32 Tax 157; W.T.A. No. 767/LB of 1996; 1997 PTD (Trib.) 902; (1989) 21 Tax 51 (Trib); 1984 PTD 137; 1994 PTD 659; W.T.A. No.767/LB of 1996; (2002) 45 Tax 193 (Trib.); 2004 PTD (Trib.) 1071; 2004 PTO 330 and (1997) 75 Tax 17 (Trib.) ref.

Muhammad Bashir Malik for Appellant.

Mian Javed‑ur‑Rehman, D.R. for Respondent.

Date of hearing: 7th September, 2002.

2005 P T D (Trib.) 786

[Income‑tax Appellate Tribunal Pakistan]

Before Ehsan‑ur‑Rehman, Judicial Member and Muhammad Sharif Chaudhry, Accountant Member

I.T.A. No.5628/LB of 2002, decided on 4th September, 2004.

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

‑‑‑‑Ss. 156, 65 & Second Sched., Cl. (172)‑‑‑C.B.R. Circular No. 13 of 1985, dated 22‑12‑1985‑‑‑C.B.R. Circular No. 14 of 1985, dated 22‑12‑1985‑‑‑Rectification of mistake ‑‑‑Assessee, instead of filing appeal against the order passed under section 65 of the Income Tax Ordinance, 1979, moved rectification application claiming set off additions made to his income against investment made in SNF Bonds under the whitening Scheme of Central Board, of Revenue‑‑‑rectification application was rejected by the Assessing Officer‑‑‑Representation made to Inspecting Additional Commissioner was also' rejected‑‑‑Appeal against such rejection was filed before First Appellate Authority which .was also rejected‑‑‑Appellate Tribunal remanded the case to First Appellate Authority with certain directions for fresh adjudication after hearing the assessee and Assessing Officer‑‑‑First Appellate Authority directed the Assessing Officer to comply with the judgment of High Court ‑‑‑Validity­‑‑First Appellate Authority had not considered and decided the issues involved in accordance with instructions of Income Tax Appellate Tribunal rather had merely followed the order of the High Court about which the Supreme Court had observed that it should be ignored‑‑‑Order of First Appellate Authority was set aside for de novo action by the Appellate Tribunal‑‑‑Supreme Court having directed that order of the High Court should not be followed and the appeal should be decided on merits, the First Appellate Authority should have decided the issues raised in appeal on merits without being influenced by the order of the High Court‑‑‑First Appellate Authority should summon the record and examine the declaration of SNF Bonds and hear the assessee and the Assessing Officer and consider their view points‑‑‑Claim made by the assessee regarding set off of assessed income against SNF Bonds should not be rejected merely on technical grounds and frivolous objections‑‑‑If the claim was in accordance with Cl. (172) of the Second Schedule of the Income Tax Ordinance, 1979 and C.B.R. Circular Nos. 13 & 14 of 1985, dated 22-12‑1985, then the claim should be allowed fully without any hesitation. \

1989 PTD 544 = PLD 1989 SC 360; 1997 PTD (Trib.) 879; PLD 1995 SC 423; PLD 1978 SC 190; 1993 SCMR 39; 1990 PTD 943; 1996 PTD 273; (2001) SCMR 1001; ITAT 2002 PTD 2629; PLD 1970 SC 93; PLD 1990 SC 1156 = 1990 PTD 768 and PLD 1998 SC 64 ref.

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

‑‑‑‑S.156 & Second Sched., (C1. 172)‑‑‑C.B.R. Circular No. 13 of 1985, dated 22‑12‑1985‑‑‑C.B.R. Circular No. 14 of 1985, dated 22‑12‑1985‑‑­Rectification of mistake‑‑‑Limitation‑‑‑Period prescribed under S.156 of the Income Tax Ordinance, 1979 was not applicable to matter of adjustment/set off of untaxed income against income and assets declared under whitening scheme of the Government of Pakistan introduced in the form of SNF Bonds which were exempt under C1. 172 of the Second Schedule of the Income Tax Ordinance, 1979 and C.B.R. Circular Nos. 13 & 14 of 1985, dated 22‑12‑1985.

Mian Ashiq Hussain for Appellant.

Muhammad Zulfiqar Ali, D.R. and Shahid Jamal Khan, L.A. for Respondent.

Date of hearing: 4th September, 2004.

2005 P T D (Trib.) 805

[Income‑tax Appellate Tribunal Pakistan]

Before Muhammad Tauqir Afzal Malik, Judicial Member and Muhammad Munir Qureshi, Accountant Member

M.As. Nos.391/LB to 393/LB of 2003, decided on 13th November, 2004:

Wealth Tax Act (XV of 1963)‑‑‑

‑‑‑Ss. 35, 17‑B & 10(4)‑‑‑Rectification of mistake ‑‑‑Assessee contended that Inspecting Additional Commissioner exercised revisional powers under S. 17‑B of the Wealth Tax Act, 1963 to revise assessment orders passed by Assistant Commissioner of Wealth Tax 'who was not subordinate to him‑‑‑Inspecting Additional Commissioner could not pass such order without getting the orders of transfer of jurisdiction under S.10(4) of the Wealth. Tax Act, 1963‑‑‑Such assumption of jurisdiction over the case was a mistake apparent on the face of record‑‑Validity‑‑­Department had not been able to produce any order through which transfer of jurisdiction under S.10(4) of the Wealth Tax Act, 1963 had been secured in order to give revisional powers under S. 17‑B of‑the Wealth Tax Act, 1963 where the Inspecting Additional Commissioner had passed the order ‑‑‑ passed by the Appellate Tribunal were recalled and consequently, the orders of assessment passed under S. 17‑B of the Wealth Tax Act, 1963 were cancelled by the Appellate Tribunal.

PLD 2002 SC 208 rel.

Mian Ashiq Hussain for Appellant.

Bashir Ahmad Shad, D.R. for Respondent.

Date of hearing: 13th November, 2004.

2005 P T D (Trib.) 807

[Income‑tax Appellate Tribunal Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member and Mazhar Farooq Sherazi, Accountant Member

I.T.As. Nos.910/LB of 2003, 203/LB of 2001 and 2536/LB of 2003 decided on 21st September, 2004.

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

‑‑‑‑S. 62‑‑‑Assessment on production of accounts, etc.‑‑‑Estimation of sales‑‑‑Assessing Officer, on the basis of local enquiries, issued a detailed notice to assessee under S.62 of the Income Tax Ordinance, 1979 whereby the assessee was confronted on various issues‑‑‑Assessing Officer, after detailed reasons, rejected the declared version and estimated the sales while various expenses claimed in the Profit and Loss Account were curtailed‑‑‑Round addition was also made in the assessment order‑‑‑Contentions of the assessee were that he was a manufacturer of spare parts for tractors which were supplied to tractor companies and Pakistan Army and were totally verifiable and were accepted in the past; that sales were subject to levy of sales tax; that gross profit rate declared was the highest in the line of business that; reply to discrepancieswas not objected to which was tantamount to acceptance of explanation and that objection was made regarding explanation offered in respect of over‑stated stocks or variance in sales and bank deposits, ‑loan figures etc. thus, addition should be deleted‑‑­Validity‑‑‑Contentions made by the assessee had force considering the ambient circumstances and past history‑‑‑Round addition made and additions under the headdiscount in sales' were deleted and it was directed by the Tribunal that the sales/GP rate declared by the assessee should be accepted for all the assessment years under appeal.

2001 PTD 2938; 1995 PTD (Trib.) 1369; (1995) 51 Tax 11; 1994 PTI) (Trib.) 586 and 1994 SCMR 229 rel.

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

‑‑‑‑S. 62‑‑‑Assessment on production of accounts, etc. ‑‑‑Estimation of sales‑‑‑Unless defects are noticed in the account books maintained by an assesses the electricity and sui gas consumption cannot be made the basis for estimation of sales.

(1995) 51 Tax 11 rel.

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

‑‑‑‑S. 62‑‑‑Assesgment on production of accounts, etc. ‑‑‑Estimation of sales‑‑‑If collateral record supports the declared results then the Assessing Officer should accept them.

1994 SCMR 229 rel.

Anwar Ali Shah, D.R. for Appellant.

Mian Ashiq Hussain and Amir S. Khan for Respondents.

Date of hearing: 29th July, 2004.

2005 P T D (Trib.) 814

[Income‑tax Appellate Tribunal Pakistan]

Before Rasheed Ahmed Sheikh, Judicial Member

I. T. A. No. 1921/LB of 2004, decided on 25th November, 2004.

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

‑‑‑S. 62‑‑‑Income Tax Rules, 1982, Rr. 28 & 29‑‑‑Assessment on production of accounts, etc.‑‑‑Assessee a medical practitioner‑‑­Assessing Officer rejected declared receipts on the ground that complete identifying particulars of the patients were lacking, corollary of which was that the declared receipts remained unverifiable being mostly on cash basis‑‑‑Validity‑‑‑Since the assessee was maintaining books of accounts and had a history of acceptance of declared receipts, the cash receipts and the cheques received in a day were deposited in the Bank, the declared receipts could not be rejected merely on conjectures and surmises unless a finding of fact was recorded that on verification, the books of accounts disclosed some defects or discrepancies which could not be reasonably explained‑‑‑Once a particular method of accounting had been adopted and found helpful determining profit on the basis of such accounting system, the declared receipts could not be rejected in absence of any glaring defects or discrepancy pointed out therein‑‑­Assessee's declared receipts merited to be accepted in circumstances.

(1984) 51 Tax 11 rel.

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

‑‑‑‑S. 62‑‑‑Assessment on production of accounts, etc,‑‑‑Book results could not be disbelieved on suspicion unless proved otherwise by adducing substantial material on record, which should be more than mere suspicion.

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

‑‑‑‑S. 62‑‑‑Assessment on production of accounts, etc. ‑‑‑Assessing Officer was not fettered by the technical rules of evidence and pleadings and he was entitled to act on material which might not be accepted as an evidence in a Court of law.

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

‑‑‑‑S. 62‑‑‑Assessment on production of accounts, etc.‑‑‑While formulating the assessment the Assessing Officer was not vested with the powers to make pure guesswork and also to make assessment without reference to any evidence or any material at all.

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

‑‑‑‑S. 62‑‑‑Assessment on production of accounts, etc.‑‑‑Cash receipts‑‑­Estimation of receipts‑‑‑To receive cash from the patients on extending medical services to them was a hard fact of life but if such receipts were corroborated with other enforceable material evidence then there hardly arises any justification to estimate the receipts.

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

‑‑‑‑S. 62‑‑‑Assessment on production of accounts, etc.‑‑‑Method of accounting‑‑‑Once the Assessing Officer in the previous years having, accepted method of accounting adopted by the assessee and having found it possible to deduce and determine the receipts, therefrom, he could not reject the same in the subsequent assessment year.

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

‑‑‑‑Ss. 24 & 62‑‑‑Deductions not admissible‑‑‑Entertainment account‑‑­Disallowance‑‑‑ Expenses on entertainment evolved 1.5 % of the total declared receipts‑‑‑Assessing Officer was directed to delete the entire addition as claim was reasonable.

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

‑‑‑‑Ss. 24 & 62‑‑‑Deductions not admissible‑‑‑Advertisement account‑‑­Verifiable expenses‑‑ ‑Addition restricted by the First Appellate Authority in advertisement account against disallowed items stood deleted by the Appellate Tribunal as the claim was open to verification but the Assessing Officer had not put any endeavour to verify the same.­

Zulfiqar Khan for Appellant.

Mustafa Ashraf, D.R. for Respondent.

Date of hearing: 20th October, 2004.

2005 P T D (Trib.) 819

[Income‑tax Appellate Tribunal Pakistan]

Before Zafar Ali Thaheem, Judicial Member and Mazhar Farooq Shirazi, Accountant Member

I.T.As. Nos.3893/LB, 3892/LB, 3472/LB, 3473/LB of 1996, 1271/LB of 2003, decided on 23rd August, 2003.

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

‑‑‑‑Ss. 62 & 80‑D‑‑‑Assessment on production of accounts, etc. ‑‑‑Income from construction of town houses‑‑‑Application of Gross Profit rate on sale of houses and application of provisions of S.80‑D of the Income Tax Ordinance, 1979 on such sales‑‑‑Validity‑‑‑Since in the immediately preceding year, Gross Profit rate had not been applied, application of Gross Profit rate for the year under consideration was quite unjustified‑‑­Action of both the authorities below was declared contrary to law‑‑­Appeal preferred by the assessee was accepted and Gross Profit rate applied was deleted by the Appellate Tribunal.

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

‑‑‑‑Ss. 62 & 13‑‑‑Qanun‑e‑Shahadat (10 of 1984)‑‑‑Income Tax Rules, 1982, R. 207A‑‑‑Assessment on production of accounts, etc. ‑‑‑Addition‑­Sale price of plot declared according to registered sale‑deed was enhanced by the Assessing Officer on estimated basis‑‑‑Validity‑‑­Department itself had accepted the sale price as declared by the assessee in cases of purchasers of the properties who were also taxpayers whereas the same had been rejected in case of assessee which was quite unjustified‑‑‑Since sale price declared by the assessee was supported by the registered sale‑deed and was also more than the rates fixed by the District Collector , its acceptance by the First Appellate Authority was justified‑‑‑Order of the First Appellate Authority was upheld by the Appellate Tribunal.

1993 PTD 206; 1993 SCMR 1108 = 1993 PTD 1108; NTR 91 Trib. 138 and 1999 PTD (Trib.) 8 rel.

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

‑‑‑‑S. 80‑D‑‑‑Minimum tax on income of certain persons‑‑‑Sale of immovable property‑‑‑Application of S. 80‑D of the Income Tax Ordinance, 1979‑‑‑Contention of the assessee was that provisions of S.80‑D of the Income Tax Ordinance, 1979 were not applicable because the immovable properties were not covered by the definition of "goods"‑‑‑Validity‑‑‑Word "goods" revealed that the immovable properties were not covered by the provisions of S.80D of the Income Tax Ordinance, 1979 as such no minimum tax was chargeable‑‑‑Orders passed by both the authorities below on the issue were vacated and appeal of the assessee was accepted.

(1999) 80 Tax 262 rel

(d) Income Tax Ordinance (XXXI of 1979)

‑‑‑‑S. 62‑‑‑Assessment on production of accounts, etc. ‑‑‑Commission‑‑­Assessing Officer rejected commission receipt on sale of P.O.L. being not supported by books of accounts‑‑‑Validity‑‑‑Assessing Officer was quite unjustified in discarding declared version of the assessee in respect of commission without ascertaining the‑veracity of the same from the principal‑‑‑Since petroleum products were purchased and sold on the rates fixed by the Government and the payments were made through bank how could unfair means be adopted for earning more commission against the rates fixed by the Government‑‑‑Assessing Officer was directed to accept the declared version of the assessee in respect of commission on sales of P.O.L.

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

‑‑‑‑Ss. 24 & 62‑‑‑Deductions not admissible‑‑‑Add back ‑‑‑EOBI/Social Security‑‑‑Addition was made out of, staff salaries for want of complete details and payment of EOBI/Social Security ‑‑‑Assessee contended that details required by the Assessing Officer were not applicable because proper salary register had been maintained‑‑‑While disallowing staff salaries 'the Assessing Officer was bound to confront the assessee with specific defects but he did not do so‑‑‑No such addition had been made in the earlier assessments‑‑‑Validity‑‑‑Before making addition Assessing Officer must have confronted the assessee with proposed treatment by pointing out specific defects in the salary register maintained by the assessee company‑ ‑‑Action of both the authorities below was contrary to history because no such addition had been made in the earlier years‑‑­Addition made out of staff salaries was deleted by the Appellate Tribunal being unjustified.

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

‑‑‑‑Ss. 24 & 62‑‑‑Deductions not admissible‑‑‑Add back under the head administrative heads as well as Profit and Loss expenses being unverifiable‑‑‑Validity‑‑‑Expenses claimed had been curtailed on the basis of unverifiable nature but not a single instance of unverifiability had been quoted in the body of assessment order‑‑‑Unjustified treatment meted out by the Assessing Officer was upheld by the First Appellate Authority merely on stock phrases which was not sustainable in the eye of law as the issue was disposed of in an arbitrary manner by both the authorities below‑‑‑Some relief under such heads was allowed by the Appellate Tribunal.

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

‑‑‑‑Third Sched., R. 7(b)(i)‑‑‑Disposal of assets and treatment of resultant gains or losses‑‑‑Addition in income arising out of sale of fixed assets without pointing out defects in the account by using general phrases‑‑‑Validity‑‑‑Version of assessee was convincing as his contentions carried legal weight that no defects were pointed out in the accounts maintained by him and the treatment of the Assessing Officer was based on stock phrases‑‑‑First Appellate Authority had ‑also not appreciated the facts in true perspective as it ignored the settled law on the issue under review‑‑‑Appeal was accepted by the Appellate Tribunal by deleting the addition.

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

‑‑‑‑S. 24 & Third Sched., R.1 (b)(i)‑‑‑Deductions not admissible‑‑­Depreciation allowance‑‑‑Rejection of‑‑ ‑Depreciation claimed had been rejected without quoting plausible reasons or any instance of un­verifiability in the body of order‑‑‑First Appellate Authority had also not applied its independent mind and had passed sketchy order‑‑In absence of any plausible reasons in support of treatment meted out by both authorities below‑‑‑Appellate Tribunal ordered for acceptance of .the depreciation claim raised by. the assessee.

Ahmad Kamal, D.R.. for Appellant (in I.T.As. Nos. 3893/LB and 3892/LB of 1996).

Muhammad Ali Asghar Qazi, I.T.P. for Respondent (in I.T.As. Nos. 3893/LB and 3892/LB of 1996).

Muhammad Ali Asghar Qazi, I.T.P. for Appellant (in I.T.As. Nos. 3472/LB, 3473/LB of 1996 and 1271/Lb of 2003).

Ahmad Kamal, D.R. for Respondent (in I.T.As. Nos. 3472/LB, 3473/LB of 1996 and 1271/LB of 2003).

Date of hearing: 4th June, 2003.

2005 P T D (Trib.) 854

[Income‑tax Appellate Tribunal Pakistan]

Before Javed Iqbal, Judicial Member and Mrs. Abida Ali, Accountant Member

I.T.A. No.90/PB of 2003, decided on 19th August, 2004

Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑Ss. 23(1)(xviii), 24(i) & 16(2)(b)‑‑‑Income Tax Rules, 1982, R.3‑‑­'Deductions‑‑‑Assessee a non‑salaried Director of a company‑‑‑Re­imbursement of medical expenses‑‑‑In profit and loss account, medical expenses ‑reimbursed to non‑salaried Director were claimed, which were disallowed under S.24(i) of the Income Tax Ordinance, 1979‑‑‑First Appellate' Authority directed that amount claimed as medical expenses was not taxable; that it did not attract the provisions of S.24(i) of the `Income Tax Ordinance, 1979 and that in fact it was covered under S.23(1)(xviii) of the Income Tax Ordinance, 1979‑‑‑Validity‑‑‑First Appellate Authority had rightly concluded that Director was not a salaried Director, therefore, S.16(2)(b) of the Income Tax Ordinance, 1979 read with S.24(1) of the Income Tax Ordinance, 1979 was not applicable and claim of medical reimbursement‑was a case of commercial expediency covered under S.23(1)(xviii)bf the Income Tax Ordinance, 1979‑‑Language of S.24(1) of the Income Tax Ordinance, 1979, provided that the key word is "Employee" and as per ‑R.3, Income Tax Rules, 1982 for a person to be termed as an "employee" he must be getting his remuneration etc. at the regular intervals and also for work full time for the Company ‑‑‑Assessee was not working for the company full time and that he was a Director in various other Companies‑‑­Assessee was also not drawing salary, this had been accepted by the Assessing Officer in his assessment order‑‑‑Order of First Appellate Authority was maintained by the Appellate Tribunal in the circumstances.

(sic) 1969 SC 335

Mirza Khan D.R. for Appellant.

Shaukat ‑Amin Shah, F.C.A. and Mehmood Mirza for Respondent.

Date of hearing: 19th August,' 2004

2005 P T D (Trib.) 860

[Income‑tax Appellate Tribunal Pakistan]

Before Javed Iqbal, Judicial Member and Mrs. Abida Ali, Accountant Member

W.T.As. Nos.80/PB to 86/PB of 2001‑02, decided on 26th July, 2004.

Wealth Tax Act (XV of 1963)‑‑‑

‑‑‑‑S. 16(2)‑‑‑Assessment‑‑‑Non‑issuance of notice under S.16(2) of the Wealth Tax Act, 1963 before finalization of assessment‑‑‑Validity‑‑‑No notice under S.16(2) of the Wealth Tax Act, 1963 had been issued and served upon assessee‑‑‑Issuance of notice under S.16(2) of the Wealth Tax Act, 1963 before finalization of assessment was a mandatory provision of law arid by not fulfilling the same, all the assessment proceedings were illegal‑‑‑Order of First Appellate Authority was vacated and the assessment orders were cancelled by the Appellate Tribunal.

1995 PTD 1239; 1971 SCMR 681 and 2002 PTD (Trib.) 272 rel.

Aamir Javed, A.C.A. for Appellant.

Mirza Khan, D.R. for Respondent.

2005 P T D (Trib.) 872

[Income‑tax Appellate Tribunal Pakistan]

Before Munsif Khan Minhas, Judicial Member and Mazhar Farooq Shirazi, Accountant Member

M.As. Nos. 624/LB to 626/LB‑ of 2003, decided on 18th November, 2004.

Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑Ss. 156 &‑ 65‑‑‑Rectification of mistake‑‑‑Agreed assessment‑‑‑Past and closed transaction ‑‑‑Assessee contended that Appellate Tribunal totally relied on the arguments put forward by the Department without appreciating factual controversy arising in the case as well as the case law furnished during the course of hearing‑‑‑Validity‑‑‑No error was found in the order of Appellate Tribunal‑‑‑Appellate Tribunal clarified that in an "agreed assessment" it was a "past and closed transaction" as assessee had already paid tax in two equal instalments as a consequence to the agreed assessment‑‑‑ "Agreed" assessment was arrived at with a clear understanding on the part of both the sides regarding their respective interest which were protected in the agreement‑‑‑Neither party could "wriggle‑' out of an agreement for whatever reasons happening subsequent to the agreement‑‑‑Any contrary practice would destroy the concept of "finality" of proceedings in a situation‑‑‑Miscellaneous applications were misconceived and prayer that Customs Tribunal had set aside the proceedings against the assessee which formed `the basis of reassessment made under S:65, Income Tax Ordinance, 1979 of the assessment years was not tenable and same were rejected by the Appellate Tribunal.

Muhammad Shahid Abbas for Appellant

Akram Tahir, D.R. for Respondent.

Date of hearing: 7th November, 2003.

2005 P T D (Trib 890

[Income‑tax Appellate Tribunal Pakistan]

Before Rasheed Ahmad Sheikh, Judicial Member and Amjad Ali Ranjha, Accountant Member

M.As.‑ Nos.. 959/LB to 961/LB of 2002, decided on 27th January, 2003.

Wealth Tax Act (XV of 1963)‑‑‑

‑‑‑‑S. 35‑‑‑Rectification of mistake ‑‑‑Evidence‑‑‑Assessee contended that complete evidence furnished at the time of hearing of appeals escaped consideration by the Appellate Tribunal which being mistake apparent from the record was liable to be rectified under, S.35 of the Wealth Tax Act, 1963‑‑‑Validity‑‑‑Order passed by the Appellate Tribunal needed to be rectified under S.35 of the Wealth Tax Act, 1963 as no finding had been given on such documents specifically furnished during the course of hearing of appeal‑‑‑Order was recalled and appeals were restored to their original‑numbers by the Appellate Tribunal.

Zia Haider Rizvi for Appellant. None for Respondent.

Date of hearing: 25th January, 2003

2005 P T D (Trib.) 895

[Income‑tax Appellate Tribunal Pakistan]

Before Khalid Waheed Ahmed, Judicial Member and Mahmood Ahmad Malik, Accountant Member

W.T.As. Nos. 77(IB) to 82(IB) of 2001‑2002, decided on 4th September, 2004.

(a) Wealth Tax Act (XV of 1963)‑‑‑

‑‑‑‑S. 17B‑‑‑C.B.R. Circular No.11 of 1994, dated 17‑7‑1994‑‑‑Powers of Inspecting Assistant Commissioner to revise Wealth Tax Officer's order‑ ‑‑Cancellation of assessments on the ground that Assessing Officer had failed to adopt any basis for assessments and‑that as per parallel cases the valuation adopted was low‑‑‑Validity‑‑‑Notice under S.17B of the Wealth Tax Act, 1963 showed that assessee was not confronted with the facts of any parallel case‑‑‑Size and accommodation available in the said parallel cases had not been given in the order‑‑‑Assessing Officer enhanced the valuation as compared to the valuation made in the preceding years‑‑‑Inspecting Assistant Commissioner had not brought on record sufficient material to show that the valuation made by the Assessing Officer was both erroneous and prejudicial to the interest of revenue.

(b) Wealth Tax Act (XV of 1963)‑‑‑

‑‑‑‑S. 17B‑‑C.B.R. Circular No.11 of 1994 dated 17‑7‑1994‑‑‑Powers of Inspecting Assistant Commissioner to revise Wealth Tax Officer's order‑‑‑Amount of allotment money for plot and under construction building‑‑‑Cancellation of assessments on the ground that value of building under construction should have been adopted as per the price that it could fetch in the market rather than the cost‑‑‑Validity‑‑‑Terms and conditions of the allotment letter provided that the lessee was not allowed to transfer the site to any other construction company/firm/ builder or an individual unless construction had been completed on the plot and lease deed was to be executed upon the completion of the building‑‑‑Building was under construction and it could not be transferred or sold in incomplete form‑‑‑Where title had not been transferred the asset could not be included in the "net wealth" and the money invested for acquiring the plot only could be included in "net wealth" and not the value of the plot which did not belong to the assessee‑‑‑Assessing Officer was justified to adopt the declared value which constituted the amount of allotment money paid for the plot of land and the amount spent for construction‑‑‑No action could be taken under S.17B of the Wealth Tax Act, 1963 on account of valuation made by the Assessing Officer in respect of such building.

W.T.As. Nos. 443 to 446(LB) of 2002, dated 22‑9‑2003 and 2000 PTD (Trib.) 1 rel.

(c) Wealth Tax Act (XV of 1963)‑‑‑

‑‑‑‑S. 17B‑‑‑C.B.R. Circular No.11 of 1994, dated 17‑7‑1994‑‑‑Powers of Inspecting Assistant Commissioner to revise Wealth Tax Officer's order‑‑‑Where payments were scheduled to be paid in instalments and property was under construction; there was nothing wrong with valuing the property at cost‑‑‑No proceedings could be taken under S. 17B of the Wealth Tax Act, 1963 in respect of such property.

(d) Wealth Tax Act (XV of 1963)‑‑‑

‑‑‑‑S. 17B‑‑‑C.B.R. Circular No.11 of 1994, dated 17‑7‑1994‑‑‑Powers of Inspecting Assistant Commissioner to revise Wealth Tax Officer's order‑‑‑Cancellation of assessments on the ground that Assessing Officer had accepted the declared value without obtaining purchase deed, size of plot and year‑wise construction‑‑‑Validity‑‑‑Inspecting Assistant Commissioner had not evolved/given any other basis for calculation/ valuation of the asset and had not shown how the valuation made was erroneous and prejudicial to the interest of revenue‑‑‑Inspecting Assistant Commissioner was not justified to invoke the provisions of S. 17B of the Wealth Tax Act, 1963 in the circumstances.

1999 PTD 3229 rel.

(c) Wealth Tax Act (XV of 1963)‑‑‑

------S. 17B‑‑‑C.B.R. Circular No.l1 of 1994, dated 17‑7‑1994‑ powers "I Inspecting Assistant Commissioner to revise Wealth Tax Officer's order‑‑‑Vacancy of property‑‑‑Lease money‑‑‑Gross Annual Letting Value‑‑‑Cancellation of assessments on the ground that property should have been valued on the basis of expected Gross Annual Letting Value of the vacant shops---Validity---Inspecting Assistant Commissioner himself accepted in his order that the value for the year when lease money was paid would be the same as the actual amount of lease money paid---No objective basis was available to make valuation on the basis of estimated Gross Annual Letting Value---Interference with the order of the Assessing Officer with regard to valuation of property was declined.

(f) Wealth Tax Act (XV of 1963)---

----S. 17B---C.B.R. Circular No.11 of 1994, dated 17-7-1994---Powers of Inspecting Assistant Commissioner to revise Wealth Tax Officer’s order---Liabilities claimed comprised of advances from customers against intended sale/purchase of property constructed on various plots of land---Inspecting Assistant Commissioner observed that value of such properties including cost of plots had been declared and assessed at too low figures as compared to the liabilities allowed and genuineness of these liabilities had not been looked into---Assessment was cancelled by observing that liabilities had been allowed over and above the amount of advances actually utilized in the construction of the buildings---Validity---Liabilities claimed had nexus with the immovable assets subjected to wealth tax and were allowable---No justification was available with the Inspecting Additional Commissioner to invoke the provisions of S. 17B of the Wealth Tax Act, 1963.

I.T.C. No.93 of 1992, dated 1-3-2001 rel.

2003 PTD 1377 distinguished.

Shahid Pervez Jami, A.R. for Appellant.

Dr. Muhammad Iqbal, D.R. for Respondent.

Date of hearing: 4th September, 2004.

2005 P T D (Trib.) 914

[Income-tax Appellate Tribunal Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member

I.T.A. No.5740/LB of 2004, decided on 6th January, 2005.

Income Tax Ordinance (XXXI of 1979)---

----S. 59(1)---Self-assessment---Senior citizen tax rebate---Case was excluded from the Self-Assessment Scheme for the reason that assessee had taken the 20% increase more than last paid/payable tax after claiming the senior citizen tax rebate and the case of assessee was assessed under S.62 of Income Tax Ordinance, 1979---Validity---Assessing Officer while confronting the assessee pointed out that assessee had paid tax after claiming the senior citizen tax rebate which was quite against the spirit of Self-Assessment Scheme which according to Assessing Officer required that tax payable ‘after all rebate’ should be 20% more than last paid/payable tax---For the qualification under Self-Assessment Scheme the words ‘after all rebate’ had not been mentioned, meaning thereby that more than 20% increase as per last paid/payable tax may be after deduction of rebate statutorily allowable under the law---Case of the assessee was qualified for Self-Assessment Scheme---Order of both the authorities were vacated by the Appellate Tribunal and directed the Assessing Officer to accept the case under Self-Assessment Scheme.

Saqib Sheikh for Appellant.

Anwar Ali Shah, D.R. for Respondent.

Date hearing: 6th January, 2005.

2005 P T D (Trib.) 920

[Income-tax Appellate Tribunal Pakistan]

Before Syed Nadeem Saqlain, Judicial Member and Raja Sikandar Khan, Accountant Member

W.T.As. Nos. 379/LB and 380/LB of 2004, decided on 20th October, 2004.

Wealth Tax Act (XV of 1963)---

----S.17B & Second Sched., Cl. 12(2)---Powers of Inspecting Assistant Commissioner to revise Wealth Tax Officer’s order---Exemption---Factory premises---Assessee was allowed exemption on account of factory premises being self-occupied---Assessment was modified by the Inspecting Assistant Commissioner on the basis of Appellate Tribunal’s judgment delivered subsequent to the date of assessment order---Validity---Judgment delivered on a subsequent date could not be applied to the assessment already completed earlier in time---Assessments were finalized on 2-12-1997 and 26-1-1999 whereas the judgment was delivered by the Appellate Tribunal on 3-12-1999---Inspecting Assistant Commissioner was not at all justified to invoke the provisions of S.17B of the Wealth Tax Act, 1963 and modify the assessments---Order passed by the Inspecting Assistant Commissioner was cancelled and the assessments finalized by the Assessing Officer were restored by the Appellate Tribunal.

2001 SCMR 1161; 2004 PTD 1621 and 2002 PTD (Trib.) 2755 rel.

PLD 1959 SC 9 ref.

M. Ajmal Khan for Appellant.

Abdul Rasheed, D.R. for Respondent.

Date of hearing: 14th October, 2004.

2005 P T D (Trib.) 937

[Income-tax Appellate Tribunal Pakistan]

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

W.T.As. Nos.542/LB to 547/LB and 557/LB of 2003, decided on 13th October, 2004.

Wealth Tax Act (XV of 1963)---

----S. 16 & Second Sched., Cl. (3)---Assessment---Exemption---Agricultural land---First Appellate Authority, on the basis of findings of committee consisting of concerned Assessing Officer, Inspector of First Appellate Authority, assessee in person and legal counsel of the assessee, directed that share of land in respect of assessee to be accepted as agricultural land---Department contended that First Appellate Authority was not justified in directing to accept the status of non-agricultural assets as agricultural when purchase deed clearly stated the purpose of purchase of land “for construction of factory” and the said land in case of the other co-shares had been declared and assessed as non-agricultural asset---Validity---Other co-owners not contesting the charging to tax all the pieces of land owned by them could not authorize the Department for charging to tax which was in fact not chargeable under the specific provisions of Wealth Tax Act, 1963---By quoting the unchallenged wrong done to another co-owner could not be made a basis by the Department for adversely affecting the assessee---Such combined act of co-owners vis-à-vis department together could not make the assessee liable to wealth tax for such land and allowing relief was factually and legally quite fair and proper when the assessee challenged it before First Appellate Authority being illegal act of taxing land not liable to wealth tax---Order did not suffer from any legal or factual infirmities and was upheld by the Appellate Tribunal---Department through its Assessing Officer on becoming a member in the committee had foregone its right to agitate any more and no such-like plea was raised before First Appellate Authority as a justification for making liable to wealth tax such piece of land in the hands of assessee---Appeal filed by the Department was dismissed by the Appellate Tribunal.

W.T.As. Nos.1172/LB to 1178/LB of 2000, dated 20-11-2001 ref.

Muhammad Zulfiqar Ali, D.R. for Appellant.

Liaqat Mehmood for Respondent.

Date of hearing: 13th October, 2004.

2005 P T D (Trib.) 944

[Income-tax Appellate Tribunal Pakistan]

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

I.T.A. No.6035/LB of 2003, decided on 13th October, 2004.

Income Tax Ordinance (XXXI of 1979)---

----Ss. 62, 30, 32A, 34 & 80---Assessment on production of accounts, evidence etc.---Rejection of accounts---Assessment was framed by rejecting the account, declared manufacturing trading results, yield and sale rate---Addition out of Profit and Loss Account expenses were made and interest income was charged to tax as a separate block under S.30 of the Income Tax Ordinance, 1979---On account of loss, demand under S.80D of the Income Tax Ordinance, 1979 was created---Assessee contended that all the requisite details in qualitative/quantitative form were furnished and stage-wise production record showing the consumption of raw material was filed---Assessing Officer denied such fact and contended in the order that reliability of accounting books could not be accepted in the absence of manufacturing record which had not been produced---Validity---Assessing Officer had not acknowledged the production of record at assessment stage whereas the assessee had contended that such record was produced but the First Appellate Authority kept silent as to the availability or otherwise of such information on record---Problem had arisen as the First Appellate Authority failed to adjudicate each and every ground of appeal which had made the arguments of the assessee devoid of any effect---Order had to be vacated and the matter had to be remanded to the First Appellate Authority for deciding afresh keeping in view the grounds of appeal---First Appellate Authority was directed to pass a proper speaking order after completely examining/perusing the assessment record; summoning the Assessing Officer and obtaining his comments; proper opportunity of being heard shall be allowed to the assessee and only then to pass an order after detailed findings on facts and on legal issues involved after determining all the facts.

I.T.A. No. 23/KB of 2002; 2004 PTD 1263; 2003 PTD (Trib.) 625; 1999 PTD (Trib.) 3892; 1997 PTD (Trib.) 1408; 2002 PTD 407; 1994 PTD 123; 1984 PTD 150 and 1984 PTD 239 ref.

Mushtaq Ahmed Vohra, FCA for Appellant.

Muhammad Zulfiqar Ali, D.R. for Respondent.

Date of hearing: 13th October, 2004.

2005 P T D (Trib.) 960

[Income-tax Appellate Tribunal Pakistan]

Before Ehsan-ur-Rehman, Judicial Member and Mazhar Farooq Shirazi, Accountant Member

I.T.As. Nos.602/LB and 467/LB of 2002, decided on 26th November, 2004.

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

----S. 64---Limitation for assessment---Service of order---Assessee contended that assessment order could not be taken as passed within time mentioned in S.64 of the Income Tax Ordinance, 1979 as the same was served within such limitation period---Service of order was to be made within the prescribed time under S.64 of the Income Tax Ordinance, 1979 as making of an order under statutory provisions means that the order must be communicated to the party affected by such order within said period of limitation---Validity---Contention of assessee that assessment order had been hit by limitation due to non-service of order within the stipulated time under S.64 of the Income Tax Ordinance, 1979, was valid---Appellate Tribunal, declared the order as null and void by agreeing with the contention of the assessee and did not dilate upon the issues emanating from such order---Appeal of assessee was accepted and that of department dismissed being legally not maintainable.

I.T.A. No.6288/LB of 1999 rel.

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

----S. 62---Assessment on production of accounts, evidence etc.---Unsigned assessment order, its validity---Assessee contended that assessment order had not been signed by the Assessing Officer and he had only signed the notice of demand---Validity---Principle---Such Assessment should have been cancelled by the First Appellate Authority being illegal and declared results should have been accepted instead of reduction in sales---Department had not denied the fact that order was unsigned but pleaded that signed notice of demand was available on record which was enough to justify the framing of assessment---Validity---Notice of demand and IT 30 Form would get a legal shape only after passing of an order---Putting signature by the Assessing Officer on the order and his seal was sine qua non of an order but notice of demand and IT 30 Form were to be backed by a proper signed order---In the closing sentence of the assessment order it was specifically given as “assessed as per IT 30 issued demand notice and challan”---Assessing Officer was required to order for issuing copy of order as thereafter signature with office seal were to be placed/affixed---Proper sequence of events was that firstly an order was to be passed which was to be followed by issuing a notice of demand, IT 30 Form and copy of assessment order---Essential pre-condition was missing as order had not been signed which an officer was required to sign prior to issuance of any notice of demand---Assessment order became valid only when the order had been signed---Revenue failed to produce a signed assessment order---Legalizing the unsigned order was fraught with disastrous consequences not merely in judicial process but also in administrative matters---Notice of demand and IT 30 Form had not succeeded the order as the order remained unsigned---Such unsigned order was invalid in the eye of law and had no existence---No liability or right could be created as a result of such order---Order was declared as null and void and appeal of the assessee was accepted by the Appellate Tribunal.

1997 PTD 616 (S.C. India) rel.

(c) Income-tax---

----Legal issues, when to be raised---Raising of legal issues at any stage of the proceedings were permitted---Permission was granted for raising legal issues as basic and preliminary objection prior to deciding the appeals on merits.

Mrs. Sabiha Mujahid, D.R. for Appellant

Muhammad Shahid Abbas for Respondent.

Date of hearing: 26th November, 2004.

2005 P T D (Trib.) 965

[Income-tax Appellate Tribunal Pakistan]

Before Rasheed Ahmed Sheikh, Judicial Member

I.T.As. Nos.4206/LB and 4207/LB of 2004, decided on 26th November, 2004.

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

----S. 12(18)---Income deemed to accrue or arise in Pakistan---Withdrawal of amounts on different dates from capital account to meet personal expenses and payment of taxes---Capital balance stood in negative---Withdrawal of such amount from capital account was treated to be loan advanced by the firm in terms of S.12(18) of the Income Tax Ordinance, 1979---Addition was deleted by the First Appellate Authority---Department contended that positive capital was to be considered to be the contribution of the members of Association of Persons towards the firm’s capital account---Once withdrawal from the firm reaches to the level where the positive capital results into zero then any further withdrawal therefrom would tantamount to be loan obtained from the firm’s capital account and amount over and above partner’s own contribution certainly qualified the phrase used in S.12(18) of the Income Tax Ordinance, 1979 to be “loan” or “advances”---Validity---By no stretch of imagination withdrawal of capital by a member/partner of the firm could be deemed to be the “loan” or “advance”---Injection of additional capital or withdrawal of amount by the members of Association of Persons over and above their capital contribution was normal business activity to which the provisions of S.12(18) of the Income Tax Ordinance, 1979 were not attracted---No provision of law was available indicating that withdrawal of sum for personal expenses by the member(s)/partner(s) of the firm shall be made through crossed cheque drawn on a bank or which prohibits charge of income tax paid by the firm from the partner’s personal account---In no way personal drawings of the members partners could be treated to be the “loan” or “advance” obtained from the firm because such amounts were adjustable against their share of profit earned by the firm in the year in which the sum was drawn or against the profit in succeeding year---Legislature had bona fidely not catered this eventuality in S.12(18) of the Income Tax Ordinance, 1979---Assessing Officer had acted in flagrant violation of law in treating the drawings made by the member of the Assessing Officer to be the loan in terms of S.12(18) of the Income Tax Ordinance, 1979---First Appellate Authority’s point of view was endorsed by the Appellate Tribunal and departmental appeal was dismissed being bereft of any merits.

Micro Pak. (Pvt.) Ltd. v. CIT 2002 PTD 877 rel.

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

----S. 12(18)---Income deemed to accrue or arise in Pakistan---Loan or advance---Withdrawal of drawing from firm’s capital account over and above the capital amount invested---Addition of being loan---Validity---Provision of S.12(18) of the Income Tax Ordinance, 1979 were not attracted in an eventuality where the amount was withdrawn by a member of the Association of Persons or by a partner of firm for his household expenses and payment of tax from the firm’s account---Drawings of the members/partners of the firm did not fall within the definition of “loan” or “advance”---Term “loan” had an inherent characteristics of repayment of money on specific conditions---“Advance” means literally a payment before hand; in certain cases it may be a loan, but it could not be said that a sum of money paid by way of advance was necessarily a loan.

(c) Interpretation of statutes---

----While interpreting any provision of statute, plain meanings of the expression and the words used in statute, shall be adhered to and no other meaning shall be deduced therefrom which is not available from a plain reading of the expression and the words used in the statute.

(d) Interpretation of statutes---

----If there are two possible constructions of the words of the statute, then the effect is to be given to the one that is in favour of the citizens and not to the one that enhances or increases the burden on them.

(e) Interpretation of statutes---

----Neither any tax nor higher rate of tax can be imposed by any interpretative process.

(f) Interpretation of statutes---

----No provision in fiscal statute can be extended on analogy.

(g) Interpretation of statutes---

----Straining the language in order to hold a subject liable to tax or to a higher rate of tax cannot be held justified when the clear words used by legislature indicate otherwise.

(h) Interpretation of statutes---

----Deeming provisions are to be applied strictly in accordance with law as such provisions are the fiction of law and all fictions of law are to be interpreted and applied strictly and the doubt, if any, is to be resolved in favour of assessee.

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

----S. 12(18)---Income deemed to accrue or arise in Pakistan---Withdrawal of amount for household expenses from firm’s capital account over and above the capital amount invested---Addition as being loan---Validity---Entire superstructure of the assessment had been built on presumption that withdrawal of money by the member/partner from the Firm’s accounts, consequent upon which capital balance stood in negative, was a loan---In order to meet the household expenses and payment of taxes, each one of them was drawing money on his personal ledger account---Such was a running account of the members maintained with the firm which has inherent characteristic of being adjusted against future profit or losses---Firm had never lent any amount to its member(s) rather the drawings were made by the assessee for meeting his personal expenses and taxes from his capital account resulting in negative capital which did not fall within the four corners of the words used in S.12(18) of the Income Tax Ordinance, 1979 as “loan” or “advance”, as were interpreted by the appellate forums in their orders.

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

----S.12(18)---Income deemed to accrue or arise in Pakistan---Drawings--Loan or advance---Neither the drawing made by the member(s)/ partner(s) of the firm nor the negative capital appearing in their personal ledger account, maintained by the firm, was covered by the definition of “loan” or “advance”.

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

----S.12(18)---Income deemed to accrue or arise in Pakistan---Amount subject to tax---Only the sum which had been claimed or shown to have been received as “loan” or “advance” otherwise than through a crossed cheque or banking channel could be subjected to tax under S.12(18), Income Tax Ordinance, 1979---Sum which had neither been claimed nor shown to have been received as loan could not be hit by mischief of S.12(18).

Mustafa Ashraf, D.R. for Appellant.

Sohail Mutee Babri for Respondent.

Date of hearing: 26th November, 2004.

2005 P T D (Trib.) 974

[Income-tax Appellate Tribunal Pakistan]

Before Rasheed Ahmad Sheikh, Jawaid Masood Tahir Bhatti, Judicial Members and Muhammad Munir Qureshi, Accountant Member

I.T.A. No.1374/LB of 2000, decided on 28th August, 2004

Per Rasheed Ahmad Sheikh Judicial Member; Jawaid Masood Tahir Bhatti Judicial Member, agreeing--

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

----Ss. 50(4), 80C & Second Sched., Cl. (188-D)---Deduction of tax at source---Supply of goods---Sale of land, building along with machinery--Deduction of tax on such transaction was constituted full and final discharge of tax liability under S.80C of the Income Tax Ordinance, 1979---Validity---Provisions of S.50(4) of the Income Tax Ordinance, 1979 were not attracted to the transaction evidencing sale of land, building and the fixed plant and machinery sold as part of the factory---Provision of withholding tax was applicable only on “supply of goods” which at best could be the machinery which was not part of the factory but extension of the word “supply” to sale of immovable property was totally illegal---Provision of S.50(4) of the Income Tax Ordinance, 1979 were illegally invoked on the transaction of sale of machinery under the misconception that such transaction fell within the definition of “supply of goods” and sale of machinery could not be subjected to tax by the Assessing Officer as a separate block of income under S.80C of the Income Tax Ordinance, 1979.

1999 PTD 4028 rel.

PLD 1990 SC 68; Trust Ceramic Industries v. Deputy Collector CE & LC 1991 CLC 1923; 1999 SCMR 138 and PLD 1972 Kar. 210 ref.

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

----S.50(4)---Deduction of tax at source---Goods---Term “goods” as used in S.50(4) of the Income Tax Ordinance, 1979 has nowhere been defined in the Income Tax Ordinance, 1979; in such situation ordinary dictionary meaning of the word “goods” shall be adopted.

(c) Words and phrases---

----Goods---Meaning---“Goods” means the movable property, merchandise, wares.

(d) Interpretation of statutes---

----In absence of definition of any term or phrase or word contained in the statute, its literal meaning shall be assigned and construed according to plain dictionary meaning.

PLD 1990 SC 68 rel.

(e) Interpretation of statutes---

----Fiscal statutes---Language of law should be construed strictly and in case any ambiguity arises therein that is to be resolved in favour of the subject.

PLD 1972 Karachi 210 rel.

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

----Ss. 50(4) & 27---Deduction of tax at source---Sale of land, building along with machinery---Transaction executed was a sale of factory, land, building and machinery installed therein and the provisions of S.50(4) of the Income Tax Ordinance, 1979 were not attracted because sale of immovable and movable property itself was not liable to any tax even under the head capital gain.

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

----Ss. 27 & 50(4)---Capital gain---Deduction of tax at source---Sale of land, building along with machinery---Sale of machinery was not liable to incidence of taxation even under the head capital gain as imposition of tax on the capital gain arising from the transfer of immovable property was beyond the taxation powers of the Federal Government.

Per Muhammad Munir Qureshi, Accountant Member---[Minority view]

Muhammad Iqbal Hashmi and Masood Ishaq for Appellant.

Muhammad Asif, D.R. for Respondent.

Date of hearing: 24th August, 2004.

2005 P T D (Trib.) 986

[Income-tax Appellate Tribunal Pakistan]

Before Rasheed Ahmed Sheikh, Judicial Member

I.T.A. No.5207/LB of 2003, decided on 21st October, 2004.

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

----Ss. 65, 62, 13(1)(e), 80C(7), & 143-B---Additional assessment---Addition---Assessee filed statement under S.143B of the Income Tax Ordinance, 1979---Wealth Tax Return was also filed---Payment was made by the assessee on his daughter’s marriage as gift---Assessing Officer inferred that lesser expenses were claimed than actually expanded by the assessee which fact certainly constituted definite information to which the provisions of S.65 of the Income Tax Ordinance, 1979 were attracted---Validity---Tax liability had arisen out of supply of raw hides which was covered under the Presumptive Tax Regime in terms of S.80C of the Income Tax Ordinance, 1979---Flagrant violation of law had been committed by the Assessing Officer while reopening the assessment under S.65 of the Income Tax Ordinance, 1979 and calling upon the assessee to file return of income which was clear contravention of the provisions of S.80C of the Income Tax Ordinance, 1979---Assessing Officer had travelled beyond his lawful authority by issuing a notice under S.65 of the Income Tax Ordinance, 1979 which was held to be of no legal effect---Order made under Ss.62/65 of the Income Tax Ordinance, 1979 was cancelled/annulled by the Appellate Tribunal.

2000 PTD (Trib.) 2193 and 2003 PTD (Trib.) 1978 rel.

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

----Ss. 65 & 143-B---Additional assessment---Condition precedent for invocation of S.65 of the Income Tax Ordinance, 1979 was that there should be an order in the field.

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

----Ss. 80C, 65 & 56---Tax on income of certain contractors and importers---Filing of returns---Persons covered under S.80C of the Income Tax Ordinance, 1979 were not required to file return of total income---Even the firms, association of persons and body of individuals were not required to file the return of wealth.

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

----S.80C---Tax on income of certain contractors and importers---Total income---In entire S.80C of the Income Tax Ordinance, 1979 the expression, “total income” has not been used anywhere.

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

----Ss. 80C (7), 55 & 59A---Tax on income of certain contractors and importers---Scheme---Presumptive Tax Regime is at complete variance with the scheme of income tax under the normal law envisaged under the Income Tax Ordinance, 1979---Departure is so complete that the income tax under S.80C of the Income Tax Ordinance, 1979 was to be levied on the income of a person on the rates specified in the First Schedule which were different from the rates of income tax to be levied on the total income and it had been further clarified that no return of total income under S.55 of the Income Tax Ordinance, 1979 was required to be filed---Even subsection (7) of S.80C of the Income Tax Ordinance, 1979 where an assessment order in respect of total income under S.59A of the Income Tax Ordinance, 1979 it was not provided that it shall be an assessment order in respect of total income but it was provided that in a case to which subsection (4) of the S.80C of the Income Tax Ordinance, 1979 an order under S. 59A of the Income Tax Ordinance, 1979 shall be deemed to have been made in respect of income referred to in subsection (1) of the S.80C of the Income Tax Ordinance, 1979.

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

----Ss. 80C, 59, 59A, 59B, 60, 62 & 63---Tax on income of certain contractors and importers---Total income---Assessable income---Deemed income---In respect of income covered under S.80C of the Income Tax Ordinance, 1979 neither there was any concept of total income nor was assessable under the Income Tax Ordinance, 1979---Under S.80C of the Income Tax Ordinance, 1979 there was a concept of deemed income which had been subjected to tax without going through the process of assessment by any Assessing Officer and without determining the total income---Very first condition of assessing total income, as had been envisaged in Ss.59, 59A, 59B, 60, 62 and 63 of the Income Tax Ordinance, 1979 was not available in case of income falling under the Presumptive Tax Regime.

Shahbaz Butt for Appellant.

Mustafa Ashraf, D.R. for Respondent.

Date of hearing: 20th October, 2004.

2005 P T D (Trib.) 993

[Income-tax Appellate Tribunal Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member and Mazhar Farooq Shirazi, Accountant member

I.T.A. No.5698/LB and M.A. (Cond.) No.831/LB of 2003, decided on 13th January, 2005.

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

----Ss. 134(3) & 66-A---Appeal to Appellate Tribunal---Limitation---Date of “communication”---Condonation of delay---Assessee contended that period of limitation in filing the appeal starts from the date of “communication” of order---Order had never been served or communicated to the assessee and assessee had filed the appeal after obtaining certified copies of the order which might be entertained by condoning delay in filing of appeal---Validity---Assessee’s contention was not accepted by the Appellate Tribunal due to the fact that all the issues agitated by him had already been adjudicated and decided by the Appellate Tribunal on appeal filed by the Department---“Communicate” means, to impart, to reveal, to demonstrate, to bestow, to succeed in conveying one’s meaning to others and to have something in corner---Order has been communicated to the assessee if not before filing of appeal before the First Appellate Authority at least at the time of hearing of appeal before the First Appellate Authority and while processing of departmental appeal before the Appellate Tribunal but assessee failed to file appeal even after the order of Appellate Tribunal within the reasonable time---No plausible explanation had been offered in approaching the Appellate Tribunal after lapse of more than ten years---Order passed under S.66A of the Income Tax Ordinance, 1979 had already been subject-matter of appeal filed by the Department before Appellate Tribunal and the Appellate Tribunal had already given findings on the issues which may be subject-matter of this appeal---No justification was available to condone the delay in filing of appeal---Miscellaneous application for condonation of delay in filing of appeal was rejected by the Appellate Tribunal and consequently, appeal filed by the assessee was dismissed.

Reference Case No.547 of 1962, decided on 7-2-1967; Civil Appeal No.104 of 1965, decided on 28-11-1966; 2002 PTD 549; AIR 1965 Punjab (at Delhi) 315 (V52 C92) and Hind Development Corporation v. Income Tax Officer decided in the Calcutta High Court on June 1, 1978 distinguished.

2001 SCMR 1062 (1072) rel.

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

----S. 154---Civil Procedure Code (V of 1908), O. III, R. 2(b), O. V, Rr.23(1) & 17---Service of notice---If service of notice is on his salesman not authorized in writing by assessee to accept such notices, even if fact of service of notice is within the knowledge of assessee such service of notice is not valid in law.

Civil Appeal No.104 of 1965, decided on 28-11-1966 rel.

(c) Income tax---

----Condonation of delay---Principles of condonation of delay to be kept in mind by every judicial or quasi-judicial forum while dealing with question of limitation.

2002 PTD 549 rel.

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

----S. 134(3) & 66-A---Appeal to Appellate Tribunal---Limitation for filing of appeal---Condonation of delay---Void and illegal order---Assessee contended that no limitation runs against the void order and the order of the Inspecting Additional Commissioner under S.66-A of the Income Tax Ordinance, 1979 was ab initio void and illegal---Validity---Contents of order had already been upheld by the Appellate Tribunal and at this stage such order could not be held to be void or illegal by Appellate Tribunal--Even against the void order, an aggrieved person was required to initiate proceedings within reasonable time, instead of invoking the jurisdiction of the Courts after lapse of considerable time when the order under attack in fact had achieved finality.

Shafqat Mehmood Chohan for Appellant.

Anwar Ali Shah, D.R. for Respondent.

Date of hearing: 25th September, 2004

2005 P T D (Trib.) 1061

[Income-tax Appellate Tribunal Pakistan]

Before Rasheed Ahmed Sheikh, Judicial Member and Javed Tahir Butt, Accountant Member

I.T.A. No.2948/LB of 2002, decided on 28th January, 2005.

(a) Workers’ Welfare Fund Ordinance (XXXVI of 1971)---

----S. 4(2)---Income Tax Ordinance (XXXI of 1979), S.156---Illegal levy of Workers’ Welfare Fund---Appeal was not filed against such levy---Refusal to rectify---Validity---Held, it would certainly amount to mockery of justice to call illegal levy to be valid merely on the pretext that the assessee could not file appeal when Workers’ Welfare Fund was charged in the IT-30 Form at the time of finalization of assessment---Non filing of appeal against an unlawful levy could not create any hurdle in the assessee’s way to seek legal remedies as were provided under the law.

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

----S. 156---Rectification of mistake---“Doctrine of rectification” applies in cases where the mistake is so manifest, so clear and so evident that it would not require chain of arguments to establish the “mistake”.

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

----S. 156---Rectification of mistake---“Mistake” does not mean a “mistake” in figures or calculation; it also circumscribes a “mistake” or an “error” of law which must be self-evident and floating on surface of the record---Such “mistake” must have a material bearing on the fate of the case.

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

----S. 156---Rectification of mistake---Scope---Illegal levy---Rectification of---Any levy which is ab initio illegal and void is a “mistake” which is floating on the surface of record to which the provisions of S.156 of the Income Tax Ordinance, 1979 are applicable---Scope of rectification is not so limited that an unlawful charge could not be rectified in terms of S.156 of the Income Tax Ordinance, 1979.

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

----S. 156---Rectification of mistake---Where a mistake of law or fact is appearing on the face of the record, the provisions of S.156 of the Income Tax Ordinance, 1979 are duly attracted.

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

----S. 156---Workers’ Welfare Fund Ordinance (XXXVI of 1971), S.4(2)---Rectification of mistake---Illegal levy of Workers’ Welfare Fund is a mistake apparent from record which is definitely rectifiable under S.156 of the Income Tax Ordinance, 1979.

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

----S. 156---Workers’ Welfare Fund Ordinance (XXXVI of 1971), S.4(2)---Rectification of mistake---An illegal or unlawful act cannot be clothed with legality under the garb of provisions of S.156 of the Income Tax Ordinance, 1979.

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

----Ss. 156, 62 & Second Sched., Cl. (118-E)---Workers’ Welfare Fund Ordinance (XXXVI of 1971), S.4(2)---Rectification of mistake---Income was not chargeable to tax under Cl. (118-E) of the Second Schedule to the Income Tax Ordinance, 1979---Workers’ Welfare Fund was not charged at the time of order passed under S.62 of the Income Tax Ordinance, 1979 but that was charged in the IT-30 Form---Appeal against such levy was not filed by the assessee---Rejection of rectification application was maintained by the First Appellate Authority on the ground that since assessee had not called in question levy of Workers’ Welfare Fund in appeal while the order under S.62 of the Income Tax Ordinance, 1979 was passed, no mistake whatsoever was apparent from record which could be rectified and rectification application was not liable to be entertained---Validity---Provisions of S.156 of the Income Tax Ordinance, 1979 were duly attracted where illegal charge of Workers’ Welfare Fund had been created under S.4(2) of the Workers’ Welfare Fund Ordinance, 1971 on an industrial establishment whose income was exempt from levy of income tax or its income was not to be computed by operation of law or its income had been assessed at a loss---Neither the First Appellate Authority was legally justified in maintaining nor the Assessing Officer had acted within the law to levy illegal charge of Workers’ Welfare Fund and this being a mistake apparent from record was liable to be rectified under S.156 of the Income Tax Ordinance, 1979---Since, Workers’ Welfare Fund had not been charged lawfully being the assessee’s income same was not chargeable to tax---Appellate Tribunal deleted the said charge.

(1996) 13 Tax 203; 1971 PTD 204; 1993 PTD 964; PLD 1997 SC 582 = 1997 PTD 1555; Civil Petitions Nos. 38, 156 to 180 and others of 2000, dated 28-3-2000; 2000 PTD 2182; 1998 PTD 2776; 2002 PTD 14 and 1989 PTD (Trib.) 1004 rel.

(i) Workers’ Welfare Fund Ordinance (XXXVI of 1971)---

----S. 4(2)---Income Tax Ordinance (XXXI of 1979)---Charge of Workers’ Welfare Fund in the IT-30 Form---Validity---No Workers’ Welfare Fund could be charged in the IT-30 Form, reason being that IT-30 Form was merely a sheet of computation of tax and nothing else which could not take place of an order---IT-30 Form follows the order but it could not be other way round---Proper course available with the Assessing Officer was to pass a separate order under S.4(2) of the Workers’ Welfare Fund Ordinance, 1971.

(j) Income tax---

----Appeal---Limitation---Order without lawful jurisdiction---No limitation for filing appeal runs against an order, which has been passed without lawful jurisdiction.

(k) Workers’ Welfare Fund Ordinance (XXXVI of 1971)---

----S.4(2)---Income Tax Ordinance (XXXI of 1979), Ss. 129 & 156---Charge of Workers’ Welfare Fund in the IT-30 Form---Appeal---Limitation---Since no order under S.4(2) of the Workers’ Welfare Fund Ordinance, 1971 had been passed, creation of Workers’ Welfare Fund in the IT-30 Form was without lawful authority and no limitation for filing the appeal would run in this situation---Appeal filed against certificatory order was treated to have been filed against the illegal charge of Workers’ Welfare Fund in the IT-30 Form---Even on this score levy of Workers’ Welfare Fund was liable to be deleted.

Sajid Ijaz Hussain for Appellant.

Dr. Shahid Siddique Bhatti, D.R. for Respondent.

Date of hearing: 5th January, 2005.

2005 P T D (Trib.) 1135

[Income-tax Appellate Tribunal Pakistan]

Before Khawaja Farooq Saeed, Chairman and Mazhar Farooq Shirazi, Accountant Member

M.A. No. 634/LB of 2004, decided on 11th February, 2005.

Income Tax Ordinance (XXXI of 1979)---

----Ss. 134 & 156---Appeal to Appellate Tribunal---Rectification of mistake---Assessee filed miscellaneous applications for recall of Appellate Tribunal’s order on the ground that appeal was decided without giving any weightage to the arguments and without considering the grounds of appeal put forth at the time of hearing---Validity---Was necessary to examine the whole issue in the light of arguments/ submissions put forth by the assessee and as set forth in the memo. of grounds of appeal for clear finding in the case and modification of the same in the light of facts and overall circumstances of the case---Order was recalled by the Appellate Tribunal with the direction that the same should be examined so that the exact position may be adopted for disposal of the main appeal on factual position of law and ground realities in view of which miscellaneous application was filed by the assessee---Miscellaneous application was allowed by the Appellate Tribunal.

2003 PTD 2841 rel.

Ch. Muhammad Aslam for Applicant.

Akram Tahir, D.R. for Respondent.

Date of hearing: 11th February, 2005.

2005 P T D (Trib.) 1208

[Income-tax Appellate Tribunal Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member and Shaheen Iqbal, Accountant Member

I.T.As. Nos.859/KB of 2000-01, 1592/KB, 1652/KB and 1778/KB of 2002, decided on 2nd November, 2002.

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

----S. 32---Method of accounting---Scope.

Board of Revenue v. Arunachalam Chettiar 1 ITC 75 rel.

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

----S. 32---Method of accounting---“Method”---Meaning.

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

----S. 32---Method of accounting---Meaning and types of.

CIT v. Singari Bai (1945) 13 ITR 224 (All.) and Dhakeshwar Prased Narain Singh v. CIT (1936) 4 ITR 71 (Pat.) rel.

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

----S. 32---Method of accounting---Expression: Computation of Income on such basis and in such manner as thinks fit---Meaning of.

Rajput Metal Works Ltd. v. CIT PLD 1976 Lah. 223 rel.

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

----S. 32---Method of accounting---“Opinion”---Meaning illustrated.

CIT v. Sh. Ehsan Elahi 1980 PTD 261; CIT v. McMillan and Co. (1958) 33 ITR 182 (SC); CIT v. A. Krishnaswami Mudaliar (1964) 53 ITR 122 (SC); CIT v. British Paints India Ltd. (1991) 188 ITR 44 (SC); Dr. Jayanti Dharma Teja v. Secretary Govt. of India, Ministry of Finance, New Delhi, and others (1984) 148 ITR 316(AP); Kashiprasad Carpets (P.) Ltd. v. CIT (1984) 148 ITR 710 (All.) and Star Rolling Mills v. CIT 1974 PTD 200 rel.

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

----S. 32---Method of accounting---Expression “Choice with the assessee to adopt his own system of accounting”---Connotation.

CIT v. Sarangpur Cotton Mfg Co. Ltd. (1938) 6 ITR 36 rel.

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

----S.32---Method of accounting---Rejection of accounts---Factors to be observed by the Assessing Officer before rejecting books of account/ method of accounting stated.

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

----S. 62---Assessment on production of accounts, evidence etc.---Sale and production---Consumption of fuel and power---Rejection of sales due to higher consumption of fuel and power than the preceding year---Only inference that could be drawn on account of higher number of unit of electricity consumed was that the assessee had suppressed production and the production records and sales would have been rejected---No objection having been raised to the production records which were duly checked and verified by the Excise and Sales Tax Authorities and the declared sales and production having been accepted, Appellate Tribunal agreed with the line of arguments of assessee and found no substance in the objection of Assessing Officer.

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

----Ss. 62 & 32---Assessment on production of accounts, evidence etc.---Method of accounting---Low gross profit---Rejection of accounts---Validity---If the method of accounting regularly adopted was the same which had been accepted in the past then the same could not be rejected without very valid reasons---Method of accountancy and the books of accounts regularly maintained and accepted by the department could not be rejected merely for the reason that Gross Profit was low.

Karachi Textile v. CIT 1984 PTD 150; Pimpa (Pvt.) Ltd. v. CIT 1994 PTD 123; CIT v. Krudd Sons Ltd. 1994 PTD 174; Roshan Cloth House v. CIT 1983 PTD 63; 1962 PTD (Trib.) 23; 2001 PTD (Trib.) 2938, M.E.J. Hazari and Sons v. CIT 1985 PTD 516, Printers Combine v. CIT 1984 PTD 276 and S.M. Yousuf and Bros. v. CIT 1974 PTD 45 rel.

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

----S.32---Method of accounting---Gross profit---Principles of accounting regarding ascertainment of gross profit---Gross profit---Meaning---Profit and loss account of a trading concern is usually divided into two sections; first being the trading account which is so framed as to show the gross profit, gross profit as shown by the trading account is transferred to second section which is the profit and loss account---Gross profit is defined as the difference between the cost of the goods that have been sold and the proceeds of their sale, without any deduction in respect of the expenses of distribution and general establishment charges---In trading account, it is necessary to include all items of charges directly affecting the cost of the goods sold---When production account and declared sale had been accepted and no direct expenses specially and exclusively disallowed, gross profit is nothing but balancing figure difference between debit and credit side of trading account.

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

----S. 62---Assessment on production of accounts, evidence etc.---Better gross profit each year---Assessing Officer’s wish that assessee has to declare better gross profits each year has no justification in law---Trading and manufacturing results depend on the conditions of business and operation of manufacturing activity during the year---Nothing existed in the income tax law which binds an assessee to declare better result each year---Decrease in declared version has to be seen in broader perspective i.e. the inflationary cost, fixed cost and price fluctuation of different items concerning the transactions engaged by the assessee---Profitability entirely depends on the production.

(l) Income-tax---

----Production and cost---Gross profit margin---Relationship---Whenever production increases, the cost of production decreases and company earns profit---However, wherever the production is lesser, fixed cost remaining the same gross profit margin decreases.

(m) Income-tax---

----Gross profit---Factors on which rate of gross profit depends---Rate of gross profit in a particular year depends on many factors, e.g., the general market condition based on demand and supply positions, the rise or fall in market rates, specially abrupt ones the capital position vis-à-vis the turnover achieved---Low G.P. may be due to recession in local and international markets depression in money market, financial stringency, detachment of Pak currency from dollars and open and tacit competition and many others, however, the law does not oblige an assessee to make the maximum profits that he could out of his trading transactions---Application of higher flat rate of G.P. is not proper when a truer state of income could be ascertained without much trouble.

(n) Income-tax---

----Rejection of accounts---Principles---detailed.

Pimpa (Pvt.) Ltd. Karachi v. CIT 1994 PTD 123; CIT v. Krudd Sons Ltd. 1994 PTD 174; M.E.J. Hazri and Sons v. CIT 1985 PTD 516; Karachi Textile v. CIT 1984 PTD 150; CIT v. Fateh Textile Mills Ltd. Hyd. 1984 PTD 218; 1962 PTD (Trib.) 23; Printers Combine v. CIT (1984) 50 Tax 183 (H.C. Kar.); (1961) 4 Tax 230; (1962) 6 Tax 95; International Forest Co. v. CIT (1975) 101 ITR 721 (J & K); M. Durai Raj v. CIT (1972) 83 ITR 484 (Ker.); Pandit Bros. v. CIT (1954) 26 ITR 159 (Bom.); Ratan Café v. State of Madras (1974) 33 STC 39 (Mad); S. Veeriah Reddiar v. CIT (1960) 38 ITR 152 (Ker.); R.M.P. Perianna Pillai and Co. v. CIT (1961) 42 ITR 370 (Mad); Ravi v. State of Tamil Nadu (1981) 48 STC 274 (Mad.); Vel Metal Industries v. State of Tamil Nadu (1988) 68 STC 55 (Mad.) and Laxmi Stores v. CST (1979) 43 STC, 167, 168 (All.) ref.

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

----S.62 (1), proviso---Assessment on production of accounts, evidence etc.---Interpretation of proviso---Proviso should be read as a whole---After detecting defects in books of accounts the Assessing Officer is legally bound to issue mandatory notice under S.62(1) of the Income Tax Ordinance, 1979 to confront the assessee with the defects pointed out by him in his order and provide an opportunity to the assessee to explain his point of view about such defects---Assessing Officer under the said proviso is required to record the explanation of assessee in the assessment order---If Assessing Officer is not satisfied with the explanation he is duty bound to record his reasons indicating the basis on which he is not accepting the assessee’s explanation in the assessment order and on what basis he is going to compute assessee’s total income---Giving reasons in support of the computation of total income is essential because no unfettered or unexaminable discretionary powers are vested with the Assessing Officer.

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

----S. 62(1), proviso---Assessment on production of accounts, evidence etc.---Rejection of accounts---Principles.

1999 PTD (Trib.) 2892 and 2001 PTD (Trib.) 2938 rel.

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

----S.62---Assessment on production of accounts, evidence etc.---Department admitted that no notice under S.62 of the Income Tax Ordinance, 1979 had been issued after examining books of account, however such defects had duly been incorporated in the assessment order---Validity---Faint argument was advanced before the Appellate Tribunal by the Department which was untenable because the Assessing Officer had to follow the mandatory requirements by issuing notice under S.62 of the Income Tax Ordinance, 1979 confronting defects to the assessee prior to finalization of assessment.

Collector, Sahiwal v. Muhammad Akhtar 1971 SCMR 681; 1993 PTD 392; 1985 PTD (Trib.) 178 and 1993 PTD 1172 rel.

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

----Ss.62(1), proviso & 32---Assessment on production of accounts, evidence etc.---Purpose of proviso to S.62(1), Income Tax Ordinance, 1979---Legislature while evolving laws on principles of natural justice devised the practical scheme of proviso (1) of S.62 of the Income Tax Ordinance, 1979---Said proviso was added to income tax law vide Finance Act, 1993 just enabling the tax payers to know the allegation against him and give a proper reply and defence thereof so that the taxpayers be saved from the arbitrary action of the Assessing Officer---In fact this was a rule that an Assessing Officer will be bound to accept a method of accounting which is regular and which is based on some rational and reasonable ground---Section 32 of the Income Tax Ordinance, 1979 was adversely used against the taxpayers and it became a tool for rejection of accounts instead of a measure of protection of the taxpayers.

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

----Ss.32 & 62---Method of accounting---Basic idea---Rejection of accounts---Assessee must be given full chance to rebut the material relied upon by the Assessing Officer for rejecting the accounts.

Seth Gurmukh Singh v. CIT (1944) ITR 393 and Mr. Gopi Mohan Sahah Ref. No. 1 of 1955 rel.

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

----S.62(1), proviso----Assessment on production of accounts, evidence etc.---Assessing Officer had not issued any notice under S.62 of the Income Tax Ordinance, 1979 after examination of books of accounts and before---Discarding books of accounts of the assessee and rejection of accounts by the Assessing Officer thus could not be sustained---Mandatory provisions of S.62 of the Income Tax Ordinance, 1979 having not been followed the assessment order was found to be capricious and arbitrary by the Appellate Tribunal.

CIT v. Fazal ur Rehman PLD 1964 SC 410; 1984 PTD 255 and 1979 PTD 568 rel.

(u) Income-tax---

----Res judicata, principle of---Applicability---Scope.

CIT v. Pakistan Industrial Engineering Agencies Limited PLD 1992 SC 562 rel.

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

----Ss.62 & 32---Assessment on production of accounts, evidence etc.---Method of accounting---Rejection of accounts---Principles of res judicata---Applicability---Past history---Principle of res judicata strictly applies in re-assessment/re-opening proceeding under tax laws to fulfillment of condition of the relevant provisions and if suppression of income is so glaring and floating on the surface of record---Method and system of accounting employed was the same as for the preceding years and assessee had history of acceptance of declared trading results---Previous assessment having been finalized under normal assessment after detailed scrutiny and examination of books of accounts and applying judicial mind to the facts of the case, principle of res judicata would come into play when altogether a new different method of accounting was employed and true profit could not be deduced therefrom---Department had strong evidence of suppressed income/account---Assessing Officer could not take shelter behind the principle of res judicata for rejecting books of accounts of the assessee for determining higher profits and income on the ground that past history could not be accepted being hit by principle of res judicata---Assessing Officer could not depart from the past history and the finding reached by his predecessor just because succeeding officer did not agree with the preceding officer’s finding---Taxation authorities should take notice of the conditions under which principle of res judicata did not apply before making such statement and giving such findings.

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

----Ss. 62 & 32---Assessment on production of accounts, evidence etc.---Rejection of accounts on the ground of low gross profit---Validity---After considering the explanation of the various objections to the method of accounting and to the books of accounts mentioned in the assessment order, the explanation for the decline in GP, the past and subsequent acceptance of declared results and the relevant case-law on the subject, the case-law that accounts cannot be rejected merely because of low of GP and the legal objection that the mandatory provisions of proviso of S.62 of the Income Tax Ordinance, 1979 had not been fulfilled, the rejection of declared version could not be maintained both on the basis of facts and law---Appellate Tribunal directed that declared version of the assessee be accepted.

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

----Ss. 62 & 32---Assessment on production of accounts, evidence etc.---Method of accounting---Scrap sales---Deduction of, from the cost of sales---Assessing Officer rejected books of accounts on the ground that assessee deducted scrap sales from the cost of sales which was a defect in the method of accounting---Validity---Fact that a receipt or an expense is included in the trading account or a direct income or expense in Profit & Loss account would not affect the net income---If the scrap sales were transferred from the cost of sales as direct income the Gross Profit would decline and direct income was increased and the net profit will remain the same---Same is the case, if an expense is transferred from cost of sales to the Profit and Loss account---Such transfer will increase the Gross profit but correspondingly increase the Profit and Loss expenses and the net profit will remain unchanged.

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

----Ss. 62 & 32---Assessment on production of accounts, evidence etc.---Transfer of an entry from trading account to profit and loss account---Rejection of accounts---Validity---Rejection of books of accounts is permitted if the books of accounts were found false and manipulated with a view to suppress profits---Mere transfer of an entry from trading account to profit and loss account and vice versa would not justify the rejection of accounts.

CIT v. Krrud Sons Limited 1994 PTD 174 rel.

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

----S.32(3)---Method of accounting---Rejection of accounts---Subjective judgment---Section 32(3) of the Income Tax Ordinance, 1979 did not empower an Assessing Officer to reject the books of accounts on the basis of a subjective judgment---Such judgment must be objective and within four walls of subsection (3) of S. 32 of the Income Tax Ordinance, 1979---Assessing Officer could not reject the books of accounts at his own whim as his action for purpose of rejecting books of accounts was subject to judicial determination---No hard and fast rule existed on such matters---Opinion of the Assessing Officer must not be his subjective, personal or private opinion, same must be based on something which conforms to an objective standard or criteria laid down or recognized by law.

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

----S. 24(1), Explanation---Sindh Employees Special Allowance (Payments) Act (X of 1986)---Deduction not admissible---Salary---Perquisites---Assessing Officer while working out excess perquisites included the payment of dearness allowance and special allowance (cost of living allowance) in perquisites---Validity---Explanation to Cl. (1) to S.24 of the Income Tax Ordinance, 1979 includes dearness or cost of living allowance in salary and not in perquisites---Special allowance was being paid under the Sindh Employees Special Allowance (Payments) Act, 1986 which was part of Employees Cost of Living Relief and Allowances---Appellate Tribunal directed the Assessing Officer that these allowances be treated as salary for calculation of excess perquisites.

(bb) Workers’ Welfare Fund Ordinance (XXXVI of 1971)---

----S.2---Income Tax Ordinance (XXXI of 1979), preamble---Chargeability---Set off losses---Appellate Tribunal confirmed the direction of first appellate authority that “Worker’s Welfare Fund may be charged on income after set off of losses”.

CIT v. Kamran Model Factory 2002 PTD 14 rel.

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

----S.30---Income from other sources---Scrap sales---Recasting of trading account---Trading account was recast by the Assessing Officer and scrap sales were treated as other income---Appellate Tribunal accepted appeal of the assessee and held that assessee had rightly deducted the scrap sales from the cost of goods.

(dd) Income-tax---

----Rejection of accounts---Principles/propositions emerging in the light of case-law.

S.M. Yousuf and Bros v. CIT 1974 PTD 45; R.B. Jessaram Fateh Chand (Sugar Deptt) v. CIT Bombay (1970) 75 ITR 33 (Bom.); Mr. Durai Raj v. CIT (1972) 83 ITR 484 (Kar.); Muhammad Umer v. CIT (1975) 101 ITR 525 (Pat.) and C.M. Francis and Co. (P.) Ltd. v. CIT (1970) 77 ITR 449 ref.

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

----S. 62---Assessments on production of accounts, evidence etc.---Cash purchases---Addition---First Appellate Authority maintained only 20% of such addition to cover a suspicion of over statement of cash purchases by observing that “possibility cannot be ruled out that cash purchases have been recorded at price higher than actually paid”---Validity---Disallowance of total payment of cash purchases was a novel treatment---Raw material purchased in cash was taken into account for calculation of excess consumption---Department had not urged that the raw material purchased from unverifiable parties was not received by the assessee or not utilized for production---Raw material purchased was recorded in the stock register---Add back of total payment from the raw material purchased from unverifiable parties could not be maintained---Suspicion of inflating of purchase price of cash purchases could only arise if the Gross Profit declared had been low or price paid for the cash purchases was more than verifiable purchases---When both these factors were not present the suspicion was totally unfounded and no addition on mere guess and conjecture had been approved by higher judicial authorities---Appellate Tribunal directed that the amount paid for cash purchases by the assessee be allowed in full.

S.M. Yousuf and Bros v. CIT 1974 PTD 45; R.B. Jessaram Fateh Chand (Sugar Deptt) v. CIT Bombay (1970) 75 ITR 33 (Bom.); Mr. Durai Raj v. CIT (1972) 83 ITR 484 (Kr.); Muhammad Umer v. CIT (1975) 101 ITR 525 (Pat) and C.M. Francis & Co. (P.) Ltd. v. CIT (1970) 77 ITR 449 rel.

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

----S. 62---Assessments on production of accounts, evidence etc.---Cash purchases---Rejection of trading result on account of having purchased from unverifiable parties---Validity---Law did not require an assessee to ascertain the whereabouts of seller/purchaser before entering into any deal.

(gg) Income-tax---

----Cash purchases---Mere fact that only 2.9% cash purchases were made from unorganized sector was not a defect either under the law or under the accepted principles of accounting.

(hh) Income-tax---

----Rejection of accounts---Cash purchases---Cash purchases were a fact of life and this fact could not be ignored in the under-developed countries like Pakistan---No principle of accountancy or rule of law was available to the effect that an assessee must purchase the goods either on credit basis or from verifiable parties only---Mere fact that a part of purchases was in cash, would not by itself be a ground for rejecting the book version.

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

----S. 62---Assessments on production of accounts, evidence etc.---Excess consumption/wastage---Addition of---First Appellate Authority deleted such addition on the ground that wastage claimed at 6.52% was less than the minimum of 8.77% allowed by the Department and actually higher wastage of more than 13% had been allowed which action had been confirmed by the Appellate Tribunal in the previous year---Validity---Departmental appeal against the relief allowed in respect of wastage had no merits, when the wastage allowed at 6.25% was much less than the wastage of up to 13.61% considered reasonable by the Appellate Tribunal in assessment year 1996-97---No interference was made with the first appellate authority’s order and department appeal on this ground was dismissed by the Appellate Tribunal.

Messrs Shafiq Textile Mills Ltd. 2001 PTD (Trib.) 2941; Indus Textile Mills Ltd. v. CIT 1989 PTD 56; Tanvir Textile Mills Ltd. v. CIT 1990 PTD 254 and Messrs Shafiq Textile Mills Ltd. 2001 PTD (Trib.) 2941 rel.

(jj) Income-tax---

----Rejection of account---Principles.

Messrs Shafiq Textile Mills Ltd.’s case 2001 PTD (Trib.) 2941; Indus Textile Mills Ltd. v. CIT 1989 PTD 507 and Tanvir Textile Mills Ltd. v. CIT 1990 PTD 254 rel.

(kk) Income tax---

----Addition---Excess consumption/wastage---Addition merely on account of excessive consumption/wastage in the absence of defects in accounts coupled with low Gross Profit was not justified.

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

----S. 24---Deductions not admissible---History---Telephone expenses were being consistently disallowed @ 10% of the claim and the same treatment was given last year---Deviation from past history and arbitrary disallowance out of telephone expenses @ 28% without any reason was not maintained---Appellate Tribunal directed that the disallowance be made @ 10% of the claim being in line with the history of the case.

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

----Ss. 32 & 62---Method of accounting---Rejection of accounts---Principles summed up by the Appellate Tribunal after considering the case-law and criterion set out by the superior Courts.

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

----Ss. 32 & 62---Method of accounting---Rejection of accounts---Requirements.

M. Jawed Zakaria and Jan-e-Alam I.T.P., for Appellant/ Assessee.

Shaheen Aziz Niazi, D.R. for Respondent/Department.

Date of hearing: 9th October, 2002.

2005 P T D (Trib.) 1303

[Income-tax Appellate Tribunal Pakistan]

Before Khawaja Farooq Saeed, Chairman and Mazhar Farooq Sherazi, Accountant Member

I.T.As. Nos.1060/LB to 1063/LB, 1229/LB to 1232/LB and 1250/LB of 2002, decided on 31st December, 2004.

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

----Ss. 52 & 50(4)---Liability of persons failing to deduct or pay tax---Reassessment proceedings---Assessing Officer came out with new charge under S.52 of the Income Tax Ordinance, 1979 by holding that assessee had failed to produce evidence for the deduction of tax under S.50 of the Income Tax Ordinance, 1979 on his purchases and other payments---Panel had only mentioned in its order that the assessee had failed to furnish evidence of deduction or paying tax and thus was held as an assessee in default---Validity---Section 52 of the Income Tax Ordinance, 1979 was being used as a tool for recovery of tax and more as substitute of normal assessment and it had totally been ignored that it was only a method of withholding tax and had nothing to do with the charging provisions---If a person had been given responsibility of collecting tax on behalf of the department, it must be verified that the law is applied on the facts of his case in full and he was legally bound to deduct tax---Assessee was purchasing goods liable to deduction of tax under S. 50(4) of the Income Tax Ordinance, 1979 which required a very strong and tangible evidence---Observation of Panel with regard to purchases i.e. "purchases were also unverifiable" in itself demolishes the subsequent creation of demand in respect of such purchases which were neither known to the assessee nor to the department---Doubt in favour of the assessee in terms of non-availability of the names of the parties, non-determination of the amount, non-establishment of the fact as to whether said purchases were supplies, the gap between the two rounds etc. did give reason to believe that the department had no case for holding the assessee in default---Non-submission of detail or the other accounts was undoubtedly an offence which was punishable under the law but the assessee had to be punished for the default which he had committed and not otherwise---Decision of holding the assessee as an assessee in default was not justified at all---Setting aside was not an answer to the situation as it was like making the Assessing Officer wiser so that he may come out with a better assessment.

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

----S. 52---Liability of persons failing to deduct or pay tax---Benefit of doubt---For a charge, the benefit of doubt goes to favour the taxpayer---In a provision like S. 52 of the Income Tax Ordinance, 1979 even a slightest doubt should be used to favour the subject taxpayer.

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

----S. 52---Liability of persons failing to deduct or pay tax---Whether a person was liable to withholding tax or not needed very clear and unambiguous evidence based upon documentation.

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

----S.52---Liability of persons failing to deduct or pay tax---Department's observation with regard to non-production of documents and un-verifiability of purchases may be fatal to the claim of acceptance of accounts, however, it was of no help for holding an assessee as an assessee in default.

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

----S. 52---Liability of persons failing to deduct or pay tax---Delay---Department had finalized the assessment in the year, 2000 and had found the assessee as an assessee in default for the year, which had ended on 30th of June, 1994---Delay by itself was fatal to the assessor.

2003 PTD 1167 rel.

(f) Income Tax---

----Remand order---Remand order was continuation of the order in which new source could be added.

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

----Second Sched., Cl. (122(d))---Exemption---Setting up of industry---Department contended that a specific period was granted in which the set up of industry was to be completed---Completion of set up could only be ascertained from the production of industry---Assessee failed to complete the set up by the end of June, 1998 and could not enjoy exemption on its production started after 30th of June, 1998---Validity---Assessee had completed construction of its building by 5-6-1988 and had imported the entire machinery before the end of 30th of June, 1998---No proof was available with regard to installation of electric connection prior to 30-6-1998---Letter reproduced by the Assessing Officer in assessment order proved that the commencement certificate was obtained on 30th September, 1988 and trial run production started on first January, 1989---Industry was in process of commencement of production during such period---Sequence of circumstances was pointer to continuous and perpetual effort on the part of assessee to reach to production stage---Intention of the assessee was clear and the project was ready for production as was proved from record---Set up was completed by 30-6-1988---Exemption was to be for five years beginning with the month in which the undertaking was set up or commercial production was commenced---Mentioning two connotations i.e. set up or commercial production for determination of period and having used only one i.e. 'set up' in the first part, the legislature had made the situation very clear---'Set up' was a different situation than 'commercial production'---Adopting the principle of interpretation, language of law should be applied in its natural meanings---Assessee having completed its set up by and before 30-6-1988 was entitled to exemption---Department was directed to allow the same accordingly by the Appellate Tribunal.

1991 PTD 359; 2004 PTD 921 and Irum Ghee Mills Limited's case 2002 SCMR 1871 rel.

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

----Second Sched., Cl. (122(d))---Exemption---Setting up of industry---Under normal circumstances only laying of foundation may also be a form of set up---However, for granting exemption to an industry the series of circumstances is not to be ignored.

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

----Second Sched., Cl. (122(D))---Exemption---Setting up of industry---Set up in which the series of events prove that the assessee is serious in starting the industry within the specific period but for the reasons of some unforeseen events or bottlenecks from certain functionaries with respect to import of machinery, installation of electric connection etc. could not enter into production, he should not be deprived of the benefits of set up of the industry.

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

----Second Sched., Cl. (122(D))---Exemption---Setting up of industry---"Commencement" is something different from "set up".

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

----Second Sched., Cl. (122(D))---Exemption---Setting up of industry---Exemption was on profit and gains derived by an assessee from an industrial unit set up upto 30-6-1988---Basic requirement was that the industry must be "set up" by 30-6-1988---Determination of set up was a point of fact and it could only be decided after looking into the facts and circumstances in each case separately.

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

----Second Sched., Cl. (122(D))---Exemption---"Set up", meaning of---Simple and workable definition of 'set up' for the purpose of Cl. (122(D)) of Second Schedule of the Income Tax Ordinance, 1979 can be 'ready for production'.

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

----S. 13(1)(aa)----Addition---Deletion of addition under S.13(1)(aa) of the Income Tax Ordinance, 1979 was confirmed by the Appellate Tribunal as at no stage of the proceedings the Panel had mentioned issuance of specific notice under S.13 of the Income Tax Ordinance, 1979 or approval from the next higher authority and amount was also obtained from sister concern, ledger copy of which was obtained from the sister concern and produced before the Assessing Officer.

Muhammad Iqbal Khawaja for Appellant (in I.T.As. Nos.1060/LB to 1063/LB, 1229/LB to 1232/LB of 2002).

Muhammad Aslam Bhatti, D.R. for Respondent (in I.T.As. Nos.1060/LB to 1063/LB, 1229/LB to 1232/LB of 2002).

Muhammad Aslam Bhatti, D.R. for Appellant (in I.T.A. No.1250/LB of 2002).

Muhammad Iqbal Khawaja for Respondent (in I.T.A. No.1250/LB of 2002).

Date of hearing: 17th December, 2004.

2005 P T D (Trib.) 1364

[Income-tax Appellate Tribunal Pakistan]

Before Syed Nadeem Saqlain, Judicial Member and Raja Sikandar Khan, Accountant Member

Income Tax Appeal No.453/LB of 2002, decided on 6th September, 2004.

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

----Ss. 13(1)(b), 65 & 5(1)(c)---Addition---Additional assessment---Affidavit---Addition on account of purchase of car was confronted being not shown in the balance sheet---Assessee submitted that due to financial crises the company could not maintain the said vehicle and the same was sold---Affidavit of the purchaser and sale receipts were furnished---Contention of the assessee was rejected on the ground that vehicle was registered in the name of assessee and addition was made---Assessee contended that affidavit of purchaser which was submitted, Assessing Officer could not reject the same summarily---Validity---Assessing Officer was fully justified to reopen the case in view of the fact that the assessee purchased a car which was duly registered in its name---Assessing Officer had no justification to take the action in view of affidavit filed by the purchaser that the car was sold---Since car stood disposed of before the end of year, the same was rightly not shown in the balance sheet---No plausible reason was given by the Assessing Officer to reject the affidavit/sale receipt filed by the assessee to prove the disposal of car---Addition made by the Assessing Officer under S. 13(1)(b) of the Income Tax Ordinance, 1979 lacked legal sanctity which was deleted by the Appellate Tribunal.

1988 PTD (Trib.) 612 and I.T.A. No.2052/LB of 2003 ref.

1991 MLD 1243 and 2001 MLD 1257 rel.

(b) Income Tax---

----Affidavit---In absence of counter affidavit, the averment supported by an affidavit are presumed to be true---Statement supported by an affidavit ought to be accepted unless rebutted by another statement on oath.

1991 MLD 1243 and 2001 MLD 1257 rel.

Ahmad Naseer Sh. for Appellant.

Abdul Rasheed, D.R. for Respondent.

Date of hearing: 3rd September, 2004.

2005 P T D (Trib.) 1370

[Income-tax Appellate Tribunal Pakistan]

Before Ehsan ur Rehman, Judicial Member and Mazhar Farooq Shirazi, Accountant Member

W.T.As. Nos.326/LB and 325/LB of 2004, decided on 18th January, 2005.

Wealth Tax Act (XV of 1963)---

----Ss.2(10), 8 & 16---Deputy Commissioner---Jurisdiction to make assessment by Taxation Officer---Assessee contended that First Appellate Authority was not justified to confirm the order of the Taxation Officer as the assessment framed by the Taxation Officer was illegal, without jurisdiction, void ab initio and liable to be annulled---Validity---Assessments framed by the Taxation Officer were without lawful jurisdiction and ab initio illegal and void in view of which the wealth tax assessment proceedings were null and void in the eye of law---Assessments framed were annulled by the Appellate Tribunal.

2002 PTD 541 and 1999 PTD (Trib.) 4026 rel.

Sh. Zafar-ul-Islam for Appellant.

Mrs. Sabiha Mujahid, D.R. for Respondent.

Date of hearing: 18th January, 2005.

2005 P T D (Trib.) 1373

[Income-tax Appellate Tribunal Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member

I.T.A. No.5901/LB of 2004, decided on 25th January, 2005.

Income Tax Ordinance (XXXI of 1979)---

----S. 62---Assessment on production of accounts, evidence etc.---Finalization of assessment on the same date on which the notice under section 62 of the Income Tax Ordinance, 1979 was issued---Validity---Assessing Officer, after issuing a notice under S.62 of the Income Tax Ordinance, 1979 on 22-2-2003 directing the assessee to appear on or before 28-2-2003 had finalized the assessment on the same date i.e. 22-2-2003 which was without any basis and nullity in the eye of law---Appellate Tribunal vacated the order of First Appellate Authority as well as the assessment order and directed that version of the assessee be accepted.

Arif Latif for Appellant.

Anwar Ali Shah, D.R. for Respondent.

Date of hearing: 25th January, 2005.

2005 P T D (Trib.) 1375

[Income-tax Appellate Tribunal Pakistan]

Before S. Hasan Imam, Judicial Member and Shaheen Iqbal, Accountant Member

I.T.As. Nos.622/KB and 623/KB of 2003, decided on 12th August, 2004.

Income Tax Ordinance (XXXI of 1979)---

----S.89---Charge of additional tax on failure to pay tax or penalty---Date of working of additional tax---In absence of "date of the month" in the notice, the time of payment had been impliedly extended in the demand note up to the last day of the month mentioned in the notice---Assessee was therefore, liable to make the payment on or before last day of the month---Where it was mentioned in the notice that demand be cleared within 15 days of the receipt of notice, mentioning of date and month would not be necessary and 15 days time shall run from the date of service of notice---If demand was reduced then additional tax would be payable on the reduced demand so worked out from the original due date till the said reduced demand was fully paid.

Ausama Rahim Khan for Appellant.

Muhammad Ali Indhar, D.R. for Respondent.

Date of hearing: 12th August, 2004.

2005 P T D (Trib.) 1385

[Income-tax Appellate Tribunal Pakistan]

Before Inam Ellahi Sheikh, Chairman and Muhammad Jahandar, Judicial Member

I.T.As. Nos.168/IB and 238/IB of 2003, decided on 27th January, 2004.

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

----Ss. 80C(2), 62, 50(4) & First Sched., Cl. (E)---Finance Act (IV of 1999), Preamble---Tax on income of certain contractors and importers---Services rendered---Contention of the assessee that "in absence of any corresponding amendment in first schedule as to the rate to be applied for the services rendered, certain receipts from companies could not be processed under section 80C of the Income Tax Ordinance, 1979" was rejected by the Assessing Officer---Validity---Through the Finance Act, 1999 when services rendered to be taxed under Presumptive Tax Regime were clarified by detailing certain categories of persons, it was obligatory on the Legislature to make chargeable the services of the persons not detailed by the amendment and a rate should also have been given in the first schedule---In absence of giving any rate a rate chargeable as per Cl. (E) of the First Schedule which was relevant to that of normal tax regime for the services rendered under S.50(4) of the Income Tax Ordinance, 1979, could not be applied---Issue set aside by the First Appellate Authority was not approved by the Appellate Tribunal with direction that receipt from companies, diplomats and Government organizations be assessed under normal tax regime.

(b) Income-tax---

----Estimation of receipts---Packing receipts---Unverifiable receipts---545.9% increase of unverifiable receipts was found to be illogical and irrational by the First Appellate Authority and directed the Assessing Officer that declared packing receipts be accepted and Appellate Tribunal approved the findings of the First Appellate Authority.

(c) Income-tax---

----Add-back---Add-backs under the head vehicles running, communications, repair and maintenance, printing and stationery made by using stock phrase of un-verifiability without pointing out any specific defect, were deleted by the Appellate Tribunal.

Abdul Basit, F.C.A. for the Appellant/Assessee.

Noushad Ali Khan, D.R. for Respondent/Department.

Date of hearing: 11th December, 2003.

2005 P T D (Trib.) 1437

[Income-tax Appellate Tribunal Pakistan]

Before Rasheed Ahmad Sheikh and Muhammad Tauqir Afzal Malik, Judicial Members and Amjad Ali Ranjha, Accountant Member

I.T.A. No.3655/LB of 2001, decided on 28th November, 2002.

Per Rasheed Ahmad Sheikh, Judicial Member; Muhammad Tauqir Afzal Malik, Judicial Member, agreeing.

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

----S. 62(1)---Assessment on production of accounts, evidence etc.---Rejection of trading results on the point of declaring low gross profit rate and disclosing low yieldage as compared to other cases confronted prior to examination of books of accounts---Validity---Order passed by the Assessing Officer had not only suffered from legal but also on factual infirmity---Assessing Officer had not pinpointed any sufficient defect in the books of account maintained by the assessee in order to reject the declared trading version despite the fact that those were examined by him---Book version had been rejected on general and flimsy grounds---Cash sales were hard fact of life but in a case where books of accounts were being maintained on the same pattern as had been accepted by the department in the past, in such situation heavy duty was cast upon the Assessing Officer to find out glaring discrepancies in the account books such as suppression in purchases or sales to reject the trading account---Mere, declaring low gross profit rate coupled with its variation in sale rates to the sales made to the verifiable and unverifiable parties, did not render rejection of declared trading version valid---Each year is a separate assessable entity but this is an established law that departure from history could not be made without pointing out existence of exceptional and extraordinary circumstances as well as glaring defects or discrepancies in the books of accounts---Appellate Tribunal held that declared trading version could not be discarded on flimsy reasoning as had been done in present case.

PLD 1975 Kar. 370; (1979) 39 Tax 76; (1984) 50 Tax 121 and 1984 PTD 197 rel.

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

----S.62(1)---Assessment on production of accounts, evidence etc.---Rejection of trading results---Section 62(1) of the Income Tax Ordinance, 1979 vividly stipulates that prior to rejection of declared trading version, the Assessing Officer is obliged to confront the assessee with the defects noted by him in the books of accounts maintained by the assessee.

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

----S.62(1)---Assessment on production of accounts, evidence etc.---Rejection of trading accounts---Notice issued under S.62 of the Income Tax Ordinance, 1979 merely spells out submissions of certain details by the assessee in no way comes at par or can be equated with the notice to be issued under S.62(1) of the Income Tax Ordinance, 1979---Issuance of notice under S.62(1) of the Income Tax Ordinance, 1979 is sine qua non and non-observance thereof is fatal---No such notice had ever been issued which would ultimately result into acceptance of declared trading version of the assessee.

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

----S.62(1)---Assessment on production of accounts, evidence etc.---Rejection of accounts---Assessee contended that without confronting with the defects noted in the books of accounts in terms of notice under S.62(1) of the Income Tax Ordinance, 1979, which was a mandatory requirement of law, rejection of accounts was not at all warranted---Validity---Declared trading results of the assessee had been discarded by the Assessing Officer without adhering to statutory obligation as had been stipulated in S.62(1) of the Income Tax Ordinance, 1979 and also without pointing out any substantial nature of defects in the books of accounts which may warrant departure from history of the case or rejection of the declared trading version---Assessing Officer was directed to accept the declared trading version of the assessee which would ultimately result into deletion of addition made in the declared gross profit by way of estimating sales and applying higher gross profit as well as in yieldage account.

1984 PTD 150; (1971) SCMR 681; 1985 PTD (Trib.) 170; (1999) 79 Tax 764 (Trib.); 1999 PTD 3896 (Trib.); 2001 PTD (Trib.) 2938; 1999 PTD (Trib.) 3892; 2002 PTD (Trib.) 1583 and I.T.A. No.414/LB of 2002, dated 27-7-2002 rel.

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

----Ss. 24(c) & 50(4)---Deduction not admissible---Commission to selling agents---Expenses were disallowed on the ground that since no tax under S.50(4) of the Income Tax Ordinance, 1979 was deducted thereon such expenses were not allowable in terms of S.24(c) of the Income Tax Ordinance, 1979---First Appellate Authority set aside the assessment on this point on ground that no confrontation before making the said addition was made to the assessee---Validity---First Appellate Authority was not justified in setting aside the case on such score---Order on this point was vacated and the addition so made by the Assessing Officer was deleted by the Tribunal.

Per Rasheed Ahmad Sheikh, Judicial Member--

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

----Ss.24(c), 80CC(2) & 62---Deduction not admissible---Export expenses---Disallowance of expenses in its entirety with the observation that those were not allowable against the local sales being duly covered against the export sales in terms of S.80CC(2) of the Income Tax Ordinance, 1979---Validity---No confrontation was ever made with regard to addition by way of issuance of notice under S.62 of the Income Tax Ordinance, 1979 and right from the very beginning of the assessments, such expenses were being prorated by the Department---Such expenses in totality were not unjustified---Appellate Tribunal directed the Assessing Officer to follow the same methodology of allocating the export expenses proportionately in the year under appeal as was being adopted in the past.

Per Muhammad Tauqir Afzal Malik, Judicial Member--

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

----Ss.24(c), 80CC(2), 143B & 62---Deduction not admissible---Export expenses---Proportionate of expenses to local sales and export sales---Validity---Though the unit was export oriented yet for the year under appeal there was a sale in local market more than in the earlier years---Assessing Officer could only see that the expenses which had been allocated to export were the expenses which actually had been expended for the goods exported, or not, were to be allocated on the export sales and any expense which had not been made on export oriented sales, had not been wrongly claimed---If all the expenses incurred were on the goods which had been exported then total export expenses were to be allowed; if not then those expenses which had not been incurred for exported goods were to be disallowed---Allocation of export expenses proportionately to the export and local sales was not approved by the Tribunal.

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

----Ss.24 & 62---Deduction not admissible---Technically the issuance of notice under S.62 of the Income Tax Ordinance, 1979 is also mandatory in disallowing the Profit and Loss expenses.

Kaleem Rathore, F.C.A. and Shahid Abbas for Appellant.

Javed ur Rehman, D.R. for Respondent.

Date of hearing: 26th November, 2002.

2005 P T D (Trib.) 1470

[Income-tax Appellate Tribunal Pakistan]

Before Muhammad Anwar Ali, Member (Technical) and Al-Haj Firoz-ud-Din, Member (Judicial)

Appeal Nos.7(201)CU/IB, 7(202)/CU/IB, 7(203)CU/IB, 7(204)CU/IB and 7(291)/CU/IB of 2000, decided on 30th November, 2004.

Customs Act (IV of 1969)---

----Ss. 13, 19, 32, 156(1)(a)(10-A), (14), (44), (45), (46), (50), (51), (59), (61), (62), (77), (81), (82), (86), (90), (91) & 194-A---Altering/ tampering bills of entry fraudulently---Imposition of penalty---Appeal to Appellate Tribunal---Appellants/importers allegedly misdeclared facts/ particulars of consignments imported by them and had fraudulently altered/tampered bills of entry after clearance and, in circumstances succeeded in removing the goods without properly in-bonding, ex-bonding and without payment of duties and taxes otherwise leviable on import of such goods---Scrutiny of record had revealed that Appellants/ importers, in collusion with clearing agents and customs staff knowingly misdeclared the facts/particulars of goods and presented false/incomplete invoice misdeclaring the value of goods imported and keeping the description and quantity of goods ambiguous giving no details to conceal the correct amount of imported goods---Authorities, after issuing show-cause notice and affording full opportunities of hearing, imposed penalties on appellants---Minute scrutiny of original examination report, had revealed that some of figures were tampered with deleting original quantities with ink remover and less quantities were entered in their place---Though an effort had been made to rub the quantities, but original figures were not deleted completely and could be read very clearly---Not all, but some entries had been tampered with in examination report---Prosecution could not prove criminal proceedings against certain appellants/accused due to lack of criminal evidence in strict judicial scrutiny of Trial Court i.e. Special Judge Customs as well as at appellate stage of High Court---Tampering and alteration had fully been proved---Criminal proceedings and departmental adjudication proceedings were independent of each other---Contention of appellants that department had no case in quasi-judicial proceedings as the main prosecution case had been set aside by High Court, was not tenable---Not all the entries had been tampered with in the examination report---Original bill of entry had shown most of the quantities were intact whereas only some of entries of items had been changed---Duties and taxes liable to be paid by appellants related only to the entries which were found altered/tampered with and did not relate to entire consignments imported into the containers---Appellants were to pay the duties and penalties adjudged in the impugned orders-in-original and orders-in-appeal, and appeals were dismissed.

PLD 1975 Lah. 1314; 2003 PTD (Trib.) 1857; PLD 1992 SC 485; 1983 PCr.LJ 676; PLD 1986 Pesh. 186; 2002 MLD 700; PLD 1997 Lah. 1318; 1985 PCr.LJ 286; 1983 CLC 786; 1995 SCMR 387; PLD 1992 SC 393; 1990 PCr.LJ 26; 2001 PCr.LJ 1919; 1989 PCr.LJ 601; 2003 PTD (Trib.) 1857; 1980 SCMR 114 and 1987 SCMR 1840 ref.

Muhammad Naeem Qazi and Mian Nazir Azhar for Appellants.

Farhat Nawaz Lodhi with Mrs. Sarwat Tahira Habib, Additional Collector/Departmental Representative and Agha Sabir Intelligence Officer for Respondents.

2005 P T D (Trib.) 1505

[Income-tax Appellate Tribunal Pakistan]

Before Muhammad Sulaiman, Member (Technical)/Chairman, Sayed Mohsin Asad, Member (Technical) and Raj Muhammad Khan, Member (Judicial)

Appeals Nos.24 to 40 and 108 to 112 of 2003, decided on 12th August, 2003.

Central Excises Act (I of 1944)---

----Ss. 3, 3-B, 4(2), 9 & 35-B---Central Excise Rules, 1944, Rr.7, 9, 10 & 210---Short payment of Central Excise Duty on solvent oil---Classification under P.C.T. Heading---Appeal before Appellate Tribunal---Matter in question was that appellants reportedly were short paying Central Excise Duty on solvent oil due to misclassification of P.C.T. Heading and it was alleged that appellants grossly underpaid Central Excise Duty due to wrong classification of P.C.T. Heading i.e. 2711.1100 instead of correct P.C.T. Heading 3814.0000 as communicated by Central Board of Revenue vide its letter---Characteristics of product/item in question were; aromatic content (Per cent)=about 10%; specific gravity=0.722; Initial Boiling Point=60°c(140F) & (4) Final Boiling Point=120oc(248-F) and in view of said characteristics, item in question was clearly classified under P.C.T. Heading 2710.0039 because product covered by 2710.0031 was white spirit, whose specific gravity was 0.722 to 0.800 and its initial boiling point was 150oc and final boiling point was over 190oc as per technical literature---White spirit described in that literature was clearly stated to contain from 20% to 25% aromatics whereas aromatic content of product under dispute was about 10%---Such fact was further strengthened by Pakistan standard classification for petroleum solvent grade 60/120 which had almost exactly the same specifications as the goods in question and which clearly stated that said petroleum solvent was a product consisting entirely of petroleum hydrocarbons obtained by refining of crude petroleum---Such were the specifications of goods under dispute as well---Appellate forum, in circumstances was of firm view that correct classification of item in question was 2710.0039 which view was also strengthened by independent opinion of World Customs Organization which had clearly ruled out 38.14 Heading and classified goods in question under Heading 2710---World Customs Organization was an independent, international expert body, whose rulings were acceptable worldwide---Customs Administration of Pakistan (C.B.R) could refuse to accept it and refer it back to World Customs Organization, but in the present case they had not done so, that was a tacit admission of its ruling---Appeals filed by appellants were accepted only to the extent of classification of goods in question under Heading 2710.0039, but other legal and factual issues raised by appellants were not upheld---Petitions of respondents were dismissed so far as the classification of goods under Head 3814.0000 was concerned and their request to refer matter to C.B.R., was not acceded to.

Messrs Central Insurance Co. and others v. The Central Board of Revenue, Islamabad and others 1993 SCMR 1232; The Commissioner of Income Tax, East Pakistan, Dacca v. Noor Hussain PLD 1964 SC 657; Laxmichand Hirjibhai v. CIT, Gujarat-III ITR 128; Tata Iron and Steel Co. Ltd. v. N.C. Upadhyaya ITR 961; UCO Bank v. CIT 1999 PTD 3752; CIT v. Muhammad Kassim 2000 PTD 280; 1993 PTD 766; 1992 SCMR 1898; 1992 CLC 841; NLR 1991 Tax 11; 1991 MLD 1459; 1992 SCMR 1652 and PTCL 2002 CL 221 ref.

Farhat Nawaz Lodhi for Appellant.

Kamran Khan, Assistant Collector and Muhammad Rasheed, Superintendent for Respondents.

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2005 P T D (Trib.) 2029

[Income-tax Appellate Tribunal Pakistan]

Before Khawaja Farooq Saeed, Chairman and Mazhar Farooq Shirazi, Accountant Member

R.A. No.526/LB of 2004, decided on 9th February, 2005.

Income Tax Ordinance (XXXI of 1979)---

----Ss. 62, 66-A, 80-C, 143-B & 136---Reference to High Court---Statement for relevant assessment year declaring supplies and deduction---Validity---Question of law involved in the case was "whether or not filing of statement under S.143-B of Income Tax Ordinance, 1979 duly signed by Tax payer should be construed as legally valid option exercised for presumptive tax regime"---Because of the fact that assessee filed statement under 5.143-B of Income Tax Ordinance, 1979 and income was not chargeable under S.80-C of the said Ordinance, it could not be considered that assessee.had opted for presumptive tax regime in respect of supplies which was a requirement under clause (9) of Part-IV of Second Schedule to Income Tax Ordinance, 1979, because it was an established proposition that unless assessee would opt for presumptive tax regime specifically by mentioning that fact in the return, mere filing of statement under 5.143-B of Income Tax Ordinance, 1979 would be of no importance and it could not be considered to be erroneous, in circumstances---Authority was not justified to invoke provisions of S.66-A of Income Tax Ordinance, 1979---Application filed by Department for reference of proposed question to High Court, had no force in the eye of law; same was dismissed being devoid of any merit and substance.

2003 PTD (Trib.) 1158; 2003 PTD (Trib.) ref.

Akram Tahir, D.R. for Appellant.

Mudassar Shuja for Respondent.

Date of hearing: 9th February, 2005.

2005 P T D (Trib.) 2032

[Income-tax Appellate Tribunal Pakistan]

Before Jawad Masood Tahir Bhatti, Judicial Member and Mukhtar Ahmad Gondal, Accountant Member

I.T.As. Nos.3934/LB, 4208/LB of 2002, 717/LB and 1167/LB of 2004, decided on 7th April, 2005.

Income Tax Ordinance (XXXI of 1979)---

----Ss. 59-A, 62, 63, 64 & 134---Appeal to Appellate Tribunal---Assessment---Limitation---Assessment for the year 1998-99 was made by Assessing Officer on or before 30-6-2001 and was served on assessee on 3-8-2001---Said assessment was invalid and ineffective under S.64 of Income Tax Ordinance, 1979 according to which it had been mentioned unambiguously that no assessment under Ss.59-A, 62 & 63 of the Ordinance would be made after expiration of two years from the end of assessment year in which total income was first assessable---Assessment order passed under S.62 of Income Tax Ordinance, 1979 being barred by time, was held to be null and void---Books of accounts produced by assessee were duly examined by Assessing Officer and Assessing Officer despite admitting that vouchers and other documents had been furnished, by assessee, on the basis of stock phrases without confronting assessee and pinpointing any specific defects in the books of accounts, rejected declared version of assessee and framed assessment on the basis of history without considering that facts for the year under review were different from previous assessment years---As assessee was maintaining books of accounts and Assessing Officer without pinpointing any specific defects in the account books had made estimation without any justification, appeal filed by assessee was allowed and declared version of assessee was directed to be accepted.

(2005) 91 Tax 322 (Trib.) and 1996 PTD 1104 ref.

Haroon Ahmad, A.C.A. for Appellant (in I.T.As. Nos.3934/LB of 2002 and 717/LB of 2004).

Imran Raza Kazmi, D.R. for Respondent (in I.T.As. Nos.3934/LB of 2002 and 717/LB of 2004).

Imran Raza Kazmi, D.R. for Appellant (in I.T.As. Nos.4208/LB of 2002 and 1167/LB of 2004).

Haroon Ahmad, ACA for Respondent (in I.T.As. Nos.4208/LB of 2002 and 1167/LB of 2004).

Date of hearing: 7th April, 2005.

2005 P T D (Trib.) 2039

[Income-tax Appellate Tribunal Pakistan]

Before Zafar Ali Thaheem, Judicial Member and Mazhar Farooq Shirazi, Accountant Member

I.T.As. Nos.2250/LB and 2251/LB of 2002, decided on 19th May, 2005.

Income Tax Ordinance (XXXI of 1979)---

----Ss. 59, 59-A, 66-A & 134---Appeal to Appellate Tribunal---Cancellation of assessments---For assessment year 1997-98 proceedings were initiated against assessment under S.59-A of Income Tax Ordinance, 1979, by order under S.66-A of said Ordinance, assessment was cancelled---In assessment year 2000-2001 proceedings under S.66-A of Income Tax Ordinance, 1979 were initiated against a completed assessment under S.59(1) of the Ordinance and assessment was cancelled---Validity---Section 59-A of Income Tax Ordinance, 1979 had been enacted to cope with returns not qualifying to be processed under Self-Assessment Scheme, but Assessing Officer found same fit to be accepted as it was---Assessing Officer in violation of S.59(4) of Income Tax Ordinance, 1979 had illegally proceeded to pass order under S.59-A of the Ordinance---Order for assessment year 1997-98, was suffering from incurable legal defects so it was cancelled and acceptance of return filed under Self-Assessment Scheme was restored as per provisions of S.59 of Income Tax Ordinance, 1979---For the assessment year 2000-2001, order was simply filling in blanks without application of mind---Such order had no legal existence and anything which was legally not in existence, no action could be contemplated under it---Impugned order for assessment year 2000-2001 was also cancelled and acceptance of Income Tax return as per provisions of S. 59 of Income Tax Ordinance, 1979, was maintained.

Muhammad Shahid Abbas for Appellant.

Ahmad Kamal, D.R. for Respondent.

Date of hearing: 7th April, 2005.

2005 P T D (Trib.) 2041

[Income-tax Appellate Tribunal Pakistan]

Before Khawaja Farooq Saeed, Chairperson and Javed Tahir Butt, Accountant Member

I.T.As. Nos.966/LB to 968/LB, 1427/LB to 1429/LB of 2002, 205/LB, 5961/LB, 5962/LB, 575/LB, 6640/LB of 2004, decided on 2nd April, 2005.

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

---S. 62---Assessment on production of accounts, evidence etc.---Interest credited to suspense account---Mark-up was credited to suspense account instead of Profit and Loss account---Assessing Officer found that accrued profits were taxable in the hand of assessee as the assessee was maintaining its accounts on mercantile system of accounting---First Appellate Authority upheld the order of the Assessing Officer on the ground that concept of real income was not recognized in the Income Tax Ordinance, 1979 where accounts were maintained on accrual basis and such suspended profits which were in accordance with the prudential regulations did not have a bearing on the taxability of this income and the income credited to suspense account was brought into the ambit of taxation---Validity---Action of the First Appellate Authority confirming the taxing of income credited to suspense account was not upheld by the Appellate Tribunal---Amount credited to suspense account was held to be not liable to tax.

1998 PTD (Trib.) 1878 and 1999 PTD (Trib.) 2294 ref.

1999 PTD (Trib.) 2294 and I.T.As. Nos.3760/LB to 3763/LB of 1999 rel.

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

---First Sched., Part V, para. D(a)---Rate of tax---Taxation of dividend income---Dividend income was to be charged to tax at reduced rate under para. D(a) of Part-V of the First Schedule of the Income Tax Ordinance, 1979.

I.T.As. Nos.2447/LB and 2448/LB of 1999; I.T.A. No.2449/LB of 1999; PLD 1997 SC 700 = 1997 PTD 1693 and 2002 PTD (Trib.) 507 rel.

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

---S. 23(1)(x)---Deductions---Provisions for bad debts were not allowed on the ground that a provision could be equated with the word "actually written off" as required under S.23(1)(x) of the Income Tax Ordinance, 1979 which was deleted by the First Appellate Authority---Validity---Order of First Appellate Authority was not called for any interference and deletion of addition under the head of provisions of bad debts by the First Appellate Authority was upheld by the Appellate Tribunal.

2002 PTD (Trib.) 1898; (2002) 85 Tax 245 (Trib.) and 2003 PTD (Trib.) 1189 rel.

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

---First Sched., Part IV, para. A(4)---Taxation of capital gain at concessionary rate---Exemption claimed of gain arises out of purchase and sale of securities was disallowed by the Assessing Officer on the grounds that purchase and sale of securities was a part of the normal business activities and no exemption could be given to the assessee on sale of such securities---Validity---First Appellate Authority found that on net capital gain, the provisions of Para. A(4) of Part-IV of the First Schedule of the Income Tax Ordinance, 1979 was to be applied and such finding of First Appellate Authority was upheld by the Appellate Tribunal.

PLD 1997 SC 700 = 1997 PTD 1693 and 2003 PTD (Trib.) 494 rel.

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

---Ss. 23 & 62---Deductions---Assets written off were disallowed on the ground that assessee failed to provide details of assets and its sale price in the market---First Appellate Authority deleted the disallowance on the ground that the Assessing Officer had accepted the accounts and the addition was tantamount to tinkering with the accounts---Findings of First Appellate Authority were found correct and order of the First Appellate Authority was upheld by the Appellate Tribunal.

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

---Ss. 23 & 62---Deductions---Premium paid on purchase of F.I.Bs.---Assessing Officer observed that premium paid was cost of securities on which it was paid and formed purchase .price of these securities and being a part of capital cost could not be amortized over the life of securities and was disallowed being capital in nature---First Appellate Authority found that premium paid on purchase of F.I.Bs. was allowable as claimed amortized by the assessee bank---Validity---Point of view of the assessee was accepted by the appellate authorities in the immediately preceding year---Issue had been settled at First Appellate Authority stage---Appellate Tribunal did not interfere in the order of First Appellate Authority.

I.T.A. No. 1658/LB of 2003 rel.

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

---Ss. 23, 24 (i) & 62---Deductions---Depreciation on vehicles---50% of the amount claimed on account of depreciation was disallowed for personal use of vehicles by employees on the ground that no details of vehicles provided to the employees had been submitted---First Appellate Authority observed that there was not justification of the treatment given by the Assessing Officer on account of conveyance provided by the employer and addition if any could be made in the hands of the employee as per Income Tax Rules, 1982 or addition may be made under S.24(1) of the Income Tax Ordinance, 1979 on account of excess perquisites but there was no justification for curtailment of depreciation claimed---Addition was deleted by the First Appellate Authority---Validity--Addition could be made under the Income Tax Rules, 1982 or under S.24(i) of the Income Tax Ordinance, 1979---Addition out of depreciation claimed on account of personal use could not be endorsed---Order of First Appellate Authority was upheld by the Appellate Tribunal.

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

----Ss. 23, 62 & Second Sched., Part 1, Cl. (116)---Deductions---Exemption on gain on sale of shares was allowable to assessee---In view of such exemption, expenses relatable to capital gain were not to be allowed against the business income as the capital gain and business income were two separate and distinct heads of income---Assessing Officer disallowed expenses relateable to capital gains but claimed under the head of "business income"---First Appellate Authority deleted the addition on the ground that where the income was from indivisible sources, the expenses could not be proportioned between income from taxable sources and from exempt sources---Validity---Appellate Tribunal did not interfere in the order of the First Appellate Authority as First Appellate Authority deleted the addition through well-reasoned arguments based on the earlier judgment of the Appellate Tribunal.

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

----Ss. 23 & 62---C.B.R. Circular No.7 of 2003, dated 12-7-2003---Deductions---Premium paid on F.I.Bs.---Assessing Officer observed that premium paid was cost of securities on which it was paid and formed purchase price of such securities and being capital cost it could not be amortized over the life of securities and the same was disallowed---First Appellate Authority found that premium paid was allowable deduction and deleted the addition---Validity---Deletion of addition by First Appellate Authority was endorsed and the order of the First Appellate Authority was upheld by the Appellate Tribunal.

(1977) Tax 273 (Trib.) (sic) rel.

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

----Ss. 62 & 24(i)---Assessment on production of accounts, evidence etc.---Addition on account of personal use of vehicles---Free use of bank maintained car had been provided to Chief Executive and other Executives-Assessing Officer disallowed 50% of the expenses---Addition was deleted by the First Appellate Authority on the ground that car was provided to the employees by the bank as a salary package and it was up to the employees how to use them and it was employee who had to pay tax on these perquisites and not the employer---Validity---Employees who were receiving the benefits/perquisites should pay. tax on account .of these perquisites---Provisions of S.24(i) of the Income Tax Ordinance, 1979 will also be attracted in such case to calculate the excess perquisites provided to the employees by 'the employer---Such disallowance should not be made on the basis of estimation but rather be properly worked out---Appellate Tribunal did not interfere in the order of the First Appellate Authority on this issue.

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

----Ss. 24(c), 50(4), 52, 86 & 62---Deductions not admissible---Membership fee---Subscription paid to Association was disallowed on the ground that assessee did not deduct tax under S.50(4) of the Income Tax Ordinance, 1979 at the time of this fee---First Appellate Authority deleted the addition as no action under S.24(c) of the Income Tax Ordinance, 1979 was called for and that the Assessing Officer had observed that separate action under Ss.52/86 of the Income Tax Ordinance, 1979 will be taken and disallowance will amount to double taxation---First Appellate Authority deleted the addition being illegal and unjustified---Validity---Separate action under Ss.52/86 of the Income Tax Ordinance, 1979 was taken by the department on this issue---Deletion of addition by the First Appellate Authority was upheld by the Appellate Tribunal.

(l) Income Tax Ordinance (XXX1 of 1979)---

----Ss. 24(i), 23, 12(7) & Second Sched: Part-IV, C1.3---Deductions not admissible---Advance of loan---Assessee advanced loans to its employees at rates, which were less than the rates at which loans were advanced to ordinary customers---Benefit provided to the employees was found to be falling under the ambit of excess perquisites under S.24(i) of the Income Tax Ordinance, 1979 by the Assessing Officer---Assessee contended that there was no justification to hold that benefits such as concessional loans/advances to employees were hit by S.24(i) of the Income Tax Ordinance, 1979 and that the claim of expenditure under S.23 Of the Income Tax Ordinance, 1979 was a pre-condition for disallowance under S.24 of the Income Tax Ordinance, 1979 and in case of concessional loans no expenses were incurred and rather banks earned income by charging interest on such loans/advances---Validity---Assessee never claimed any expenditure and bank earned income by charging interest on concessionary loans/advance to its employees---Since no expenditure had been claimed, the provisions of S.24(i) of the Income Tax Ordinance, 1979 were not attracted and addition made on account of concessionary loans could not be endorsed---Addition was deleted by the Appellate Tribunal.

Messrs Hongkong and Shanghai Banking Corporation decided by ITAT vide I.T.A. No.652/KB of 1999-2000 Per incurium.

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

----S.24(i) & Second Sched: Part-IV, Cl.3---Deductions not admissible-Addition to income as excess perquisites was made on the ground that assessee had not provided employee-wise details of such other benefits from where the working of excess perquisites. could be made---Addition was upheld by the First Appellate Authority---Assessee contended that in view of C1.3 of Part-IV of the Second Schedule to the Income Tax Ordinance, 1979, no addition could be made on account of excess perquisites in the case of assessee being a banking company---Validity---Contention of the assessee that word `or' used in Cl. 3 of Part-IV of the Second Schedule to the Income Tax Ordinance, 1979 was disjunctive and condition of owned and controlled by the Federal Government will be read with the financial institutions and not with the banking company was not correct as words owned and controlled by the Federal Government refer to both banking company as well as financial institution---Assessee company though a banking company did not fall under Cl. 13 of Part-IV of the Second Schedule to the Income Tax Ordinance, 1979---Addition under S.24(i) of the Income Tax Ordinance, 1979 was correctly made by the Assessing Officer.

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

----S. 24(j)---Deductions not admissible---Penalties---Addition was made of the amounts represented penalties imposed by the State Bank of Pakistan---Such disallowance was upheld by the First Appellate Authority---Validity---Appellate Tribunal did not interfere in the order of First Appellate Authority and disallowances made under S.24(j) of the Income Tax Ordinance, 1979 were upheld.

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

----Ss. 24 & 50(7B)---Deductions not admissible---Rent paid for a Branch Office was disallowed on the ground that tax under S.50(7B) of the Income Tax Ordinance, 1979 was not deducted---Assessee contended that owner fell outside the taxable territories of the country, therefore, no tax under S.50(7B) of the Income Tax Ordinance, 1979 was deducted---Assessing Officer observed that no exemption was available in such caes---First Appellate Authority upheld the decision of the Assessing Officer---Validity---While deciding the issue under Ss.52/86 of the Income Tax Ordinance, 1979, First Appellate Authority observed that action under S.52 of the Income Tax Ordinance, 1979 was not maintainable as action under S.24(c) of the Income Tax Ordinance, 1979 had already been taken and vacated the order under S.52 of the Income Tax Ordinance, 1979---Action under S.52 of the Income Tax Ordinance, 1979 had been disapproved by the First Appellate Authority and upheld the addition under S.24 of the Income Tax Ordinance, 1979---Appellate Tribunal did not interfere in the order of First Appellate Authority and upheld the addition made under S.24(c) of the Income Tax Ordinance, 1979.

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

----Ss. 52, 86 & 50---Liability of persons failing to deduct or pay tax---Assessee was treated as "assessee in default" on the ground that assessee failed to deduct tax under S.50 of the Income Tax Ordinance, 1979 on account of rent paid of a Branch Office and on account of membership fee paid to the Association and tax under S.52 of the Income Tax Ordinance, 1979 ,was charged along with additional tax under S.86 of the Income Tax Ordinance, 1979---Tax under S.52 of the Income Tax Ordinance, 1979 on account of .membership fee paid to the Association was upheld by the First Appellate Authority as no tax was deducted at the time of making such payments---Validity---Order of First Appellate Authority was a speaking order which did not call for any interference and the same was upheld by the Appellate Tribunal.

Dr. Ikram-ul-Haq for Appellant (in I.T.As. Nos.966/LB to 968/LB of 2002, 205/LB, 5961/LB and 5962/LB of 2004).

Dr. Shahid Siddique Bhatti, D.R. for Respondent (in I.T.As. Nos.966/LB to 968/LB of 2002, 205/LB, 5961/LB and 5962/LB of 2004).

Dr. Shahid Siddique Bhatti, D.R. for Appellant (in I.T.As. Nos.1427/LB to 1429/LB of 2002, 575/LB and 6640/LB of 2004).

Dr. Ikram-ul-Haq for Respondent (in I.T.As. Nos.1427/LB to 1429/LB of 2002, 575/LB and 6640/LB of 2004).

Date f hearing 25th January, 2005.

2005 P T D (Trib.) 2062

[Income-tax Appellate Tribunal Pakistan]

Before Muhammad Tauqir Afzal Malik, Judicial Member and Mazhar Farooq Shirazi, Accountant Member

W.T.A. No. 184/LB of 2004, decided on 18th September, 2004.

Wealth Tax Act (XV of 1963)---

----Ss. 35 & 45-A---Income Tax Ordinance (XXXI of 1979), S. 134---Assessment, annulment of---Appeal to Income Tax Appellate Tribunal---Assessment proceedings were finalized by Taxing Officer whereas it had to be taken up and decided by Wealth Tax Officer---Wealth tax assessment and income tax assessment were governed separately under Wealth Tax Act, 1963 and Income Tax Ordinance, 1979 respectively---Wealth tax assessments could not be taken up or finalized by the Taxation Officer---Assessee had come in appeal against the Income Tax Officer before Commissioner Wealth Tax (Appeal) with additional ground that assessment made by Taxation Officer was illegal, without jurisdiction, void ab initio and liable to annulment---Commissioner Wealth Tax annulled assessment---Revenue was unable to point out any flaw in order of first Appellate Authority---Order of Commissioner Wealth Tax being legal was upheld.

1999 PTD (Trib.) 4026 and 1997 PTD 821 ref.

Bashir Ahmad Shad, D.R. for Appellant.

Nemo. for Respondent.

Date of hearing: 18th September, 2004.

2005 P T D (Trib.) 2088

[Income-tax Appellate Tribunal Pakistan]

Before Zafar Ali Thaheem, Judicial Member and Mazhar Farooq Shirazi, Accountant Member

I.T.As. Nos.4329/LB and 4328/LB of 2003, decided on 14th May, 2005.

Income Tax Ordinance (XXXI of 1979)---

----S. 59---Filing return under Self-Assessment Scheme---Exclusion of return from Scheme---Delay in filing documents---Condonation of delay---Return filed by assessee for relevant year under Self-Assessment Scheme was processed under normal law due to late submission of documents---Assessee filed requisite documents with Assessing Officer after six days' delay from the date of compliance given by Assessing Officer---Failure to submit documents by assessee within prescribed period would not totally deprive assessee from benefit of Self-Assessment Scheme---Assessing Officer was empowered to condone the delay in submission of documents and had discretion not to exclude case from benefit of said Scheme---Explanation of assessee for delay in submission of required documents with Assessing Officer should be considered by him so that case was made eligible for Self-Assessment Scheme for the relevant assessment year.

1991 PTD 968; 2002 PTD 407; 2003 PTD (Trib.) 1948; 1995 PTD 1087; 1989 MLD 3215; 1954 SC 191 and 2004 PTD 30 ref.

Shahid Baig for Appellant.

Ahmed Kamal, D.R. for Respondent.

Date of hearing: 12th May, 2005.

2005 P T D (Trib.) 2097

[Income-tax Appellate Tribunal Pakistan]

Before Nadeem Saqlain, Judicial Member and Javed Tahir Butt, Accountant Member

I.T.A. No.4748/LB of 2002, decided on 3rd June, 2004.

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

----S. 122---Amendment of assessment---Powers of Commissioner--Issuance of notice under Income Tax Ordinance, 1979---After promulgation of Income-Tax Ordinance, 2001 w.e.f. 1-7-2002 which had given powers of amendment to Commissioner of Income Tax under S.122 of said Ordinance, action under S. 66-A of (repealed) Income Tax Ordinance, 1979 on 8-7-2002 in case of assessment finalized under S.59(1) of said repealed Ordinance, was not legally tenable in the absence of saving clause---Issuance of notice under S. 66-A of repealed Income Tax Ordinance, 1979 was without jurisdiction and being illegal was recalled.

Farid Adil for Appellant.

Dr. Amjad Iqbal, D.R. for Respondent.

Date of hearing: 3rd April, 2004.

2005 P T D (Trib.) 2103

[Income-tax Appellate Tribunal Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member and Mazhar Farooq Shirazi, Accountant Member

M.As. Nos.15/LB and 16/LB of 2004, decided on 21st August, 2004.

Income Tax Ordinance (XXXI of 1979)---

----Ss. 59 & 134---Filing return under Self-Assessment Scheme---Late submission of documents---Rejection of appeals---Appeals of assessee having been rejected by Income Tax Appellate Tribunal, assessee had filed present applications for recall of rejection order on the plea that Income Tax Appellate Tribunal had materially erred to process estimation of sales and was not justified to reject his appeals on that ground---Was necessary to examine relevant assessment record and all other material evidence for a clear finding regarding contentions of assessee/applicant as raised in main appeals for relevant assessment years---Rejection order was recalled with the direction that relevant assessment record in the case was duly produced before Income Tax Appellate Tribunal on the date of hearing of main appeals so that exact position in the case could be adopted for disposal of main appeal on factual position of law and ground realities---Applications filed by assessee, were accepted accordingly.

1991 PTD 968; 2002 PTD 407; (2003) PTD (Trib.) 1948; 1995 PTD 1087; 1989 MLD 3215 and PLD 1954 SC 191 ref.

Muhammad Shahid Baig for Applicant.

Abdul Rasheed, D.R. for Respondent.

Date of hearing: 18th August, 2004.

2005 P T D (Trib.) 2111

[Income-tax Appellate Tribunal Pakistan]

Before Zafar Ali Thaheem, Judicial Member and Mazhar Farooq Shirazi, Accountant Member

I.T.As. Nos. 777/LB to 779/LB of 2003, decided on 30th June, 2003.

Income Tax Ordinance (XXXI of 1979)---

----S. 65---Additional assessment---Agreed assessment---Assessments were re-opened on the basis of information received from Central Excise and Sales Tax Department that assessee had sold imported raw material meant for self-consumption in the open market---Legal proceedings initiated against the assessee by the Central Excise and Sales Tax Department were set aside by the Customs Tribunal---Assessee contended that proceedings initiated under S.65 of the Income Tax Ordinance, 1979 should have been quashed as the basis on which proceedings were undertaken no longer existed in the allegation of sale of imported raw material meant for self-consumption---Department contended that assessee had entered into an agreement with the Income-tax Authorities and 'merely setting aside of the case by the Customs Tribunal did not warrant sufficient justification for dropping the proceedings initiated under S.65 of the Income Tax Ordinance, 1979---Validity---Proceedings initiated under S.65 of the Income Tax Ordinance, 1979 were held to be valid along with the consequential treatment in the shape of agreed assessment entered into by the assessee with Department---Assessee could not "wriggle" out of the agreement once it was made by both sides---Neither party could back track on it---Proceedings initiated under S.65 of the Income Tax Ordinance, 1979 and the orders of the First Appellate Authority were maintained in their totality by the Appellate Tribunal.

Muhammad Shahid Abbas for Appellant.

Ahmad Kamal, D.R. for Respondent.

Date of hearing: 28-6-2003.

2005 P T D (Trib.) 2123

[Income-tax Appellate Tribunal Pakistan]

Before S. A. Minam Jafri, Accountant Member

I.T.A. No.534/KB of 2004, decided on 4th November, 2004.

Income Tax Ordinance (XXXI of 1979)-

------S. 133(6)-Appellate Tribunal's Circular No. 9 of 2002, dated 21-6-2002---S.R.O. 63(KE)/95, dated 6-2-1995---Exercise of powers by Appellate Tribunal---Assessee objected to the jurisdiction of the Single Bench on the ground that he had declared loss therefore the jurisdiction of the appeal did not lie with that Court and as per provision of S.R.O. 63(KE)/95, dated 6-2-1995 the appeal before the Single Bench could only be fixed if the income computed by the Deputy Commissioner of Income Tax did not exceed three hundred thousand rupees; further that only appeals passed by the Appellate Assistant Commissioner and not by the Commissioner of Income Tax (Appeals) could be heard by the Single Bench---Validity---Income as computed by the Deputy Commissioner of Income Tax meant income formally evolved by the Assessing Officer at the original assessment level---Plea of assessee, in such background was not tenable on technical ground---Yet mode of appellant's plea was attracted by the proximity to the `Doctrine of Ephesis'---Assessee's contention in this peculiar situation required consideration on minimal floor of fundamental fairness in broader sense despite of above appraisal of facts---Deriving analogical guidance from common law principle of 'Forum Non Conveniens' subject to observance of procedural requirement, Appellate Tribunal directed the office to re-fix the appeal on the issues taken up by the Department before the Division Bench.

Webster's Third New International Dictionary ref.

Farzana Jabin, D.R. for Appellant.

Shabbar Zaidi for Respondent.

Date of hearing: 2nd November, 2004.

2005 P T D (Trib.) 2136

[Income-tax Appellate Tribunal Pakistan]

Before Zafar Ali Thaheem, Judicial Member and Mazhar Farooq Shirazi, Accountant Member

I.T.As. Nos. 2066/LB and 2067/LB of 2004, decided on 20th April, 2005.

Income Tax Ordinance (XXXI of 1979)---

----Ss. 12(18) & 134---Appeal to Appellate Tribunal---Sum received as loan by assessee---Provisions of S.12(18) of Income Tax Ordinance, 1979 were not attracted in case where amount received represented trade advances and ultimately which were adjusted against sales made to the same parties---Amount received as advance against sales of goods/ products, would not attract provisions of S.12(18) of Income Tax Ordinance, 1979---Additions under S.12(18) of Income Tax Ordinance, 1979 in both relevant Assessment Years, were not maintainable and were deleted.

2004 PTD (Trib.) 1642; 2002 PTD 407; 2002 PTD 877; 2003 PTD 1527 and 1973 PTD 375 ref.

M. Shahid Abbas for Appellant.

Ahmad Kamal, D.R. for Respondent.

Date of hearing: 30th March, 2005.

2005 P T D (Trib.) 2143

[Income-tax Appellate Tribunal Pakistan]

Before S. Hasan Imam, Judicial Member and Agha Kafeel Barik, Accountant Member

I.T.A. No.2071/KB of 2004, decided on 15th December, 2004.

Income Tax Ordinance (XXXI of 1979)---

---Ss. 19, 50, 62, 80-C & 134---Assessment---Allocation of service expenses---Appeal to Appellate Tribunal---C.B.R. Circular No.7 of 1992, Para. 5---Para. 5 of Circular No.7 of 1992 had provided that where income from imports and supplies was inseparable from indenting commission or brokerage receipts and assessee was unable to prove the extent of overhead expenses related to said receipts, allocation of expenses could be made on a pro rata basis in the same ratio as the commission receipts not covered by S.80-C of Income Tax Ordinance, 1979 to the gross profit on sales and supplies---Commissioner Income Tax (Appeal) in circumstances was justified to hold that earlier Circular 12 of 1991 could not be invoked ignoring assessee's service receipts under normal law and that circumstances of case fell within ambit of subsequent Circular 7 of 1992---Findings of Commissioner Income Tax(Appeal) would not warrant interference.

(1999) 79 Tax (Trib.) (sic) ref.

Farrukh Ansari, D.R. for Appellant.

Shahid Pervez Jami for Respondent.

Date of hearing: 11th December, 2004.

2005 P T D (Trib.) 2151

[Income-tax Appellate Tribunal Pakistan]

Before Muhammad Tauqir Afzal Malik, Judicial Member and Muhammad Munir Qureshi, Accountant Member

I.T.A. No.7006/LB of 1996, decided on 28th May, 2005.

Income Tax Ordinance (XXXI of 1979)---

----Ss.50(5-A), 62, 80-D, 118-D & 134---Appeal to Appellate Tribunal---Cancellation of assessment---Appellant/Department had contended that Commissioner Income Tax (Appeals) had unjustifiably cancelled assessment order for 1994-95 passed under Ss. 62 & 118-D of Income Tax Ordinance, 1979 by wrongly treating it as rectified under S.156 of Income Tax Ordinance, 1979---Contention of appellant-Department was that in fact Assessing Officer had made no rectification of assessment order and tax under S.80-D of Income Tax Ordinance, 1979 had been correctly charged in assessment order on declared turnover--Commissioner Income Tax (Appeals) apparently had cancelled order under S.156 of Income Tax Ordinance, 1979 for year 1994-95 and not under Ss.62 & 118-D of said Ordinance as contended by Appellant-Department in grounds of appeal---Appellant-Department had misconceived factual position with regard to order passed by Commissioner Income Tax (Appeals)---No justification existed for the Commissioner Income Tax (Appeals) to cancel order under S.156 of Income Tax Ordinance, 1979 for years 1994 to 95 as that order had nothing to do with tax charged under S.80-D and tax under S. 80-D had been correctly charged in the order under Ss. 62 & 118-D of Income Tax Ordinance, 1979 with reference to assessee's declared sale in which export rebate/duty drawback was not included as per assessee's own statement---Order passed by Commissioner Income Tax (Appeals) was vacated and matter was remanded to First Appellate Authority for de novo adjudication strictly in accordance with law.

S.A. Masood Raza Qizalbash, D.R. for Appellant.

Shahid Pervaiz Jami for Respondent.

Date of hearing: 13th April, 2005.

2005 P T D (Trib.) 2158

[Income-tax Appellate Tribunal Pakistan]

Before Muhammad Tauqir Afzal Malik, Judicial Member, Muhammad Munir Qureshi, Accountant Member

M. As. Nos. 138 to 143/LB of 2005, W.T.As. Nos.1204 to 1209/LB and 1178 to 1183/LB of 2001, decided on 24th March, 2005.

Wealth Tax Rules, 1963------

-----R. 8(3)-Evaluation of constructed property---Constructed property could not be evaluated with separate value of cost of construction and land; it was to be evaluated as per R. 8(3) of Wealth Tax Rules, 1963.

1992 SCMR 2352; 1999 PTD (Trib.) 2283 and 1992 SCMR 60 ref.

Bashir Ahmad Shad, D.R. for Appellant.

Siraj-ud-Din Khalid for Respondent.

Date of hearing: 24th March, 2005.

2005 P T D (Trib.) 2161

[Income-tax Appellate Tribunal Pakistan]

Before Ehsan-ur-Rehman, S. Hasan Imam, Judicial Members and Agha Kafeel Barik, Accountant Member

I.T.As. Nos.733/KB to 743/KB of 2003, 340/KB to 342/KB of 2004, 1509/KB to 1511/KB of 2003 and I.T.A. No.947/KB of 2003, decided on 27th April, 2005.

Income Tax Ordinance (XXXI of 1979)---

----Ss. 28(2), 24(2) & 23---Proration of expenditure--Expenditure shall not be prorated but should be allowed by actually identifying each amount of expenditure after proper scrutinizing the same by the Assessing Officer---Principles.

2002 PTD (Trib.) 900; 1988 PTD (Trib.) 626; 2002 PTD 589; (1969 20 Tax supplementary); 2005 PTD (Trib.) 344; I.T.A. No. 1066 to 1078, dated 22-12-2004; 1993 PTD (Trib.) 472; PLD 1995 SC 423; 90 Tax. 128; 2004 PTD 62; PLD 1992 SC 562. = 1992 PTD 954; 1994 SCMR 229 = 1994 PTD 174; (1984) PTD (Trib.) 341 and 2005 PTD (Trib.) 259 ref.

Agha Hidayatullah, D.R. and Aqeel Abbasi, Legal Adviser for Appellants (I.T.As. Nos. 733/KB to 743/KB of 2003).

Shabbar Zaidi,, C.A., Abdul Qadeer, A.R., Asif Zia, A.C.A. and Syed Majid Ali, F.C.A. for Respondents (I.T.As. Nos. 733/KB to 743/KB of 2003).

Farrukh Ansari, D.R. for Appellant (in I.T As. Nos. 340/KB to 342/KB of 2004, 1509/KB to 1511/KB of 2003).

Ikram-ul-Haq and Mansoor Baig for Respondents (in I.T.As. Nos. 340/KB to 342/KB of 2004, 1509/KB to 1511/KB of 2003).

Farrukh Ansari, D.R. for Appellant (in I.T.A. No. 947/KB of 2003).

Muhammad Arshad, A.C.A. for Respondent (in I.T.A. No. 947/KB of 2003).

Date of hearing: 26th April, 2005.

2005 P T D (Trib.) 2171

[Income-tax Appellate Tribunal Pakistan]

Before Zafar Ali Thaheem, Judicial Member and Mazhar Farooq Shirazi, Accountant Member

W.T.As. Nos.79/LB to 85/LB and 92/LB to 96/LB of 2004, decided on 26th May, 2005.

Wealth Tax Act (XV of 1963)---

----Ss. 2(10) & 16(3)/17---Income Tax Ordinance (XXXI of 1979), S.56---Wealth Tax assessment and Income Tax assessment---Jurisdiction of Taxation Officer---Wealth tax assessments and income tax assessments were governed separately under Wealth Tax Act, 1963 and Income Tax Ordinance, 1979---Wealth tax assessments could not be taken up or finalized by Taxation Officer.

1999 PTD (Trib.) 4026 and 1997 PTD 821 ref.

Muhammad Shahid Abbas for Appellant (in W.T.As. Nos.79/LB to 85/LB of 2004).

Sheraz Mirza, D.R. for Respondent (in W.T.As. Nos.79/LB to 85/LB of 2004).

Sheraz Mirza, D.R. for Appellant (in W.T.As. Nos.92/LB to 96/LB of 2004).

Muhammad Shahid Abbas for Respondent (in W.T.As. Nos.92/LB to 96/LB of 2004).

Date of hearing: 25th May, 2005.

2005 P T D (Trib.) 2203

[Income-tax Appellate Tribunal Pakistan]

Before S. Hasan Imam, Judicial Member and Agha Kafeel Barik, Accountant Member

I.T.A. No.147/KB of 2001 and in M.A. No.743/KB of 2002, decided on 25th October, 2004.

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

---Ss. 52, 50(7C) & 156---Liability of persons failing to deduct or pay tax---Licensor and licensee---Raffle Scheme was introduced by Civil Aviation Authority---Assessee was a licensee of the Civil Aviation Authority---Assessing Officer found the assessee to be a person responsible for deduction of tax and treated it as defaulter under S.52 of the Income Tax Ordinance, 1979---First Appellate Authority maintained the order of the Assessing Officer---Appellate Tribunal reversed the finding of the First Appellate Authority and held the Civil Aviation Authority/licensor as the person liable to deduct tax under S.50(7C) of the Income Tax Ordinance, 1979---Best evidence to determine the liability was an agreement admittedly executed between the two parties as well Appendix containing special conditions as part and parcel of the agreement---Sufficient evidence was on record to hold that it was the utmost responsibility of the contractor/assessee to deduct withholding tax from the winner of the car, awarded in car raffle scheme---Contents of the licence agreement and special conditions laid down in the Appendix in no way legally in writing or impliedly made the Civil Aviation Authority responsible for payment of tax and withholding tax---Contractor could not go beyond the contents of the agreement, specially when all the basic requirements had been brought in black and white through terms of agreement---It was improper and unjustified to float on presumptions, gathering and deriving circumstances to forego the conditions of the agreement---Licensee/contractor was exclusively responsible for deducting the tax under S.50(7C) of the Income Tax Ordinance, 1979 and not the Civil Aviation Authority---Order of Assessing Officer holding the assessee as assessee in default for non-deduction of tax from winner of the car under Raffle Tickets Scheme was justified---Order confirming the treatment passed by the First Appellate Authority was maintained by the Appellate Tribunal.

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

--S. 50-Deduction of tax at source---Ignorance of law is no excuse and there was no provision of law for informing the assessee regarding his liabilities pertaining to withholding obligation.

Ahsan Laliwala, A.R. and Nadeem Iqbal for Appellant.

Ghulam Shabbir Memon D.R. for Respondent.

Date of hearing: 9th October, 2004.

2005 P T D (Trib.) 2211

[Income-tax Appellate Tribunal Pakistan]

Before Rasheed Ahmed Sheikh, Judicial Member, Amjad Ali Ranjha and Raja Sikandar Khan, Accountant Members

I.T.A. No.183/LB of 1996, decided on 23rd September, 2003.

Per Rasheed Ahemd Sheikh, Judicial Member; Raja Sikandar Khan, Accountant Member, agreeing---

Income Tax Ordinance (XXXI of 1979)---

------S. 132(1)(a)(i)---Decision in appeal---Setting aside of assessment by First Appellate Authority---Assessee contended that once the First Appellate Authority had come to the conclusion that the assessment framed was without jurisdiction and even that was not sustainable .to be a best judgment, the assessment order should have been cancelled or annulled instead of setting aside the same for fresh proceedings--Validity-Assessment framed by the Assessing Officer at "L" was without lawful jurisdiction as the assessee's head office and the factory premises were located at "B" over which the jurisdiction to assess the case was vested with the Commissioner of Other Zone---Where the Appellate Authority, came to a conclusion that the order passed by the Assessing Authorities was without lawful jurisdiction, the appropriate course available was to cancel/annul that assessment order instead of setting aside the same for de novo consideration---First Appellate Authority deprecated remanding the case to the Assessing Authority for de novo consideration for the purpose of covering up his legal lacunas---Appellate Tribunal cancelled/annulled the assessment order passed by the Deputy Commissioner of Income Tax at "L" and vacated that of First Appellate Authority.

Per Amjad Ali Ranjha, Accountant Member [Minority view]

Muhammad Yousaf, ITP for Appellant.

None for Respondent.

Date of hearing: 7th August, 2003.

2005 P T D (Trib.) 2229

[Income-tax Appellate Tribunal Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member and Mukhtar Ahmad Gondal, Accountant Member

I.T.As. Nos.2302/LB to 2306/LB of 2002, decided on 11th May, 2005.

(a) Income Tax Appellate. Tribunal Rules, 1981---

----R. 20(3), proviso---Hearing of appeal---Observations made by the Tribunal on the issues which were not agitated in the grounds of appeal---Recall of order---Order of Appellate Tribunal was recalled and the appeals were directed to be placed on their original numbers and to be heard and decided afresh for the reason that while passing the order observations had been made by the Appellate Tribunal on the issues which were not agitated in the grounds of appeals by the Department which had adversely affected the assessee.

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

----S. 65---Additional assessment---Definite information---Agricultural income---Non-declaration of agricultural income was not a definite information for reopening of assessment under S.65 of the Income Tax Ordinance, 1979.

I.T.As. Nos. 2313 to 2315/LB of 2002 rel.

(c) Income-tax---

----Estimation of agricultural income without any basis---Reduction in agricultural income---First Appellate Authority had rightly reduced the agricultural income of the assessee as estimation made by the Assessing Officer was without any basis.

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

----S. 65(2)---Additional assessment---Approval and permission---Re­opening of case without approval of Inspecting Additional Commissioner---Validity---Case of the assessee had been reopened under S.65 of lire Income Tax Ordinance, 1979 without prior approval of the Inspecting Additional Commissioner which was mandatory requirement as provided in S.65(2) of the Income Tax Ordinance, 1979---In the assessment order, there was reference of permission' accorded by the Inspecting Additional Commissioner---Order passed uponpermission' was not tenable in law as the departmental officers were supposed to know the exact meaning of provision of law and to implement law in its real form and perspective---Word approval' was very specific and it was a statutory requirement of law and had different meaning the assessment word `permission' and due to this sheer negligence reopened under S.65 of the Income Tax Ordinance, 1979 was liable to be cancelled---Appeals filed by the Department were dismissed.

(2004) PTD (Trib.) 463 rel.

(e) Constitution of Pakistan (1973)---

----Art. 4---Income Tax Ordinance (XXXI of 1979), Preamble-Administration of justice---"Where anything was provided to be done in a particular manner, it has to be done in that manner if of not so done, law which the same would not be lawful" is an established principle had been provided under Article 4 of the Constitution giving right to individuals to be dealt with in accordance with law, which had been said to be inalienable right of every citizen wherever he may be and of every other person for the time being within Pakistan.

Anwar Ali Shah, D.R. for Appellant.

Shahid Abbas for Respondent.

Date of hearing: 11th May, 2005.

2005 P T D (Trib.) 2241

[Customs, Central Excise and Sales Tax Appellate Tribunal]

Before Mian Muhammad Jahangier, Member Judicial and Mehmood Alam, Member Technical

Appeal No.86/LB of 2005, decided on 20th April, 2005.

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

----Ss. 2(s), 156(1), 168, 169, 171 & 180---Expression "Seizure of things liable to confiscation"---Connotation---Word "seize" would mean to take into custody, physically or otherwise, goods in respect of which some offence had been committed under Customs Act, 1969---Offence would be committed on violation of provision of Customs Act, 1969---Only smuggled goods could be seized---Authority at very initial stage would collect grounds showing, prima facie, that goods seized were liable to be confiscated---After seizure of goods, authority would proceed strictly in accordance with provisions of Ss.168, 170 and 180 of Customs Act, 1969---Grounds of confiscation must be conveyed to person concerned---provisions of Ss. 171 and 180 of the Act were mandatory, thus, any violation thereof would render all proceedings as illegal.

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

----Ss. 2(s), 156(1), 168, 169, 171 & 180---S.R.O. No.374(I)/2002 dated 15-6-2002---Seizure and confiscation of vehicle-Examination of vehicle after its seizure, at its owner's request from Forensic Science Laboratory showing chassis number thereof to be manually punched-Vehicle manufacturing company, at the request of prosecution, opined that chassis number thereof was not according to standard of company punching and its font and shape of digit did not tally with specimen of company and was without alphabetic code---Ordering confiscation of vehicle on basis of such evidence---Validity---Such evidence would not be sufficient to believe that vehicle was smuggled one---According to report of company, unit of vehicle in question had been imported in CKD Kit from Japan and had been assembled locally---Prosecution had not contested such aspect of case---Prosecution has failed to establish that vehicle was foreign made and brought into country without payment of duties and taxes---Tribunal accepted appeal and set aside impugned order while ordering for handing over of vehicle to its owner.

Mian Abdul Ghaffar and Malik Muhammad Arshad for Appellants.

Mubashir Baig D.R. for Respondent.

Date of hearing: 3rd March, 2005.

2005 P T D (Trib.) 2262

[Customs, Central Excise and Sales Tax Appellate Tribunal]

Before Raj Muhammad Khan, Member (Judicial) and Muhammad Wali Khan, Member (Technical)

Misc. Application No.100/PB of 2005 in Appeal No. Cus. 278/PB of 2004, decided on 27th May, 2005.

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

---Ss. 169, 201 & 215---Disposal of things/goods seized and liable to confiscation---Pre-requisites---Such things would be properly stored and taken care of---Such things might be sold by department even during pendency of adjudication proceedings or appeal, but its sale proceeds would be kept in deposit till final decision of case---Pre-requisite for sale of things under S.169 of Act, 1969 or sale of goods under S.201 thereof would be issuance of due notice to owner thereof to be served through registered post---Where such notice was not given, then sale -proceeds of things/goods would be paid to owner thereof, despite the fact that goods had been out rightly confiscated---Word "any goods" used in S.201 of Act, 1969 would cover both goods liable and not liable to confiscation---If such things/goods afterwards found not liable to confiscation, then entire sale proceeds would be handed over to its owner after deduction of necessary duty, taxes etc.---Principles.

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

----Ss. 169(5), 181, 182 & 201(3)(5)---Customs Rules, 2001, Chap. V [Rr.49 & 75]---Customs General Order No. 5 of 1989, dated 15-3-1989---Customs General Order No.5 of 1992, dated 19-4-1992---Customs General Order No.5 of Confiscated goods---Connotation---Option of owner to pay in lieu of confiscation---Disposal of confiscated goods---Pre-requisites---Confiscated goods would forthwith vest in Federal Government i.e. transfer of title to Government and extinguishment of all rights in goods vesting in any person---Such transfer would not be valid, if same was not absolute or was conditional for one reason or other---Finality could be attached to an order of confiscation of goods, if same was no more sub judice in any forum available under law---On exercise of option by owner to pay in lieu of confiscation of goods, confiscation would not remain absolute, but would be converted into simple fine or monetary consideration payable in lieu thereof---Before disposing of goods, owner would be served with a notice prescribed under law---Perishable goods would be sold after reasonable notice to owner to enable him to pay fine and obtain delivery---After payment of redemption fine and duty, goods would continue to remain that of owner and department would have no jurisdiction to sell same---If such goods were sold, then sale proceeds would become payable to owner after deduction of duty and taxes etc., provided owner applied for same within six months of sale or showed sufficient cause for not doing so---Where Adjudicating Authority or Appellate Forum ordered redemption of confiscated goods or any goods liable to confiscation against fine etc. as envisaged under S. 181 of Act, 1969, then goods would no more remain absolutely vested in Government, but would remain property of owner subject to payment of fine, duty and taxes etc. and in such case sale proceeds would be refunded in accordance with provisions of S. 169(5) read with S.201(2) of Act, 1969, even if such goods happened to have been auctioned or disposed of in any prescribed manner---Principles.

PTCL 1992 ST 650; AIR 1958 SC 845; PLD 1977 Kar. 1000; AIR 1964 Madras 504 and AIR 1962 Bom. 290 rel.

(c) Appeal---

----Appellate proceedings are continuation of original proceedings.

(d) Constitution of Pakistan (1973)---

----Art. 24---Property rights---Scope---Depriving some one of his property rights through arbitrary premature transfer would be against the Constitution.

Muhammad Fayyaz and Wahid Ali Khan for Appellant.

Qurban Ali Khan, D.R. and Azam Khan, D.S. Sohail, Inspector for Respondents.

Date of hearing: 21st May, 2005.

2005 P T D (Trib.) 2273

[Customs, Central Excise and Sales Tax Appellate Tribunal]

Before Raj Muhammad Khan, Member (Judicial) and Muhammad Wali Khan, Member (Technical)

Appeal No.7(442)CU/ATIB of 1999, decided on 13th May, 2005.

(a) Sales Tax Act (VII of1990)---

---S. 3, Second Sched. [as omitted by Finance Supplementary (Amendment) Act (IV of 1997)], 6th Sched., Item No.43 & 7th Sched. [as added by Finance Supplementary (Amendment) Act (IV of 1997) and omitted by Finance Act (XXII of 1997)]---Drugs Act (XXXI of 1976), S.3---S.R.O. 324(1)/94, dated 19-4-1994 issued by Ministry of Health under Drugs Act, 1976---Raw materials imported for manufacture of syringes and infusion giving sets---Bill of Entry, dated 22-3-1997---Clearing of such materials at concessionary rate of 5% in terms of Item No.11 of 2nd Sched., of Sales Tax Act, 1990 instead of enhanced rate of 10% effective from 2-11-1996 through Sales Tax (Amendment) Ordinance, 1997 after omission of 2nd Sched. and inclusion of such materials in Item No. 32 of 7th Sched. of Act, 1990 through Finance Supplementary (Amendment) Act, 1997 and omission of 7th Sched., through Finance Act, 1997---Demand of sales tax at two counts i.e. with reference to Bill of Entry, dated 22-3-1997 and then with reference to 6th Schedule of Act, 1990 after omission of 7th Sched. thereof---Appellate Authority upheld order-in-original---Validity---During period when Second Sched. of Act, 1990 remained operative, sales tax rate was applicable to such materials under Item No.11 thereof, but not under Item No.9 thereof being a general law applicable to raw materials imported for manufacture of pharmaceutical products---After omission of Second Sched. of Act, 1990, concessionary rate of sales tax was enhanced w.e.f. 2-11-1996 after placing at Serial Numbers 30 & 32 of Seventh Sched. thereof raw materials imported for manufacture of pharmaceutical products and those imported for manufacture of syringes and infusion giving sets respectively---Syringes and infusion giving sets were drugs within meaning of S.3 of Drugs Act, 1976 in terms of S.R.O. 324(I)/94, dated 19-4-1994---No specific entry existed in Sixth Sched. of Act, 1990 for raw materials imported for manufacture of syringes and infusion giving sets, which being pharmaceutical products would be covered by Item No.43 thereof, thus, was exempt from sales tax---Importer was, held, liable to pay differential amount of sales tax in respect of such materials cleared under Bill of Entry, dated 22-3-1997 and was not liable to pay sales tax on import covered by Item No.46 of 6th Sched. of Act, 1990---High Court accepted appeal partly.

Messrs Wislhire Laboratories (Pvt.) Ltd. v. Federation of Pakistan through Secretary Finance, Islamabad and 3 others 1998 PTD 3061 ref.

(b) Interpretation of statutes---

---Specific law would have precedence over general law.

(c) Words and phrases---

---"Drug"---Meaning.

Black's Law Dictionary, Sixth Edition ref.

(d) Words and phrases----

---"Product"---Meaning.

Butterworths Medical Dictionary, Second Edition (Page 1291) ref.

(e) Words and phrases---

----"Pharmaceutical"---Meaning.

Collins Dictionary of the English Language at page 469 ref.

Farhan Ahmad Rattu, Consultant for Appellant.

Qurban Ali Khan, D.R. and Fazal-ur-Rehman, D.S. and Azam Khan, D.S. for Respondents.

Date of hearing: 7th May, 2005.

2005 P T D (Trib.) 2511

[Customs, Central Excise and Sales Tax Appellate Tribunal]

Before Sher Zaheer Ahmad Khan, Member (Judicial) Sarfraz Ahmad Khan, Member (Technical)

Customs Appeal No.343/LB of 2000, decided on 30th January, 2003.

Customs Act (IV of 1969)---

----S. 20---S.R.O. 367(I)/94, dated 9-5-1994---Central Board of Revenue's power to grant exemption from duty in exceptional circumstances---Import of centrifuges including centrituqal dryers filtering or purifying machinery and apparatus for liquids or gases---Claim of benefit of total exemption. from payment of duty/taxes in terms, of S.R.O. 367(I)/94, dated 9-5-1994 was refused and appellants were ordered to pay the amounts of duty/taxes---Central Board of Revenue conveyed certification for the benefits of S.R.O. 367(I)/94, dated 9-5-1994 in the light of recommendations of Ministry of Environment, Local Government and Rural Development's Office Memorandum---Validity---Held, in the light of certification by Central Board of Revenue vide its letter, dated 23-8-2002, on the recommendation of the Ministry of Environment, Local Government and Rural Development's Office Memorandum No.20(2)/97-TO-PEOC, dated 16-9-2000, being the Regulatory Authority, the appellants were entitled to the benefits of . S.R.O. 367(I)/94, dated 9-5-1994 and demand of duty/taxes was not sustainable---Appellate Tribunal ordered that the appellants shall be extended the benefit of S.R.O. 367(I)/94, dated 9-5-1994 -Order was set aside and the case was remanded to the Collector of Customs for finalizing the matter after allowing the benefits of S.R.O. 367(I)/94, dated 9-5-1994 in respect of consignment imported by the appellants.

Malik Muhammad Rafique Rajwana for Appellant.

M.B. Tahir, S.D.R. assisted by Muhammad Azdar Durani, Appraiser for Respondent.

Date of hearing: 30-1-2003.

2005 P T D 9

[Karachi High Court]

Before Sabihuddin Ahmed and Khilji Arif Hussain, JJ

Messrs QASIM INTERNATIONAL CONTAINERS TERMINAL LIMITED, KARACHI

Versus

COLLECTOR OF CUSTOMS, KARACHI and 2 others

Constitutional Petition No.D-1162 of 2000, decided on 2nd September, 2004.

Pakistan Customs Tariff Rules---

----Chapters 84 & 87---Constitution of Pakistan (1973), Art.199--­Constitutional petition---Quantum of Customs Duty and Sales Tax payable on terminal tractor---Petition related to dispute as to quantum of Customs Duty and Sales Tax payable to terminal tractor to be used for movement of trailers in container terminal---Claim of petitioner was that imported goods were entitled to concessional rates of Customs Duty in terms of S.R.O. 28(I)/98 dated 17-1-1998 as such concession had already been provided to another importer; alternatively it was contended that imported goods were liable to be classified as prime movers under Chapter 84 of Pakistan Customs Tariff Rules, operating at relevant time---Respondents insisted on treating imported goods as vehicle under Chapter 87 of Pakistan Customs Tariff Rules and were prepared to release said goods only on payment of Duties and Taxes thereunder---No formal adjudication proceedings ever took place and no order determining quantum of duty paid was passed by Adjudicating Officer--­Party who was required to pay taxes needed to know the reason for the levy and avail Appellate and revisional remedies provided by law---High Court under Constitutional jurisdiction could not pronounce upon appropriate classification of imported goods---Case was remanded to Collector to decide same after hearing parties on all questions of facts and law.

Shaiq Usmani for Petitioner.

Raja Muhammad Iqbal for Respondents Nos. 1 & 2.

Nadeem Azhar, Dy. A.-G. for Respondent No.3.

2005 P T D 13

[Karachi High Court]

Before Sabihuddin Ahmed and Khilji Arif Hussain, JJ

Messrs DADABHOY CEMENT INDUSTRIES LTD.

Versus

FEDERATION through Additional Secretary, Ministry of Finance, Central Board of Revenue, Karachi and 2 others

Constitution Petition No. 1415 of 1995, decided on 3rd September, 2004.

Central Excises Act (I of 1944)---

----S.4---Inclusion of "transportation charges" for determining value of goods for purposes of duty---Transportation charges could be included in determination of value of goods; it was of little consequence whether those were paid by manufacturer or stockist.

Pakistan v. Kohat Cement Co. PLD 1995 SC 659 ref.

S.I.H. Zaidi for Petitioner.

Nadeem Azhar, Dy. A.-G., along with Fariduddin and Raja Muhammad Iqbal for Respondents.

2005 P T D 19

[Karachi High Court]

Before S.A. Sarwana and Muhammad Mujeebullah Siddiqui, JJ

ABBAS STEEL INDUSTRIES (PVT.) LTD., KARACHI

Versus

FEDERATION OF PAKISTAN through Secretary, Ministry of Finance, Government of Pakistan, Secretariat, Islamabad and another

C. Ps. Nos. D-156 and 156 of 1993, decided on 18th March, 2003.

Central Excises Act (I of 1944)---

----S.3D---Sales Tax Act (VII of 1990), S.3B---Constitution of Pakistan (1973), Art. 199---Constitutional petition---Exemption from levy of Central Excise Duty and Sales Tax---Refund of excess payment--­Petitioner had sought declaration that billets be also treated at par with Ingots, in other words billets be also exempted from levy of Central Excise Duty and Sales Tax and billets be levied and brought at par with rate applicable to Ingots---Petitioner had also prayed that authorities be directed to refund to petitioner excess payments made by it towards Central Excise Duty and Sales Tax---Collector Central Excise had conceded that billets and Ingots were same product and billets were liable to same - duty as Ingots---Collector, however had opposed the prayer for refund of amount of Tax on the ground that incidence of Tax had been passed on to the consumers under S.3D of Central Excises Act, 1944 and under S.3B of Sales Tax Act, 1990---Whether or not incidence of Tax had been passed on to the consumer, was a question of fact which could not be investigated in Constitutional petition---Prayer of petitioner with regard to declaration that billets be also treated at par with Ingots and exemption from levy of Central Excise Duty and Sales Tax, was allowed, but with regard to refund of excess payment, petitioner was at liberty to take appropriate proceedings in accordance with law for recovery of the same.

Ahmed Investment (Pvt.) Ltd. v. Federation of Pakistan and others 1991 PTD 618 ref.

Muhammad Saleem for Petitioner.

Raja Muhammad Iqbal for Respondent No.2.

2005 P T D 23

[Karachi High Court]

Before Shabbir Ahmed and Muhammad Mujeebullah Siddiqui, JJ

SHAHZAD AHMED CORPORATION through Shahzad Ahmed

Versus

FEDERATION OF PAKISTAN through Secretary, Ministry of Finance, Government of Pakistan, Islamabad and 2 others

Constitution Petition No.D-817 of 2004, decided on 7th September, 2004.

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

----Ss. 168(2) & 171---Period of two months as specified in S. 168(2) of Customs Act, 1969---Extension of---Scope---Customs Officer had no jurisdiction to extend such period by delaying service of notice under S.171 of Act, 1969.

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

----Ss. 4, 32, 168, 171 & 186---S.R.O. No.388(I)/82, dated 22-4-1982--­Constitution of Pakistan (1973), Art. 199---Constitutional petition--­Goods already out of charge detained by Appraising Officer (Intelligence, and Investigation) without complying with mandatory provisions of Ss. 168 & 171 of Customs Act, 1969---Validity---Neither imposition of fine/penalty had been alleged against petitioner nor same had been alleged to be under consideration nor case was covered by S.186(2) of the Customs Act, 1969---Such act of Appraising Officer would amount to seizure of goods under S.168(1) of Customs Act, 1969---Appraisin~ Officer had not recorded grounds for seizure and reasons as to on what basis he had formed opinion that goods already cleared by appraisement staff (being appropriate officers) were liable to confiscation---Appraising Officer not being an appropriate officer for purposes of Ss.32 & 168 of Customs Act, 1969) by his such act had stepped, over jurisdiction vested in appropriate officer- --Petitioner acquired a vested right for clearance of goods after same having been assessed to duty and taxes under S.80 of Customs Act, 1969 and passing of order by appropriate officer for its clearance---Any act depriving petitioner of such vested right must have been backed with sufficient reasons and grounds, failing which same would be liable to be struck off---Information, if any, 'available with Director or Appraising Officer of Customs Intelligence and Investigation,, could be provided to officials of Appraisement Department---Information as to appraisement officials being in collusion with petitioner could be provided to senior officials in hierarchy of appraisement, who could exercise all powers and discharge all duties conferred or imposed upon their subordinate officers---No officer of Directorate General of Intelligence and Investigation had power to detain or seize or re-examine goods already examined and assessed by appropriate officers of Appraisement Department---High Court accepted Constitutional petition and quashed impugned action and subsequent acts done in pursuance thereof to be unlawful and void ab initio.

Syed Muhammad Razi v. Collector of Customs (Appraisement) 2003 PTD 2821 fol.

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

----Ss. 80, 83, 168 & 171---Seizure of goods liable to confiscation--­Conditions precedent---Goods duly imported, if once examined and assessed to duty and taxes by appropriate officer, then owner thereof would acquire a vested right for its clearance and same would not be liable to confiscation---Any act of Custom, officials depriving owner of goods of such vested right acquired in due course of law must be backed with sufficient reasons and grounds, failing which same would be liable to be struck off---Grounds forming basis of opinion of appropriate officer must contain specific reasons in writing as to why goods were liable to confiscation and must be Communicated to person concerned as soon as possible and should not be deferred for indefinite period---Such opinion should not be generalized and vague---Grounds for seizure of goods should precede or at leased coincide with seizure but should not be result of a fishing and roving inquiry after seizure---Confiscation proceedings initiated without reasonable grounds in writing and communication thereof to person concerned would be liable to be struck off---Principles.

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

----Ss. 3 & 4---S.R.O. No. 388(I)/82, dated 22-4-1982---Charter of functions for Directorate General of Intelligence and Investigation (Customs and Excise)---Validity-- Jurisdiction was conferred on officers of such Directorate under S.R.O. No. 388(I)/82---Such charter was in the nature of guidelines and had no binding force conferring any specific jurisdiction.

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

----Ss. 3, 4, 168 & 186---S.R.O. No. 388(I)/82, dated 22-4-1982--­Jurisdiction of officers of Directorate of Intelligence and Investigation (Customs and Excise) to detain or seize or re-examine goods already examined and assessed by appropriate officers of Appraisement Department---Scope---Such Directorate had been established for prevention of smuggling and performance of preventive operations relating to smuggling and evasion of dutiable goods, misdeclaration, frauds, fraudulent claims of refund and rebate etc.---Such powers conferred on officers of the said Directorate would have no overriding effect on powers conferred on other officers of Customs Department--­Officers of each category under Customs Department were required to act within specified sphere and parameters without encroaching upon powers of officers of other department---No officer of the said Directorate had power to detain or seize or re-examine .goods already examined and assessed by appropriate officers of Appraisement Department---Appraising Officer of the said Directorate could at the most require production of order under S.83 as provided under S.174 of Customs Act, 1969.

Ismat Mehdi for Petitioner.

Syed Tariq Ali, Federal Counsel for Respondent Nos. 1 & 2.

Respondent No.3 in person.

Dates of hearing: 17th and 18th, August 2004.

2005 P T D 53

[Karachi High Court]

Before S. A. Sarwana and Muhammad Mujeebullah Siddiqui, JJ

COLLECTOR OF SALES TAX & CENTRAL EXCISE (WEST), KARACHI and others

Versus

CUSTOMS, EXCISE & SALES TAX APPELLATE TRIBUNAL, KARACHI BENCH and others

Spl. Sales Tax Appeals Nos.68, 69 and 164 of 2001, decided on 12th May, 2003.

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

----S.2(4)---Central Board of Revenue---Powers and limitation of---Legal force of S.R.Os.---S.R.Os. were statutory rules and had its legal force, which could not be replaced through instructions or interpretation of Central Board of Revenue---Central Board of Revenue could not change the rulings unless conditions of S.R.O. were also changed in accordance with law---Question of prospective or retrospective application of S.R.O. was relevant while interpreting a law only and not the opinion of Central Board of Revenue which was merely a view held by an executive Authority having no force of law---Central Board of Revenue though was empowered to issue S.R.Os./Notifications in exercise of delegated authority under statute by way of Subordinate Legislation and so long it was not inconsistent with provisions of statute, would have the force of law, but Board had no authority to give interpretation of law as it fell exclusively within the domain of judicial functions---Board though occupied apex position in hierarchy of tax administration, but under the Scheme of law pertaining to direct and indirect taxation, it had no authority to give any judicial interpretation except in cases, where Board was empowered to exercise revisional jurisdiction---Barring said exception, Board was executive Authority primarily concerned with implementation of statutory provisions pertaining to direct and indirect federal taxes and in execution thereof was empowered under various statutes to issue S.R.Os./Notifications and frame rules in exercise of delegated authority by way of subordinate Legislation---Any view/opinion contained in any Circular or Letter issued by Board, was in the nature of an executive interpretation/opinion and could not be treated at par with judicial interpretation and it could not be held to be a rule as was understood in the common parlance of law.

Central Insurance Company and others v. The Central Board of Revenue, Islamabad and others 1993 SCMR 1232 ref.

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

----S.13---Exemption---Electric accumulators (storage batteries) were not included in classification of parts and accessories or components of Motor Vehicles---Same would not be so included whether exemption was granted to parts and accessories/components of motor vehicles specifi­cally under PCT heading 87.08 or with the use of expression "respective headings", the reason being that expression `respective headings' connoted reference to PCT headings and classification of the goods under respective classification, which had to be determined in the light of principles and guidelines contained in Harmonized Commodity Des­cription and Coding System Explanatory Notes.

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

---S.13---Tax was to be levied/charged under clear language which admitted of no ambiguity and ambiguity if any was to be resolved in favour of citizens/tax-payers and not in favour of Revenue/Government--No presumption and inferences were available in respect of a tax and if anything was not covered within the clear, plain and unambiguous language of law, then there could be no presumption to tax---So far principle relating to exemption was concerned it was not the same---Once it was established that tax was chargeable then for the purpose of availing exemption, a person claiming same had to establish that claim was squarely covered under exemption granted and law pertaining to exemption was to be strictly interpreted and could not be allowed on the basis of mere inferences or any presumption---Effect of exemption, was that the payment of tax was allowed to escape which was otherwise chargeable---Law relating to exemption was not to be interpreted liberally in favour of taxpayers and had to be interpreted strictly---If any claim to exemption was not fully covered under law pertaining to exemption, it was not to be allowed.

Shakeel Ahmed for Appellant.

Qadirdad Khan for Respondent No.1 (in Spl. S.T.As. Nos. 68 and 69 of 2001).

Fazale Ghani Khan along with Abdul Ghaffar Khan for Respondent No.2 (in Spl. S.T.A. Nos.68 and 69 of 2001).

Fazale Ghani Khan along with Abdul Ghaffar Khan for Appellant (in Spl. S. T. A. No. 164 of 2001).

Qadirdad Khan for Respondent No. 1 (in Spl. S.T.A. No. 164 of 2001).

Shakeel Ahmad for Respondent No.2 (in Spl. S.T.A. No. 164 of 2001).

Date of hearing: 5th November, 2002.

2005 P T D 69

[Karachi High Court]

Before Anwar Zaheer Jamali and S. Ali Aslam Jafri, JJ

Messrs HABIB-UR-REHMAN & COMPANY through Proprietor

Versus

COLLECTOR OF CUSTOMS (APPRAISEMENT), KARACHI and 4 others

Constitutional Petition No.D-964 of 2004, decided on 26th October 2004.

Customs Act (IV of 1969)---

----Ss.81(1) & 25---Constitution of Pakistan (1973), Art.199--­Constitutional petition---Customs---Value of goods---Determination--­Provisional assessment of duty---Petitioner, inter alia, had challenged the letter/valuation advice issued by the Customs Valuation Department for finalization of the assessment of petitioner's goods, which had already been released under S.81(1), Customs Act, 1969---Contention of the petitioner was that such valuation advice issued by the Collectorate of Customs (Valuation Department) could not be taken as conclusive evidence of valuation for the purpose of assessment and for that purpose procedure under S.25(1) or 25(4) of the Customs Act, 1969 was to be followed---Validity---Held, final assessment of the petitioner's goods shall be undertaken under S.81(2) Customs Act, 1969 by the Department and while making such assessment the department would consider all the evidence available, and the letter of valuation advice in question would not be taken as conclusive evidence of valuation---Final assessment in terms of S.25 of the Act would be made after affording proper opportunity to the petitioner to place the material to that effect on record.

Fine Traders v. Collector of Customs (Appraisement) and others C.P. NO.D-718 of 2004 and Messrs Kings Pen Company v. Collector of Customs (Appraisement) and others C. P. No.D-528 of 2004 ref.

Mian Abdul Ghaffar for Petitioner.

Raja Muhammad Iqbal for Respondents Nos. 1 to 3.

2005 P T D 78

[Karachi High Court]

Before Sarmad Jalal Osmany and Amir Hani Muslim, JJ

PAKISTAN STATE OIL COMPANY LIMITED, KARACHI

Versus

CUSTOMS, EXCISE AND SALES TAX, APPELLATE TRIBUNAL BENCH III, KARACHI and another

Special Customs Appeals Nos. 210 of 2001, 170 to 254 of 2002 and 118 to 161 of 2003, decided 3rd August, 2004.

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

----S.196(2)---Appeal to High Court---Limitation---Appeal was filed on 27-11-2001 i.e. within thirty days of dispatch of the impugned order as provided under S.196(2), Customs Act, 1969; thereafter due to office objection as to how one appeal could be filed in 85 cases, the same were filed on 6-12-2001---Appeals, in circumstances, were not time-barred.

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

----S.196(2)---Appeal to High Court---Limitation---Issue whether limitation vis-a-vis the show-cause notices served upon the appellant being a pure question of law which was taken before the Tribunal in the memo of appeal, can be considered by High Court---Issue of limitation can be raised even before the Supreme Court provided it is a pure question of law and the facts are not in issue, since in most cases the question of limitation is a mixed question of law and fact.

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

----S.196(1)---Appeal to High Court--Only a question of law arising out of the order of Tribunal can be entertained.

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

----S.196---Appeal to High Court--Term "arising out of the, order of the Tribunal" not only includes those legal issues on which the Tribunal has expressed an opinion but also such issues, on which no opinion has been expressed though pressed before it by a party, otherwise it would close the doors of appeal to a party before the High Court.

Thatta Cement Company v. Customs, Central, Excise and Sales Tax Appellate Tribunal 2003 PTD 1899 and Rana Brothers Oil Mills v. A.C. Sales Tax 2002 PTD 2526 distinguished.

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

----Ss.132(3), 106 & 196---Show-cause notice---Limitation---Show-cause notices were of various dates in the months of February, March, May, June and December, 2001---Alleged evasion of customs duty was regarding the supplies made in the year 1997 to 2000 and wording employed in the show-cause notices were to the effect that "the customs duty was evaded due to a wrong interpretation of S.106, Customs Act, 1969 by the appellant viz., that Pakistan Navy Ships proceeded to foreign territories which was factually incorrect and hence the benefit of S.106, Customs Act, 1969 could not be claimed by the appellant ­Held, in circumstances, S.32(3), Customs Act, 1969 would be applicable which, at the relevant time, provided a period of six months of the relevant date within which show-cause notices were to be issued where the case related to a non-levying, short levying or erroneous refund of customs duty by reason of any inadvertence, error or misconstruction--­Show-cause notices issued to the appellant on various dates in the year 2001 pertaining to the appeals in question were time-barred since the transactions thereunder viz. supply of POL to the Pakistan Navy was in the years 1997 to 2000 per the shipping Bills in-question viz. after the expiration of six months--Orders of the Tribunal pertaining to these appeals, in circumstances, were set aside as also the orders of the Collector.

P.I.A. Corp. v. C.B.R. 1990 CLC 868 and Federation of Pakistan v. Ibrahim Textile-Mills Ltd. v. 1992 SCMR 1898 ref.

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

----Ss. 106 & 196---Appeal to High Court---Tribunal in the present case had not decided the real issue raised before it by the appellants Viz., whether the supplies made to the Pakistan y Navy were exempt under S. 106 of the Customs Act, 1969 from payment of duty etc., but dismissed the appeals on another ground---High Court, in circumstances, declined to address the merits of the case.

Sajid Zahid for Appellant.

Raja Iqbal for Respondents.

Dates of hearing: 2nd, 28th and 29th April, 2004.

2005 P T D 90

[Karachi High Court]

Before Shabbir Ahmed and Muhammad Mujeebullah Siddiqui, JJ

JAHANZEB KHAN BURKI and another

Versus

PAKISTAN through Secretary Revenue Division/Chairman, Central Board of Revenue, Islamabad and another

Constitutional Petition No.D-934 of 2004, decided on 9th October, 2004.

Customs Act (IV of 1969)---

----S.26---Constitution of Pakistan (1973), Art. 199---Constitutional petition---Power to require information to be furnished---Conditions of production of original registration certificate or auctioneer's receipt as prescribed by the Central Board of Revenue for import of second hand Dump Trucks in CBU condition having pay load capacity exceeding 5 tons under the Import Policy Order from Karachi Export Processing, Zone into the Tariff Area--Validity---Such conditions were neither mandatory nor compulsory- --Such documents were being asked just to­ as certain the legally of the import and the description of the vehicle--­Seeking of such information was within the competence of the tax officials under the provisions of S.26, Customs Act, 1969---Such requirement, however was not mandatory or condition precedent for starting the process of examination of goods---High Court disposed of the Constitutional petition with the consent of the counsel of the parties in the terms that the 'department will allow, the clearance in consonance with the parameters fixed by the Supreme Court in C.P. 774 to 784 of 2001 decided on 6-12-2001, the parameters laid down in explanatory notes under H.S. Code No.8704.1000 and the conditions specified in Letter from Collectorate of Customs dated 13-8-2003 read with office order No.37/2004 dated 13-3-2004---Customs officials may require for production of original registration certificate or the auctioneer's receipt containing particulars about the purchase and in case, registration receipt or catalogue were not produced the importer must furnish satisfactory explanation with regard to the non-production of the said documents and may prove by any other cogent evidence, acceptable to the customs to show that the actual imports pertain to dumper designed for off highway.

Civil Petition Nos. 774-K & 784-K of 2001 fol.

Super Industries (Pvt.) Ltd. v. Central Board of Revenue 2002 PTD 955 and Messrs Colgate Palmolive (Pakistan) Ltd. v. Federation of Pakistan 2004 PTD 2516 ref.

Khalid Jawed Khan for Petitioners. .

Khalid Anwer and Bilal Shaukat for Respondents.

Date of hearing: 6th October, 2004.

2005 P T D 102

[Karachi High Court]

Before Sabihuddin Ahmed and Khilji Arif Hussain, JJ

Messrs MAHBOOB ENTERPRISES, KARACHI though Partner, Mahboob Ali

Versus

FEDERATION OF PAKISTAN through Additional Secretary, Ministry of Finance, Islamabad and 3 others

Constitutional Petition No.363 of 1991, decided on 21st September, 2004.

Customs Act (IV of 1969)---

----S.25---Constitution of Pakistan (1973), Art. 199---Constitutional petition---Making of valuation of price of imported marble slabs--­Valuation of price of marble slabs imported by petitioner was made without taking into consideration the letter received by Collector of Customs (Valuation) from Commercial Consular Pakistan's Embassy of the country- of Export---Said letter which' substantially supported petitioner's contention, was not taken into consideration---Validity--­Failure to refer to such information rendered order arbitrary---Neither Standing Counsel nor counsel for Controller of Customs (Valuation) were able to refer any law where contrary view seemed to have been taken---Matter was remanded to Competent Authority for fresh assessment in accordance with law.

Mohsin Tea Stores v. Federation of Pakistan 1999 CLC 753 ref.

Khalid Jawed Khan for Petitioner.

Sajjad Ali Shah, Standing Counsel for Respondent No. 1.

Raja Muhammad Iqbal for Respondent No.2.

2005 P T D 118

[Karachi High Court]

Before Shabbir Ahmed and Muhammad Mujeebullah Siddiqui, JJ

Messrs KINGS PEN COMPANY through Sole Proprietor Nooruddin

Versus

COLLECTOR OF CUSTOMS (APPRAISEMENT), KARACHI and 2 others

Constitutional Petitions Nos. D-718, 747, 748, 888 and 994 of 2004, decided on 14th September, 2004.

Customs Act (IV of 1969)---

----S.25---Constitution of Pakistan (1973), Art.199---Constitutional petition---Provisional assessment of duty---Petitioner was aggrieved by provisional assessment of duty on the subject consignment---Final assessment had not been done---Advice contained in letter issued by Controller of Customs Valuation, was nothing but an advice, which had no binding effect and final assessment was yet to be made--­Constitutional petition filed by petitioner was disposed of in the terms that while making final assessment, Collector of Customs Appraisement Department would consider evidence available and said letter could not be taken as conclusive evidence for valuation---Final assessment in terms of S.25 of Customs Act, 1969 could be made after providing opportunity to petitioner to place material in support of his case.

Sohail Muzaffar for Petitioner.

Raja Muhammad Iqbal for Respondents.

2005 P T D 122

[Karachi High Court]

Before Sabihuddin Ahmed and Khilji Arif Hussain, JJ

IMPERIAL COMMERCIAL AGENCIES, KARACHI

Versus

GOVERNMENT OF PAKISTAN through Chairman Central Board of Revenue, Islamabad and 2 others

Constitutional Petition No.D-129 of 1995, decided on 29th September, 2004.

Customs Act (IV of 1969)---

----Ss.25 & 30---Constitution of Pakistan (1973), Art. 199--­Constitutional petition---Assessment of Customs duty---Grievance of petitioner was that the Customs Authorities had not assessed value of imported goods on the basis of value operating at the time of import, but had assessed on the basis of value operating three years earlier--­Under provisions of Ss.25 & 30 of Customs Act, 1969 assessment was to be made on the price prevailing on the date of import---Assessment made on the basis of value prevailing three years prior to date of import appeared to be arbitrary---Case was remanded to Collector of Customs (Appraisement) who would make assessment in accordance with law within specified period.

Abdul Wajid Wyne for Petitioner.

Nadeem Azhar, Dy. A.-G. for Respondent No. 1.

Haider Iqbal Wahniwal for Respondent No.2.

Raja M. Iqbal for Respondent No.3.

2005 P T D 186

[Karachi High Court]

Before Sabihuddin Ahmed and Khilji Arif Hussain, JJ

Messrs TARIQ BROTHERS through, Partner Mian Ejaz Ahmed

Versus

CONTROLLER OF CUSTOMS and 3 others

Constitutional Petitions. Nos. D-446 & D-520 of 1994, heard on 27th August, 2004.

(a) Notification---

---- Notification imposing liabilities could never be given retrospective, effect.

(b) Interpretation of statutes---

---- When a statute provides for exception to general rules and allows impairment of rights of parties through executive action, then all conditions for its effectiveness must be established.

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

----S. 25-B---Inspection and Valuation of Imported Goods Rules, 1990, R. 9---Import Tariff Price fixed under S.25-B of Customs Act, 1969--­Prevalent Price Report issued by COTECNA---Effectiveness---Import Tariff Price would become operative only after its duly publication in notification from the date specified therein---Such tariff would not apply to goods regarding which Bills of Entry for ex-bonding were filed before actual publication of notification, but same would be liable to duty at the rate assessed in terms of Prevalent Price Report of COTECNA---Where Bill of Entry was filed after publication of such notification, then, duty would be payable at the rate specified therein.

Province of East Pakistan v. Hassan Askari PLD 1971 SC 82 and Muhammad Ishaq v. Chief Administrator Auqaf PLD 1977 SC 639 ref.

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

----S. 25-B---Inspection and Valuation of Imported Goods Rules, 1990, R. 9---Constitution of Pakistan (1973), Art. 199---Constitutional petition---Valuation of goods at Import Tariff Price by mentioning wrong notification---Liability to pay duty was exactly at the same rate--­Held: interference with such order in exercise of Constitutional jurisdiction would be unjust and contrary to public interest.

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

----S. 25-B---Inspection and Valuation of Imported Goods Rules, 1990, R. 9---Valuation of goods on basis of Prevalent Price Report prepared by COTECNA-- Validity---Assessment would be made on, basis of such report, unless evidence of higher import price was available with Customs Authorities---Such report could not be discarded merely on basis of opinion or on best judgment of Customs officers---Word "evidence" as used in R. 9 of Inspection and Valuation of Imported Goods Rules, 1990, pre supposes existence of some tangible material indicating a higher value---Where such evidence was available, Customs Authorities must bring same to notice of importer and make assessment without delay after giving him an opportunity to rebut same---Authorities could not be allowed to claim premium over their own negligence in delaying assessment---Not sufficient to discard such report on basis of the opinion or best judgments of such officers.

(f) Interpretation of statutes---

----Proviso to a statute---Scope---Proviso is in the nature of an exception to general rule and ought to be strictly construed.

(g) Administration of justice---

---- Requirement of---While taking an action detrimental to the rights of a party in deviation of normal requirements based on evidence, then such party must be given an opportunity of confronting such evidence.

Khalid Anwar and Munib Akhtar for Petitioner (in C. P. No.D-520 of 1994).

Muhammad Anwar Tariq for Petitioner (in C.P. No. D.446 of 1994).

Raja Muhammad Iqbal and Nadeem Azhar, Dy. A.-G. for Respondents.

Dates of hearing: 24th, 26th and 27th August, 2004.

2005 P T D 247

[Karachi High Court]

Before Sabihuddin Ahmed and Khilji Arif Hussain, JJ

ENGLISH SWEETS (PVT.) LTD., KARACHI

Versus

PAKISTAN through Secretary to the Government of Pakistan, Islamabad and 3 others

Constitutional Petitions Nos. 1533, 2783 of 1993, 3020 of 1992 and 1940 of 1996, decided on 9th September, 2004.

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

----S.223---Officers of Customs to follow orders of the Central Board of Revenue---Scope---Natural justice, principles of---Applicability---No action detrimental to the interest of a person can be taken without hearing the affected parties---Section 223, Customs Act, 1969 does enable the Central Board of Revenue to issue orders and directions, which are required to be followed by officers of Customs, nevertheless S.223 makes an important exception by stipulating that no such instructions shall be given to interfere with the discretion of officers in exercise of their quasi-judicial function.

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

----S.25---Determination of Customs Value of goods---Valuation of imported goods in a particular consignment for the purpose of levy of Customs duty is ex facie a quasi-judicial function and the orders passed are subject to the incidence of appeal and revision.

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

----Ss.193-A & 223---Appeal---While deciding an appeal the concerned officer acts in a quasi-judicial capacity and is not liable to follow directions under S.223, Customs Act, 1969.

M.A. Rehman v. Federation of Pakistan PLD 1988 SC 695 ref.

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

----Ss.223 & 25---Officers of Customs to follow directions of the Central Board of Revenue---Scope---Directions only of an administrative nature could be issued by the Board and not those incorporating statutory provisions for determining tax liability of the assessee.

Central Insurance v. Central Board of Revenue 1993 PTD 766 ref.

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

----Ss.223 & 25---Constitution of Pakistan (1973), Art. 199--­Constitutional petition---Officers of Customs to follow directions of the Central Board of Revenue---Scope---Classification of imported goods--­Once the orders in revision are found to have been passed after duly hearing the assessee and said officers having treated the opinion of the Central Board of Revenue as binding, the assessee's claim founded upon the principles of natural justice, would lose all its force---Where the imported paper could not be classified as adhesive as claimed by the assessee and was imported in strips of less than 15 cm width and was meant for wrapping sweets, the same clearly fell under Heading 4823.90---High Court, under its jurisdiction under Art.199 of the Constitution could not enter into an independent inquiry as to classification of goods or substitute its opinion for that of the competent authorities.

Collector Sahiwal v. Muhammad Akhtar 1971 SCMR 681; Government of Pakistan v. Indo Pakistan Corporation PLD 1979 SC 723 and Collector of Customs v. New Electronics PLD 1994 SC 363 ref.

I. H. Zaidi for Petitioner.

Shakeel Ahmad, Raja Muhammad Iqbal and S. Ziauddin Nasir, Standing Counsel for Respondents.

Date of hearing: 9th September, 2004.

2005 P T D 251

[Karachi High Court]

Before Anwar Zaheer Jamali and S. Ali Aslam Jafri, JJ

Messrs KUMAIL STEEL TRADERS through Proprietor

Versus

DEPUTY COLLECTOR CUSTOMS (GROUP-V), APPRAISEMENT COLLECTORATE, KARACHI and 4 others

Constitutional Petitions Nos.D-1070 and D-1076 of 2004, decided on 10th November, 2004.

Customs Act (IV of 1969)---

----Ss.81(2) & 25---Determination of Customs Value of goods--­Provisional assessment of duty---Final assessment was to be undertaken under S.81(2) of the Customs Act, 1969 by the Department and while making such assessment the Collector of Customs (Appraisement) was to consider all the evidence available and the letter would not be taken as conclusive evidence of valuation---Final assessment in terms of S.25, Customs Act, 1969 would be made with proper opportunity to the assessee to place material to that effect on record---Department, however, would be at liberty to take any further action against the assessee for alleged misdeclaration or any other illegality committed by them.

C. P. No.D-964 of 2004 fol.

Mian Abdul Ghaffar for Petitioner.

Raja Muhammad Iqbal for Respondents.

2005 P T D 253

[Karachi High Court]

Before Sabihuddin Ahmed and Khilji Arif Hussain, JJ

Messrs KALOODI INTERNATIONAL (PVT.) LTD., KARACHI

Versus

CONTROLLER OF CUSTOMS VALUATION, KARACHI and 3 others

Constitutional Petition No.D-2962 of 1992, decided on 28th October, 2004.

Customs Act (IV of 1969)---

----Ss.25-B & 25---Determination of value not covered by S.25, Customs Act, 1969---Valuation, in the present case, was determined not under S.25, Customs Act, 1969 but under S.25-B of the Act which at the relevant time enabled the Department or an officer authorized by it to fix the value at such rate as he deemed fit notwithstanding anything contained in S.25 of the Act---In view of the stipulation that S.25-B, Customs Act, 1969 was required to operate notwithstanding anything contained in S.25, strict proof of nexus with the transaction value under S.25 was not necessary---Discretion under S.25-B of the Act indeed was required to be exercised reasonably and there was no allegation that the fixation of value was effected in a perverse or mala fide manner.

Muhammad Anwar Tariq for Petitioner.

Faisal Arab, Standing Counsel and Raja Muhammad Iqbal for Respondents.

Date of hearing: 28th October, 2004.

2005 P T D 255

[Karachi High Court]

Before Anwar Zaheer Jamali and S. Ali Aslam Jafri, JJ

Messrs KOHINOOR TEXTILE MILLS LTD, KARACHI

Versus

COLLECTOR OF CUSTOMS, SALES TAX & CENTRAL EXCISE (ADJUDICATION), KARACHI

Spl. Customs Appeal No. 65 of 2002, decided on 5th November, 2004.

Customs Act (IV of 1969)---

----S.32---Untrue statement---Fabric on physical examination were found printed less than 25% admissible to duty draw back @ 2.80% FOB under S.No.2(1) of Sch.1 of S.R.O. 172(I)/99 dated 22-3-1999 as against @ 5.80% claimed by exporter under S.No.4 of the same as provided in the explanation at the footnote of the S.R.O.---Effect---Covered area of printed fabric attracted the provision of S. 32, Customs Act, 1969.

Sohail Muzaffar for Appellant.

Raja Muhammad Iqbal for Respondent.

Date of hearing: 5th November, 2004.

2005 P T D 257

[Karachi High Court]

Before Sabihuddin Ahmed and Khilji Arif Hussain, JJ

RECKITT & COLMAN OF PAKISTAN LTD., KARACHI

Versus

PAKISTAN through Secretary to Government of Pakistan, Ministry of Finance, Islamabad and 3 others

Constitutional Petition No.D-1281 of 1992, heard on 30th September, 2004.

Customs Act (IV of 1969)---

----S.19 & First Sched., Chap. 30---S.R.O. 349(I)/85 dated 15-4-1985--­Exemption---Import of raw material---Apart from being covered by Chap. 30, First Schedule to the Customs Act, 1969 and being registered under the Drugs Act, 1976, the benefit of exemption under S.19 Customs Act, 1969 could only be claimed if the goods were specified in the annex to S.R.O. 349(I)/85 dated 15-4-1985.

Pfizer Laboratories v. Federation of Pakistan (Civil Appeals Nos.350 and 351 of 1993) ref.

S.I.H. Zaidi for Petitioner.

Jawed Farooqui and Raja Muhammad Iqbal for Respondents.

Date of hearing: 30th September, 2004.

2005 P T D 259

[Karachi High Court]

Before Shabbir Ahmed and Muhammad Mujeebullah Siddiqui, JJ

GULSHAN SPINNING MILLS LTD. and others

Versus

GOVERNMENT OF PAKISTAN and others

C.Ps. Nos. D-704 of 1990, D-991 of 1989, D-738 of 1990, D-739 of 1990, D-740 of 1990, D-742 of 1990, D-747 of 1990, D-753 of 1990, D-781-1990, D-824 of 1990, D-1018 of 1990, D-1145 to D-1147 of 1990, D-1175 of .1990, D-1227 of 1990, D-1277 of 1990, D-1278 of 1990, D-1433 of 1990, D-138 of 1991, D-139 of 1991, D-351 of 1991 and D-509 of 1991, heard on 21st January, 2004.

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

----S.107---Income Tax Rules, 1982, R.48---Constitution of Pakistan (1973), Art. 199---Constitutional petition---Tax Credit ---Entitlement--­Petitioners by virtue of amendment made by Finance Act, 1988, had become entitled to Tax Credit at the rate of 15% of amount invested in between 1-7-1976 and 30-6-1991 for the purposes of replacement, balancing or modernization of machinery and plant already installed--­Prior to said amendment. Tax Credit was available for the investment made between 1-7-1976 and 30-6-1988---In pursuance of and acting upon entitlement available to petitioner under provisions as amended by Finance Act, 1988, petitioners made investments between 1-7-1988 and 30-6-1989---Subsequently subsection (1) of S.107 of Income Tax Ordinance, 1979 was further amended by Finance Act, 1989 whereby year "1991" was substituted as "1988", which amendment had reverted to the position as was prevailing prior to earlier amendment vide Finance Act, 1988---As a consequence of said subsequent amendment by Finance Act, 1989 substituting year 1988 for the year 1991, Authority and Income Tax Department refused the claim of petitioners with regard to tax credit for which they had become entitled by First amendment in Finance Act, 1988---Validity---Right of petitioners to claim tax credit on investment made by them in between 1-7-1988 and 30-6-1989 was matured at the time of investment and thus became a past and closed transaction---Result would be that notwithstanding retrospective amendment made by Legislature in S.107(1) of Income Tax Ordinance, 1979 by Finance Act, 1989, it would not affect rights of petitioners to claim tax credit which had already accrued to them on account of past and closed transaction at the time when said subsequent amendment was made on 1-7-1989---Constitutional petitions filed by petitioners were allowed in the terms that they were entitled to claim tax credit on investments made by them during period between 1-7-1988 and 30-6-1989---Competent Authorities were directed to issue Instalation Certificate to ,petitioners for claiming tax credit.

(b) Interpretation of statutes---

---- In absence of express words used by Legislature, retrospectivity to any law was not to be given so as to reopen the past and closed transactions and deprive any person of any accrued vested right in pursuance of such past and closed transactions.

The Chief Land Commissioner v Ghulam Hyder Shah 1988 SCMR 715; Province of East Pakistan v. Sharafatullah and others PLD 1970 SC 514; Ghulam Hyder Shah v. Chief Land Commissioner 1983 CLC 1585 and Molasses Trading and Export (Pvt.) Ltd. v. Federation of Pakistan 1993 SCMR 1905 ref.

Nasrullah Awan, Jawaid Farooqui, Aqeel Ahmed Abbasi and Nadeem Azhar Dy. A.-G. for Respondents.

Muneeb Akhtar, Salman Iqbal Pasha, Noorallah holding brief for I.H. Zaidi, Ihsrat Alavi and Abdul Hadi Farid for Petitioners.

None present on behalf of Petitioner (in C.P. No. D-1433 of 1990).

Date of hearing: 21st January, 2004.

2005 P T D 495

[Karachi High Court]

Before Sabihuddin Ahmed and Khilji Arif Hussain, JJ

NISHAT MILLS LIMITED

Versus

FEDERATION OF PAKISTAN through Secretary, Finance Division, Federal Secretariat and 2 others

Constitutional Petitions Nos. D‑842, D‑843, D844, D‑920, D‑921, D‑1142 of 2003, D‑54 and D‑222 of 2004, heard on 23rd November, 2004.

(a) Customs Act (IV of 1969)‑‑‑

‑‑‑‑S.19(3) [as inserted by Customs (Amendment) Ordinance (XXIV of 2002)]‑‑‑Protection of Economic Reforms Act (XII of 1992), Preamble‑‑­Provisions of S.19(3), Customs Act, 1969 (as amended) would prevail over the provisions of Protection of Economic Reforms Act, 1992 and were designed to nullify the effect of the pronouncement of the Supreme Court in Fecto Balarus Tractors Ltd. v. Pakistan 2001 PTD 1829.

1986 SCMR 1917 ref.

(b) Customs Act (IV of 1969)‑‑‑

‑‑‑‑S.19(3) [as inserted by Customs (Amendment) Ordinance (XXIV of 2002)]‑‑‑Sales Tax Act (VII of 4990), S.13(2)(a)‑‑‑S.R.O. 554(I)/98 dated 12‑6‑1998‑‑‑ Exemption‑‑‑Notification No. S.R.O. 554(I)/98 dated 12‑6‑1998 could not be characterized as "time bound" inasmuch as it did not grant any exemption from payment of duty for a specific period of time but merely stated certain preconditions to be fulfilled for qualifying to the benefit of exemption‑‑‑When the five years or three years period had not expired, the petitioners, had not even acquired the right to exemption and the question of withdrawal would be altogether irrelevant‑‑‑Executive was bound by representation it made under the doctrine of a promissory estoppel but there could be no estoppel against exercise of legislative power‑‑Even if certain rights had accrued to the petitioners, said rights stood wiped out by the enactment of S.19(3) of the Customs Act, 1969 [as amended].

Al‑Samrez's case 1986 SCMR 1917; Facto Belarus Tractors v. Pakistan 2001 PTD 1829; M.Y. Electronics v. Government of Pakistan 1998 SCMR 1404; Collector of Central Excise v. Azizuddin PLD 1970 SC 439 and Army Welfare Sugar Mills v. Federation of Pakistan 1992 SCMR 1652 ref.

(c) Estoppel‑‑‑

‑‑‑‑Promissory estoppel‑‑‑ Executive was bound by representation it made under the doctrine of a promissory estoppel but there could be no estoppel against exercise of legislative power.

Tariq Jawaid and Tasawar Ali Hashmi for Petitioner.

Faisal Arab, Standing Counsel.

Raja Muhammad Iqbal, Haider Iqbal Wahniwal, Nadeem Qureshi, Shakeel Ahmed and Ahmed Khan Bugti for Respondents.

Date of hearing: 23rd November, 2004.

2005 P T D 501

[Karachi High Court]

Before Anwar Zaheer Jamali and S. Ali Aslam Jafri, JJ

Messrs HUSSEIN INDUSTRIES, KARACHI

Versus

ASSISTANT COLLECTOR, COLLECTORATE OF CUSTOMS (EXPORT) REBATE, KARACHI

Spl. Custom Appeal No.9 of 2003, decided on 29th October, 2004.

Customs Act (IV of 1969)‑‑‑

‑‑‑‑Ss.194‑A(b) & 196‑‑‑Appeal to Appellate Tribunal‑‑‑Section 194A(b), Customs Act, 1969 which was made basis by the Appellate Tribunal for dismissal of appeal was omitted much earlier to the passing of impugned order‑‑‑Appeal preferred before the Tribunal therefore could not have been dismissed on said ground‑‑High Court, in appeal, set aside the impugned order and remanded the case to the Tribunal for fresh disposal in accordance with law.

Muhammad Aslam Shaikh for Appellant.

Raja Muhammad Iqbal for Respondent.

2005 P T D 502

[Karachi High Court]

Before Saiyed Saeed Ashhad, C.J. and Ghulam Rabbani, J

Messrs NOORI TRADING CORPORATION (PRIVATE) LIMITED, KARACHI

Versus

CONTROLLER OF CUSTOMS VALUATION, KARACHI and 3 others

Constitution Petition No. 850 of 1992, decided on 29th April, 2004.

Customs Act (IV of 1969)‑‑‑

‑‑‑‑S.25‑B‑‑‑S.R.O. 610(I)/1988, dated 30‑6‑1988‑‑‑Constitution of Pakistan (1973), Art.199‑‑‑Constitutional petition‑‑‑Vires of S.25‑B Customs Act, 1969 and S.R.O. 610(I)/1988, dated 30‑6‑1988‑‑Provisions contained in S.25‑B, Customs Act, 1969 and S.R.O. 610(I)/1988, dated 30‑6‑1988 and the valuation made thereunder were valid and legal‑‑­Constitutional petition was dismissed.

Collector of Customs v. New Electronics (Pvt.) Ltd. PLD 1994 SC 363; Messrs Madina Traders v. The Federation of Pakistan 1999 SCMR 95 and Tajuddin Trading Company v. Controller of Customs Valuation and others in Constitutional Petition No. D‑1748 of 1992 fol.

Muhammad Anwar Tariq for Petitioner.

Sirajul Haq and Raja Muhammad Iqbal for Respondents Nos. 1 and 2.

Sajjad Ali Shah, Standing Counsel for Respondents Nos. 3 and 4.

2005 P T D 582

[Karachi High Court]

Before Anwar Zaheer Jamali and S. Ali Aslam Jafri, JJ

Messrs ABDUL MAJID & SONS LTD.

Versus

WEALTH TAX OFFICER

W.T.Cs. Nos. 55 to 58 of 1994, decided on 10th December, 2004.

(a) Wealth Tax Act (XV of 1963)‑‑‑

‑‑‑‑S.35‑‑‑Rectification of mistake‑‑‑Power of rectification ‑‑‑Scope‑‑­Wealth Tax Officer, in the present case, while determining the value of the building had separately worked out the value of ground floor and at the same time also added total value of the building as declared by the assessee in the Balance Sheet of the relevant assessment year‑‑‑Such alleged illegality could not be cured in exercise of power under S.35, Wealth Tax Act, 1963‑‑‑Principles.

From the language of section 35 of the Wealth Tax Act, 1963, as amplified with various decisions, it is clear that the power of rectification provided under this provision of law is much wider than the power of review conferred upon the ordinary Courts and that such power of rectification need not be confined to mere correction of arithmetical mistakes/mistakes of calculations or obvious mistake on record but it could also be exercised in the cases of glaring illegalities or failure to follow the relevant precedents.. But at the same time it is to be kept in mind that the scope of rectification cannot be extended in a way so as to empower an officer to set aside its own order or to modify it as if sitting in a Court of appeal.

The mistakes which are not apparent and obvious on the record cannot be termed to be mistakes which can be corrected in exercise of power under section 35 of the Act. More particularly those mistakes which do not surface from the record but need further investigation to reach to a definite conclusion. To say it in other words, while exercising power of rectification, envisaged under section 35, of Wealth Tax Act an officer cannot enter into investigation of factual controversies nor can he investigate into a matter which may require additional evidence for that purpose.

In the present case the Wealth Tax Officer while determining the value of building has separately worked out the value of ground floor and at the same time also added total value of the building as declared by the assessee in the Balance Sheet of the relevant assessment year, but this so‑called illegality cannot be cured in exercise of power under section 35 of the Wealth Tax Act for the reason that assessee while declaring the total value of the building has not given separate value of the ground floor or any other floor or even number of floors in the under construction building which could, for the arguments sake, enable proportionate deduction from the total assessed value of the building, it view of separate valuation of ground floor by the Wealth Tax Officer. It the circumstances obviously the shortcoming in the order of Wealth Tax Officer highlighted by the assessee was not one which could have beer corrected under the ambit of rectification as the corresponding correction in the order was not possible without reopening the whole case of bringing further evidence on record.

24 ITR 93; (1986) 54 Tax 26; (1975) 31 Tax 162; (1992) 65 Tax 257; (1971) 23 ITR 236; (1984) 49 Tax 166; (1985) 52 Tax 35; Meka Venkatappaiah v. I.T.O. (1957) Andhra Pradesh High Court Shaikh Muhammad Iftikharul Haq v. I.T.O. Bahawalpur (1966) 13 Tax 203 and Pakistan River Steamer Ltd. v. CIT 1971) PTD 204 ref.

(b) Wealth Tax Act (XV of 1963)‑‑‑

‑‑‑‑S.35‑‑‑Rectification of mistake‑-‑Scope‑‑‑Assessee, at the time of assessment, had not brought on record any material before the Wealth Tax Officer to show the annual rental value of the whole property so as to prove that the valuation made by the Wealth Tax Officer was more than ten times annual rental value of the property in which case prior approval of the Inspecting Assistant Commissioner was necessary‑‑‑Such grievance of the assessee was not within the four corners of rectification as provided by S. 35, Wealth Tax Act; 1963.

24 ITR 93; (1986) 54 Tax 26; (1975) 31 Tax 162; (1992) 65 Tax 257; (1971) 23 ITR 236; (1984) 49 Tax 166; (1985) 52 Tax 35; Meka Venkatappaiah v. I.T.O. (1957) Andhra Pradesh High Court; Shaikh Muhammad Iftikharul Haq v. I.T.O. Bahawalpur PLD 1966 SC 524 and Pakistan Rivery Steamer Ltd. v: CIT 1971 PTD 204 ref.

Arshad Siraj for Applicant.

Nasrullah Awan for Respondent.

Date of hearing: 27th October, 2004.

2005 P T D 634

[Karachi High Court]

Before Anwar Zaheer Jamali and S. Ali Aslam Jafri, JJ

KARIM GHEE AND OIL MILLS (PVT.) LTD., KARACHI

versus

FEDERATION OF PAKISTAN, through the Secretary, Revenue Division and another

Constitutional Petition No. D‑774 of 2004, decided on 14th December, 2004.

Customs Act (IV of 1969)‑‑­

‑‑‑‑S.31‑A‑‑‑Customs Rules, 2001, R.296(1)(g)‑‑‑Sales Tax Act (VII of 1990), S.6(lA)‑‑‑S.R.O. 176(1)/2004 dated 22‑3‑2004‑‑‑Constitution of Pakistan (1973), Art.199‑‑‑Constitutional petition‑‑‑Duty and tax remission for exports‑‑‑Petitioner, who was engaged in the manufacture and export of vegetable ghee, on the basis of Duty and Tax Remission for Export Scheme introduced by the.‑Federal Government, entered into an agreement dated 19‑8‑2003 with foreign importers to export 5000 metric tons of vegetable ghee to them for which there was no duty, tax etc.‑‑‑Export of goods including vegetable ghee, though was not liable to any tax, duties etc, however import of input goods/raw material used in its manufacture was subject to duty/tax at the stage of import with a right to seek refund of the duty/tax paid on the import and such input/raw material which was used in the manufacture of goods which ultimately were to be exported out of Pakistan‑‑‑Petitioner was stated to have been authorized to import 2500 metric tons of duty/tax free Palm Oil and 2500 metric tons of Palm Olien and such indemnity was furnished in terms of Duty and Tax Remission for Export Scheme on 3‑9‑2003‑‑‑Petitioner had claimed to have imported so far 546 metric tons of Palm Olien under the approval and was still to import 2500 metric tons of duty/tax free Palm Oil and 1954 metric tons of Palm Olien and that it had manufactured and exported 326.7 metric tons of vegetable ghee to its purchasers abroad and still it was under contractual obligation to export 4673.3 metric tons of vegetable ghee‑‑‑Grievance of the petitioner was that Federal Government had issued S.R.O. 176(1)/2004 dated 22‑3‑2004 whereby rule 296(l)(g) of Customs Rules, 2001 was amended to the effect that Duty and Tax Remission for Export Rules Were made inapplicable, inter alia in the case of exporters of vegetable ghee‑‑­Validity‑-‑Held, doctrine of "promissory estoppel" could not be pressed into service against the legislature more particularly when admittedly no Letter of Credit had been opened by the petitioner before 23‑3‑2004, hence no vested right appeared to have been created in his favour‑‑­Exemption granted to the petitioner in terms of order dated 5‑9‑2003 therefore, could be withdrawn by Notification S.R.O. 176(1)/2004 dated 22‑3‑2004.

Messrs Inter Globe Commercial (Pvt.) Limited v. Government of Pakistan 2004 PTD 21; Messrs Afreen International (Pvt.) Limited Karachi v, Collector Customs (Appraisement) Dry Port and others 2003 PTD 2015; Messrs M.Y. Electronics Industries (Pvt.) Limited and others v. Government of Pakistan through Secretary Finance, Islamabad and others 1998 SCMR 1404; Alsamraiz Enterprise v. Federation of Pakistan 1986 SCMR 1917 and Pakistan v. Fecto Belarus Tractors Limited PLD 2002 SC 208 distinguished.

Khalid Jawed Khan for Petitioner.

S. Ziauddin Nasir; Standing Counsel fur Respondent No.1.

Raja Muhammad Iqbal for Respondent No.2.

Date of hearing: 4th November, 2004.

2005 P T D 709

[Karachi High Court]

Before Anwar Zaheer Jamali and S. Ali Aslam Jafri JJ

PAKISTAN STATE OIL COMPANY LIMITED

versus

COLLECTOR OF CUSTOMS

Spl. Custom Appeals Nos. 253 to 315 of 2004, decided on 21st December, 2004.

(a) Customs Act (IV of 1969)‑‑‑

‑‑‑‑S.194‑B‑‑‑Sales Tax Act (VII of 1990), S.46‑‑‑Order of the Appellate Tribunal‑‑‑No provision of law empowers the Appellate Tribunal for passing short order in the first instance and recording its reasons later on.

In the present case, order of the Tribunal nowhere mentioned that it was a short order which was to be followed by separate reasons to be recorded by the Tribunal later on. The practice followed by the Tribunal even otherwise did not seem to be warranted by law as there was no such provision available in the Customs Act/Sales Tax Act, which empowered the Tribunal performing judicial work to decide the fate of an appeal by passing short order in the first instance and recording its reasons later on. Unless such power is expressly conferred by statute, which was lacking in the present case, it could not be exercised by any Tribunal or Court, specially when dealing with its judicial work.

(b) Customs Act (IV of 1969)‑‑‑

‑‑‑‑Ss.194‑A, 194‑B, 194‑C, 196-H & 224‑‑‑Appeal to Appellate Tribunal‑‑‑ Limitation‑ ‑‑Penal provision of law like law relating to limitation for filing of appeal, depriving a party from seeking adjudication of its case on merits after a particular period, are to be construed strictly and same cannot be invoked on mere presumptions or assumptions‑‑‑If two equally plausible conclusions are possible then the one favourable to the subject is to be preferred, so that case may be decided on merits.

Taha Ali for Appellants.

Raja Muhammad Iqbal along with Muhammad Rais, S.P.O. for Respondents.

Date of hearing: 21st December, 2004.

2005 P T D 719

[Karachi High Court]

Before Sabihuddin Ahmed and Khilji Arif Hussain, JJ

I.C.I. PAKISTAN LTD.

versus

PAKISTAN. through Secretary to the Government of Pakistan, Ministry of Finance and 3 others

Constitution Petition No. 1454 of 1999, decided‑ on 7th December, 2004.

Central Excises Act (I of 1944)‑‑‑

‑‑‑‑S.7‑‑‑Indirect taxes‑‑‑Where the burden is passed on to the consumers, the assessee collects the duty as agent of the Government or defrays it on behalf of the actual consumer and only such consumer is entitled to claim refund ‑‑‑Assessee having failed to show that he had borne the burden of tax and not passed it on to the consumers, his Constitutional petition was dismissed‑‑‑Constitution of Pakistan (1973), Art. 199.

Collector of Central Excise and Sales Tax v. Rupali Polyester Ltd. 2002 SCMR 738; Sajjad Nabi Dar and Co. v. The Commissioner of Income Tax, Rawalpindi Zone, Rawalpindi PLD 1977 SC 437 and Federation of Pakistan v. Metropolitan Steel Corporation 2002 PTD 87 ref.

S.I.H. Zaidi for Petitioner.

Faisal Arab, Standing Counsel and Raja Muhammad Iqbal for Respondents.

2005 P T D 729

[Karachi High Court]

Before Sabihuddin Ahmed and Khilji Arif Hussain, JJ

Messrs SITARA CHEMICAL INDUSTRIES LTD., through Company Secretary

versus

COLLECTOR OF CUSTOMS (APPRAISEMENT), PMBQ, KARACHI and another

Constitution Petition No. D‑1631 of 2001, heard on 24th December, 2004

Customs Act (IV of 1969)‑‑‑

‑‑‑‑S.19(3) [as inserted by Customs (Amendment) Ordinance (X of 2002)]‑‑‑Protection of Economic Reforms Act (XII of 1992), Preamble‑‑­Exemption from duty‑‑‑Provision of S.19(3)‑, . Customs Act, 1969 provides that no exemption premised on the ground of promissory estoppel and notwithstanding anything contained in the Protection of Economic Reforms Act, 1992 or any other law or any judgment of a Court could be obtained.

Fecto Belarus Tractors v. Pakistan PLD 2002 SC 208 distinguished.

Rana M. Shamim for Petitioner

Raja Muhammad Iqbal for Respondent No.1.

Faisal Arab, Standing Counsel, for Respondent No.2.

Date of hearing: 24th December, 2004.

2005 P T D 742

[Karachi High Court]

Before Sabihuddin Ahmed and Khilji Arif Hussain, JJ

Messrs HASHOO STEEL INDUSTRIES LTD.

versus

GOVERNMENT OF PAKISTAN through Secretary, Ministry of Finance and Economic Affairs and 3 others

Constitution Petition No. D‑807 of, 1991, decided on 23rd September, 2004.

Sales Tax Act (VII of 1990)‑‑‑

‑‑‑‑S.7‑‑‑Constitution of Pakistan (1973), Art 199‑‑‑Constitutional petition‑‑‑Petitioners had questioned the imposition of Sales Tax on "wire rods" manufactured by them at the rate of 12‑1/2 % ad valorem on the ground, of being discriminatory and arbitrary as other products of iron and steel falling in the same classification were liable to fixed Sales Tax @Rs.175 per metric ton‑‑‑Validity‑‑‑Held, the product manufactured by the petitioner was liable to Sales Tax @ 175 per metric ton, nevertheless the petitioner could only seek refund of the amount already paid upon proof of the fact that the burden of tax had not passed on to the consumer before the competent authority, such exercise was to be completed within three months.

Al‑Abbas Steel (Pvt.) Ltd, v. Federation of Pakistan C. P No.13‑155 of 1993 ref.

Mansoorul Arfin for Petitioner.

Nadeem Azhar, D.A.‑G. for Respondent No. 1.

Raja Muhammad Iqbal and Abdul Saeed Khan Ghori for Respondents Nos.2 to 4.

2005 P T D 778

[Karachi High Court]

Before Sabihuddin Ahmad and Khilji Arif Hussain, JJ

Messrs AUTO CENTRE through Managing Partner

versus

CHAIRMAN, CENTRAL BOARD OF REVENUE, MINISTRY OF FINANCE and 3 others

Constitution Petition No. D‑566 of 1991, heard on 8th December, 2004.

Customs Act (IV of 1969)‑‑‑

‑‑‑‑S.25‑‑‑Value of goods, determination of‑‑‑Once the goods had been cleared upon receipt of payment by the supplier and documents were negotiated, the letter of credit ceases to have effect and a formal amendment therein merely to enable the importer to claim discount at a higher rate did not have any legal sanctity.

Zamiruddin for Petitioner:

Faisal Arab, Standing Counsel and Rata Muhammad Iqbal for

Date of Hearing: 8th December, 2004

2005 P T D 833

[Karachi High Court]

Before S. Ahmed Sarwana and Muhammad Mujeebullah Siddiqui, JJ

CALL TELL and another

versus

FEDERATION OF PAKISTAN and others

C.P. No. D‑468 of 2003, decided on 5th August, 2003.

(a) Income‑tax‑‑‑

‑‑‑‑Advance tax‑‑‑Concept‑‑‑Deduction/collection of advance tax does not amount to levy of tax, except in cases falling under the presumptive tax regime where the deduction/collection of tax amounts to final payment of tax and no refund is made‑‑‑Principles.

In fact the collection of advance tax does not amount to levy of tax. Advance tax is a payment made merely on account to be adjusted against the charge of Income Tax as finally ascertained. It is not a tax but merely a provisional payment of an amount towards tax due. The said amount does not become the property of the Central Government but remains vested in the assessee.

Thus the deduction/collection of advance tax does not amount to levy of tax, except in the cases falling under the presumptive tax regime where the deduction/collection of tax amounts to final payment of tax and no refund is made.

CIT v. Asbestos Cement Industries Ltd. (1992) 66 Tax 140 ref.

(b) Taxation‑‑‑

‑‑‑‑ Powers of legislation‑‑‑Scope‑‑‑Power of taxation rests on necessity, and is an essential and inherent attribute of sovereignty belonging as a matter of right to every independent State or Government‑‑‑Legislature, particularly in economic activities, enjoys a wide latitude in the matter of selection of persons, subject‑matters, events etc., for taxation‑‑‑The presumption is in favour of the validity of the legislation and burden to prove, that the same is invalid is on the person who alleges it‑‑‑Principle.

CIT v. Asbestos Cement Industries Ltd (1992) 66 Tax 140; Elahi Cotton Mills Ltd. v. Federation of Pakistan PLD 1997 SC 582; Corpus Juris Secundum, Vol. LXXXIV; Assistant Commissioner of Land Tax, Madras, and others v. Buckingham and Carnatic Col. Ltd. (1970) 75 ITR 603 and The Elel Hotels and Investments Ltd. and another v. Union of India AIR 1990 SC 1664 ref.

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

‑‑‑‑5.236 & First Sched., Part IV, Division V, para..(b)‑‑‑Constitution of Pakistan (1973), Arts. 199, 23, 24, 25 & 4, Federal Legislative List‑‑­Constitutional petition‑‑‑Collection of advance tax, and refund of the advance taxes already collected ‑‑‑Vires of 5.236, Income Tax Ordinance, 2001 read with para. (b) of Division V of Part IV of the First Schedule of the Ordinance‑‑‑Validity‑‑‑Advance tax impugned in the present case does not fall within the purview of presumptive tax regime‑‑‑Advance tax collected by the company engaged in the business of selling prepaid cards for telephones from the buyers/users of the prepaid telephone cards shall ‑ be merely credited to the Government which can be utilized and adjusted to the extent found necessary towards the ultimate liability of income tax dues, after it has been determined and the excess amount if any is to be refunded to the purchasers of prepaid cards‑‑‑If, however, there is no ultimate liability to pay income tax by a purchaser, the entire amount collected by the cards company or any other seller of the prepaid telephone cards will be refunded‑‑‑Mere hardship or ignorance about the mechanism of law by any person, shall not form a basis for declaring any provision of statute to be invalid or unconstitutional‑‑‑If a person sought to be taxed comes within the letter of law he must be taxed, however great hardship may appear to the judicial mind‑‑‑High Court, on having found no substance in the contentions of the petitioners that 5.236, Income Tax Ordinance, 2001 read with its para. (b) of Division V of Part IV of the First Schedule was ultra vires the Constitution or the provisions contained therein suffered from any invalidity, dismissed the Constitutional petition.

Commissioner of Income Tax v. Pakistan Tobacco Ltd. 1988 PTD 66; Commissioner of Income Tax v. Mackinnon Mackenzie 1993 PTD 46; CIT v. Asian D Enterprises 2000 PTD 892.; M. Shakel Saigol v. Income Tax Officer PLD 1976 Lah. 616 and Highway Petroleum Service v. Islamic Republic of Pakistan PLD 1977 Lah. 797 ref.

[Leave to appeal was refused by the Supreme Court against this judgment vide 2004 PTD 3032]

Dr. Amjad Hussain Bukhari for Petitioners.

Nemo for Respondents.

Date of hearing: 5th august, 2003.

2005 P T D 874

[Karachi High Court]

Before Anwar Zaheer Jamali and Azizullah M. Memon, JJ

COLLECTOR, SALES TAX (WEST)

versus

Messrs PAKISTAN AIR‑CONDITIONING & REFRIGERATION CORPORATION (PVT.) LIMITED

Special Sales Tax Appeal No.30 of 2000, decided on 19th January, 2005.

Sales Tax Act (VII of 1990)‑‑‑

‑‑‑‑Ss. 13, 7 & 45‑A‑‑‑S.R.O. No.600(1)/1990 dated 7‑6‑1990‑‑‑S.R.O. 697(1)/1977 dated 4‑8‑1977‑‑‑Supplies 'of Air‑Conditioning Plants more than 10HP Classifiable under PCT Heading 84.15‑‑,‑Exemption‑‑­Conditions ‑‑‑Interpretation, application and scope of S.R.O. No.600(1)/ 1990 dated 7‑6‑1990.

The only controversy in the present case now emanating from the record, which is factual one, is in respect of alleged supply of package type Air‑Conditioning plants of more than 10 H.P. during the period 1989‑1990 to 1992‑1993 (up to September, 1992) by the assessees in open market, which according to the department were not covered by exemption provided in the S.R.O. 600(1)/1990 due to the non‑fulfilment of condition contained in the Proviso of this S.R.O.

A bare reading of S.R.O. No.600(I)/1990 dated 7‑6‑1990 goes to show that for its applicability the word, "machinery" has been given a much wider meaning than its ordinary dictionary meaning. Further the language of this S.R.O. does not spell out any intention of law makers that its applicability is only restricted to the supplies/sales of articles which are directly made to the industrial units so as to be identifiable for intended use only with machinery and not to the supplies/sales made otherwise in open market. It is, therefore, amply clear that to avail the benefit of S.R.O. 600(1)/1990 and the other earlier S.R.O., the assessees were neither supposed to restrict their supplies/sales of articles "package type Air‑conditioning plants of more than 10 H.P. classifiable under P.C.T. Heading 84.15" directly to the industrial units to ensure its intended use only with machinery nor they were under any obligation not to follow normal norms of the business/trading by appointing agents/dealers through whom supply/sale of these Air‑conditioning plants could be made in open market' for its consumption within the scope of S.R.O. 600(1)/1990. Indeed, proviso to S.R.O. 600(1)/1990 imposes condition for availing of exemption that the articles are identifiable as intended for use only with machinery, but after due clarification given by the Central Board of Revenue in this regard vide their letter dated 18‑12‑1991 no room for discrimination was left open for the department on the basis of mode of sales/supplies of the articles in question. Apart from it, it was also nowhere disputed by the department that the articles supplied/sold by the assessees were otherwise identifiable as intended for use only with machinery within the ambit of two said S.R.Os.

The contention that the Tribunal could not have set aside the order impugned before it without first deciding as to whether before such sales/supplies of the package type Air‑Conditioning plants of more than 10 H.P. by the assessees during the relevant years, the conditions laid down in the relevant S.R.Os. were fulfilled by them, has also no force, as the Tribunal, relying on the clarifications of S.R.O. 697(1)/1977 and S.R.O. 600(1)/1990 issued by the Central Board of Revenue, has rightly accepted the plea of the assessees. Moreover, the contention that the clarifications in respect of the interpretation and applicability of S.R.O, No.600(1)/1990 and earlier S.R.O. 697(1)/1977 issued by the Central Board of Revenue were binding upon the Sales Tax Authorities and relying on such letters issued by the Board of Revenue assessees had rightly availed the benefit of supplying their package type Air­-Conditioning plant of more than 10 H.P. during the relevant period without recovering any sales tax from its buyers, has also much force.

Messrs Army Welfare Sugar Mills Ltd. and others v. Federation o~ Pakistan and others 1992 SCMR 1652 ref.

Sattar Silat for Appellant.

Dr. Amjad Hussain Bukhari for Respondents.

Date of hearing: 19th January, 2005.

2005 P T D 884

[Karachi High Court]

Before Saiyed Saeed Ashhad, C. J. and Ghulam Rabbani, J

MUHAMMAD YOUNUS through Attorney

versus

COLLECTOR OF CUSTOMS (APPRAISEMENT), KARACHI and 5 others

Constitution Petition No. 2337 of 1993, decided on 22nd January, 2004.

Customs Act (IV of 1969)‑‑‑

‑‑‑‑Ss. 219, 169 & 201‑‑‑Registration of Auctioneers and Auction Procedure Rules, 1980, R. 24‑‑‑Constitution of Pakistan (1973), Art. 199‑‑‑Constitutional petition‑‑‑Petitioner had made highest bid for purchasing lots of uncleared goods and in consequence thereof he made payment, whereupon delivery of the goods in question was ordered, but subsequently the Assistant Collector of Customs (Appraisement Auctions), issued directions to the trustees of Port Trust for not handing over delivery of the auctioned lots till final decision by the Customs Authority‑‑‑Petitioner had assailed the directions of the department and stated that no further steps had been taken by the department as yet‑‑­Validity‑‑‑Provisions of R.24, Registration of Auctioneers and Auction Procedure Rules, 1980 empowered the Collector of Customs to accept and reject any bid or offer given at any auction proceeding without assigning any reason at any time before delivery of the auctioned goods to the successful bidder and as such directions issued to the Port Trust for not handing over the auctioned goods to the petitioner could not be said to be an illegal or unlawful inasmuch as same were made in pursuance of the powers conferred upon it‑‑‑High Court, however, remanded the case to the Collector of Customs (Appraisement) to decide the matter in accordance with the provisions of R.24 of Registration of Auctioneers and Auction Procedure Rules, 1980 within six weeks from the date of the remand order under intimation to the High Court.

Khawaja Naveed for Petitioner.

Raja M. Iqbal for Respondents Nos. l to 3.

Sajjad Ali Shah, Standing Counsel for Respondent No.6.

2005 P T D 911

[Karachi High Court]

BeforeS. Ahmed Sarwana and Anwar Zaheer Jamali, JJ

Messrs COLONY TEXTILE MILLS LTD. through Representative

versus

FEDERAL GOVERNMENT OF PAKISTAN through Secretary Ministry of Finance, Pakistan Secretariat, Islamabad and 2 others

Constitutional Petition No.D-1532 of 1999, decided on 21st February, 2001.

(a) Central Excise Rules, 1944---

----R. 9, fifth proviso---S.R.O. Nil(I)/99, dated 16-9-1999---S.R.O. No.454(I)/96, dated 13-6-1996---Customs Act (IV of 1969), S.31-A---Constitution of Pakistan (1973), Art. 199---Constitutional petition---Demand of Central Excise Duty at 15% ad valorem by virtue of S.R.O. Nil(I)/99, dated 16-9-1999 having amended or superseded S.R.O. No.454(I)/96, dated 13-6-1996---Validity---Provision of S.31-A of Customs Act, 1969 could not be extended to Central Excise Duty as there was no comparable provision in the Central Excises Act, 1944---Fifth Proviso to R.9 of Central Excise Rules, 1944 could not be interpreted to take away vested right of a person---Petitioner was entitled to benefit of S.R.O. 454(I)/96 and was not liable to pay Central Excise Duty under S.R.O. Nil (I)/99---High Court disposed of the Constitutional petition in such terms.

Kohinoor Textile Mills Limited v. Federation of Pakistan (C.P. No. D-1582 of 1999) and by judgment, dated 13-12-1999 fol.

(b) Constitution of Pakistan (1973)---

----Arts. 189 & 201---Judgment of Division Bench of High Court---Binding effect---Such judgment would be binding on another Division Bench of same High Court.

(c) Constitution of Pakistan (1973)---

----Art. 201---Judgment of High Court---Effect---Such judgment, until reversed by Supreme Court, is good law.

Syed Saeeduddin Nasir for Petitioner.

Raja Mohammad Iqbal for Respondents.

2005 P T D 917

[Karachi High Court]

Before Zahid Kurban Alavi and Muhammad Mujeebullah Siddiqui, JJ

Messrs MEHAR BROTHERS through Prop. Zaheer Ahmed

versus

ADDITIONAL COLLECTOR OF CUSTOMS (APPRISEMENT-II), KARACHI and 3 others

Constitutional Petition No.D-517 of 2000, heard on 14th September, 2001.

Customs Act (IV of 1969)---

----Ss. 193-B(4) & 196---Constitution of Pakistan (1973), Art. 199---Constitutional petition---Judgment of Appellate Tribunal as to classification of imported goods on basis of report of PCSIR Laboratory---Non-filing of appeal by Department---Refusal of department to accept such classification and release securities furnished by importer before Tribunal for provisional release of goods---Validity---Department having not preferred appeal had no authority to withhold such securities of importer---High Court accepted Constitutional petition with direction to Department to release such securities as early as possible.

Mian Abdul Ghaffar for Petitioner.

Raja M. Iqbal for Respondents.

Date of hearing: 21st August, 2001.

2005 P T D 923

[Karachi High Court]

Before S. Ahmed Sarwana and Muhammad Mujeebullah Siddiqui, JJ

Messrs SHAFIQ TEXTILE MILLS LTD., KARACHI

versus

FEDERATION OF PAKISTAN through Ministry of Finance, Islamabad and 3 others

Constitution Petitions Nos.D-1226, D-1227 and D-1228 of 1994, decided 21st January, 2003.

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

----Ss. 32, 33 & 156(1)---S.R.O. 738(I)/90, dated 11-7-1990---Constitution of Pakistan (1973), Art. 199---Constitutional petition---Refund of export duty, application for---Pleas raised in application were to the effect that export duty had been wrongly charged on export of cotton thread, which was not subject to payment of export duty; that if goods were taken to be cotton yarn even then no export duty was payable after issuance of S.R.O. 738(I)/90 and that such S.R.O. was discriminatory---Rejection of claim and issuance of show-cause notice and imposition of penalty on exporter for knowingly making false statement by giving goods a dubious description in an attempt to defraud public exchequer by filing draw-back claim---Validity---Exporter by describing goods first as thread and then alternately terming same as cotton yarn had not made a false statement, but had only put forward its argument in support of claim---Taking of alternate pleas could not be termed as making a false or untrue statement nor same would amount to misdeclaration---No document was alleged to have been concealed or withheld by exporter---If any document was missing, authority could ask for same or reject claim---No amount had been refunded by department---High Court accepted Constitutional petition and set aside show-cause notice and order of penalty by declaring same to be against law and without jurisdiction.

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

----Ss. 32 & 33---Refund of duty, application for---Alternate pleas, taking of---Validity---Taking of alternate plea could not be termed as making a false or untrue statement nor same would amount to misdeclaration.

(c) Interpretation of statutes---

----Every person is entitled to put forward his interpretation of a provision of law before Adjudicating Authority, and it is for the latter to decide, whether or not to accept such argument.

Rasheed A. Akhund for Petitioner.

Nadeem Azhar Siddiqui for Respondent No.1

Raja M. Iqbal for Respondents Nos.2 to 4.

Date of hearing: 16th October, 2002.

2005 P T D 935

[Karachi High Court]

Before Muhammad Mujeebullah Siddiqui and Azizullah M. Memon, JJ

MUHAMMAD MOINUR REHMAN through Attorney

versus

CENTRAL BOARD OF REVENUE through Chairman, Islamabad and 2 others

Constitutional Petition No. 8 of 2002, decided on 25th September, 2002.

Customs Act (IV of 1969)---

----S. 25---Constitution of Pakistan (1973), Art. 199---Constitutional petition---Amnesty Scheme for regularizing smuggled vehicles on payment of customs duty---Production of vehicle before Customs officials for its proper assessment was condition precedent for availing such scheme---Non-production of vehicle within stipulated period---Dismissal of petitioner’s representation by Member (Legal), Central Board of Revenue---Validity---Production of vehicle before Customs officials after presentation of Constitutional petition would be inconsequential as Amnesty Scheme had already expired much earlier---No illegality, infirmity and material irregularity was found in impugned order---High Court dismissed Constitutional petition is limine.

Khawaja Naved Ahmed for Petitioner.

Raja Muhammad Iqbal for Respondent.

Date of hearing: 25th September, 2002.

2005 P T D 940

[Karachi High Court]

Before Zahid Kurban Alavi and Sarmad Jalal Osmani, JJ

Messrs UDL INDUSTRIES LTD., KARACHI

versus

COLLECTOR OF CUSTOMS APPEALS (APPRAISEMENT), KARACHI and 4 others

Constitutional Petition No.D-2611 of 1993, decided on 9th February, 2002.

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

----Ss. 25, 25-B & 33---Refund claim---Clearance of goods on payment of duty on basis of ITP fixed under original notification---Representation against such ITP---Issuance of subsequent notification rectifying original notification and formulation of revised price list on basis of amended ITP---Refusal of Authority to grant refund claim---Validity---Petitioner had initially agitated against original notification, which had been rectified by subsequent notification to be effective from subsequent date---Petitioner had been forcibly asked to pay on the basis of original notification---Beneficial aspects of notification could be given retrospective effect---Issuance of subsequent notification would be with retrospective effect---High Court accepted Constitutional petition with direction to Authority to grant such a refund permissible under law.

Messrs Army Welfare Sugar Mills Ltd. v. Federation of Pakistan and others 1992 SCMR 1652 fol.

(b) Notification---

----Beneficial aspects of notification could be given retrospective effect.

Messrs Army Welfare Sugar Mills Ltd. v. Federation of Pakistan and others 1992 SCMR 1652 fol.

Raja Qasit Nawaz for Petitioner.

Ziauddin Nasir, Standing Counsel and Raja Muhammad Iqbal for Respondents.

Date of hearing: 31st January, 2002.

2005 P T D 950

[Karachi High Court]

BeforeS. Ahmed Sarwana and Muhammad Mujeebullah Siddiqi, JJ

ASIA LUBRICANTS, KARACHI

versus

FEDERATION OF PAKISTAN through Secretary, Revenue Division, Central Board of Revenue, Islamabad and another

C.P. No.D-713 of 2002, decided on 7th October, 2003.

Central Excise Rules, 1944---

----R. 10---Constitution of Pakistan (1973), Art. 199---Constitutional petition---Issuance of letter demanding excise duty at specified rate---Validity---Case of department was of short levy of duty payable under R.10 of Central Excise Rules, 1944---Show-cause notice as required under R.10 had not been issued to assessee---Impugned decision conveyed through such letter was violative of mandatory requirement of issuance of show-cause notice---High Court accepted Constitutional petition while declaring impugned decision to be illegal, void and inoperative and directed department not to take any action in pursuance thereof.

Khalid Jawed Khan for Petitioner.

Ziaduddin Nasir, Standing Counsel for Respondent No.1

Raja Mohammad Iqbal for Respondent No.2.

2005 P T D 955

[Karachi High Court]

Before Zahid Kurban Alavi and Muhammad Mujeebullah Siddiqui, JJ

FAR EASTERN IMPEX (PVT.) LTD., KARACHI

versus

FEDERATION OF PAKISTAN through Secretary, Ministry of Finance & Economic Affairs (Revenue Division) Central Board of Revenue, Islamabad and 4 others

Constitutional Petition No.D-22 of 2000, decided 28th December, 2001.

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

----S.4 & First Sched., Item 04.03---Food colours---Taxability---All items mentioned in Item 04.03 of First Schedule of Central Excises Act, 1944 were for use in painting of buildings etc., and were never to be used for any edible purpose---Food colours were not mentioned in list of such items---Any ambiguous provision had to be resolved in favour of assessee and against taxing authority---Food colours held were not to fall within category of Item 04.03 of Schedule I.

Collector of Central Excise v. Azizuddin PLD 1970 SC 439; Data Steel Mills v. Government of Balochistan 1983 CLC 571; Sethisthan Board v. Collector of Excise PLD 1988 Lahore 282 and the case of Searle Pakistan v. Government of Pakistan PLD 1993 Kar. 799 ref.

Muhammad Aamir v. Controller of Duties PLD 1981 SC 119 and Commissioner of Sales Tax U.P. v. S.N. Brothers Kanpur PTCL 1989 FC 201 rel.

(b) Interpretation of statutes---

----Fiscal statute---Ambiguity in law---Ambiguous provision would be resolved in favour of assessee and against taxing authority.

Muhammad Aamir v. Controller of Duties PLD 1981 SC 119 rel.

Syed Mamnoon Hasan for Petitioner.

Raja Muhammad Iqbal for Respondents.

Date of hearing: 23rd November, 2001.

2005 P T D 972

[Karachi High Court]

Before S. Ahmed Sarwana and Muhammad Mujeebullah Siddiqui, JJ

Messrs MACPAC FILMS LTD., KARACHI

versus

FEDERATION OF PAKISTAN through Secretary, Ministry of Finance, Federal Secretariat, Islamabad and 2 others

Constitutional Petition No.963 of 2000, decided on 30th January, 2001.

Customs Act (IV of 1969)---

----Ss. 19 & 33---SRO 484(I)/92, dated 14-6-1992---Constitution of Pakistan (1973), Art. 199---Constitutional petition---Refund claim---Show-cause notice as to non-applicability of S.R.O. 484(I)/92 to goods imported for units established in specified area---Clearance of goods on payment of duty under protest subject to vacation of show-cause notice by Appellate Authority---Refusal of department to refund amount after vacation of show-cause notice by Appellate Authority---Objection of department was that goods required investigation, whether same was of the kind not manufactured in Pakistan---Validity---Such objection not raised earlier was belated, an afterthought and not bona fide---Matter had been decided in favour of importer---Refusal to refund amount was not justified---High Court accepted Constitutional petition by directing department to refund amount within specified time after verification of payment and return indemnity bond and undertaking submitted by importer.

Makhdoom Ali Khan and Miss Danish Zuberi for Petitioner.

Raja M. Iqbal alongwith Khalid Mehmood for Respondents.

2005 P T D 981

[Karachi High Court]

Before Zahid Kurban Alavi and Sarmad Jalal Osmani, JJ

OCCIDENTAL OF PAKISTAN, ISLAMABAD

versus

COLLECTOR (APPRAISEMENT), CUSTOM HOUSE, KARACHI and 2 others

Constitutional Petition No.874 of 1993, decided on 8th February, 2002.

Customs Act (IV of 1969)---

----Ss. 16 & 20---Regulations of Mines, Oilfields and Mineral Development (Government Control) Act (XXIV of 1948), S. 2---Constitution of Pakistan (1973), Art. 199---Constitutional petition---Contract for exploration of oilfields between foreign company and Federal Government---Duty free import of Rig by contractor for exploration and drilling operations in terms of such contract---Completion of contracted project---Subsequent use of such Rig by contractor in other fields with approval of concerned Ministry of Government---Show-cause notice demanding customs duty from contractor for not re-exporting such Rig on completion of contracted project---Validity---Such Rig, if not re-exported after completion of contracted project, but used locally on commercial basis, would be deemed to have been imported without payment of customs duty and other taxes---Drilling for oil and gas, in the present case, was done officially at Government level and no private sector was involved therein---Original contract would be assumed to be in force as such Rig was still being used officially in exploration of oil and gas---High Court accepted Constitutional petition and declared impugned show-cause notice to be without lawful authority.

Zahid F. Ebrahim for Petitioner.

Raja M. Iqbal for Respondents.

Date of hearing: 24th January, 2002.

2005 P T D 990

[Karachi High Court]

Before Zahid Kurban Alavi and Sarmad Jalal Osmani, JJ

Messrs SHAFIQ TEXTILE MILLS LTD., KARACHI

versus

FEDERATION OF PAKISTAN through Secretary, Ministry of Finance, Islamabad and 3 others

Constitutional Petitions Nos.D-480 of 1995 and D-2180 to D-2187 of 1994, decided on 9th February, 2002.

Customs Act (IV of 1969)---

----Ss. 32 & 33---Refund claim---Issuance of show-cause notice under S.32 of Customs Act, 1969 instead of deciding such claim and passing order thereon---Validity---Provisions of S.32 of Customs Act, 1969 speak of duty or charge not levied, short-levied and erroneously refunded---Refund claim, if granted, would fall within term erroneously refunded---Being a simple claim for refund could be rejected after assigning reasons---Issuance of such notice was, erroneous, illegal and without lawfully authority.

Rashed A. Akhund for Petitioner.

Raja M. Iqbal for Respondents.

Date of hearing 1st February, 2002.

2005 P T D 1010

[Karachi High Court]

Before Saiyed Saeed Ashhad, C.J. and Wahid Bux Brohi, J

Mst. ZAHIDA HASNAIN

versus

FEDERATION OF PAKISTAN through Finance Secretary, Government of Pakistan, Central Customs and Excise Division Pak-Secretariat, Islamabad and 6 others

C.P. No. D-37 of 2000, decided on 8th February, 2001.

Customs Act (IV of 1969)---

----S.168---Constitution of Pakistan (1973), Art. 199---Constitutional petition---Scope---Seizure and detention of vehicle---Alternate remedy available under a statute---Effect---Not discretion or choice of petitioner to abandon such statutory remedy and invoke Constitutional jurisdiction of High Court---Principles.

Once a party has taken recourse to the remedies available to him under a statute, then the law shall have to take its own course and the parties should resort to all the remedies available under the said statute. In such cases, it is not the choice or discretion of the party to abandon the remedies available to him by way of appeal or revision and to invoke the Constitutional jurisdiction of High Court.

The Commissioner of Income Tax v. Messrs N.V. Philips PLD 1993 SC 434 rel.

M.M. Tariq for Petitioner.

Raja M. Iqbal for Respondent.

2005 P T D 1014

[Karachi High Court]

Before Sabihuddin Ahmed and Khilji Arif Hussain, JJ

MUHAMMAD SHAFI and 3 others

versus

INCOME TAX OFFICER and others

Constitutional Petitions Nos. D-3204 to 3207 of 1992, decided on 19th November, 2004.

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

----S.65---Additional assessment---Scope---Proceedings under S.65(1), Income Tax Ordinance, 1979 can be initiated only in case where definite information has come into the possession of the Assessing Officer and that too after obtaining the approval of Additional Commissioner of Income Tax in writing.

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

----Ss.65 & 13---Income Tax Rules, 1982, R.207-A---S.R.O. 550(I)/97 dated 20-7-1997---Stamp Act (II of 1899 ), S.27-B---Additional assessment---Definite information---Reopening of assessment on the ground that market price of the property in the vicinity was more than the price shown by the assessee in his statement---Validity---Merely because in the same locality some other property with construction had been sold at a price higher than the price shown by the assessee, could not be made basis for reopening the assessment---Once, while passing the assessment order value declared had been accepted in terms of R.207-A, Income Tax Rules, 1982, normally same could not be reopened except when the facts and circumstances of that particular case warranted and justified reopening of the assessment---Principles.

The phrase “definite information” in possession of Assessing Officer so as to reopen the assessment, used in section 65(2) of the Ordinance is in fact penal in nature and required that officer concerned must have in his possession some information in respect of the particular matter which he wanted to reconsider. In the present case the Income Tax Officer wanted to reopen the assessment on the ground that market price of the property in the vicinity was more than the price shown by the assessee in his statement. It is not alleged in the show-cause notice that the Income Tax Officer was holding sale agreement executed between the assessee and the seller of the property wherein the price of the property in question has been shown much more than the price declared in the sale-deed, nor it is alleged in the show-cause notice that the seller in his statement had declared the value of the property in question more than the value of the property shown by the assessee. It is a matter of common knowledge that the value of the property in the same locality varied due to number of considerations such as location of particular plot whether West open, East open, corner or situated on the main road or on by lane, open from more than one side and in respect of constructed property, the value of the property differs due to nature of construction, material used in its construction, etc. Therefore, merely because in the same locality some other property with construction has been sold on a price higher than the price shown by the assessee cannot be made basis for reopening the assessment. Without going into the question whether the alleged information, on the basis of which department wanted to reopen can be termed as a definite information to reopen the assessment consciously made in exercise of powers under section 65(2) of the Ordinance, the petition can be disposed of on the basis of S.R.O. No.550(I)/97 dated 20-7-1997 whereby Rule 207-A was inserted in the Income Tax Rules, 1982. In terms of Rule 207-A, the Income Tax Officer was obliged to accept the valuation of immovable property for the purpose of section 13 of the Income Tax Ordinance, 1979 as determined by the District Collector for the purpose of stamp duty. The Collector in exercise of power under section 27-B of the Stamp Act fixed minimum valuation of the property for levying of stamp duty and registration fee. It is not disputed by either of the parties that the sale-deed in question had been registered without any objection from the Registrar about the valuation of sale and the consideration shown in the sale-deed was not less than the value determined by the District Collector for the purposes of stamp duty notified by the Collector. Once, while passing the assessment order, value declared has been accepted in terms of Rule 207-A of Income Tax Rules, 1982, normally same cannot be reopened except when the facts and circumstances of the particular case warrant and justify reopening of the assessment.

M.R. Sons v. Income Tax Officer 1989 PTD 1010; Car Tunes v. Income Tax Officer 1989 PTD 478; Commissioner of Income Tax v. American Express Int’l Banking Corporation 1992 PTD 751; Commissioner of Income Tax v. Jennings Private School, Karachi 1993 SCMR 96; Messrs Julian Hoshang Dinshaw Trust and others v. Income Tax Officer 1992 PTD 1 = 1992 SCMR 250; Central Insurance Co. Ltd and others v. Income Tax Officer 1993 SCMR 1232; Inspecting Additional Commissioner of Income Tax v. Pakistan Heralds Ltd. 1997 SCMR 1256 and ANZ Grindlays Bank Inc and others v. Deputy Commissioner of Income Tax and others Constitution Petition No.D-1727 of 1994 ref.

Iqbal Salman Pasha for Petitioners.

Aqeel Ahmed Abbasi for Respondents.

Date of hearing: 8th September, 2004.

2005 P T D 1029

[Karachi High Court]

BeforeS. Ali Aslam Jafri, J

AGHA MUHAMMAD

versus

ADDITIONAL COLLECTOR OF CUSTOMS

Special Customs Appeal No. 107 of 2000, decided on 1st November, 2004.

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

----S.196---Civil Procedure Code (V of 1908), O.XLVII, R.1---Appeal to High Court---Review---Question raised in review application under O.XLVII, R.1, C.P.C. related to factual controversy which already stood decided in view of the findings recorded by the Collector of Customs and the Appellate Tribunal that the betel-nuts being smuggled/contraband goods were confiscated as per law and the documents produced by the appellant in respect of his claim did not tally with the material recovered, hence the applicant/claimant failed to discharge his burden---Review application having no merits was dismissed.

Messrs Baghpottee Services (Pvt.) Limited and others v. Messrs Allied Bank of Pakistan Limited 2001 CLC 1363; The State v. Umer Hayat PLD 1992 SC 393 and State through Deputy Attorney General Peshawar v. Banda Gul and 2 others 1993 SCMR 311 ref.

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

----Ss.161(1)(2)(8)(9) & 12---Criminal Procedure Code (V of 1898), S.4(s)---Contention of the appellant was that F.I.R. was registered at the place which was not a notified police station in terms of S.4(s), Cr.P.C.---Validity---Held, S.161, Customs Act, 1969 dealt with the situation as existed in the present case and subsections (1) (2) (8) (9) and (12) thereof were a complete answer to the contention by the applicant.

Messrs Baghpottee Services (Pvt.) Limited and others v. Messrs Allied Bank of Pakistan Limited 2001 CLC 1363; The State v. Umer Hayat PLD 1992 SC 393 and State through Deputy Attorney General Peshawar v. Banda Gul and 2 others 1993 SCMR 311 ref.

Sohail Muzaffar for Applicant.

Fariduddin for Respondent.

Date of hearing: 22nd September, 2004.

Review Application No.8 of 2001

2005 P T D 1040

[Karachi High Court]

Before Anwar Zaheer Jamali and Muhammad Mujeebullah Siddiqui, JJ

COMMISSIONER OF INCOME TAX, CENTRAL ZONE-D, KARACHI

versus

MUHAMMAD SARDAR

I.T.R. No.47 of 1992, decided on 2nd March, 2005.

Income Tax Ordinance (XXXI of 1979)---

----S. 19(3)---Income from house property---Relief under S. 19(3), Income Tax Ordinance, 1979 is not available to a person when he was in occupation of the house property for his residence not in his capacity as its owner but as sub-lessee of the Lessee employer of the said property.

1989 PTD 917 ref.

Muhammad Hanif v. Government of Pakistan 2001 PTD 795 per incurium.

Jawaid Farooqui for Applicant.

Iqbal Salman Pasha for Respondent.

Date of hearing: 2nd March, 2005.

2005 P T D 1047

[KarachiHigh Court]

Before Anwar Zaheer Jamali and Muhammad Mujeebullah Siddiqui, JJ

COMMISSIONER OF INCOME-TAX

versus

Messrs AGRO GENERAL INSURANCE CO., LTD.

Income Tax Case No. 505 of 2004, decided on 18th February, 2005.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 20 & 133---Income Tax Ordinance (XXXI of 1979), Fourth Schedule, R. 5(a)---Zakat and Ushr Ordinance (XVIII of 1980), S. 25---Deduction---Insurance Company---Khas Deposit Certificates---Asset---Payment of Zakat, at source on Khas Deposit Certificates by Insurance Company---Allowable deduction under R. 5(a), Fourth Schedule, Income Tax Ordinance, 1979.

Commissioner of Income-tax v. Azlak Enterprises 2003 PTD 1309 fol.

1989 PTD (Trib.) 1263; 1989 PTD (Trib.) 1263 and 1991 PTD (Trib.) 804 ref.

Muhammad Altaf Mun for Appellant.

Nemo for the Respondent.

Date of hearing: 18th February, 2005.

2005 P T D 1069

[Karachi High Court]

BeforeS. Ahmed Sarwana and Muhammad Mujeebullah Siddiqui, JJ

SOHAIB KHAN

versus

COLLECTOR OF CUSTOMS, APPRAISEMENT, KARACHI and 3 others

Constitution Petition No. D-1141 of 2003, decided on 3rd October, 2003.

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

----Ss. 25-A, 25 & 2(b)---Constitution of Pakistan (1973), Art. 199---Constitutional petition---Determination of customs value of goods---Power to take over the imported goods---Scope---Appropriate officer for the purpose of S. 25-A, Customs Act, 1969 being Additional Collector of Customs and not the Principal Appraiser who had no jurisdiction to issue any notice under S. 25-A Customs Act, 1969, notice issued by the Principal Appraiser was ultra vires, without jurisdiction, void ab initio and had no legal effect, and any action including the takeover of the consignment in terms of S. 25-A, Customs Act, 1969 on the basis of such notice was also illegal and without any lawful authority---Department was directed by the High Court not to entertain any offer on the consignment in question in terms of S. 25-A of the Act and accord the same treatment to the importer as had been given to other importers in similar circumstances by the department---Department was further directed to assess the goods of the importer strictly in terms of S. 25, Customs Act, 1969.

(b) Interpretation of statutes---

----Ascertaining the true intention of a Statute---Principles.

No provision of law is to be interpreted in isolation. Accepted general principle of the interpretation of statutes is that in order to ascertain the true intention of the legislature as well as the purport and scope of a particular provision, it has to be examined in the totality of entire scheme of the law contained in a particular statute and the context in which a particular provision has been enacted. The reason being that the words, expressions and the provisions take colour and complexion in the context they are used and appear in the totality of the scheme contained in the statute.

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

----Ss. 25-A & 25---Customs Rules, 2001, Ch.IX, (Rr.107 to 125)---Takeover of imported Goods Rules, 2003---S.R.O. 371(I)/2002 dated 15-6-2002-S.R.O. 487(I)/2003 dated 7-6-2003---Determination of customs value of goods---Power to takeover the imported goods---Guidelines/principles for invoking the provisions contained in S. 25-A, Customs Act, 1969.

To examine the provisions contained in section 25-A of the Customs Act the first expression requiring consideration is the “Appropriate Officer”. This expression has been defined in section 2(b) of the Customs Act, to mean the Officer of the Customs to whom the functions to be performed under this Act are assigned by or under the Customs Act. Under section 4 of the Customs Act, an officer of the Customs appointed under section 3 shall exercise such powers and discharge such duties as are conferred or imposed on him by or under the Customs Act. For this purpose, the C.B.R. issues notifications from time to time assigning the functions to various categories of officers appointed under section 3 of the Customs Act. The S.R.O. for the time being in force is S.R.O. 371(I)/2002 dated 15-6-2002. Under this notification the appropriate officer for the purpose of section 25-A is the Additional Collector of Customs.

While referring to the meanings given to the word “find” in the dictionaries, one has to be conscious of the principle of interpretation that dictionaries cannot be taken as authoritative exponents of the meaning of the words used in Acts of Legislature, for the plainest words may be controlled by a reference to the context. One has to be further conscious of the principles that, whenever a definition is sought to be culled from a dictionary meaning of the word used with a legal provision, that meaning cannot be adopted in isolation of the context in which the word is used in the particular provision. Thus, word ‘find’ used in section 25-A of the Customs Act, has to be considered in context of the legal provisions in which it has been used, further keeping in view the totality of the scheme contained in the Customs Act, pertaining to the valuation of the goods dictionary meanings can be referred for the reason that in the absence of any definition of a word in the statute, the reference to the standard dictionaries can be of assistance in assigning meaning to that word.

On a perusal of the various meanings of the word “find” in the dictionaries and the various aspects and variations thereof, the word ‘Find’ envisages the discovery, determination and ascertainment of a fact and drawing a conclusion after due application of mind. It requires no emphasis that resolving of an issue on scrutiny and ascertainment of facts requires a proper inquiry which should entail a conclusion based upon the reasons for the drawing of a conclusion. Thus, the first condition precedent for invoking the jurisdiction under S. 25-A, is that an appropriate officer, and none else, should arrive at a conclusion based on reasons that the value of the imported goods declared in the bill of entry or goods declaration is understated. Here the question is whether the Legislature has left it at the discretion of the appropriate officer to hold the inquiry in any manner he likes or to adopt any course deemed fit by him or has prescribed manners and methods for giving finding that the value of imported goods declared is understated. A perusal of section 25(10) shows that the methods of valuation given in section 25 are not confined to the purpose of any particular section only. It is specifically stated that subsections (1), (5), (6), (7), (8) and (9) define how the customs value of imported goods is to be determined under this Act (emphasis provided by us). The words ‘under this Act’ are very important and leave no doubt that, whenever, a question for determination of the customs value of the goods for the purpose of Customs Act, arises the methods provided in section 25 are to be employed and in a sequential order. Section 25-A is no exception. Thus, the appropriate officer is required to determine that the value of imported goods declared by the importer is understated, in accordance with the methods specified in section 25 of the Customs Act. In Customs Rules, 2001, detailed procedure and guidelines have been prescribed in Chapter IX. The appropriate officer for the purpose of determination of the value of the imported goods has to undertake the exercise by giving reasonable opportunity to the importer and by maintaining the complete transparency. No such exercise is to be undertaken in the absence and behind the back of an importer and in the first instance an importer should be given an opportunity to furnish the explanation including documents and evidence in support of the declaration and when a final decision is taken by the appropriate officer, the said officer is required to communicate to the importer in writing his decision and the grounds therefor as provided in Rule 109(3). Any exercise done or decision taken in violation of the rules and the provisions contained in section 25 of the Customs Act, shall always be held to be illegal, arbitrary and consequently liable to be struck down. Other rules contained in Chapter IX are also required to be kept in view. The Additional Collector of Customs, is appropriate officer for the purpose of section 25-A. However, he shall be within his right to base his findings on the point that the declared value of the goods is understated on the basis of exercise done by the appropriate officer for the purpose of section 25, subject to the condition that before giving a finding for the purpose of section 25-A, he will first provide an opportunity to the importer and after hearing his point of view, shall give the final decision on the point of understatement of the value of imported goods declared by the importer.

Vide Notification No. S.R.O. 487(I)/2003, dated 7-6-2003, the C.B.R. has framed the rules called as Takeover of Imported Goods Rules, 2003, which shall apply to the goods to be taken over by the Customs in terms of section 25-A of the Customs Act. A perusal of these rules shows that they merely prescribe as to what would be the range of understated value declared by the importer for taking over of the goods under section 25-A and the procedure to be adopted in respect of the taken over imported goods under section 25-A, after a finding is given that the customs value of imported goods declared by the importer are understated and buyer prepared to offer substantially higher value is available. This further confirms that for the purpose of determining the customs value of the imported goods and giving a finding that it is understated, the provisions contained in section 25-A are to be read with the provisions contained in section 25 of the Customs Act. A perusal of the rules contained in Sub-Chapter (ii) of Chapter IX of the Customs Rules, 2001, shows that an importer shall furnish declaration disclosing full and accurate detail relating to the value of imported goods and the appropriate officer, after determination of the value of imported goods, may call further information. In the provisions contained in Rule 112, it is clearly provided that, whenever the appropriate officer is unable to accept the transaction value without further inquiry, he shall give the importer an opportunity to supply such further detailed information as may be necessary to enable him to examine the circumstances surrounding the sale. Without referring to the detailed guidelines available in section 25 as well as in Chapter IX of the Customs Rules, the relevant provisions envisage total transparency. The importer has to be associated with every step of the inquiry/process of valuation and anything done without notice to the importer and without affording reasonable opportunity of being heard, would not be in consonance with the intention of the Legislature and the spirit of the law. All such actions taken or processed without notice to the importer and prejudicial to his interest, shall be held to be unwarranted in law and shall be liable to be struck down as invalid and illegal.

Section 25-A is consequential in nature and falls within the category of various penal actions which can be taken against an importer. Section 25-A can be invoked on valuation of the imported goods in accordance with section 25 and by adhering to the rules contained in Chapter IX of the Customs Rules 2001. The provisions contained in section 25-A are very harsh and are likely to affect the investment environment and the business/trading, therefore, in consonance with the principle that whenever any such harsh provisions are enacted, the Legislature, in order to strike a balance and to minimize the possibility of misuse of such, provisions provides certain safety valves and safeguards to the persons likely to be adversely affected, has provided such safeguards to the importers. View that the provisions in section 25A are consequential and punitive, is based on the provision that the appropriate officer may order for entertaining offer by any other person to buy these goods without prejudice to any other action he may take in respect of importer. So far, as the safeguards to the importers are concerned, they are ingrained in the provisions contained in section 25 and the Rules in Chapter IX of the Customs Rules, 2001. In addition, the Legislature has provided that the consequential/penal action under section 25-A, can be invoked if there is a finding that the value of imported goods declared in the bill of entry or goods declaration, is understated and there is a buyer of imported goods at substantially higher value. The expression “substantially higher value” is of significance. The Legislature has not defined this expression. However, the C.B.R., while framing rules, called as Takeover of Imported Goods Rules, 2003, applicable to the goods to be taken over by the Customs in terms of section 25-A, has specified the range of understated value requiring invocation of section 25-A of the Customs Act. The table in the rules contains 13 descriptions of goods. The list is, on the face of it, not exhaustive but is indicative of the intention as to what would be the range of understated value justifying the invocation of section 25-A of the Customs Act. The range of understated value for 6 items is 50% and for 7 items is 30%. It is indicative of the fact that for invoking the provisions contained in section 25-A, and after resorting to the valuation in accordance with the methods specified in section 25 and by adhering to the procedure provided in the rules, it should be determined that in respect of goods described in the table the range of understated is as specified and in respect of other goods, the range of understated value is at least 30%. If the range of understated value is less than 30% no resort should be made to the take over of goods under section 25-A and the appropriate officer may have resort to any other action provided in the Act.

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

----S. 25-A---Power to take over the imported goods---Expressions: “Appropriate Officer” and “Find”--Connotation.

Chambers 20th Century Dictionary 1983 Edn.; Shorter Oxford English Dictionary 1952 Edn.; Black’s Law Dictionary, 6th Edn. 1991 and legal Thesaurus Second Edn. 1992 by William C. Curtain ref.

(e) Interpretation of statutes---

----Dictionary meanings of a word in a statute, when can be of assistance---In the absence of any definition of a word in the statute, the reference to the standard dictionaries can be of assistance in assigning meaning to that word.

(f) Words & phrases---

----“Find”---Connotation.

Chambers 20th Century Dictionary 1983 Edn.; Shorter Oxford English Dictionary 1952 Edn.; Black’s Law Dictionary, 6th Edn. 1991 and legal Thesaurus Second Edn. 1992 by William C. Curtain ref.

(g) Words and phrases---

----“Appropriate Officer”---Connotation.

Chambers 20th Century Dictionary 1983 Edn.; Shorter Oxford English Dictionary 1952 Edn.; Black’s Law Dictionary, 6th Edn. 1991 and legal Thesaurus Second Edn. 1992 by William C. Curtain ref.

Junaid Ghaffar for Petitioner.

Shakeel Ahmed for Respondents Nos. 1 to 3.

Syed Ziauddin Nasir, Standing Counsel for Respondent No.4.

Date of hearing: 3rd October, 2003.

2005 P T D 1102

[Karachi High Court]

Before Sabihuddin Ahmed and Khilji Arif Hussain, JJ

Messrs BAIG SPINNING MILLS LTD.

versus

FEDERATION OF PAKISTAN and others

Constitutional Petition No.203 of 1999, decided on 19th November, 2004.

Income Tax Ordinance (XXXI of 1979)---

----Ss.80-D, 88, 89, 54 & 62---Assessee had failed to pay minimum tax under S.80-D, Income Tax Ordinance, 1979 along with the return---While passing the assessment order under S.62, Income Tax Ordinance, 1979 the Income Tax Officer ordered to pay minimum tax along with additional tax under S.88 of the Ordinance and called upon the assessee to pay the same on or before a specified date---Income Tax Officer, on failure of assessee to pay the amount, held, had rightly passed the order for the payment of additional tax under S.89 of the Income Tax Ordinance, 1979---Principles.

The assessee was required to pay in terms of section 80D of Income Tax Ordinance, 1979 minimum tax @ 0.5 per cent of the amount representing its turnover from all sources. The assessee did not pay minimum tax as required under section 80-D with its return as per explanation of section 54 of the Income Tax Ordinance. Assessing Officer levied additional tax under section 88 of Income Tax Ordinance, 1979 for the assessment years in question. On failure of the assessee to pay minimum tax and additional tax under section 88 of the Ordinance after demand the Assessing Officer in exercise of his power under section 89 of the Ordinance he levied additional tax at the rate of 15 per cent.

Chapter VI of the Income Tax Ordinance, 1979 deals with the payment of tax before the assessment whereas Chapter VII deals with the matter pertaining to the assessment and Chapter VIII deals with the tax liability in special cases.

Section 89 of the Ordinance stipulates payment of additional tax by an assessee who fails to pay the tax levied under Chapter VII (sections 55 to 67) or the penalty levied under Chapter XI (sections 108 to 116). Chapter VII deals with the assessment and the assessment under section 62 is to be made on the basis of the total income of the assessee. The concept of total income in terms of section 2(44) read with section 11 is altogether different from income as defined in section 2(24). Section 80-D, on the other hand, contemplates a minimum amount of tax payable on income of certain companies or persons who are otherwise not liable to pay any tax on their total income for that year or whose tax liability is less than 0.5% of their turnover from all sources.

A person required to pay tax under section 80-D does not escape process of assessment under Chapter VII and his total income continues to be liable to be assessed. Nevertheless such assessment has to be undertaken initially for the purpose of determining whether total income of assessee exceeds 0.5% of the minimum of amount payable under section 80-D or not. Indeed if it exceeds same would be subjected to the payment of normal tax but if it does not, he could only be required to pay the minimum amount of tax contemplated under section 80-D which falls in Chapter VIII. No doubt such persons were required to pay the amount of tax under section 80-D along with their return through a specific amendment in section 54 but no corresponding amendment was made in section 62 or section 89. Such persons may be liable to penalty for non-payment of tax under section 88 of the Ordinance.

The terms “pay” used in subsection (2) of section 80-D and “charge” used in section 80-C or tax levied under Chapter VIII and Chapter XI of the Income Tax Ordinance, 1979 used in section 89 are interchangeable connotations and have to be given meaning with reference to the context in which they are used. The word “levied” includes the act creating charge, levy tax as well as process of assessment.

The question which required consideration is whether demand for payment of tax in terms of section 80-D under Chapter VIII can be termed as levy of tax under Chapter VII of the Income Tax Ordinance, 1979 or not. Normally tax liability can be created under the Ordinance in pursuance of an assessment order and not otherwise. Therefore, whenever, any tax is levied then such is levied under Chapter VII of the Ordinance and not otherwise. Tax under section 80-D can be levied only after the assessment of income and total turnover under Chapter VII of the Ordinance. When the concerned officer comes to the conclusion that the income of assessee does not exceed 0.5%, he can order for payment of minimum tax equal to half (1/2) of the turn over from all sources.

On comparison of section 80-C with 80-D of the Income Tax Ordinance, 1979 reply to question became easier. Section 80-C does not require filing of return and as such any tax paid under section 80-C does not require any assessment order in terms of section 62 of Chapter VII whereas under section 80-D of the Ordinance the assessee ought to have filed his return and on the basis of the said return concerned officer has to assess under Chapter VII of the Income Tax Ordinance, 1979 and then pass order in case the said party satisfied the requirement of section 80-D. Sections 80-D, 80-C and 80-CC cannot be equated with each other as they are founded on different basis.

A demand of tax under section 80-D can be created under the Ordinance pursuant to an assessment order and the reference to Chapter VII means only that in the matter an assessment order has been passed. The difference between 80-C and 80-D is that in the latter there is no need of filing of return or assessment whereas in former return has to be filed, assessment under Chapter VII has to be undertaken.

In case of default in payment of tax under sections 9 and 10 of Chapter III of the Ordinance section 80-D in Chapter III of the Ordinance the assessee can be asked to pay additional tax on the amount of such tax when assessee failed to pay.

In the present case admittedly assessee had failed to pay minimum tax under section 80-D along with return. Accordingly while passing the assessment order under section 62 of the Income Tax Ordinance, 1979 the concerned Income Tax Officer ordered to pay minimum tax along with additional tax under section 88 and called upon the assessee to pay the same on or before December, 1991. On failure of the assessee to pay the amount the Deputy Commissioner of Income Tax, rightly passed the order for the payment of additional tax under section 89 of the Income Tax Ordinance, 1979.

The payment of tax under section 80-D required assessment of the return submitted by the party under Chapter VII of the Income Tax Ordinance, 1979. In case of default in payment of whole or any part of the tax levied, the assessee can be held liable to pay additional tax under section 89 of the Income Tax Ordinance, 1979.

Elahi Cotton Mills and others v. Federation of Pakistan PLD 1997 SC 582 fol.

Rehan Hassan Naqvi for Petitioner.

Nadeem Azhar Siddiqui, D.A.-G. for Respondents Nos.1 & 2.

Jawaid Farooqui for Respondents Nos. 3 to 6.

Date of hearing: 2nd September, 2004.

2005 P T D 1115

[Karachi High Court]

Before Anwar Zaheer Jamali and Muhammad Mujeebullah Siddiqui, JJ

FATIMA SUGAR MILLS LTD., MULTAN

versus

FEDERATION OF PAKISTAN through Secretary Finance and Economic Affairs, Islamabad and 4 others

Constitutional Petition No.D-373 of 2004, decided on 18th February, 2005.

Customs Act (IV of 1969)---

----Ss. 31-A & 79---S.R.O. 484(I)/92 dated 14-5-1992---Sales Tax Act (VII of 1990), S. 5---Constitution of Pakistan (1973), Art. 199---Constitutional petition---Exemption---Promissory estoppel, doctrine of---Applicability---Where the exemption granted by the Federal Government is not withdrawn but the S.R.O. dies its natural death on expiry of the date specified therein, the doctrine of promissory estoppel will not be applicable to the goods---Rate of Sales Tax is to be changed in case of the goods entered for home consumption on the date on which a bill of entry is presented under S. 79, Customs Act, 1969 as is in force on the date of presentation of the bill of entry---S.R.O. 484(I)/92 dated 14-5-1992 expired on 30-6-1995 and the bill of entry was admittedly filed on 29-7-1995 with the result that the exemption granted vide the S.R.O. was no more applicable and the importer was liable to pay the Sales Tax at the rate, as was in force on 29-7-1995---Tax officials, therefore, had rightly demanded the payment of Sales Tax to which no exception could be taken---Claim of exemption on the part of the importer was not warranted and consequently, he was liable to pay the Sales Tax as well as demurrage claimed by the Port Trust.

Collector of Customs v. Ravi Spinning Mills Ltd. 1999 SCMR 412; Pakistan through Ministry of Finance, Economic Affairs and another v. Fecto Belarus Tractors Limited PLD 2002 SC 208; Al-Samrez’s case 1986 SCMR 1917; Crescent Pak. Industries v. Central Board of Revenue 1990 PTD 29; The Fecto Cement v. Collector of Customs 1994 MLD 1136; Hashwani Hotels Ltd. v. Government of Pakistan (2004) 90 Tax 158 ref.

Malik Muhammad Rafiq Rajwana for Petitioner.

Nasrullah Awan for Respondent No.3.

Ahmed Khan Bugti for Respondents Nos.1 & 2.

Arif Khan for Respondent No.5.

Date of hearing: 18th February, 2005.

2005 P T D 1123

[Karachi High Court]

Before Anwar Zaheer Jamali and Muhammad Mujeebullah Siddiqui, JJ

ASIF ENTERPRISE through Proprietor

versus

PAKISTAN through Secretary, Revenue Division/Chairman, Central Board of Revenue and another

C.P. No. D-1151 of 2004, decided on 8th February, 2005.

Customs Act (IV of 1969)---

----S. 31-A---Letter No. S1/Misc./243/98-Oil dated 24-3-1999---Constitution of Pakistan (1973), Art. 199---Constitutional petition---Consignment of coconut oil, in the present case, was no more fit for human consumption but could now be used for soap manufacturing purpose---High Court, disposed of the Constitutional petition in the terms that the consignment of inedible coconut oil be released to the petitioner on payment of all the leviable duties on the consignment and fulfilment of all such other conditions as contained in letter S1/Misc./243/98-Oil dated 24-3-1999---Petitioner was directed to furnish security equivalent to the value of the consignment as assessed by the department---If any proceedings were to be initiated or were pending against the petitioner on the basis of Contravention Report, same shall follow its own course without being prejudiced by order of the High Court.

Khalid Jawaid Khan for Petitioner.

Sajjad Ali Shah, D.A.-G. for Respondent.

Raja M. Iqbal for Respondent No.2.

Date of hearing: 8th February, 2005.

2005 P T D 1128

[Karachi High Court]

Before Anwar Zaheer Jamali and Muhammad Mujeebullah Siddiqui, JJ

PAKISTAN STATE OIL COMPANY LTD.

versus

COLLECTOR OF CUSTOMS, KARACHI and another

Special Customs Appeal No.100 of 2003, decided on 17th February, 2005.

Customs Act (IV of 1969)---

----Ss. 194-B(2) & 196---Appeal to High Court---Rectification of mistake---Scope---Question referred was “whether the rectification application was in substance a review application or a rectification application seeking rectification of a mistake apparent from the record”---Held, prayer in the said application was to modify the order passed by the Tribunal and there was no prayer that there was some mistake floating on the face of record which may be rectified---Finding given by the Tribunal to the effect that in fact, review of the order of the Tribunal was sought through the application and no such jurisdiction had been conferred on the Tribunal, therefore the application was not maintainable, was not open to any exception---Every question of law was not to be admitted for hearing by High Court---Point in issue as in the present case, having stood settled by various judgments of High Courts as well as Supreme Court, no fresh findings were required on the point as to what was the scope of mistake apparent on record.

CIT v. Qureshi Brothers 1986 PTD 100; CIT v. National Food Industries 1992 PTD 570 = 1992 SCMR 687 and Baqar v. Muhammad Rafique 2003 SCMR 140 ref.

Taha Alizai for Appellant.

Raja Muhammad Iqbal for Respondents.

2005 P T D 1132

[Karachi High Court]

Before Sabihuddin Ahmed and Khilji Arif Hussain, JJ

Messrs CIBA GEIGY (PAK.) LTD.

versus

DEPUTY CONTROLLER OF CUSTOMS VALUATION, KARACHI and 2 others

Constitution Petition No.D-1908 of 1996, heard on 28th January, 2005.

Customs Act (IV of 1969)---

----Ss. 32 & 25---Constitution of Pakistan (1973), Art. 199---Constitutional petition---Petitioner contended that the documents described as evidence forming the basis of the show-cause notice spoke of the value of the goods in Germany and could not be taken into consideration for the purpose of determining transaction value of the goods under S. 25 of the Customs Act, 1969---Department’s contention was that veracity of the evidence could be determined in the course of proceedings before the appropriate authorities and valuation could not be gone into by the High Court exercising Constitutional jurisdiction---Validity---High Court, without going into question of the worth of the evidence held that the “evidence” accompanying the show-cause notice could not form a valid basis for initiating proceedings under S. 32, Customs Act, 1969 and allowed the Constitutional petition accordingly.

Lateef Brothers v. Deputy Collector of Customs 1992 SCMR 1083; Kousar Trading Company v. Government of Pakistan 1986 CLC 612 and New Electronics v. Federation of Pakistan PLD 1994 SC 363 ref.

Sattar Silhat for Petitioner.

Raja Muhammad Iqbal along with Altaf Ahmad, Law Officer/ Principal Appraiser and Ali Nawaz Khan, Appraiser for Respondents.

Date of hearing: 28th January, 2005.

2005 P T D 1164

[KarachiHigh Court]

Before Sabihuddin Ahmed and Khilji Arif Hussain, JJ

Messrs ALI TRADE LINKERS, LAHORE

versus

FEDERATION OF PAKISTAN through Secretary, Ministry of Finance Government of Pakistan, Islamabadand 4 others

Constitutional Petition No.D-1388 of 1995, heard on 27th January, 2005.

Customs Act (IV of 1969)---

----Ss.25, 32 & 179---Constitution of Pakistan (1973), Art.199---Constitutional petition---Determination of Customs value of goods---Untrue statement---Power of adjudication---Scope---Normal price of the goods in terms of S.25, Customs Act, 1969 has to be the value of goods in the country from where the goods originated---Under S.32, Customs Act, 1969, whenever customs duty has been short levied, the person liable to pay any amount is to be served with a show-cause notice under S.32(2) and the appropriate officer is required to determine the amount of duty payable under S.32(4) of the Act---Function of appropriate officer under the said provisions have been assigned to Officers of Customs competent to adjudicate the case under S. 179, Customs Act, 1969, apart from the Assistant Collector, the Deputy Collector and the Controller of Valuation---Goods in the present case, having been released from the Lahore Dry Port, the Deputy Collector Appraisement at Karachi did not have jurisdiction to determine the matter---High Court observed that matter being more than 10 years old, it would be entirely futile to require the petitioner to avail of the remedies that had become open to him after passing of the order in revision---All the orders of the department, passed in the case were declared by the High Court to be without lawful authority but left it open to the authorities to take appropriate action strictly in accordance with law.

Latif Brothers v. Government of Pakistan 1992 SCMR 1083 fol.

Shehzad Ahmad Corporation v. Federation of Pakistan C.P.D. No.817 of 2004 and Arif Javed and another v. Mumtaz Hussain Bhutto and others C.P.D. No.1751 of 1992 ref.

Mansoorul Arfin for Petitioner.

Faisal Arab, Standing Counsel for Respondent No.1.

Messrs Raja Muhammad Iqbal and Ahmed Khan Bugti for Respondent No.4.

Dates of hearing: 25th and 27th January, 2005.

2005 P T D 1172

[Karachi High Court]

Before Sabihuddin Ahmed and Khilji Arif Hussain, JJ

Messrs SHAHNAWAZ ENTERPRISES

versus

COLLECTOR OF CUSTOMS and others

Constitutional Petitions Nos.D-1860 and 1961 of 1994, decided on 10th February, 2005.

Customs Act (IV of 1969)---

----Ss.80 & 32---Constitution of Pakistan (1973), Art.199---Constitutional petition---Assessment of duty---Allegation of untrue statement by importers---Goods had not been finally assessed---Entire consignment had been cleared and even few samples were not left to enable the appropriate officer to finally assess the goods after proper examination and taking into consideration the available evidence---High Court on examination of the record noticed that importers had categorically asserted in the memo. of Constitutional petition that goods imported were teakwood of market quality and were roughly squared and that no customs duty was leviable on roughly squared teakwood which was not controverted by the department which simply asserted that they were liable to customs duty at the rate of 80% ad valorum being classified under Heading 4407 and the only defence set up was that the goods in question consisted of sawn timber and therefore classifiable under Heading 4407---Such a defence was plainly inconsistent with the settled law---Department, however filed another affidavit more than two years after the filing of the comments wherein it was stated that the goods imported were not roughly squared---Such affidavit must be treated as an afterthought and had to be ruled out of consideration inasmuch as the goods had been released more than two years ago and there was nothing to show that the department had any occasion to examine them---Held, Court had no option but to allow the petition and declare that the goods imported by the petitioners were not liable to customs duty under Heading 4407, consequently they were entitled to withdraw the amount deposited in Court---Department, if so advised, was free to take appropriate disciplinary action against officers who failed to protect the interest of Revenue in the proceedings.

Collector of Customs v. S. M. Ahmad 1999 SCMR 138 fol.

Collector of Customs v. New Electronics PLD 1994 SC 363 ref.

Mrs. Navin S. Merchant and Junaid Ghaffar for Petitioner.

Sajjad Ali Shah, D.A.G., Faisal Arab, Ziauddin Nasir, Standing Counsel along with Muhammad Farooq Khan, Law Officer for Respondents.

Dates of hearing: 3rd, 8th and 10th February, 2005.

2005 P T D 1180

[Karachi High Court]

Before Shabbir Ahmed and Azizullah M. Memon, JJ

Messrs HARIS TRADING INTERNATIONAL through Authorized Representatives and another

versus

DIRECTOR INTELLIGENCE AND INVESTIGATION (CUSTOMS AND EXCISE), KARACHI and 4 others

C.Ps. Nos. D-1512 and D-1513 of 2003, decided on 16th March, 2004.

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

----Ss.32(1), 121 & 156---Customs Rules, 2001, Rr.335 & 341---Constitution of Pakistan (1973), Art.199---Constitutional petition---Trans-shipment of goods without payment of duty---Untrue statement by importer---Customs Authorities, under Rr.335(3)(4) & 341, Customs Rules, 2001, have been conferred powers in respect of the suspected consignments to carry out 2% physical examination and hundred per cent weighment at the Port of trans-shipment and in case of contravention, penal action as contemplated under Ss.32(1) & 121 of the Customs Act, 1969 and the carrier shall also be liable to take penal action under the provisions of S.156, Customs Act, 1969 in terms of R.341, Customs Rules, 2001---Customs authorities at the port of entry are competent to take cognizance of any contravention or misdeclaration.

Messrs N.B. Trading Company, Samberial (Sialkot) v. Collector of Customs (Appraisement) and others 2003 PTD 14; Famous Corporation v. Collector of Customs 1989 MLD 2322; M. Hameedullah Khan v. Director of Customs Intelligence and 3 others 1992 CLC 57 and Shafi Shahid and another v. Director, Intelligence and investigation (Customs and Excise), Karachi and others (un-reported judgment) C.P. No.1016 of 1999 ref.

Messrs Baba Khan v. Collector of Customs, Quetta and 2 others 2000 SCMR 678 fol.

(b) Customs Rules, 2001---

----R.330, Appendex I, Columns Nos. 5 to 10 & 14 to 20---Trans-shipment permit---Carrier has to apply for trans-shipment permit through an application Appendex I of R.330 of Customs Rules, 2001 to the Assistant Collector and the Bill of Lading, the port of shipment of goods with country and importer’s name and address, N.T. Number, Import Registration number are to be detailed therein which are to be furnished by the importer/consignee and the bonded carrier cannot give the details and the documents unless provided by the importer---Carrier cannot be the agent of customs.

Mian Abdul Ghaffar and Muhammad Anwar Tariq for Petitioners.

Syed Tariq Ali, Federal Counsel and Ahmed Khan Bugti for Respondents.

Dates of hearing: 12th February and 3rd March, 2004.

2005 P T D 1192

[KarachiHigh Court]

Before Saiyed Saeed Ashhad C.J. and Maqbool Baqar, J

GHULAM HAIDER

versus

FEDERATION OF PAKISTAN through Secretary, Ministry of Finance, Islamabadand 3 others

Constitutional Petition No.D-906 of 2003, decided on 2nd February, 2005.

Chartered Accountants Ordinance (X of 1961)---

----Ss. 20A, 20B, 20C, 9 & Sched. I, Part 4, Cl.(5)---Constitution of Pakistan (1973), Art.199---Constitutional petition---Allegation of professional misconduct against a Chartered Accountant on account of getting an advertisement published in the daily newspaper---Initiation of proceedings by the Institute of Chartered Accountants of Pakistan---Procedure---Institute in initiating the disciplinary proceedings against the petitioner committed a grave and serious illegality in overlooking the provisions of Ss.20A & 20B of the Chartered Accountants Ordinance, 1961 and in violation thereof, issued show-cause notice and the Investigation Committee proceeded to investigate/inquire into the guilt of the petitioner---Such conduct/procedure was not proper irrespective of the fact that the material on record might have made out a prima facie case against the petitioner of being guilty of professional misconduct---Institute, in circumstances, had failed to proceed in accordance with law against the petitioner and the proceedings for professional misconduct initiated against him were defective being in contravention and violation of statutory provisions---Principles---High Court accepted the Constitutional petition and set aside the inquiry proceedings pending against the petitioner being contrary to law and illegal---High Court, however, observed that the Institute would be at liberty to initiate fresh proceedings against the petitioner for professional misconduct in accordance with the relevant provisions of the Ordinance.

In the present case the petitioner, who is a Chartered Accountant, got published an advertisement in the daily newspaper for expressing thanks and gratitude to the Chairman, Securities and Exchange Commission of Pakistan for implementing the decision of introducing the rotation of auditors and putting bar on the award of consultancy assignment to the auditors of listed companies. The advertisement further contained that the above decision provided an even playing field to the smaller firms of Chartered Accountants who will get rid of the so-called big five Accounting Firms from their monopoly/ Clout.

When the above advertisement came to the notice of the Institute of Chartered Accountants of Pakistan by its letter called upon the petitioner to show cause why action under section 20B of the Chartered Accountants Ordinance, 1961 for professional misconduct be not taken against him.

From a bare perusal of section 20A of the Chartered Accountants Ordinance, 1961, it reveals that the requirements spelt out from the language are that the Secretary of the Institute, any member or any aggrieved person is required to lay before the Investigation Committee any fact indicating that any member of the Institute was, prima facie, guilty of any professional misconduct specified in Schedule I or Schedule II. Subsection (2) of section 20A of the Ordinance deals with a situation where a complaint is received by the Institute against any member of the Institute or student of being guilty of professional misconduct then such complaint with the relevant and necessary facts shall be laid before the Investigation Committee. From the provisions of section 20A it is absolutely clear that initially any fact or a complaint relating to professional misconduct against a member of the Institute or student is to be laid before the Investigation Committee as envisaged in section 20A of the Ordinance. By virtue of the provisions of section 20B of the Ordinance the Investigation Committee is required to consider the facts or complaint laid before it and in case it is of the opinion that such facts or complaint required investigation then it shall, after giving a notice to the member of the Institute, hold an inquiry, on conclusion whereof the Investigation Committee is required to submit its report relative to the result of the inquiry to the Council constituted under section 9 of the Ordinance of 1961. Section 20B lays down the procedure to be followed by the Council in cases where the Investigation Committee finds a member or student guilty of professional misconduct.

The proceedings for professional misconduct against the petitioner were not initiated in accordance with the provisions of the Ordinance of 1961. There is nothing on record to indicate that the factum of publication of the advertisement was placed or laid by the Secretary of the Institute before the Investigation Committee or that any member or any aggrieved person had brought to the notice of the Investigation Committee the alleged professional misconduct in getting published the advertisement. From the letter of the Institute it is to be inferred that without resorting to the provisions of section 20A of the Ordinance of 1961, the Manager of the Institute issued the said letter purporting to be a show-cause notice requiring the petitioner to show cause as to why proceedings be not initiated against him by the Investigation Committee under section 20B of the Ordinance of 1961. As a matter of fact, the advertisement in the daily newspaper was required to be placed before the Investigation Committee by the Secretary in accordance with the provisions of section 20A of the Ordinance of 1961 but the said requirement was not complied with. Provisions of section 20B were also violated inasmuch as before placing or laying the advertisement before the Investigation Committee for holding an inquiry and preparing a report of the result of the inquiry, a show-cause notice was issued to the petitioner.

If a Statute requires a thing to be done in a particular manner or lays down the manner in which it is to be done or accomplished then it is obligatory on the part of the person concerned to follow the provisions of the Statute in letter and spirit and that all methods/manners in doing or accomplishing the object are followed. The provisions of the statute are to be adhered to strictly and no provision is to be left as surplus, redundant or naugatory. Institute in initiating the disciplinary proceedings against the petitioner committed a grave and serious illegality in overlooking the provisions of section 20A and 20B of the Ordinance of 1961 and in violation thereof, issued a show-cause notice and the Investigation Committee proceeded to investigate/inquire into the guilt of the petitioner. Such conduct/procedure cannot be held to be legal and proper irrespective of the fact that the material on record might have made out a prima facie case against the petitioner of being guilty of professional misconduct. In the circumstances, the Institute had failed to proceed in accordance with law against the petitioner and the proceedings for professional misconduct initiated against him were defective being in contravention and violation of Statutory provisions.

The inquiry proceedings pending against the petitioner were set aside as being contrary to law and illegal. The Institute, however, will be at liberty to initiate fresh proceedings against the petitioner for professional misconduct in accordance with the relevant provisions of the Ordinance of 1961.

Syed Sami Ahmed and M.A. Baig for Petitioner.

Syed Zaki Muhammad, D.A.-G.

I.H. Zaidi for Respondent No.2.

2005 P T D 1205

[Karachi High Court]

Before Anwar Zaheer Jamali and S. Ali Aslam Jafri, JJ

Messrs SHAHZAD GHEE MILLS LTD. through Chief Executive, Peshawar

versus

FEDERATION OF PAKISTAN through Secretary, Ministry of Finance & Economic Affairs, (Revenue Division), Islamabad and 3 others

C.P. Nos. 585-D and 1295 of 2004, decided on 21st December, 2004.

Customs Act (IV of 1969)---

----Ss. 12 & 13---S.R.O. 822(I)/91 dated 20-8-1991---S.R.O. 1140(I)/97 dated 6-11-1997---S.R.O. 450(I)/2001 dated 18-6-2001---Power to declare or licence public warehouses/private wherehouses---Additional duty will be charged on all transactions/goods into bonded wherehouses appointed under S. 12, Customs Act, 1969 and licensed under S. 13 of the said Act except those mentioned in S.R.O. 822(I)/91 dated 20-8-1991 which also included goods imported as raw materials and stored in manufacturing bonds operating under Notification S.R.O. 1140(I)/97 dated 6-11-1997 superseded by S.R.O. 450(I)/2001 dated 18-6-2001, therefore neither additional customs duty/warehousing surcharge will be payable nor it will be demanded on the goods meant to be legally stored in such manufacturing bonds.

Nisar A. Mujahid for Petitioners.

Raja Muhammad Iqbal for Respondents.

2005 P T D 1299

[Karachi High Court]

Before Sabihuddin Ahmed and Khilji Arif Hussain, JJ

Messrs ENGINEERS & CONTRACTORS (PVT.) LIMITED

versus

PAKISTAN through Secretary, Ministry of Finance and others

C.P. No. D-1519 of 1994, heard on 21st September, 2004.

Customs Act (IV of 1969)---

----Ss. 80, 81 & 223---Constitution of Pakistan (1973), Art.199---Constitutional petition---Levy of customs duty---Provisional assessment of customs duty---Furnishing of Bank guarantees---Claim of petitioners/ importers was that goods imported by them were liable to be classified under P.C.T. heading 84.17 and were liable to customs duty at the rate of 40% ad valorem, whereas the Authorities had claimed that imported goods fell under P.C.T. heading 84.15 attracting customs duty at 120%---Said goods, however were provisionally assessed at the rate of 120%, but petitioners were allowed the facility of releasing them upon payment of 40% and furnishing a Bank guarantees for remaining amount of 80%---Said Bank guarantees were furnished accordingly which were to expire on specified extended dates---Case of petitioners was not finalized by the authorities despite direction of higher authority even after expiry of dates of Bank-guarantees---Said guarantees were initially issued for a period of three months and subsequently were extended for further period of three months upon same terms and conditions---Authorities contended that said guarantees were to remain intact till final assessment was made---Contention was repelled in view of the fact that in case guarantees were to remain alive till authorities chose to make a final assessment, then there could be no possible ground left for seeking extension of guarantees---Authorities could not choose to delay final assessment at their leisure and claim Bank guarantees to remain alive---Section 81(2) of Customs Act, 1969, as it stood at the relevant time, required that when goods were released on basis of provisional assessment, the amount of duty payable was to be "finally assessed as soon as could be" and subsequently a mandatory period of 180 days for doing so was provided---No final assessment having been made within said period of six months, no demand whatsoever could be made by the Authorities---No provisions of law enabled customs officers to provisionally assess duties at a higher value and then release them upon payment of a lesser amount---Amount determined on provisional assessment had to be lower than the one possibly be payable upon final assessment and vice versa---Constitutional petition was allowed to the extent of declaring that Bank guarantees were no more encashable and had to be returned, and authorities were required to undertake final assessment and collect such amount, if any, as could be due from the petitioners.

M.A. Rehman v. Federation of Pakistan 1988 SCMR 691 and Central Insurance Company v. Central Board of Revenue 1993 PTD 766 ref.

Ms. Sana Minhas for Petitioner.

Sajjad Ali Shah standing counsel for Respondents.

Ahmed Khan Bugti for Respondent No.3.

Date of hearing: 21st September, 2004.

2005 P T D 1316

[Karachi High Court]

Before Anwar Zaheer Jamali and Muhammad Mujeebullah Siddiqui, JJ

HONDA SHAHRAH-E-FAISAL ASSOCIATION OF PERSONS, KARACHI and others

versus

REGIONAL COMMISSIONER OF INCOME TAX, KARACHI and 2 others

Constitutional Petitions Nos.D-643 to D-646 of 2004, decided on 2nd March, 2005.

Income Tax Ordinance (XLIX of 2001)---

----S. 122(5-A) [as inserted by Finance Act (I of 2003) with effect from 1-7-2003]---C.B.R. Circular No.1(48)IT-1/79 dated 17-2-1981---Constitution of Pakistan (1973), Art.199---Constitutional petition---Provision contained in S.122(5-A), Income Tax Ordinance, 1922 was not retrospective in operation---Assessments finalized before 1-7-2003 (date of enforcement of S.122(5-A) could not be reopened/revised/amended in exercise of jurisdiction under the said provision---Notices issued in respect of assessments finalized before 1-7-2003 were without jurisdiction, illegal and void ab initio which were ordered to be quashed by the High Court---C.B.R. Circular No.1(48) IT-1/79 dated 17-2-1981 had clinched the issue of retrospectivity and was still binding on the department---Principles.

Messrs Mannoo Industries Ltd. v. CIT 2001 PTD 1525 fol.

Mansoorul Arfin for Petitioners.

Aqeel Ahmed Abbasi for Respondents.

Date of hearing: 2nd March, 2005.

2005 P T D 1328

[Karachi High Court]

Before Sabihuddin Ahmed and Khilji Arif Hussain, JJ

Messrs MADINA ENTERPRISES LTD., JHANG ROAD, FAISALABAD through Legal Manager

versus

FEDERATION OF PAKISTAN through Secretary, Ministry of Law and Parliamentary Affairs, Islamabad and 2 others

Constitutional Petition No.D-598 of 2001, heard on 14th September, 2004.

Income Tax Ordinance (XXXI of 1979)---

----Ss. 50(5), 80-DD & Second Sched., Cl. (118-D)---Constitution of Pakistan (1973), Art.199---Customs Act (IV of 1969), S.25---Constitutional petition---Charge of income tax---Tax on edible oil imported by petitioner was charged by Authority under sub-clause (5) of S.50 of Income Tax Ordinance, 1979---Petitioner objected to such charge of Income Tax contending that amount paid as Sales Tax could not be deemed to be the income of assessee and could not be subjected to payment of Income tax---Petitioner had enjoyed exemption under clause (118-D) of Second Sched. of Income Tax Ordinance, 1979---Under Sub-clause (5) of S.50 of Income Tax Ordinance, 1979, tax collected on import of edible oil as raw material by an industrial undertaking, was minimum amount of tax payable under S.80-DD of Income Tax Ordinance, 1979 and was not a full and final discharge of the tax liability of assessee under the Income Tax Ordinance, 1979---Tax under Sub-clause (5) of S.50 of Income Tax Ordinance, 1979 was collected on value determined under S.25 Customs Act, 1969 which provided that for purpose of determining the value, normal price of imported goods would be determined by including in the price, duties and taxes applicable in Pakistan---At the time of collecting income tax on import of goods, value of goods was to be taken as value of the goods determined under S.25 of Customs Act, 1969 along with Customs duties and sales tax, if any, to be paid on it.

Ramma Pipe and General Mills Ltd. v. Federation of Pakistan 1994 PTD 848 ref.

Dr. M.R. Zia Rana for Petitioner.

Raja M. Iqbal for Respondents Nos.2 and 3.

Aqueel Ahmed Abbasi for Respondent No.4.

Syed Ziauddin Nasir, Standing Counsel for Respondent.

Date of hearing: 14th September, 2004.

2005 P T D 1348

[Karachi High Court]

Before Anwar Zaheer Jamali and Muhammad Mujeebullah Siddiqui, JJ

PROCTER & GAMBLE PAKISTAN (PVT.) LTD., KARACHI

versus

FEDERATION OF PAKISTAN through Secretary, Ministry of Finance and 4 others

Constitution Petition No.D-1353 of 2004, decided on 17th March, 2005.

Customs Act (IV of 1969)---

----Ss. 18, 18-A & 25---Constitution of Pakistan (1973), Art. 199---Constitutional petition---Charging extra customs duties---Extra customs duties on the basis of 10% increased value of goods were being charged by Authorities on goods imported by petitioner---Such charge of duties had been challenged by petitioner in its Constitutional petition---Authorities submitted the comments and no reference was made to any specific order passed by the Authorities for making 10% increase in the value of goods imported by petitioner for the purpose of customs duties--Authorities were also not able to make definite statement to confirm or dispute that position---Constitutional petition was disposed of in the terms that concerned Authority, if had not yet passed such order, would pass an appropriate order for any increase in the value of imported goods of petitioner for the purpose of customs duties within specified period after providing proper opportunity of hearing to the petitioner.

Aijaz Ahmed for Petitioner.

Raja M. Iqbal for Respondents Nos.3 and 5.

Jawed Farooqui for Respondent No.4.

2005 P T D 1362

[Karachi High Court]

Before Anwar Zaheer Jamali and Muhammad Mujeebullah Siddiqui, JJ

PAKISTAN INTERNATIONAL AIRLINES CORPORATION through Attorney, Karachi

versus

COLLECTOR OF SALES TAX AND CENTRAL EXCISE, KARACHI

Central Excise Appeal No. 14 of 2005, decided on 9th March, 2005.

Central Excises Act (I of 1944)---

----Ss. 3-B & 36--Central Excise Rules, 1944, R. 96ZZA---Levy of additional duty and penalty---Collector (Adjudication) and Appellate Tribunal had failed to consider the proper applicability of S.3-B, Central Excises Act, 1944 read with Central Excise Rules, 1944, R.96ZZA and distinction between the import of phrase "shall pay" and "shall be liable to pay" before levying additional duty and penalty upon the assessee---High Court, in appeal, set aside the order of the Tribunal as well as order of the Collector (Adjudication) and remanded the case to the Collector (Adjudication) for its fresh disposal in accordance with law, after taking into consideration the said aspects---Collector was directed to allow two weeks time to the appellant to submit its reply.

Ideal Glass (Pvt.) Ltd. v. Federation of Pakistan 1999 PTD 1308 and Assistant Collector of Customs, Central Excise Division-III, Sukkur v. Messrs Mari Gas Company Limited 2003 PTD 818 fol.

Khalid Jawaid Khan for Appellant.

Raja M. Iqbal for Respondent No.1.

2005 P T D 1413

[Karachi High Court]

Before Sabihuddin Ahmed and Khilji Arif Hussain, JJ

PAKISTAN INDUSTRIES CORPORATION through Proprietor

versus

CENTRAL BOARD OF REVENUE (JUDICIAL), KARACHI and 2 others

Constitution Petition No. D-1230 of 1991, decided on 27th January, 2005.

Central Excises Act (I of 1944)---

----S. 3 & First Sched., Item No.04.05---Constitution of Pakistan (1973), Art.199---Civil Procedure Code (V of 1908), S.11---Constitutional petition---Res judicata, principle of---Applicability---Levy of duty---Petitioner had challenged the levy of duty on the same items which were subject to duty in another Constitutional petition and it was not the petitioner's case that the said products were not covered by item No.04.05 of the Schedule to the Central Excises Act, 1944---Constitutional petition, being barred by res judicata, was dismissed by the High Court.

Zamiruddin Ahmed for Petitioner.

Faisal Arab, Standing Counsel and Raja M. Iqbal for Respondents.

2005 P T D 1469

[Karachi High Court]

Before Anwar Zaheer Jamali and S. Ali Aslam Jafri, JJ

ALTAF HUSSAIN through Lawful Attorney

versus

MUHAMMAD ASLAM and 5 others

C.P. No. D-907 of 2004, decided on 4th November, 2004.

Customs Act (IV of 1969)---

----Ss. 168 & 194-A---Constitution of Pakistan (1973), Art.199---Constitutional petition---Confiscation of vehicle and imposition of penalty---Petitioner had conceded in his Constitutional petition that all grounds urged in the Constitutional petition had been taken by the petitioner in his appeal which was pending before the Appellate Tribunal---Effect---Such being the position it was evident that not only adequate alternate remedy was available to the petitioner against the orders impugned in the Constitutional petition but such remedy had already been availed by him---No valid justification, in circumstances, was available for the High Court to entertain the Constitutional petition at such a stage---Petition was dismissed in limine with the observation that Appellate Tribunal shall hear and dispose of the pending appeal of the petitioner within two months from the date of communication of order of the High Court.

Sami Ahsan for Petitioner.

Raja Muhammad Iqbal for Respondents.

Date hearing: 4th November, 2004.

2005 P T D 1575

[Karachi High Court]

Before Sabihuddin Ahmed and Khilji Arif Hussain, JJ

Messrs MADINA ENTERPRISES (PVT.) LTD. through Director

Versus

COLLECTOR OF CUSTOMS and another

Constitution Petition No. 1024 of 2001, heard on 2nd February, 2005.

Sales Tax Act (VII of 1990)---

----Ss. 13(1) & Sixth Sched., Item. No. 6---Imported edible oil found in laboratory report to be unfit for human consumption and inedible without further process of refining---Held: Such consignment on its import was not edible oil, thus, not exempt from levy of sales tax.

Batala Ghee Mills (Pvt.) Ltd. v. Collector of Customs and 2 others 2003 SCMR 1040 fol.

Mazhar Lari for Petitioner.

Raja M. Iqbal for Respondent No. 1.

S. Ziauddin Nasir, Standing Counsel.

Date of hearing: 2nd February, 2005.

2005 P T D 1590

[Karachi High Court]

Before Anwar Zaheer Jamali and Syed Zawwar Hussain Jaffery, JJ

COLLECTOR OF SALES TAX AND CENTRAL EXCISE, KARACHI

Versus

Messrs CALTEX OIL (PAKISTAN) LTD., KARACHI

Spl. Sales Tax Appeals Nos. 210 and 173 of 2003, decided on 6th April, 2005.

Sales Tax Act (VII of 1990)---

----S. 47---Appeal to High Court---Earlier case relating to other period remanded by Supreme Court to Tribunal for its fresh decision--­Controversy involved in appeal before High Court was identical, which had been decided by Supreme Court---High Court with consent of parties set aside impugned order and remanded case to Tribunal for its decision afresh after providing due opportunity of hearing to both parties and allowing them to raise any fresh question of fact or law.

Caltex Oil (Pakistan) Limited v. Collector, Central Excise and Sales Tax and others (PTCL 2004 CL 494) rel.

Muhammad Farogh Nasim for Petitioner.

Raja Muhammad Iqbal for Respondent.

2005 P T D 1600

[Karachi High Court]

Before Anwar Zaheer Jamali and S. Ali Aslam Jafri, JJ

Messrs STEEL SYNDICATE through Proprietor Shaukat Afzaal

Versus

DEPUTY COLLECTOR CUSTOMS (GROUP-V), KARACHI and others

C.P. No. 1071/D/2004, decided on 10th November, 2004.

Customs Act (IV of 1969)---

----Ss.25 & 81(2)---Constitution of Pakistan (1973), Art. 199--­Constitutional petition---Determination of customs value of goods--­Authority alleging that petitioners had made misdeclaration, intended to take further action against them in that regard---Copy of order earlier passed in Constitutional petition had been produced on record wherein High Court had observed that final. assessment would be undertaken under S.81(2) of Customs Act, 1969 by the Authority and while making such assessment Collector of Customs (Appraisement) Department would consider all evidence available and letter dated 23-2-2004 would not be taken as conclusive evidence of valuation---Further final assessment in terms of S.25 of Customs Act, 1969 would be made after giving proper opportunity to the petitioner to place the material to that effect on record---Instant Constitutional petitions by consent of parties were disposed of in the light of terms in earlier judgment of the High Court--­Authorities would be at liberty to take any further action against petitioners for alleged misdeclaration or any other illegality committed by them.

Mian Abdul Ghaffar for Petitioner.

Raja Muhammad Iqbal for Respondents.

2005 P T D 1607

[Karachi High Court]

Before Sarmad Jalal Osmany and Amir Hani Muslim, JJ

Messrs PAKSAUDI FERTILIZERS LIMITED

Versus

COMMISSIONER OF INCOME-TAX and others

I.T.A. No. 915 of 1999, decided on 9th February, 2005.

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

----S. 136---Appeal to Nigh Court---Interpretation of agreement is a question of law.

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

----Ss. 50(4), 80-C, 136, 143-B & Second Sched., Part IV, Cl. (9)--­Sales of Goods Act (III of 1930), Ss. 4(1) & 5(1)---Contract Act (IX of 1872), Ss. 182, 211, 222 & 223---Agreement for distributing and marketing products of Manufacturing Company after its purchase by Marketing Company---Deduction of advance Income Tax by Marketing Company on payments made to Manufacturing Company for such purchase---Claim of Manufacturing Company to be assessed under S.80-C of Income Talc Ordinance, 1979---Appellate Tribunal rejected such claim as no supplies as envisaged by S.50(4) of Income Tax Ordinance, 1979 were involved---Validity---Question decided by Tribunal was, whether. Manufacturing Company was not entitled to benefits of S.80-C of Ordinance upon such deductions made from its payments by Marketing Company---Such exercise would involve interpretation of agreement between the parties, which was a question of law---Only question of law decided by Tribunal would be appealable before High Court---Present appeal did raise questions of law decided by Tribunal---Agreement in question involved an outright purchase of products of Manufacturing Company by Marketing Company to distribute and market same---All essential elements of a contract of agency were missing in such agreement between parties---Such agreement envisaged outright sale of products of Manufacturing Company to Marketing Company---Advance tax deducted under S.50(4) of the Ordinance upon payment made by Marketing Company would qualify Manufacturing Company to claim benefits of S.80-C thereof for disputed year---High Court accepted appeal and, set aside the impugned order.

Rehmatuallh Khan v. Government of Pakistan 2003 SCMR 50; Concentrate Manufacturing Company of Ireland v. Seven-Up Bottling Company Pvt. Ltd. 2002 CLD 77; Coca Cola Beverages Pakistan v. Abdul Hameed Chaudhry 2001 YLR 568; Pakistan Paper Corporation v. National Trading Company Ltd. 1983 CLC 1695; Caltex Oil (Pakistan) Ltd., Karachi v. Rehanuddin PLD 1958 (W.P.) Lah. 63; World Wide Trading v. Sanyo Electric Trading Co. Ltd. PLD 1986 Kar. 234; Vijay Tranders v. Bajaj Auto Ltd. 1995 SCC 566; Sri Tirumala Venkateswara v. Commercial Tax Officer AIR 1968 SC 784; State of Mysore v. Mysore Spinning AIR 1958 SC 1002; Hope P & Co. v. Hamel and Horley Ltd. AIR 1925 PC 161; Gordon Woodroffe and Co. v. Shaikh M.A. Majid and Co. AIR 1967 SC 181; CIT/WT v. Prime Dairies Ice Cream Ltd. 1999 PTD 4147; Messrs Nafees Cotton Mills Lid. v. Income Tax Appellate Tribunal, Lahore 2001 PLD 1380; CIT v. Shaikh Muhammad Ismail and Co. 1986 SCMR 968; Irum Ghee Mills Ltd. v. ITAT 1998 PTD 3835; Inland Revenue Commissioner v. Wesleyen General Assurance Society 1948 ITR 101; Lachminarayan Madan Lal v. CIT West Bengal AIR 1972 SC 439; GEC Avery (Pvt.) v. Government of Pakistan and others 1995 PTD 856; Asian Food Industries v. Pakistan and others 1985 SCMR 175; Nazeer Ahmed v. Pakistan and 11 others PLD 1970 SC 453 and Mehran Associates v. CIT Karachi 1993 SCMR 274 ref.

Mrs. Yasmeen Lari v. Registrar ITAT 1990 PTD 967 rel

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

----S. 136---Appeal to High Court---Only a question of law decided by Appellate Tribunal would be appealable before High Court.

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

---Ss. 50(4) & 80-C---Deduction of advance income tax from payments made by the payer to payee/assessee---Claim for benefits of S.80-C of Income Tax Ordinance, 1979 by assessee---Validity---Assessee merely on basis of such deduction would not automatically qualify to claim such benefits---Upon filing of return by assessee claiming such benefits, Income Tax Officer would allow or refuse such benefits depending upon his opinion as to whether or not a supply or service had been made/ rendered by assessee to payer---Principles.

C.I.T. v. Prime Dairies Ice Cream Ltd. 1999 PTD 4147 rel.

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

----Ss.80-C & Second Sched., Part IV, Cls. (9)---Presumptive tax regime, option to avail---Scope---Unless such option was exercised, assessee would continue to be taxied under normal law---Law gave an unfettered right to assessee to opt in or out of presumptive tax regime under S.80-C of Income Tax Ordinance, 1979---Past history of assessee (i.e. of opting in or out of such regime), thus, would be of no consequence.

Khalid Anwar for Appellant.

Muhammad Farid for Respondents.

Dates of hearing: 14th, 15th April, 5th 6th, 12th May, 2004 and 7th February, 2005.

2005 P T D 1646

[Karachi High Court]

Before Anwar Zaheer Jamali and Syed Zawwar Hussain Jaffery, JJ

SHER FARAZ KHAN through Attorney

Versus

ADDITIONAL COLLECTOR OF CUSTOMS, KARACHI and another

Constitutional Petition No. D-148 of 2005, decided on 6th April, 2005.

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

----Ss. 32, 168 & 171---Constitution of Pakistan (1973), Art. 199--­Constitutional petition---Import of merchandise goods under garb of unaccompanied baggage---Notice to passenger after seizure of goods liable to confiscation---Appointment of attorney by, passenger to get such goods cleared---Refusal of Customs Authorities to accept status of attorney or, the ground that his power of attorney seemed to be fabricated---Validity---Mere such assertion that power of attorney was fabricated would not be enough---Such issue, if necessary, could be considered in pending proceedings before Customs Authorities by calling upon original documents of consignment, passport and power of attorney of passenger or any other relevant record---High Court accepted Constitutional petition while allowing attorney to pursue the case of passenger for clearance of his consignment.

Sohail Muzaffar for Petitioner.

Raja Muhammad Iqbal for Respondents.

2005 P T D 1663

[Karachi High Court]

Before Anwar Zaheer Jamali and Syed Zawwar Hussain Jaffery, JJ

COMMISSIONER OF INCOME-TAX

Versus

Mst. SHAKILA KHATOON

I.T.R. No. 217 of 1991, decided on 6th April, 2005.

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

----S.111---Penalty for concealment of income---Limits---Assessing Officer,. while imposing penalty, could not transgress any of the two limits i.e. maximum limit not exceeding 2-1/2 times and minimum limit not less than amount of tax avoided, if income as returned by assessee was accepted as correct income.

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

----Ss. 111, 132(1)(b) & 135(5)---Concealment of income by assessee--­Imposition of penalty by Assessing Officer less than minimum limit prescribed by S.111 of Income Tax Ordinance, 1979---Enhancement of such penalty--Appellate Authority in exercise of power under S.132(1)(b) of the Income Tax Ordinance, 1979 could examine and correct such mistake, error or illegality---Appellate Authority, if wanted to enhance penalty, was bound to issue notice to assessee---Appellate Tribunal was competent to cure such illegality, mistake or error and enhance penalty within limits prescribed by S. 111 of the Ordinance either itself or remand case to Assessing Officer for fresh determination of quantum of penalty to be imposed upon assessee.

Nasrullah Awan for Applicant.

Rehan Hasan Naqvi for Respondent.

Date of hearing: 6th April, 2005.

2005 P T D 1687

[Karachi High Court]

Before Sabihuddin Ahmed and Khilji Arif Hussain, JJ

Messrs GENERAL TYRE AND RUBBER CO. OF PAKISTAN LIMITED, KARACHI

Versus

DEPUTY COLLECTOR OF CUSTOMS APPRAISEMENT COLLECTORATE, KARACHI and 2 others

Constitution Petition No.726 of 2001, heard on 2nd March, 2005.

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

----S. 18---Islamic Development Bank Ordinance (VI of 1978), S.5(1) & Sched. Art.. 59---Import of goods by Islamic Development Bank 'for subsequent sale---Scope---Islamic Development Bank Ordinance, 1978 had no overriding effect over the Customs Act, 1969---Such import would not be exempt from payment of duty under Ordinance, 1978--­Principle illustrated.

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

---S. 18---Islamic Development Bank Ordinance (VI of 1978), S.5(1)---Qanun-e-Shahadat (10 of 1984), Art. 114---Import of goods by Islamic Development Bank under lease-purchase agreement with petitioner---Furnishing of indemnity bond by petitioner undertaking to pay customs duty and other charges with interest after transfer of goods in his favour by Islamic Development Bank---Payment of customs duty and other charges by petitioner, but his refusal to pay interest on deferred payment of duty for period for which goods remained with him as property of Islamic Development Bank on the ground that such indemnity bond was executed under coercion---Validity---Such claim for interest, on basis of a valid agreement, would not be inconsistent with any law in force---Customs authorities had power to collect customs duty at the time of import of goods; but they had agreed to delay payment till transfer of goods in favour of petitioner---Petitioner through such undertaking had persuaded customs authorities to act to their detriment, thus, rule of estoppel would apply---Petitioner had not questioned such indemnity bond for more than 16 years till he was required to pay customs duty---High Court dismissed Constitutional petition.

Treasurer of Charitable Endowments v. Central Board of Revenue PLD 1981 Kar. 357 rel.

Iqbal Salman Pasha for Petitioner.

Faisal Arab, Standing Counsel and Raja Muhammad Iqbal for Respondents.

Date of hearing: 2nd March, 2005.

2005 P T D 1726

[Karachi High Court]

Before Sabihuddin Ahmed and Khilji Arif Hussain, JJ

HUBCO POWER COMPANY LTD.

Versus

COLLECTOR OF CUSTOMS, (EXPORT) and another

Constitution petition No.D-141 of 1996, heard on 26th January, 2005.

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

----Ss. 35 & 36---Duty drawback on re-export of goods---Admissibility---Identification of goods---Necessity---Duty drawback could be claimed on goods other than those, which had been imported---Under S.35 Customs Act, 1969, goods capable of being identified, when imported upon payment of customs duties, then 7/8 of duties would be repaid as drawback, if exported within two years of their import and identified to be the same goods as had been imported---Under S.36 of Customs Act, 1969, repayment of duty as drawback in respect of goods put into use between-their import and export would be made in accordance with rules---Section 36 of Customs Act, 1969 would be applicable to goods used in Pakistan before its re-export, and duty drawback in such case would not be 7th/8th of import duty, but would depend upon statutory rules---Principles.

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

----Ss. 35 & 36---Duty drawback on re-export of goods---Inability to identify goods due to non-signing of packing list by Master Shed Appraiser at the time of export---Validity---In absence of any specified rule, no weight could be attached to factum of non-signing of packing list.

Anjum Ghani for Petitioner.

Faisal Arab, Standing Counsel, Jawed Farooqui and Raja Muhammad Iqbal for Respondents.

Date of hearing: 26th January, 2005.

2005 P T D 1768

[Karachi High Court]

Before Sabihuddin Ahmed and Khilji Arif Hussain, JJ

GHANDHARA NISSAN (PVT.) LTD.

Versus

FEDERATION OF PAKISTAN through Member Judicial, Central Board of Revenue, Karachi and another

Constitutional Petition No. 1451 of 1993, heard on 10th September, 2004.

Customs Act (IV of 1969)--

----Ss. 25 & 30---Customs General Order No.23 of 1986---Constitution of Pakistan (1973), Art. 199---Constitutional petition---Arrival of imported vehicles without getting prior approval of its Import Trade Price front Collector of Customs---Determination of value of vehicles at price prevailing on date of import---Validity---Value of consignment declared by importer, if not accepted as true, then value of identical or similar consignment from port of origin at same time, for same quantity and on same commercial level could be made basis for assessment of duty---Such prior approval of Import Trade Price would not be a valid basis for assessment---High Court accepted Constitutional petition, set aside impugned order and remanded case to Adjudicating Officer to assess consignment strictly in accordance with requirements of Ss. 25 & 30 of Customs Act, 1969.

Aziz A. Shaikh for Petitioner.

Nadeem Azhar Dy A.-G. and Raja Muhammad Iqbal for Respondents.

2005 P T D 1793

[Karachi High Court]

Before Anwar Zaheer Jamali and Syed Zawwar Hussain Jaffery, JJ

PAKISTAN STATE OIL COMPANY LIMITED, KARACHI

Versus

COLLECTOR, COLLECTORATE OF CUSTOMS, SALES TAX AND CENTRAL EXCISE (ADJUDICATION-III), KARACHI and 2 others

Special Central Excise Appeal No.39 of 2004, decided on 20th April, 2005.

Central Excises Act (I of 1944)--

----S. 35-C---Disposal of appeal by Tribunal without touching questions of law including question of limitation raised therein regarding impugned show-cause notice issued by authority---Validity--High Court in appeal, set aside impugned order and remanded case to Tribunal for its fresh decision after taking into all legal and factual pleas raised in memorandum of appeal.

Muhammad Murtaza Chunai for Appellants.

Raja Muhammad Iqbal for Respondents.

2005 P T D 1799

[Karachi High Court]

Before Sabihuddin Ahmed and Khilji Arif Hussain, JJ

Messrs ASSOCIATED INDUSTRIES (GARMENTS) PAKISTAN (PVT.) LTD., Versus

ISLAMIC REPUBLIC OF PAKISTAN Represented by the Secretary to the Government of Pakistan, Ministry of Finance, Islamabad and 2 others

Constitution Petition No.288 of 1994, heard on 25th January, 2005.

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

----S. 37---Drawback of customs duty on imported goods used in manufacture of exported goods---Scope---Such drawback could be allowed only in respect of goods of any class or description as notified by Central Board of Revenue in official Gazette.

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

----S. 21 (c)---S.R.O. No.187(I)/91, dated 10-3-1991---Customs Standing Order No.5/92, dated 19-3-1992---Re-payment of customs duty on imported goods used in manufacture of exported goods to the extent of specified ratio of FOB value of exported goods---Validity---C&F value of imported goods used in manufacture of exported goods would have no nexus with provisions regarding re-payment---Repayment by its very nature indicated that only a certain payment of customs duty paid by importer would be refunded, which could not be claimed more than what had been paid.

Sohail Muzaffar for Petitioner.

Messrs Faisal Arab, Standing Counsel and Raja Muhammad Iqbal for Respondents.

Date of hearing: 25th January, 2005.

2005 P T D 1810

[Karachi High Court]

Before Sarmad Jalal Osmany and Ameer Hani Muslim, JJ

WIN PIPE INDUSTRIES (PVT.) LTD.

Versus

ISLAMIC REPUBLIC OF PAKISTAN through Secretary Ministry of Finance, Islamabad and 5 others

Constitution Petition No.D-485 of 2004, decided on 30th April, 2004.

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

----S.20---Certificate for duty free import granted to importer by concerned authorities-Validity--Such certificate could not be cancelled or suspended without hearing the importer---Principles illustrated.

(b) Natural Justice, principles of---

----Right of hearing is one, which has to be read into every statute and rules.

Muhammad Saleem Mangrio for Petitioner.

Ziauddin Nasir, Standing Counsel for the State.

Raja Muhammad Iqbal for Respondent No.4 along with Deputy Collector and Junaid Memon, Asstt. Collector Export.

2005 P T D 1823

[Karachi High Court]

Before Anwar Zaheer Jamali and Syed Zawwar Hussain Jaffery, JJ

MUHAMMAD IQBAL

Versus

MEMBER (CUSTOMS) CENTRAL BOARD OF REVENUE, ISLAMABAD and 3 others

Constitutional Petition No. D-22 of 2005, decided on 21st April, 2005.

Customs Act (IV of 1969)---

----Ss. 4 & 5---Guiding instructions issued through a letter by Central Board of Revenue---Binding force---Internal correspondence of department in terms of such letter would not be binding upon its subordinates, who would be at liberty to follow or not to follow such instructions while dealing with assessment.

Sohail Muzaffar for Petitioner.

Raja Muhammad Iqbal for Respondents Nos. 1 to 3.

Faisal Arab for Respondent No.4.

2005 P T D 1928

[Karachi High Court]

Before Sarmad Jalal Osmany and Amir Hani Muslim, JJ

PAKISTAN BEVERAGES LTD.

Versus

FEDERATION OF PAKISTAN through Ministry of Finance, Islamabad and 3 others

Constitutional Petition No.D-1926 of 2002, decided on 14th January, 2005.

Central Excise Act (I of 1944)---

----S. 4(2)---Central Excise General Order (14 of 1969)---Constitution of Pakistan (1973), Art.199---Constitutional petition---Retail price determined under S.4(2) of the Central Excise Act, 1944 would be as fixed by the assessee which would include all charges/taxes (less sales tax) and upon such retail price the central excise duty would be determined---Principles.

Section 4 of the Central Excise Act, provides the mechanism for determining the value of any product upon which Central Excise Duty is levied. Per section 4(1) such value shall be deemed to be the wholesale cash price for which an article of the like kind and quality is sold or is capable of being sold to the general body of retail traders [or, if there is no general body of retail traders, the general body of consumers] on the day on which the article which is being assessed to duty is removed from the factory or the warehouse, as the case may be, without any abatement or deduction whatever except the amounts of duty and sales tax then payable. Per section 4(2) notwithstanding the provisions of subsection (1) the Federal Government may, by Notification in the official Gazette, declare that in respect of any goods or class of goods, the duty shall be charged on the retail price fixed by the manufacturer inclusive of all charges and taxes, other than sales tax levied and collected under section 3 of the Sales Tax Act, 1990, at which any particular brand or variety of such article should be sold to the general body of consumers or, if more than one such price is so fixed for the same brand or variety, the highest of such prices.

Under section 4(2) of the Act excise duty is to be levied on the price fixed by the Manufacturer and such price should include all charges and taxes (excluding sales tax). Any other interpretation would amount to double taxation as the object of the Act is only to recover excise duty once on the value of the goods/services concerned. This conclusion is further fortified by the fact that nowhere in section 4(2) the word "duty" has been used to include an ingredient of retail price, whereas the word "duty" has been defined under section 2(17) of the Act to include additional duty, regulatory duty and any other sum payable under any of the provisions of this Act or the rules made thereunder.

The retail price to be determined under section 4(2) of the Central Excise Act, 1944 would be as fixed by the Assessee which would include all charges/taxes (less sales tax) and upon such retail price the central excise duty is to be determined.

Atlas Battery Ltd. v. Superintendent, Central Excise and Land Customs PLD 1984 SC 86 and Messrs Lucky Cement v. C.B.R. 2003 PTD 1002 quoted.

Hirjina and Co. v. Islamic Republic of Pakistan 1993 SCMR 1342 distinguished.

C.Ps. Nos.1527-L to 1530-L and 1576-L to 1579-L of 2000 and Atlas Battery Ltd. v. Superintendent, Central Excise and Land Customs PLD 1979 Kar. 545 ref.

Ali Sibtain Fazli for Petitioner.

Javed Ahmed Farooqui for Respondents Nos.3 and 4.

Dates of hearing: 7th and 18th May, 2004.

2005 P T D 1962

[Karachi High Court]

Before Anwar Zaheer Jamali and Syed Zawwar Hussain Jaffery, JJ

COLLECTOR, SALES TAX AND CENTRAL EXCISE (ENFORCEMENT), KARACHI

Versus

Messrs SHAIKH MOHAMMAD FAREED

Special Sales Tax Appeal No.570 of 2004, decided on 11th May, 2005.

Sales Tax Act (VII of 1990)---

----Ss. 2(46)(e), 33(2)(cc) & 47---Appeal to High Court---Order of the Appellate Tribunal revealed that by the impugned order, order-in­ original had been set aside, whereby the Deputy Collector had ordered that in the first instance the course provided under S.2(46)(e), Sales Tax Act, 1990 would be followed, whereby the Valuation Committee in terms thereof would determine the value of the goods within six weeks from the date of the order and in case the issue was not resolved in the said terms, then value of the supply shall be deemed to be value in open market as provided under S.2(46) of the Act and accordingly Sales Tax would be recoverable from the assessee along with additional tax due plus penalty equal to 3% of the amount in terms of S.33(2)(cc) of the Sales Tax Act, 1990---Validity---Held, first course adopted by the Deputy Collector in referring the matter for determination of value of supply by the Valuation Committee was appropriate and such course should have been followed by the Department, instead of enforcing the recovery of sales tax as contemplated in the other part of the order-in­ original---High Court, to meet the ends of justice partly set aside the order of the Tribunal and directed that the Valuation Committee be constituted in terms of S.2(46)(e) of the Act and question of levy of Sales Tax and penalty, if any, or otherwise shall follow such report of the Committee.

Raja Muhammad Iqbal for Appellant.

None for Respondent.

2005 P T D 1966

[Karachi High Court]

Before Anwar Zaheer Jamali and Syed Zawwar Hussain Jaffery, JJ

Messrs APPOLLO TEXTILE MILLS LTD. through Authorised Person

Versus

COLLECTOR OF CUSTOMS, APPRAISEMENT, CUSTOMS HOUSE, KARACHI and another

Constitution Petition No. D-476 of 2005, decided on 24th May, 2005.

Customs Act (IV of 1969)---

----Ss. 19 & 31-A---Constitution of Pakistan (1973), Art. 199---S.R.O. 554(I)/98 dated 12-6-1998---Constitutional petition---Stipulation made in the S.R.O. as regards the cut off date of import, for availing its benefit having not been met by the importer, irrespective of the fact whether delay in arrival of the consignment had occasioned due to the fault of the importer or otherwise, the importer was not entitled to the benefit of S.R.O. 554(I)/98 dated 12-6-1998, but by virtue of S.31-A of the Customs Act, 1969, he was liable to pay duty at the rate prevalent at the relevant time.

M.Y. Electronics v. Federation of Pakistan 1998 SCMR 1404 and Fecto Belarus Tractors Ltd. v. Pakistan through Ministry of Finance and Economics Affairs 2001 PTD 1829 distinguished.

Karim Ghee Oil Mills v. Federation of Pakistan 2005 PTD 634 and Nishat Mills v. Federation of Pakistan 2005 PTD 495 fol.

Rizwan Ahmed Siddiqui for Petitioner.

Raja Muhammad Iqbal for Respondents.

2005 P T D 1971

[Karachi High Court]

Before Ata-ur-Rehman, Actg., C.J. and S. Ali Aslam Jafri, J

KASHIF NASEEM

Versus

COLLECTOR OF CUSTOMS (APPRAISEMENT), KARACHI and 4 others

Constitutional Petition No. D-394 of 2005, decided on 6th May, 2005.

Customs Act (IV of 1969)---

---Ss. 25 & 25-A---Constitution of Pakistan (1973), Art. 199---Constitutional petition---Levy of Customs duty-Petitioner imported certain items and declared their value before the Customs---Department refused to accept that value and determined it on higher rate of the imported goods---Another party had offered to purchase the consignments and pay the duties/taxes as assessed by the Customs Authorities and in reply to this the petitioner was also ready to match offer of the party in accordance with the procedure and provisions of S.25-A Customs Act, 1969---High Court, without going into the debate as to the provisions/procedure of Ss. 25 & 25-A, Customs Act, 1969 and without prejudice to the contentions and rights of the parties in any proceedings/suit and the orders passed, disposed of the Constitutional petition in the terms that petitioner will approach the concerned official within 10 days and comply with the provisions of subsection (ii) of subsection (1) of section 25-A of Customs Act, 1969 and deposit the entire amount i.e. admitted and disputed with the Customs Authorities---Customs Authorities will release the goods to the petitioner on payment---Disputed amount deposited will be subject to the ultimate determination of the value by the concerned authorities in accordance with law and subject to any other legal proceedings between the parties.

Khalid Jawed Khan for Petitioner.

Raja M. Iqbal for Respondent No.2.

Jawaid Farooqui for Respondent No. 1

Faisal Arab and Abid S. Zuberi for Intervenors.

2005 P T D 1974

[Karachi High Court]

Before Anwar Zaheer Jamali and Muhammad Mujeebullah Siddiqui, JJ

MUNEER BHIMJEE and others

Versus

ISLAMIC REPUBLIC OF PAKISTAN and 2 others

C. Ps. Nos. D-1047, 1048 and 1096 of 2004, decided on 15th February, 2005.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 114, 120(I)(b), 77 & 177(1-A)---Return under Universal Self-Assessment Scheme, filing of---Issuance of notice to assessee selecting his case for total audit without assigning any reason or giving details therefor, or pointing out any of the clauses of S.117 of Income Tax Ordinance, 2001---Validity---Authority intending to initiate such proceedings against assessee would be bound to incorporate in notice relevant grounds, reasons and clauses of S.117 of Income Tax Ordinance, 2001 for enabling him to find out the rationale/criterion and justification for selecting his case for total audit---Return qualifying for acceptance under such Scheme would be deemed to be assessment order passed by Commissioner on the date return was furnished---Such assessment would remain protected against any bald or arbitrary action---Proceedings initiated against assessee on the basis of such notice would be defective and on its basis no further action would follow against him.

Ch. M. Hussain Agency Dealer v. Commissioner of Income Tax, 2005 PTD 152 fol.

Shahid Pervez Jami for Petitioners.

Aqeel Ahmed Abbasi and Javed Farooqui for Respondents.

Date of hearing: 15th February, 2005.

2005 P T D 2035

[Karachi High Court]

Before Anwar Zaheer Jamali and Syed Zawwar Hussain Jaffery, JJ

MAHMOOD NAWAZ

Versus

COMMISSIONER OF INCOME-TAX, COMPANY CIRCLE, ZONE B, KARACHI

Income Tax Case No. 242 of 1991, decided on 14th April, 2005.

Income Tax Ordinance (XXXI of 1979)---

---Ss. 136(2), 156(1) & Second Sched., Part III, para. 1---Amount of Zakat paid by assessee added to total income in exercise of powers of rectification under S.1.56(1), Income Tax Ordinance, 1979---Validity---Tribunal had examined such aspect of case with reference to relevant facts of case---Findings of Tribunal were unexceptionable--No question of law arose out of order of Tribunal---High Court dismissed application in limine.

Commissioner of Income Tax Company's II, Karachi v. National Food Laboratories 1992 SCMR 687 ref.

Iqbal Salman Pasha for Applicant.

Nasrullah Awan for Respondent.

2005 P T D 2116

[Karachi High Court]

Before Anwar Zaheer Jamali and S. Zawwar Hussain Jaffery, JJ

COLLECTOR OF CUSTOMS (APPRAISEMENT), KARACHI

Versus

Messrs AUTO MOBILE CORPORATION OF PAKISTAN, KARACHI

Special Customs Appeals Nos.568, 574 and 575 of 2004, decided on 3rd May, 2005.

Customs Act (IV of 1969)---

-------Ss.81 & 196---Interpretation of S.81, Customs Act, 1969---Provisional assessment of duty---When no -final assessment is made in terms of S.81(2) of the Customs Act, 1969, the provisional assessment will become final on declared value of goods by the assessee, and disbursement of additional amount or guarantee furnished by the importer/exporter, in terms of S.81(3) of the Customs Act, 1969, will be regulated on such premises---Principles.

A plain reading of S.81 of the Customs Act, 1969 goes to show that' it has been meant to facilitate both the Customs Authorities as well as the assessee in a situation, where it is not possible to assess the customs duty immediately, to get the goods, released on the basis of provisional assessment for want of required test/reports/documents, for further enquiry or wherefor any other valid reason(s) final assessment of the goods is not possible, at the relevant time. The proviso to subsection (1)

Provides that at the time of provisional assessment the Customs Authorities may ask the importer or the exporter, as the case may be, for payment of additional amount as security or to furnish such guarantee of scheduled bank, to secure the payment of such amount, which may be further found due on final assessment of duty over the provisional assessment. Subsection (2) to section 81 of the Act of 1969 provides the period during which such provisional assessment is to be finalized by the Assessing Authority while the proviso to subsection (2) empowers the Collector of Customs to extend the period of. final assessment up to 90 days under circumstances of exceptional nature after recording such circumstances. Subsection (3) to section 81 provides that on completion of assessment, the concerned Assessing Officer shall order that the amount already paid or guaranteed be adjusted against the amount payable on the basis of final assessment and the difference between the two amounts, if any, shall be paid forthwith to or by importer or exporter as the case may be. Further, subsection (4) to section 81 provides that if the final assessment is not completed within the specified period given under subsection (2) to section 81 then provisional assessment shall become final. In other words, subsection (4) to section 81 is a penal provision incorporated in the scheme for the benefit of the assessees/importers/exporters to save them from unnecessary harassment by the Customs Authorities by way of keeping their cases lingering on for indefinite period on the pretext of finalizing the assessment. When the practical working of the scheme of provisional assessment, as provided under section 81 of the Act of 1969, is analyzed, it will be seen that the figure of provisional assessment denotes figure of levy of duty on the basis of value declared by the importer/exporter plus any reasonable percentage of loading over such declared value made by the Assessing Officer to secure any excess payment of duties/charges, which may be found due in addition to the duty levied on the declared value of the goods, at the time of final assessment within the period stipulated by subsection (2) to section 81. It is such excess payment of duty/charges levied on the basis of loading, which are secured by charging additional amount or furnishing of guarantee of scheduled bank. Thus, it is apparent that charging of such additional amount or furnishing of guarantee is subject to the terms of final assessment and not otherwise. In other words, when no final assessment is made in terms of subsection (2) to section 81, the provisional assessment will become final on declared value of goods by the assessee, and disbursement of additional amount or guarantee furnished by the importer/exporter, in terms of subsection (3) to section 81, will be regulated on such premises.

In the present case admittedly the Customs Authorities had failed to finalize the assessment of the assessee within the stipulated period as provided by subsection (2) to section 81 of the Act of 1969. In such circumstances, the provisional assessment made by the Customs Authorities in terms of section 81(1) of the Customs Act, 1969, had attained finality on the basis of declared value of the goods by the assessee and not in any other manner.

Messrs Farooq Woollen Mills v. Collector of Customs, Customs Dryport, Sambrial and 2 others 2004 PTD 795 and Hassan Trading Company v. Central Board of Revenue, Government of Pakistan 2004 PTD 1979 ref.

Raja Muhammad Iqbal for Appellant.

Miss Danish Zuberi for Respondent.

Date of hearing: 3rd May, 2005.

2005 P T D 2216

[Karachi High Court]

Before Anwar Zaheer Jamali and Azizullah M. Memon, JJ

Messrs PAKISTAN REFINERY LTD.

Versus

COMMISSIONER OF INCOME TAX, COMPANIES-V KARACHI

Income Tax References Nos.184 and 185 of 2002, decided on 1st July. 2005.

Income Tax Ordinance (XXXI of 1979)---

----Ss. 2(11), 22, 30 & 80-D---Dividend income of company---Charging tax on dividend income under S.30 of Income Tax Ordinance, 1979 in addition to turnover tax charged under S.80-D thereof---Plea of assessee was that dividend income was also covered under S.80-D of Ordinance, 1979---Validity---Assessee had not initially claimed dividend income as part of their income from business---Such income of assessee was not part of their business income as defined in S.2(11) of Income Tax Ordinance, 1979---Provisions of S. 80-D of Ordinance, 1979 would be read in conjunction with other provisions thereof keeping in mind whole scheme of the enactment---Dividend income derived by assessee from other sources was explicitly covered by S'.30 of the Ordinance, thus, same could not be categorized as part of their income from business---High Court turned down such plea---Principles.

Muhammad Hussain Patel v. Habib Wall Muhammad PLD 1981 SC 1; S. Sundaram Pillai and others v. V.R. Pattabiraman AIR 1985 SC 582; Octavius Steel and Company Ltd. v. The Commissioner of Income Tax, Dacca PLD 1960 SC 371; Commissioner of income Tax v. Messrs National Bank of Pakistan PLD 1976 Kar. 1025; Ltd. Col. Muhammad Amin Khan and others v. Government of West Pakistan and others PLD 1966 Lah. 111 and Commissioner of Income Tax, Companies-II, Karachi v. Muhammad Usman Hajrabai Trust Imperial Courts, Karachi 2003 PTD 577 ref.

1996 PTD (Trib.) 286; Elahi Cotton Mills Ltd. and others v.' Federation of Pakistan PLD 1997 SC 582; 1997 PTD 1555 and Messrs Japan Sotrage Battery Ltd. v. Commissioner of Income Tax, Companies Zone-I, Karachi 2003 PTD 2849 fol.

Fateh Ali W. Vellani for Applicant.

Aqeel Ahmed Abbasi for Respondent.

Dates of hearing: 12th, 13th and 14th January, 2005.

2005 P T D 2255

[Karachi High Court]

Before Anwar Zaheer Jamali and S. Ali Aslam Jafri, JJ

Messrs DADA BHOY CEMENT INDUSTRIES

Versus

COLLECTOR OF SALES TAX, KARACHI and others

Spl. Central Excise Appeal No.15 of 1999, decided on 1st July, 2005.

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

---Ss. 3(1) & 2(g)---Excise Duty on Production Capacity (Cement) Rules, 1991, R.49(1)---C.B.R. Directions/Instructions No.C.No.1(18) CE-Budget/91, dated 4-8-1991---C.B.R. Letter C.No.1(18)-CEB.91-Vol.II, dated 21st August, 1993---Demand of excise duty on the clinker from cement manufacturer, despite having not taken out of the factory for home use, but used and utilized within the factory premises for manufacturing cement, which was made subject to payment of duty under the Excise Duty on Production Capacity (Cement), Rules, 1991 on capacity basis, as per direction issued by C.B.R. was legal, valid and within the four corners of the relevant law-Clinker-Meaning-High Court, however, observed that the manufacturer was allowed to move a separate application along with all the material particulars and details to the Collector of Excise for consideration of his request on merits regarding deduction of the amount duly determined on the amount of clinker in terms of S. 3(1) of the Central Excise Act, 1944 from the capacity duty for which the manufacturer had not furnished credible evidence before the Appellate forum.

Chambers 21st Century Dictionary; Commissioner of Income Tax, East Pakistan v. Noor Hussain PLD 1964 SC 657; Messrs Central Insurance Company and others v. Central Board of Revenue Islamabad and others 1993 SCMR 1232; Messrs Dewan Textile Mills Limited v. Government of Pakistan and others 1984 CLC 1740; Messrs Kohinoor Industries Limited v. Government of Pakistan 1989 MLD 1 and Central Board of Revenue and others v. 7-Up Bottling Company (Pvt.) Limited 1996 SCMR 700 ref.

(b) Words and phrases---

----Clinker---Meaning.

Chambers 21st Century Dictionary ref.

Syed Ali Zafar for Appellant.

Sirajul Haq Memon for Respondents.

Date of hearing: 16th May, 2005.

2005 P T D 2345

[Karachi High Court]

Before Muhammad Mujeebullah Siddiqui and Maqbool Baqar, JJ

ASIA PETROLEUM LTD. through Managing Director

Versus

PAKISTAN through Secretary, Ministry of Finance (Revenue Division) and Ex-officio, Chairman, Central Board of Revenue, Islamabad and another

Constitution Petition No. D-306 of 2005, decided on 21st June, 2005.

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

----Preamble---Assessment year 2002-2003, is covered by the Income Tax Ordinance, 1979.

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

----Ss. 61, 62, 55, 56 & 65---Constitution of Pakistan (1973), Art. 199---Constitutional petition---Issuance of notices under Ss. 61 & 62 of the Income Tax Ordinance, 1979 to the assessee---Contentions were that said notices were issued without jurisdiction as neither a return of total income was filed under S.55 of the Ordinance nor any notices were issued under Ss. 56 or 65 of the Ordinance, calling upon the assessee to file the return of total income; that the notices under Ss. 61 and 62 of the Ordinance could be issued during the course of proceedings of assessment, after assumption of jurisdiction either on filing of return of total income under S. 55 or filing of return of total income in response to the notices under Ss. 56 & 65 of the Ordinance, or in case of failure of the assessee to file the return of total income in response to the said notices and that when the jurisdiction was not assumed by the Assessing Officer in accordance with law, the notice under Ss. 61 & 62 of the Ordinance were without jurisdiction and void ab initio which could not be acted upon and all the proceedings/orders in pursuance of such notices were without jurisdiction, which were liable to be struck down-Validity---Held, in the realm of normal tax regime, under the Scheme of law contained in the Income Tax Ordinance, 1979, an Assessing Officer shall acquire jurisdiction to initiate the assessment proceedings on filing of return of total income, under S.55 of the Ordinance or in case of default on the part of assessee, who was required to file the return of total income, on issuance of notice under Ss. 56 or 65 of the said Ordinance as the case may be---Impugned notices were without jurisdiction and consequently, void ab-initio and thus Assessing Officer was not empowered to take any proceedings in pursuance' of said notices---Contention that the issuance of notices under Ss. 61 & 62 of the Ordinance fulfilled the requirements of calling upon an assessee to file return of total income had no substance---High Court, however, clarified that notwithstanding the present judgment, the department shall be at liberty to issue the notice under the relevant provisions of law calling upon the assessee to furnish the return if it deemed same fit and proper with equal liberty to the assessee to take pleas of facts and law---Principles.

A perusal of section 61 of the Income Tax Ordinance, 1979 shows that according to it, the Deputy Commissioner may serve upon any person who has furnished a return of total income for any income year, or upon whom a notice has been served to furnish such return, a notice requiring him on a date specified therein, to attend at the Deputy Commissioner's office or to produce, or cause to be produced, any evidence on which such person may rely in support of the return. The provision is very clear and there is no ambiguity requiring any clarification or interpretation. A plain reading of section 61 of the said Ordinance shows that the Deputy Commissioner can issue a notice under this section to a person who has furnished a return of total income for any income year, or upon whom a notice has been served to furnish such return. The evidence required under section 61 is filed in support of the return. Thus, in the absence of any return or notice to furnish return the Deputy Commissioner cannot issue any notice under section 61. Likewise, it is provided in section 62 that the Deputy Commissioner, after considering the evidence on record including evidence, if any, produced under section 61 and such other evidence as the Deputy Commissioner may require, on specific points, shall, by an order in writing, assess the total income of the assessee and determine the tax payable by him on the basis of such assessment. It has nowhere provided that the assessment proceedings can be undertaken by an Assessing Officer without filing of return of total income or issuance of notice calling upon the assessee to file a return of total income.

In the realm of normal tax regime, under the scheme of law contained in the Income Tax Ordinance, 1979 an Assessing Officer shall acquire jurisdiction to initiate the assessment proceedings on filing of return of total income, under section 55 or in case of default on the part of assessee, who is required to file the return of income, on issuance of notice under section 56 or 65 as the case may be.

Contentions that the issuance of notice under sections 61 and 62 fulfilled the requirement of calling upon an assessee to file the return of total income, had no substance.

Notices under sections 61 and 62 of the Ordinance, issued by the department were without jurisdiction and consequently, void ab initio. The Assessing Officer was not empowered to take any proceedings in pursuance of these notices, which were also illegal, without jurisdiction and void ab initio.

High Court clarified that notwithstanding, the present judgment the department shall be at liberty to issue the notice under the relevant provision of law calling upon the assessee to furnish the return if deemed fit and proper. If the department feels that there was any other manner of deciding the issue the department shall be at liberty to adopt the course in accordance with law. The assessee is also at liberty to take all the pleas of facts and of law, before the Departmental Officer and other forums available to it.

Dr. Muhammad Farogh Naseem for Petitioner.

Nemo for Respondent No.1.

A.R. Akhtar for Respondent No.2.

Date of hearing: 21st June, 2005.

2005 P T D 2417

[Karachi High Court]

Before Muhammad Mujeebullah Siddiqui and Khilji Arif Hussain, JJ

Messrs SHAHMURD SUGAR MILLS LTD. through Managing Director and others

Versus

ADDITIONAL COLLECTOR, SALES TAX (ADJUDICATION) QUETTA, HYDERABAD and others

Special Sales Tax Appeals Nos. 9 to 13 of 2005, decided on 17th August, 2005.

Sales Tax Act (VII of 1990)---

----Ss. 46 & 47---Remand by Tribunal---Appeal to High Court---Validity---Impugned order passed by the Tribunal showed that Tribunal had neither found the facts on record deficient in any manner nor any probe or factual inquiry was required enabling the Tribunal to effectively decide all the questions of fact and law raised before it---All the judicial/quasi-judicial forums were required to decide the issues of facts and law raised before them---Mere disposal of the matter was undesirable---Parties should not be sent back to the lower forums without proper justification thereby causing delay in the decision of the issues in controversy---All the points in the present case, before the Tribunal ought to have been considered and decided by the Tribunal instead of sending the matter back to the lower forum which had already given its finding on the relevant issues---Impugned order of remand passed by the Tribunal was set aside by the High Court and the case was remanded to the Tribunal with direction to hear the appeals afresh and decide all the questions of facts and law by a speaking order.

Shahab Industries Ltd. v. Commissioner of Income Tax 1991 PTD 463 ref.

Muhammad Farogh Naseem for Appellants.

Fariduddin for Respondents.

Date of hearing: 17th August, 2005.

2005 P T D 2422

[Karachi High Court]

Before Muhammad Mujeebullah Siddiqui and Khilji Arif Hussain, JJ

Messrs AMMAR ENTERPRISES KARACHI through Partner

Versus

COLLECTOR OF CUSTOMS (EXPORTS), KARACHI and 5 others

Constitutional Petition No. D-844 of 2005, decided on 17th August, 2005.

Customs Act (IV of 1969)---

----S. 181---Constitution of Pakistan (1973), Art. 199 --Constitutional petition---Matter agitated in the Constitutional petition was the subject-matter of appeal at the instance of Collector of Customs (Exports) and was pending before Collector of Customs (Appeal)---Question was as to how, the issues involved could be decided by the High Court in exercise of its Constitutional jurisdiction under Art. 199 of the Constitution when the matter was pending before the Collector of Customs (Appeals)---Contentions of the petitioner were that it had to fulfil its commitment which was going to expire on 31-8-2005, therefore, Collector of Customs (Appeals) be directed to dispose of the appeal within 15 days and in the meanwhile the Collector of' Customs (Exports) and Assistant Collector of Customs (Export Examination) may be directed to release the goods to fulfil his contractual obligation; that State revenue. was fully secured, as the post-dated cheque had been issued in favour of the Collector of Customs and indemnity bond had also been executed and that petitioner would deposit sum representing 15 % fine imposed by the Deputy Collector (Adjudication) on the assessed value within three days---High Court, in circumstances, disposed of Constitutional petition along with the listed applications with the direction to the Collector of Customs (Appeals) to decide the appeal within 15 days from the date of High Court judgment, after hearing both the parties and the concerned Authorities were also directed to release the detained goods to the petitioner, in the meanwhile subject to deposit of fine calculated at 15% of the assessed value within three days.

Arif Moton for Petitioner.

Raja M. Iqbal for Respondents Nos. 1 and 4.

2005 P T D 2425

[Karachi High Court]

Before Muhammad Mujeebullah Siddiqui and Khilji Arif Hussain, JJ

COLLECTOR OF CUSTOMS (APPRAISEMENT), CUSTOMS HOUSE, KARACHI

Versus

MUHAMMAD ATEEQ PARACHA and 4 others

Customs Appeal No. 1 of 2005, decided on 11th August, 2005.

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

----S. 196---Appeal to High Court---Limitation---Documents produced by both the sides in support of their case were not sufficient to give any definite finding on the question whether the copy of the order was burnished to the relevant authorities on the crucial date---High Court, giving benefit of doubt to the appellant held that the appeal was filed within the period of limitation.

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

---Ss. 168 & 196---Appeal to High Court---.Seizure of goods as smuggled---Record showed that Tribunal had failed to give specific and detailed findings on the points raised by the parties---Contention of the Department was that initially no documents were produced by the importers to show that the seized goods were not smuggled and subsequently, the documents, which were furnished, did not show conclusively that the seized goods were covered by the Bills of Entry produced by the importers---Importers, on the other hand stated that the goods were legally imported and were covered by the Bills of Entry produced by them---Order of the Tribunal showed that it had not given any detailed and specific finding on the point whether the. seized goods were actually covered by the documents produced by the importers or the documents pertained to some other goods and the importers had failed to establish that the goods were actually covered by said documents--Tribunal, instead of considering the particular facts of the case, had decided the issues by making reference to the judgments of the Supreme Court and had not even acted on the principles laid down by the Supreme Court---High Court, in circumstances, set aside the order of the Tribunal and remanded the case to the Tribunal with the direction that the parties be heard afresh and speaking and specific findings be given in respect of each category of goods alleged to be smuggled by the Department and stated to be legally and validly imported by the importers---Tribunal was further directed to decide the appeal within four months from the date of receiving the copy of the High Court order.

Raja Muhammad Iqbal for Appellant.

Muhammad Nadeem Qureshi for Respondents.

2005 P T D 2429

[Karachi High Court]

Before Muhammad Mujeebullah Siddiqui and Khilji Arif Hussain, JJ

COMMISSIONER OF INCOME TAX, COMPANIES-I, KARACHI

Versus

Messrs EASTERN SERVICES (PVT.) LTD., KARACHI

Income Tax Case No. 52 of 1992, decided on 16th August, 2005.

Income Tax Ordinance (XXXI of 1979)---

----Ss.59(3) &136 --- Reference to High Court---Question as framed for reference was whether profit on sale of plot was capital gain and was exempt from tax or not, when the assessee was a contractor and a builder and plot in question was stock-in-trade---.Questions proposed had not arisen out of the order of the Tribunal---Tribunal had not given any finding on the point as to what was the nature of income---Only finding given by the Tribunal was that the adjustment sought was to be made in exercise of powers under S.59(3) of the Income Tax Ordinance, 1979 was beyond the purview of the provisions---Tribunal had rightly found that the jurisdiction of Assessing Officer under S.59(3) of the Ordinance was confined to minor adjustments and was not extended to making a probe on a disputed question of fact---Reference application being without substance was dismissed by the High Court.

(1986) PTD 380 ref.

Jawaid Farooqi for Applicant.

Muhammad Farogh Naseem for Respondent.

2005 P T D 2434

[Karachi High Court]

Before Anwar Zaheer Jamali and S. Ali Aslam Jafri, JJ

COLLECTOR OF CUSTOMS (EXPORTS), KARACHI

Versus

Messrs MUHAMMAD SHARIF INDUSTRIES (PVT.) LTD., FAISALABAD

Special Customs Appeals Nos.326 to 336 of 2004, decided on 21st December, 2004.

Customs Act (IV of 1969)---

----Ss. 224, 194A & 196---Appeal to Appellate Tribunal---Limitation---Extension of time---Requirements---Tribunal was to see whether delay caused was due to the reason beyond the control of party and a plausible explanation, not shadowed by negligence had been furnished by the defaulting party for condonation of such delay, which seemed to be lacking in the present case---Once the appeals preferred before the Tribunal were found time-barred by over two months, valuable rights had accrued in favour of opposite party which could not be brushed aside/done away with lightly---Appellants being Government functionaries, were not entitled to any special treatment in the matter of condonation of delay---No illegality having been committed by the Tribunal while passing the order, dismissing the appeals being barred by limitation---Appeals against the impugned judgments of the Tribunal were dismissed by the High Court.

Chief Settlement and Rehabilitation Commissioner and another v. Ghulam Ghaus and others 1974 SCMR 38 fol.

Lakhan Chandra Paramanik and others v. Bihar State Housing Board and another 2003 Current Civil Cases 180 ref.

Akhlaq Ahmad Siddiqui for Appellant.

Mirza Muhammad Awais for Respondent.

2005 P T D 2462

[Karachi High Court]

Before Anwar Zaheer Jamali and Muhammad Mujeebullah Siddiqui, JJ

Messrs LEVER BROTHERS PAKISTAN LTD.

Versus

CUSTOMS, SALES TAX AND CENTRAL EXCISE APPELLATE TRIBUNAL through Registrar and another

Customs Appeals Nos. 122 to 125 of 2000, decided on 16th August, 2005.

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

----S.196---Appeal to High Court---Scope---Appellate Tribunal is entirely a final fact-finding authority---High Court, while exercising advisory jurisdiction in tax matters shall express its opinion on the basis of facts as determined by the Tribunal---Appeal/reference to the High Court lies on the point of law arising out of the order of the Tribunal and therefore, findings of facts given by the Tribunal shall be final, not open to further examination/scrutiny by High Court and the opinion in exercise of advisory jurisdiction shall be given on the basis of facts as determined by the Tribunal.

Iram Ghee Mills (Pvt.) Limited v. Customs, Central Excise and Sales Tax (Appellate) Tribunal 2004 PTD 559 ref.

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

----S.19---S.R.O. No.484(I)/92, dated 14-5-1992---S.R.O. 512(I)/94 dated 9-6-1994---Interpretation of S.R.O. 484(I)/92, dated 14-5-1992---Exemption granted by clauses (a) and (b) of S.R.O. No.484(I)/92; dated 14-5-1992---Scope.

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

----S.195---Powers of Central Board of Revenue---Scope---Central Board of Revenue has no place in the Scheme of law, conferred with the jurisdiction to interpret any law, statutory or in exercise of delegated authority, i.e. subordinate legislation.

Central Insurance Companies 1993 PTD 766 ref.

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

----S.19---S.R.O. 484(I)/92, dated 14-5-1992---S.R.O. 1284(I)/90 read with C.B.R. clarification dated 14-1-1991---Exemptions granted by notifications S.R.O. 484(I)/92 and S.R.O. 1284(1)/90 are not similar---Scope of the two notifications elaborated.

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

----Ss.19, 30 & 31-A---S.R.O. 484(I)/92, dated 14-5-1992---S.R.O. 512(I)/94, dated 9-6-1994---Import of machinery for installation at an Industrial Estate---Exemption granted under S.R.O. 484(I)/92, dated 14-5-1992 as amended by S.R.O. 512(I)/94, dated 9-6-1994 resulting in substitution of Table II of S.R.O. 484(I)/92---Effect---When all the imports were made after the substitution of Table II of S.R.O. 484(I)/92, exemption granted under S.R.O. 484(I)/92 was no more available---Principles.

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

----Ss. 19, 32, 30 & 31-A---S.R.O. 484(I)/92, dated 14-5-1992---S.R.O. 512(I)/94, dated 9-6-1994---Misdeclaration and furnishing of incorrect statement---Import of machinery for installation at an Industrial Estate---Exemption---Admittedly on the date of filing of Bills of Entry the exemption Notification S.R.O. 484(I)/92, dated 14-5-1992 was no more in the field but the exemption notification occupying the field and applicable to the imports, made in the present case, was S.R.O. 484(I)/92 as amended by S.R.O. 512(I)/94, dated 9-6-1994---Claim of exemption under the unamended notification was therefore a clear misdeclaration and incorrect statement---Fact that the importer had not mentioned that the place where the imported machinery was to be installed was situated in the Industrial Estate, was a clear concealment of fact amounting to misdeclaration in a very clever and clandestine manner giving impression as if the unit was situated in a rural area simpliciter, although the importer was required to disclose in the written declaration in pursuance of the condition precedent in terms of exemption notification that the unit was situated in the areas specified in Table II of the notification---Principles.

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

----Ss.32 & 19---S.R.O. 484(I)/92, dated 14-5-1992---S.R.O. 512(I)/94, dated 9-6-1994---Import of machinery for installation at a place specified in the exemption notification ---Misdeclaration and furnishing of incorrect statement---Provision of 5.32(1), Customs Act, 1969 provides that if any person, in connection with any matter of customs makes or signs or causes to be made or signed, or delivers or causes to be delivered to an officer of Customs any declaration, notice, certificate or other document whatsoever, knowing or having reason to believe that such document or statement is false in any material particular, he shall be guilty of an offence under S.32 of the Customs Act, 1969---Words and expressions used by the legislature in S.32 of the Act are comprehensive enough to cover any incorrect declaration or information in any document in connection with the matter of customs having the effect of causing loss to revenue ---Misdeclaration or concealment etc. is not confined to the declaration/statement in respect of goods only---Exemption, in the present case, could be claimed if the goods imported were plant and machinery not locally manufactured and further if it was intended to be installed at the places specified in the exemption notification and the availability of exemption was contingent on filing of declaration showing the location of the industrial unit---Importer having not correctly shown the location of the industrial unit, he had made a misstatement/ misdeclaration attracting the provision contained in S.32, Customs Act, 1969.

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

----S.32---Untrue statement---hens rea was not required to be established for the purpose of attracting the provisions contained in S.32, Customs Act, 1969---Principles.

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

----Ss.32 & 156---Misdeclaration/misstatement in connection with any matter of the customs---Invocation of 5.32, Customs Act, 1969 and imposition of penalty and confiscation of goods---Principles elaborated.

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

----S. 19(3)---Protection of Economic Reforms Act (X of 1992), S.6---S.R.O. 484(I)/92, dated 14-5-1992---S.R.O. 512(I)/94, dated 9-6-1994---Exemption---Protection under 5.6, Protection of Economic Reforms Act, 1992---Availability---Held, on account of retrospective insertion of subsection (3) in S.19 of the Customs Act, 1969, protection claimed under S.6 of the Protection of Economic Reforms Act, 1992 was no more available---Protection available under S.6, Protection of Economic Reforms Act, 1992 had been nullified irrespective of the fact whether the reliance was placed on a notification or on the principle of promissory estoppel contained in the letter of authorization or in any other document or law.

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

---S. 19(3)---S.R.O. 484(I)/92, dated 14-5-1992 Table II---S.R.O. 512(I)/94, dated 9-6-1994---Exemption---When the Bills of Entry were filed, Table II of S.R.O. 484(I)/92, dated 14-5-1992 was already amended through S.R.O. 512(I)/94, dated 9-6-1994, whereby the exemption from the payment of whole customs duty was withdrawn and the exemption was allowed from payment of customs duty as was in excess of 10% ad valorem---Consequently, the exemption from payment of whole of the customs duty was being claimed in the absence of notification in this behalf---Validity---Once any S.R.O. is rescinded, withdrawn, altered, amended or substituted then to the extent such of withdrawal, alteration, amendment or substitution the earlier notification wholly or partially, as the case may be, does not remain operative and is to be treated as absent---Legislature, even to the disadvantage of a beneficiary, can make any retrospective amendment in law---Such judgment is vested in the legislature.

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

----S. 32---Untrue statement---Issuance of show-cause notice under 5.32, Customs Act, 1969---Past and closed transaction---Determination---Principles.

A transaction becomes past and closed when it attains finality meaning thereby that it cannot be reopened. After a matter is decided by a competent forum and no appeal, revision or petition, as the case may be, is filed within the specified period, it shall be deemed to have attained finality and the status of past and closed transaction. However, if any appeal, revision or petition is filed then until and unless the matter is decided by the highest forum it shall not become past and closed transaction. The pending proceedings can never be held to be final and falling within the category of past and closed transaction. Likewise, if any matter pertaining to the evasion of tax on account of non-levy or short-levy of tax or non-payment thereof can be reopened within the period of limitation provided in law then it cannot be treated as past and closed transaction, if it is reopened within the period of limitation provided in law. If the case is not reopened within the period of limitation then on expiry of such period it shall attain the status of past and closed transaction and in case it is re-opened within the period of limitation, then it becomes past and closed transaction, after final adjudication.

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

----S.32(2)(3)(3-A)---Untrue statement---Service of notices under S.32(2)(3) & (3-A) of the Customs Act, 1969 within the period of limitation specified in S.32, Customs Act, 1969 is a condition precedent for acquiring jurisdiction to 're-open such cases---Principles.

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

----S.32(2)---Untrue statement---Case of misstatement/misdeclaration made by the importer and consequential non-levy of customs duty would fall under S.32(2) of the Customs Act, 1969.

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

----S. 32(1)(2)---Untrue statement---Show-cause notice---Limitation.

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

----S.32(2)(3)---Untrue statement---Show-cause notice---Significance---Where it was not a case of non-levy of tax on account of any inadvertence, error or misconstruction but was a case of non-levy of tax on account of misstatement/ misdeclaration in the Bill of Entry, the show-cause notice was required to be issued under S.32(2) and not under S.32(3) of the Customs Act, 1969---Service of notice under appropriate provision of law was condition precedent for acquiring the jurisdiction---Show-cause notice being jurisdictional in nature, its absence made the active proceedings without, jurisdiction---Notice under wrong provision in respect of a Bill of Entry was without jurisdiction and consequently demand raised in that case was void and not enforceable in law.

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

----S.32(2)(3)---Untrue statement---Show-cause notice---If a notice under subsection (2) of 5.32 of the Customs Act, 1969 is issued, but ultimately it is found that the case was covered under subsection (3), no further notice is required to be issued under subsection (3) on the principle that a lesser charge, liability or allegation was always deemed to be a part of higher charge, liability or allegation, provided the notice is served 'within the period of limitation specified in subsection (3)---When a notice is served under subsection (2) and the case is found to be covered under subsection (3) but it is served beyond the period of limitation specified in subsection (3), the entire proceedings shall be rendered void being without jurisdiction---Where the notice is served under subsection (3) within the period specified in this subsection or beyond such period but within the period specified in subsection (2) and the case is found to be covered under subsection (2) such a notice shall not clothe the Adjudicating Officer with jurisdiction---Proceedings shall be void for want of service of notice of proper jurisdictional nature---Reasons elaborated.

If a notice under subsection (2) of section 32 of the Customs Act, 1969 is issued, but ultimately it is found that the case was covered under subsection (3), no further notice is required to be issued under subsection (3) on the principle that a lesser charge, liability or allegation was always deemed to be a part of higher charge, liability or allegation, provided the notice is served within the period of limitation specified in subsection (3). If a notice is served under subsection (2) and the case is found to be covered under subsection (3) but it is served beyond the period of limitation specified in subsection (3), the entire proceedings shall be rendered void being without jurisdiction. However, if notice is served under subsection (3) within the period specified in this subsection or beyond such period but within the period specified in subsection (2) and the case is found to be covered under subsection (2) such a notice shall not clothe the Adjudicating Officer with jurisdiction. The proceedings shall be void for want of service of notice of proper jurisdictional nature. The reason being that in the proceedings under subsection (3) no allegation or charge is required to be levelled against an assessee: The loss of revenue which is required to be retrieved is occasioned on account of mere inadvertence, error or misconstruction on the part of assessee or the customs officials, attributing no culpability on the part of assessee. He is therefore, not required to furnish any explanation with regard to the misstatement or misdeclaration. Sub-section (3) does not cover any case of misstatement or misdeclaration. At the most, it will cover the case of honest difference of opinion or genuine interpretation, though it may ultimately be found to have been raised on account of any error of judgment or misconstruction or inadvertence and thus, not acceptable to the departmental officers and even by the superior Courts. On the other hand, jurisdiction under subsection (2) is dependent on allegation/charge of misdeclaration/ misstatement which is required to be explained by the assessee. The converse principle is applicable to such case which is to the effect that the higher offences are never treated to be the part of offences/acts of lower magnitude. The cases covered under subsection (2) though are confined to civil liability but, of the higher magnitude, as compared with the cases covered under subsection (3). For this reason the period of limitation specified in. subsection (21 is more than the period specified in subsection (3). Consequently, a notice under subsection (3) shall not confer jurisdiction to proceed with the cases covered under subsection (2) hint vice versa is permissible.

Central Cotton Mills Ltd. v. Collector of Central Excise and Land Customs 1992 CLC 841; Ibrahim Textile Mills Ltd. v. Federal Government PLD 1989 Lah. 47; Federal Government v. Ibrahim Textile Mills 1992 SCMR 1898, Muhammad Hussain v. Collector of Customs 1991 MLD 1456; Pakistan International Airlines Corporation v. Central Board of Revenue 1990 CLC 868; Eastern Rice Syndicate v. Central Board of Revenue PLD 1959. SC 364; Hardcastle Wand (Pakistan) Limited v. Pakistan PLD 1962 Kar. 895; Abdul Hadi v. Ali Haider PLD 1983 SC 342; Messrs Gatron Industries v. Government of Pakistan 1999 SCMR 1072; Government of Pakistan v. Fecto Belarus Tractors Ltd. (Civil Appeal No. 1174 of 1997); C. P. No. D-1142 of 2003; C.P. No.D-1613 of 2001; Fecto Belarus Tractors Ltd. v. Pakistan 2001 PTD 1829, Messrs, Gatron Industries Ltd.'s case 1999 SCMR 1072 mentioned.

Sana Minhas for Appellant

Raja M. Iqbal for Respondents.

Dates of hearing: 9th, 10th and 11th February, 2005.

2005 P T D 2505

[Karachi High Court]

Before Subihuddin Ahmed and Ghulam Rabbani, JJ

AL-HAMRA INDUSTRIES

Versus

FEDERATION OF PAKISTAN

C.P. No. 1240 of 1996, heard on 3rd October, 2000.

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

----Ss. 19 & 20---Protection of Economic Reforms Act (XII of 1992), S.6---Constitution of Pakistan (1973), Art. 199 --- Constitutional petition---Exemption from Customs duty---Customs duty on imported goods at time of placing import order was leviable at the rate of 10% ad valorem in terms of Notification which had expressly stipulated that it would remain in force till 30-6-1996---Subsequently during enforcement of said Notification, Customs Authorities demanded 45% ad valorem duty on said goods and on failure of petitioner to do so, his goods were detained---Validity---Incentives to imported goods at concessional rate of customs duty available to petitioner up to specified date, could not be withdrawn through a subsequent executive order before expiry of the specified date---Authorities were directed to release goods on the concessional rate of duty at 10% as provided by earlier Notification which existed at the relevant time.

Messrs Gatron and Bhadelia Industries Ltd. v. Government of Pakistan 1999 MLD 2994 ref.

Anwar Mansoor and Asim Mansoor for Petitioner.

M. Naimur Rehman, Dy. A.-G. for Respondent.

Date of hearing: 3rd October, 2000.

2005 P T D 2507

[Karachi High Court]

Before Anwar Zaheer Jamali and S. Ali Aslam Jafri, JJ

ASHRAF INDUSTRIES (PVT.) LTD. and another

Versus

FEDERATION OF PAKISTAN and others

C. Ps. Nos. D-585 and 1295 of 2004, decided on 21st December, 2004.

Customs Act (IV of 1969)---

----Ss. 12, 13, 18-A & 33---S.R.O. 1140(I)/97, dated 6-11-1997---S.R.O. 450(I)/01, dated 18-6-2001--S.R.O. 822(I)/91, dated 20-8-1991---Constitution of Pakistan (1973), Art. 199---Constitutional petition---Levy of additional customs duty---Refund of duties---Petitioner had sought declaration that levy of 0.5% additional customs duty was illegal and of no legal effect and that authorities be ordered to refund duties to petitioner which they had charged illegally---Petitioner had submitted that he would be satisfied if authorities were bound down by their own statements which had shown that goods imported as raw material and stored in manufacturing bonds operating under Notification S.R.O. No.1140(I)/97 dated 6-11-1997 superseded by S.R.O. 450(I)/01 dated 18-6-2001, were neither liable for additional customs duty/ warehousing charges nor it was to be determined for the goods meant to be stored in such manufacturing bonds---Authorities having not disputed said position, Constitutional petitions were disposed of in terms that additional duty would be charged on all transactions/goods into bonded warehouse declared under S. 12, Customs Act, 1969 and licensed under S. 13 thereof except those mentioned in S.R.O. 822(I)/91 dated 20-8-1991 which also included goods imported as raw materials and - stored in manufacturing bonds under Notification S.R.O. 1140(I)/97 dated 6-11-1997 as superseded by S.R.O. 450(I)/2001 dated 18-6-2001---Neither additional customs duty/warehousing charges would be payable nor it would be demanded on the goods meant to be legally stored in such manufacturing bonds.

Nisar A. Mujahid for Petitioners.

Raja Muhammad.Iqbal for Respondents.

Date of hearing: 21st December, 2004.

2005 P T D 2513

[Karachi High Court]

Before Anwar Zaheer Jamali and Syed Zawwar Hussain Jaffery, JJ

Messrs ANNOOR TEXTILE MILLS LTD.

Versus

COMMISSIONER OF INCOME-TAX

I.T.R. No.280 of 1991, decided on 2nd September, 2005.

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

----S. 107---Interpretation of S.107, Income Tax Ordinance, 1979---Tax credit---Benefit of tax credit provided under S.107, Income Tax Ordinance, 1979 is only available- to the assessee over the amount invested by him for the purpose of plant and machinery and not over the expenses incurred by him for its installation---Principles.

1987 PTD (Trib.) 116; Central Insurance Co. and others v. Central Board of Revenue, Islamabad and others (1993) 68 Tax 86 (SC Pak); Challapalli Sugars Ltd. v. Commissioner of Income-tax, A.P. (1975) 98 ITR 167 (SC India); Commissioner of Income-tax (Central) Calcutta v. Standard Vacuum Refining Co. of India Limited (1966) 61 ITR 799 and CIBA of India Ltd. v. Commissioner of Income-tax 1994 PTD 237 ref.

(b) Interpretation of statutes---

----Each provision of law is to be given its simple literal meaning and no word used by the legislature is to be deemed redundant.

Iqbal Salman Pasha for Applicant.

Nasrullah Awan for Respondent.

Date of hearing: 10th August, 2005.

2005 P T D 2519

[Karachi High Court]

Before Anwar Zaheer Jamali and Muhammad Mujeebullah Siddiqui, JJ

KSB PUMPS COMPANY LTD., LAHORE

Versus

COLLECTOR OF CUSTOMS (APPRAISEMENT), CUSTOMS HOUSE, KARACHI

Special Customs Appeals Nos.69 to 74 of 2004, decided on 15th March,2005.

Customs Act (IV of 1969)---

----Ss. 32 & 196---Pakistan Customs Tariff Headings 8501.5390 & 8501.5210---C.B.R. letter dated 26-5-2001---C.B.R. letter dated 5-9-2001---General Clauses Act (I of 1897), S.24-A(2)---Import of submersible pump motors---Classification and application of PCT Heading---Notice for short levy of customs duty---Appellate Tribunal had decided the issue under consideration in a perfunctory manner by a slipshod order, which was totally bald and devoid of any reason---Tribunal had neither appreciated the correct facts nor law---Finding of the Tribunal that goods imported were simply electric motors and not submersible electric motors was against the material available on record---Relevant PCT headings in the First Schedule showed that electric induction motors had been dealt with separately from submersible pump motors thereby bringing the submersible pump motors under the PCT Headings 8501.5390 and 8501.5190 and rate of customs duty at 10% ad val. was prescribed under both these Headings---First opinion of the Central-Board of Revenue contained in its letter dated 26-5-2001, in respect of imports by another importer was correct which was based on examination of the relevant PCT Headings while the Second opinion of the C.B.R. contained in its letter dated 5-9-2001, contrary to its earlier opinion, was not based on any reason and was discriminatory in nature and also was violative of the provisions contained in S.24-A(2) of the General Clauses Act, 1897---Both the forums below had been misdirected in arriving at the conclusion that the imports by the appellant were covered by PCT Heading 8501.5210---Imports made by the appellant, held, were covered under PCT Heading 8501.5390 and consequently there was no short levy of any customs duty---Appellate Tribunal was directed to pass necessary orders to dispose of the case conformably to the decision of present judgment of the High Court.

Khalid Jawed Khan for Appellant.

M. Nadeem Qureshi for Respondent.

Date of hearing: 15th March, 2005.

2005 P T D 2534

[Karachi High Court]

Before Muhammad Mujeebullah Siddiqui and Khilji Arif Hussain, JJ

COMMODITY & EQUIPMENT INT'L (PVT.) LTD.

Versus

COMMISSIONER OF INCOME-TAX

I.T.R. No.80 of 1993, decided on 31st August, 2005.

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

----S. 32(3)---Method of accounting---Past history of the case---When relevant.

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

---S. 32(3)---Method of accounting---Invoking of S.32(3), Income Tax Ordinance, 1979---Requirements.

Section 32(3), Income Tax Ordinance, 1979 shows that where no method of accounting has been regularly employed or the method employed is such that in the opinion of the Deputy Commissioner, the income, profits and gains cannot be properly deduced therefrom or where subsection (2) applied, the assessee fails to maintain accounts, and does not make payments or records transactions in the form or manner, prescribed under the said subsection, then only the income, profits and gains of assessee shall be computed on such basis and in such manner as the Deputy Commissioner thinks fit. Resort to the provisions contained in section 32(3) of Income Tax Ordinance, 1979 cannot be made until and unless the conditions precedent specified in the provision itself are fulfilled. In the present case the Assessing Officer has nowhere given any finding that the accounts have not been properly maintained or it has been maintained in such a manner that it is not possible to deduce the correct income, profits and gains. On the contrary, the Assessing Officer has held that the purchases and sales are verifiable. In these circumstances the Income Tax Appellate Tribunal ought to have accepted the declared GP rate as well. It appears that the Income Tax Appellate Tribunal failed to advert to the point that in the wake of acceptance of declared purchases and sales the enhancement of GP rate would be against the principle of accountancy and would be certainly a bad mathematics.

The provisions contained in section 32(3) of the Income Tax Ordinance, 1979 thus could not be invoked.

Salman Pasha for Applicant.

Aqueel Ahmed Abbasi for Respondent.

Date of hearing: 31st August, 2005.

2005 P T D 2539

[Karachi High Court]

Before Muhammad Mujeebullah Siddiqui and Khilji Arif Hussain, JJ

ASSISTANT COLLECTOR, CUSTOMS AND CENTRAL EXCISE, DIVISION-III, SUKKUR

Versus

Messrs PAKISTAN PETROLEUM LTD., KARACHI

Central Excise Appeal No.253 of 2001, C.M.As. Nos.813, 426 of 2005 and 2534 of 2001, decided on 8th September, 2005.

Central Excise Act (I of 1944)---

----S. 36-C---Appeal to High Court---Appeal under S.36-C, Central Excise Act, 1944 can be filed by the Collector only and none else---Appeal in the present case, was filed in the name of the Assistant Collector, Customs and Central Excise, while it was signed by the Deputy Collector Customs, Central Excise and Sales Tax and the verification was signed by a Law Officer, Customs and Central Excise; in addition to the said anomalies and filing of appeal by incompetent persons, department submitted a notification to the effect that the Collectorate was transferred to the large taxpayers unit---Department, in circumstances, had no locus standi to submit the application to file a fresh memo. of appeal duly signed by the Collector and by removing other anomalies---Appeal in the present form being not maintainable was dismissed by the High Court.

Fariduddin and Raja Muhammad Iqbal for Appellant.

Muhammad M. Chinoy for Respondent.

2005 P T D 2543

[Karachi High Court]

Before Sabihuddin Ahmed and Khilji Arif Hussain, JJ

Messrs QAISER BROTHERS (PVT.) LTD., KARACHI

Versus

CONTROLLER OF CUSTOMS VALUATION CUSTOM HOUSE, KARACHI and 3 others

Constitutional Petitions Nos. 440 of 1991 and D-2813 of 1992, decided on 14th December, 2005.

(a) Notification---

----Where the statute itself provides the date from which a notification is to become effective no general principle can be resorted to---Equities of the situation must always be looked into before giving retrospective effect to a notification.

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

------S. 25-B [as it stood in 1991-1992]---Constitution of Pakistan (1973), Art. 199---Constitutional petition---Goods of the petitioner were allowed to be cleared upon payment of duty at the rate of US $800 as per declaration of the petitioner and furnishing bank guarantee for the disputed amount---Provision of S.25-13, Customs Act, 1969 enabled the Central Board of Revenue or its delegatee to fix the ITP of goods at such rates as it might deem fit but there was no room for unfettered discretion in public law and all public powers must be exercised rationally and upon objective considerations---No material, in the present case, was placed on record to indicate as to what persuaded the Controller of Customs Valuation to fix the ITP of the imported goods at US $1165 per metric ton, it had also not been explained whether the ITP had rightly been fixed on 29-10-1991 and as to what persuaded the competent Authority to slash it by more than 30% within six months---Record showed that equally responsible officer of the Customs viz. the Collector of Customs as well as the Valuation Inspectors under Statutory Rules . (COTECNA), who were required to be aware of the trend of international prices had opined well before clearance of the consignments that the value declared (US $800) by the importer was not incorrect---Department had allowed to clear the consignment upon furnishing bank guarantee subject to resolution of the question of the correct ITP and as such it was a live issue rather than a past and closed transaction on 1-4-1992---High Court, in circumstances, round no justification in refusing to give retrospective effect to the notification dated 1-4-1992 insofar as same concerned the petitioner---Constitutional petition was allowed to the extent of holding the petitioner's liability to pay customs duty at the rate of US $830 per metric ton who will deposit the outstanding amount whereupon the bank guarantee shall be discharged.

Army Welfare Sugar Mills v. Federation of Pakistan 1992 SCMR 1652; Illahi Cotton Mills v. Federation of Pakistan PLY) 1997 SC 582; Anoud Power Generation v. Federation of Pakistan PLD 2001 SC 340 and Polyron v. Government of Pakistan PLD 1999 Kar. 238 ref.

Abdul Ghaffar and Khalid Jawed Khan for Petitioners (in C.P.D. No.2813 of 1992).

Faisal Arab Standing Counsel for Respondents.

Jawed Farooqui for Respondent No. 1.

Date of hearing: 1st December, 2004.

2005 P T D 2554

[Karachi High Court]

Before Sarmad Jalal Osmany and Amir Hani Muslim, JJ

MUHAMMAD SARWAR

Versus

FEDERATION OF PAKISTAN through the Secretary, Revenue Division and 2 others

Constitutional Petition No.D-490 of 2004, decided on 23rd April, 2005.

Customs Act (IV of 1969)---

----Ss. 177 & 3---Customs Rules, 2001, R.335--- S.R.O. 388(I)/82, dated 22-4-1982---S.R.O. 431(I)/98, dated 30-4-1998--- Constitution of Pakistan (1973), Art. 199---Constitutional petition---.Powers of Directorate General of Intelligence & Investigation---Scope---Seizure of containers---Directorate General of Intelligence and Investigation had no jurisdiction either to seize or to issue notice under S. 171, Customs Act, 1969, inter alia, for the reason that such authority was not even vested with the Collector of the Port of Transshipment, which could have taken note of the alleged misdeclaration---Customs Intelligence Directorate had no jurisdiction to seize duty paid goods as the same did not fall within the ambit of its powers---In the present case, one of the containers on which duty was paid, was intercepted afterwards by the Directorate General of Intelligence and Investigation and Deputy Director General of Intelligence & Investigation and which was not the subject-matter of. transshipment---High Court, in circumstances, directed that the container in question be released immediately to the importer, subject however, to any action to be taken by the Collectorate of the Port for misdeclaration or evasion of Customs duty, if any, in accordance with law---Notice issued by the Directorate General of Intelligence and Investigation in that behalf was declared to be without lawful authority---Other two containers which were also in the custody of the Deputy Director General of Intelligence and Investigation and were to be transshipped to the Dry Port were ordered to be released and handed over to the Collector of the Port for proceedings according to law---Impugned notices issued by Directorate General and Deputy Director General of Intelligence and Investigation were quashed by the High Court with directions that if need be, both the Directorates shall issue the delay and detention certificates forthwith for the three containers from the date of seizure till its release as the importers could not be compelled to pay any amount of demurrage on account of the wrongful acts of the Directorates.

Messrs Haris Trading International and another v. Director Intelligence and Investigation (Customs and Excise), Karachi and 4 others passed on 16-3-2004 in Constitution Petitions Nos.D-1512 and 1513 of 2003 and Shahzad Ahmed Corporation v. Federation of Pakistan and 2 others passed on 7-9-2004 in Constitution Petition No.D-817 of 2004 fol.

Collector of Customs v. S. M. Yousuf 1973 SCMR 411 and Mazhar Iqbal v. Collector of Customs 2004 PTD 2994 ref.

Khalid Javed Khan or Petitioner.

Syed Tariq Ali, Standing Counsel for Respondents.

Date of hearing: 14th December, 2004.

2005 P T D 2568

[Karachi High Court]

Before Sabihuddin Ahmed and Khilji Arif Hussain, JJ

Messrs SINGER PAKISTAN LTD.

Versus

GOVERNMENT OF PAKISTAN through Secretary Ministry of Finance, Islamabad and 4 others

Constitutional Petition No.D-1482 of 1995, decided on 30th September, 2004.

Customs Act (IV of 1969)---

----S. 25(2)---Constitution of Pakistan (1973), Art.199---Constitutional petition---Determination of Customs value of goods---For the purpose of determining value of the imported goods at the relevant time "normal price" had to be determined by the Authority, whereas after amendment under S.25(2) Customs Act, 1969 it was "actual price" which had to be taken into consideration---Authorities, having determined "normal price", which, in exercise of Constitutional jurisdiction, in the absence of any cogent evidence, could not be interfered with---Constitutional petition was dismissed by the High Court.

Shafaat Hussain, for Petitioner.

Messrs Haider Iqbal Wahniwal and Raja M. Iqbal for Respondents.

Date of hearing: 30th September, 2004.

2005 P T D 2573

[Karachi High Court]

Before M. Mujeebullah Siddiqui and Khilji Arif Hussain, JJ

Messrs WALL MASTER

Versus

COLLECTOR OF CUSTOMS and others

Constitutional Petition No. D-1003 of 2004, decided on 1st September, 2005.

Customs Act (IV of 1969)---

----Ss.81 & 80---Constitution of Pakistan (1973), Art. 199---Constitutional petition---Provisional assessment---Period of one year specified in S.81(2) of the Customs Act, 1969 from the date of provisional assessment had expired and there was no order extending the period of final assessment by 90 days by the Collector of Customs---No final assessment order having been made under 5.80 of the Customs Act, 1969, by virtue of the provisions contained in 5.81(4) of the Act, the provisional assessment made under S.81(1) had attained finality---High Court allowed the Constitutional petition in the terms that notices issued for enforcing the recovery against the cancelled bank guarantee as well as for the recovery of amount in excess of assessed taxes and duty, shown in the provisional assessment order, were illegal and were liable to be struck down---Department was restrained from enforcing any recovery from the, petitioner in excess of the taxes and duty assessed at the time of provisional assessment order.

Ruling No.66, given by Central Board of Revenue contained in the book Customs General Order, 2002 Edition, compiled by Mr. Tariq Najib Choudhry, page 369 ref.

Muhammad Afzal Awan for Petitioner.

Ahmed Khan Bugti with Fayyaz Ahmed Rai, Appraising Officer in Customs Department for Respondents.

Date of hearing: 1st September, 2005.

2005 P T D 2582

[Karachi High Court]

Before Muhammad Mujeebullah Siddiqui and Khilji Arif Hussain, JJ

COLLECTOR OF SALES TAX AND CENTRAL EXCISE LARGE TAXPAYERS UNIT, KARACHI

Versus

Messrs ALLIED ENGINEERING AND SERVICES LTD., KARACHI

Special Sales Tax Appeal No. 529 of 2004, decided on 9th September, 2005.

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

----Ss.2(33), (35) & (46)---Charges received for installation of the generators sold by the assessee were not to be included in the value of supply and rendering of such services was not included in taxable activity in accordance with the law as prevailing in the year 2000.

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

----S.47---Appeal to High Court---Only substantial question of law was to be entertained by High Court---Where no substantial question of law requiring interpretation had been shown, the appeal was dismissed in limine.

Raja Muhammad Iqbal for Appellant.

Faisal Siddiqui for Respondent.

2005 P T D 2586

[Karachi High Court]

Before Muhammad Mujeebullah Siddiqui and Khilji Arif Hussain, JJ

Messrs ATLAS INVESTMENT BANK LTD.

Versus

COMMISSIONER OF INCOME TAX

I.T.Rs. Nos. 247, 248, 249, 250, 251 & 252 of 2005, decided on 26th August, 2005.

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

----Ss.23 & 24---Income Tax Act (XI of 1922), Ss.10(2)(iii) & 15-BB---Deductions---No conflict or difference of opinion existed in the judgment passed by Karachi High Court in the case of Commissioner of Income Tax Y. PICIC 1988 PTD 626 and judgment passed by Lahore High Court in Tax Reference No.7 of 2001 dated 22-6-2004 reported as 2005 PTD 2599---Position elucidated.

Commissioner of Income Tax v. PICIC 1988 PTD 626 and 2005 PTD 2599 ref.

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

----Ss.23, 26 & 136---Deductions ---Reference to High Court---Tribunal had found that if an assessee had taxable as well as exempt income, the expenditure incurred for the purpose of earning the taxable income was a deductible expenditure while the expense incurred for earning the exempt income was not deductible expenditure---Principle forming basis of the order passed by the Tribunal was not open to any exception by the High Court.

(c) Precedent---

----If there is difference of opinion between the High Courts, all the subordinate Courts including Benches of the Income Tax Appellate Tribunal are required to follow the view taken by the High Court within whose jurisdiction they are working.

Rehan Hassan Naqvi with Miss Lubna Perwez for Applicant.

None for the Respondent.

Date of hearing: 26th August, 2005.

2005 P T D 1

[Lahore High Court]

Before Nasim Sikandar and Mian Hamid Farooq, JJ

GHARIBWAL CEMENT LIMITED through General Manager

Versus

INCOME TAX APPELLATE TRIBUNAL, OF PAKISTAN, LAHORE and 2 others

Income Tax Appeal No. 25 of 1999, decided on 29th July, 2004.

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

----Ss. 5(1)(c), 116(a) & 136---Appeal to High Court---Imposition of penalty by Additional Commissioner as Special Officer without obtaining statutory permission of Commissioner concerned---Such question neither raised before Tribunal nor ruled upon by it---Effect---Additional Commissioner ought to have obtained approval under S. I 16(a) of Income Tax Ordinance, 1979---Statutory permission to impose penalty was a jurisdictional fact, which could be raised at any time.

Sandal Engineering (Pvt.) Ltd. v. I.A.C. Income Wealth Tax (2001) 83 Tax 551 rel.

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

----S. 136---Appeal to High Court---Effect---Whole of the matter is thrown open on appeal, thus, objection with regard to limitation and jurisdiction could always be taken before the next forum.

(c) Contract Act (IX of 1872)---

----S. 17---Fraud---Connotation---Deception, which does not deceive, is not fraud, rather same is only an attempt.

(d) Fraud---

----Proof---Fraud cannot be presumed, rather same must be proved as a positive act.

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

----Ss. 111 & 119---"Concealment"---Connotation---"Fraud", "deception" and "concealment"--Distinction--Penalty and prosecution for concealment of income---Essential conditions stated.

Concealment is an active act, which operates both in mind as well as in action. It implies pre-existence of ability and opportunity to judge and decide. Besides other things, it is of paramount importance to know that the act employed to deceive is either half open or is totally concealed. A fraud cannot be presumed. It must be proved as a positive act. Generally speaking, in Income Tax proceedings, an act of concealment is perfected and completed, when in any assessment year on the basis of a wrong information supplied or an item of receipt liable to tax is successfully suppressed or income chargeable to tax is not disclosed to the revenue or an illegal deduction is successfully claimed as expenditure incurred. As a rule, a deception, which does no deceive, is not fraud. It is only an attempt. The provisions of section 111 of Income Tax Ordinance, 1979 are unique in the sense that these treated attempt and completed action of concealment alike. Therefore, both attempts as well as active act of concealment are punishable alike. In such situation; when an attempt and completed act of concealment are punishable alike, a penalty may not finally be imposed, unless the revenue is absolutely positive and can prove on record that an attempt was actually made to conceal income. An act of concealment is matured in the form of framing of an assessment, which is traced out in any subsequent year. It is liable to punishment as a completed action of concealment inasmuch as the assessee succeeded in reaping the fruits of the fraud by reducing or diminishing his liability towards revenue. A bona fide claim made may loosely be described as an attempt, but it is never completed action of fraud on the revenue. The introduction of provisions of subsection (2-A) in section 11 by Finance Act, 1988 was an attempt to soften the rigours of the provisions of subsection (1) of that section. The inserted provisions did not succeed in making a clear distinction between an honest claimant, a mere attempt or an actual act of concealment, because the three dividing lines between them are so thin and mostly relates to personal intention of a person or the condition of his mind. A real picture does not emerge till the act crosses the stage of attempt and matures into an active fraud.

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

----S. 111---Penalty for concealment of income, imposition of--­Existence of mens rea on assessee's part not established---Claimed expenses not proved to be a deliberate and wilful attempt on assessee's part to conceal income---Held; mere claim of an expense would not make assessee contumacious, unless proved on record to have persistently been cheating the revenue in previous years and was bent upon to go away with same in year under review---Imposition of penalty in such circumstances was, unjustified.

(g) Income-tax---

----Penalty, imposition of---Power to impose penalty, if discretionary, should not be exercised, unless defaulter was found contumacious--­Principles.

In fiscal statutes, a penalty should not be imposed only for the reason that it is legal to do so, particularly where the Statute vests a discretion in the Revenue Authority. In cases, where imposition of penalty is discretionary, the power so vested may not be exercised, unless the defaulter is found contumacious.

Commissioner of Income-tax v. Miss Aasia, Film Artiste, Lahore 2001 PTD 678 and Additional Commissioner of Income-tax v. Naravandas Ramkishan 1994 PTD 199 rel.

Messrs Abrar Hussain Naqvi and Zia Haider Rizvi for Appellant.

Muhammad Ilyas Khan for Respondents.

Date of hearing: 16th March, 2004.

2005 P T D 14

[Lahore High Court]

Before Nasim Sikandar, J

Messrs FAWAD TEXTILES MILLS LTD. through Director, Lahore

Versus

PAKISTAN through Secretary, Ministry of Finance and 3 others

Writ Petition No. 16021 of 2003, decided on 21st October, 2004.

Income Tax Ordinance (XXXIX of 1979)---

---Ss.156 & 62---Income Tax Ordinance (XLIX of 2001), S.221(1A)--­Constitution of Pakistan (1973), Art.199---Constitutional petition--­Rectification of mistake--Limitation-- Order under S.62, Income Tax Ordinance, 1979 or any other provision of the said Ordinance could not be rectified after expiry of four years by invoking the provisions of S.221 of the Income Tax Ordinance, 2001---Principles.

In the present case, at the time when the original assessment was rectified on 1-5-1999 the provisions of section 156 of the late Income Tax Ordinance, 1979 were in the field. Subsection (4) of section 156 of the late Ordinance provided that no rectification order "shall be made after the expiry of four years from the date of the order sought to be amended". The Income Tax Ordinance, 2001 was promulgated on 13th September, 2001 (though not with immediate effect). In the new Ordinance section 221 (Rectification of Mistakes) was introduced as parallel to the provisions of section 156 (Rectification of Mistakes) of the late Ordinance. Then by Finance Act, 2003 subsection (1A) to 5.221 was introduced in the new Ordinance of 2001 to enable the Revenue/Commissioner to amend any order passed under the repealed Ordinance by a Deputy Commissioner or an Income Tax Panel. As framed originally subsection (4) of section 221 of the new Ordinance provided that "no order under subsection (1) may be made after five years from the date of the order sought to be rectified". The legal position, therefore, as asserted by the petitioner, melts down to the proposition whether an order under section 62 or any other provision of the late Income Tax Ordinance can be rectified after expiry of four years by invoking the provisions of section 221 of the new Ordinance.

The answer to the proposition in hand is in the negative. Although the provisions relating to limitation are procedural in nature yet these cannot be invoked or made use of where a longer limitation is brought on the statute by way of an amendment when the act sought to be touched had already attained finality on expiry of the limitation under the previous legislation.

The law prescribing the period of limitation is to be considered as procedural rather than substantive. This proposition of law would have only one exception, i.e., if under the existing law of limitation the right to initiate a proceeding has already become time-barred then a subsequent enlargement of time by an amendment of law cannot be availed of. In such a case, the matter having attained finality, would vest a party with substantive right which has already accrued. This accrued right cannot be taken away by a subsequent amendment. Substantive laws determine the rights and liabilities of the parties concerned, whereas procedural laws govern the manner in which such rights or obligations are to be enforced or realized.

In the present case the order recorded under section 156 of the repealed Ordinance on 1-5-1999 attained finality after the expiry of the prescribed limitation of four years in that Ordinance on 30-4-2003. On the other hand the power to rectify the orders recorded under the late Ordinance was vested in the Revenue by introducing said subsection (1A) in section 221 through Finance Act, 2003 dated 17-6-2003. Since by that time the period of four years prescribed under the late Income Tax Ordinance, 1979 had already expired, subsection (4) of section 221 of the new Income Tax Ordinance, 2001 could not be invoked to extend the period to five years. On expiry of the prescribed period of four year under the late Ordinance the petitioner acquired a vested right and it, orders under section 156 recorded on 1-5-1999 rectifying the origin assessment orders matured into a past and closed transaction.

Commissioner of Income-tax v. Mrs. Manjula Sood (1997) 227 ITR 873 fol.

Sajid Ijaz Hotiana for Petitioner.

Shahid Jamil Khan for Respondents.

Date of hearing: 24th June, 2004.

2005 P T D 21

[Lahore High Court]

Before Ali Nawaz Chowhan and Rustam Ali Malik, JJ

Messrs YOUSAF ENTERPRISES

Versus

COLLECTOR

Custom Appeal No.21 of 2002, heard on 20th October, 2004.

Customs Act (IV of 1969)---

----Ss.25 & 81---Determination of value of goods---Procedure--­Provisional assessment---Contention of the appellant was that under S.25 of the Customs Act, 1969, a procedure having been laid down for purposes of valuation, the dependence of the Customs Department on the advice of Traders Association was something alien to the system and should not have been acted upon---Validity---Held, when a system was laid for the purpose of valuation, it had to be adhered to and appreciation of any evidence in that respect had to be in conformity with what was prescribed because otherwise depending on something outside the laid down methodology would amount to an aberration and hearsay and could damage the requirement given by the law---Advice coming from the Traders Association was only a factor which was to be considered while the record showed that the main factor taken into consideration was the advice of the Association---Such situation, in circumstances came in clash with the provisions of S.25 of the Customs Act, 1969 and therefore was not tenable in law and it would be proper if the matter was remitted to the Deputy Collector Customs for following the procedure under S.25 read with S.30 of the Act for coming to a correct valuation in accordance with law---Advice given by the Association, however, was to be considered as one of the factors in that connection but not the basis.

Muhammad Naeem Qazi for Appellant.

M.D. Shahzad for Respondent.

Date of hearing: 20th October, 2004.

2005 P T D 50

[Lahore High Court]

Before Nasim Sikandar and Muhammad Sair Ali, JJ

COMMISSIONER OF INCOME-TAX/WEALTH TAX

Versus

Mst. KAMAL ASGHAR

W.T.As. Nos. 274, 305 to 316, 318 to 338, 60 to 69, 44, 45, 289, 290, 291, 4, 243 of 2002, 13 to 30 of 2003, heard on 18th October, 2004.

(a) Wealth Tax Act (XV of 1963)---

----S.27---Appeal to High Court---Question as framed could not be said to have arisen out of the order of the Tribunal inasmuch as it was never contended or argued before the Tribunal---High Court rejected the appeal.

(b) Wealth Tax Rules, 1963---

----R.8(3)---Wealth Tax Act (XV of 1963), S.27---C.B.R. Circular No.7 of 1994, dated 10-7-1994---Valuation of assets---Land and building—­Assessees had filed their wealth tax returns indicating different values for the movable properties owned by them---Assessing Officer, after discarding the declared value of residential houses or commercial properties, proceeded to determine their value by clubbing the cost of construction and the value of land as determined by the District Collector under S. 27-A, Stamp Act, 1899---Validity---Only method provided by law in such cases was R.8(3), Wealth Tax Rules, 1963---Separate valuation of cost of construction and land for the purpose of assigning of value to a property could not be made---C.B.R Circular No.7 of 1994, dated 10-7-1994 could not hold good as against R.8(3), Wealth Tax Rules, 1963---Term and expression "GALV" as defined in explanation to R.8(3), Wealth Tax Rules, 1963 by itself implied that it was not necessary for a building or property to have actually been let out for the purpose of "GALV" rule---Said Explanation defined "Gross Annual Rental Value" to be the one for which the property might reasonably be expected to be let from time to time---Definition had itself indicated that "GALV" was only a notional value on which a property could reasonably be expected to be let from year to year---Actual renting out of property for the purpose of application of R.8(3), therefore, was not required at all.

K. T. Kuruvilla v. District Valuation Officer and another 2001 PTD 848 distinguished.

Saqib Hassan and Mian Yousaf Qamar for Appellant.

Dr. Ilyas Zafar, Malik Tabbasam Maqsood Khan and Ch. Anwarul Haq for Respondent.

Date of hearing: 18th October, 2004.

2005 P T D 67

[Lahore High Court]

Before Muhammad Sair Ali, J

Messrs SOHRAB GLOBAL MARKETING (PVT.) LTD. through Director

Versus

DEPUTY COLLECTOR OF CUSTOMS, LAHORE and 4 others

Writ Petition No. 13655 of 2004, heard on 14th October, 2004.

Customs Act (IV of 1969)---

----Ss. 81, 25 & Scheds. I & II---Constitution of Pakistan (1973), Art. l99---Constitutional petition---Valuation of goods---Determination--­Provisional assessment---Issuance of valuation advice without any data along therewith---Contention of the petitioner was that he was not confronted with any evidence; even otherwise, no evidence was available to fix the price of the consignment; that such fixation without hearing, was of no value and that the enhancement or change in the value had been effected through a letter and admittedly not through a notification as was mandatorily required under S.25 of the Customs Act, 1969--­Validity---Department was unable to show as to whether the advice so issued met the fatally essential requirements of S.25 of the Customs Act, 1969 and that the provisions of the Act had been duly complied with--­Held, Central Board of Revenue or any other authorized Officer could fix the minimum custom value of goods specified in the First and Second Schedules through a notification and valuation advice letter being not such notification could not have any legal effect whatsoever.

Messrs Siddique International v. Assistant Collector (Customs) Writ Petition No.7752 of 2004 and Messrs Al-Huda Enterprises v. Central Board of Revenue and Wasim Khan v. Additional Collector of Customs Writ Petition No.4319 of 2000 applied.

Mian Abdul Ghaffar for Petitioner.

Muhammad Naeem Sheikh for Respondent.

Date of hearing: 14th October, 2004.

2005 P T D 72

[Lahore High Court]

Before Nasim Sikandar and Mian Hamid Farooq, JJ

Messrs MAHMOOD & COMPANY

Versus

ASSISTANT COLLECTOR, SALES TAX (ENFORCEMENT & COLLECTION), SHALIMAR DIVISION; LAHORE and 2 others

S.T.As. Nos.224 and 225 of 2002, decided on 25th October, 2004.

Sales Tax Act (VII of 1990)---

----Ss. 33(4)(c), 3 & 47---S.R.O. No.630(I)/95 dated 2-7-1995--­Constitution of Pakistan (1973), Arts.77 & 127---Association of Re­-Rolling of Steel Mills, of which the appellants, in the present case., were the members, approached the Federal Government with the request to continue with the fixed tax regime undertaking that the members of the Association would pay 20% more during the year 1996-1997 as compared to the year 1995-1996 and in return they were promised by the Revenue that no audit of any of the members of the, Association will be undertaken--Revenue under the agreement fulfilled its part of the ­agreement also that almost all members of the Association except for a very few including the appellants defaulted--Revenue directed the appellants to pay a certain amount as Sales Tax along with additional tax and penalty---Validity---Held, mere minutes of the meeting between the Association and the Revenue was not enough to change the existing tax .regime fully supported by the provisions of S.3(1), Sales Tax Act, 1990---Such matter could not be settled by way of an administrative arrangement--No levy against the express words of the Statute could be made on the basis of such an agreement, much less to say of imposition of additional Tax or penalties in case of non.-compliance with the terms of agreement---Appellants were not in any manner estopped from taking the plea of non-acceptance of the agreement,---Agreement between the Association and the Revenue having never been converted into law through the process prescribed in that behalf no person could be forced to comply with the same---Plea that a person did for some time accept the terms of agreement and acted upon the same, would not convert that agreement into a law---Principles.

Mere minutes of meeting between the Association and the Revenue were not enough to change the existing tax regime fully supported by the provisions of section, 3(1) of the Sales Tax Act, 1990. The view that the matter stood settled by way of an administrative arrangement cannot be accepted as correct, statement of law. Not only the imposition of a tax but also any change even in its rate or process of collection cannot be made without there being a superior or subordinate legislation. The minutes of the meeting between the Revenue and the Association of a class of taxpayers is neither a superior nor a subordinate legislation. In taxation system of Pakistan it is correct that Legislature at times delegates its powers to the Revenue wing of the Government to make changes giving exemptions or altering the rate of levy or the procedure to collect it. The exercise of such power by the executive, however, is certainly conditional to the existence of a delegation in the superior legislation i.e. an Act of the Parliament. In the present case it was necessary to formally legalize the terms of the agreement either by an Act of the Parliament or if the existing law so permitted, by way of a subordinate legislation in the form of a notification. In absence of a delegated power and manifestation of that -power through a notification or an amendment in the rules, the agreement between the Association and the Revenue was at best a promise to pay at a certain rate on the part of one party and to refrain from conducting audit by the other. That set of promise could very well be a gentleman's promise. However, it was not enforceable in law. No levy against the express words of the statute can be made on the basis of such an agreement, much less to say of imposition of additional tax or penalties in case of non-compliance with, the terms of agreement.

The appellants were not in any manner estopped from taking the plea of non-acceptance of the agreement. There is no estoppel against law. The agreement between the parties having never been reduced in the form of a statutory instrument, any person affected by the same could very well refuse to abide by such agreement even after having initially accepted the same. An association of taxpayers is different from a collective bargain agent which is authorized by law to negotiate and bargain on behalf of the labourers which if represents. An association of taxpayers has no role to play under the Sales Tax Act nor any of the rules framed thereunder. It can certainly represent the interest of its members. However; in absence of any support from any law it cannot bind its members when it comes to payment of a levy, its rate or even the procedure of its collection. This is clearly discernible from the present scheme of the Sales Tax Act, 1990. It also means that compliance by most .of the members of the Association cannot upgrade the agreement to the status of a statutory instrument. The levy of tax, its rate and collection does not depend upon the will or agreement of some gentlemen who purport to represent other taxpayers of their class. The Constitutional prohibition against imposition of tax, except under the authority of a law as contained in Articles 77 read with Article 127, also extends not only to the rate of tax and the procedure of its collection unless the superior legislation had delegated such a power and that power had been exercised strictly in terms and conditions of the delegation. The agreement between the said Association and the Revenue, having never been converted into law through the process prescribed in that behalf, no person could be forced to comply with the same. The plea that a person did for some time accept the terms of an agreement and acted upon the r same would not convert that agreement into a law.

Mian Abdul Ghaffar for Appellant.

A. Karim Malik for Respondent.

Date of hearing: 5th July, 2004.

2005 P T D 86

[Lahore High Court]

Before Muhammad Sair Ali, J

Messrs PUNJAB ARMS CO., LAHORE through Proprietor

Versus

DEPUTY COLLECTOR OF CUSTOMS (GROUP-IV), LAHORE and 4 others

Writ Petition No.9146 of 2004, heard on 16th September, 2004.

Customs Act (IV of 1969)---

----Ss.81(3), 25 & Scheds. I, II---Constitution of Pakistan (1973), Art. 199-- Constitutional petition---Customs Valuation of goods--­Determination---Provisional assessment of duty---Contention of the petitioner was that valuation advice was issued without a notification in terms of S.25, Customs Act, 1969 and the rules framed thereunder and it was thus ultra vires the law---Validity---Held, Central Board of Revenue or any other authorized officer could fix the minimum Customs value of goods specified in the First Schedule and Second Schedule only through a notification under S.25(14) of the Customs Act, 1969---Letter of valuation advice not being a notification, could not have any legal effect whatsoever and as such valuation was not finalized through a notification as required by law.

Messrs Siddique International v. Assistant Collector (Customs) Writ Petition No.7752 of 2004 and Messrs Al-Huda Enterprises v. Central Board of Revenue and Wasim Khan v. Additional Collector of Customs Writ Petition No.4319 of 2000 applied.

Mian Abdul Ghaffar for Petitioner.

Sultan Mahmood for Respondents.

Date of hearing: 6th September, 2004.

2005 P T D 88

[Lahore High Court]

Before Nasim Sikandar and Muhammad Sair Ali, JJ

COMMISSIONER OF INCOME-TAX

Versus

OLIVES CATERING

I.T.A. No.581 of 1998, decided on 19th November; 2003.

Income Tax Ordinance (XXXI of 1979)---

----Ss.13(1)(aa) & 136---Appeal---Maintainability---Question of law--­Assessing Officer made an addition in the declared income of assessee on account of unexplained investment---Appellate Authority deleted the addition but Income Tax Appellate Tribunal partially maintained the deletion---Plea raised by the Income Tax authorities was that the Appellate Authorities were not justified in deleting the additions made under S.13(1)(aa) of Income Tax Ordinance, 1979---Validity---Income Tax Appellate Tribunal found that the Appellate Authority deleted the entire addition on the basis of general observations---In the view of the Tribunal the Appellate Authority neither considersed the credit nor any explanation was offered to the authority, therefore, to that extent the addition was restored---From such findings of fact no question of law hard arisen unless it could be established that either the observations were not supported from record or else the Tribunal reached a. conclusion which was against the record---High Court refused to entertain the question---Appeal was dismissed in limine.

Shahid Jamil Khan for Respondent.

Date of hearing: 19th November, 2003.

2005 P T D 101

[Lahore High Court]

Before Nasim Sikandar and Muhammad Sair Ali, JJ

COMMISSIONER OF INCOME-TAX

Versus

STANDARD FOOD

I.T.A.No.603 of 1999, decided on 11th December, 2003.

Income Tax Ordinance (XXXI of 1979)---

----Ss.135 & 136---Appeal---Maintainability---Rectification of earlier order---Validity-- Order under appeal was passed by Income Tax Appellate Tribunal on miscellaneous application---Validity---It was only an order passed under S.135 of Income Tax Ordinance, 1979, which was amenable to the appellate jurisdiction of High Court---Order under appeal was recorded on miscellaneous application declining rectification of earlier order---Appeal was not maintainable in circumstances.

Messrs Hong Kong Chinese Restaurant, Main Boulevard Gulberg, Lahore v. Assistant Commissioner of Income Tax, Circle 6, Lahore and another 2002 PTD 1878 ref.

M. Ilyas Khan for Appellant.

Ch. Muhammad Ishaq for Respondent.

Date of hearing: 11th December, 2003.

2005 P T D 106

[Lahore High Court]

Before Nasim Sikandar and Muhammad Sair Ali, JJ

COMMISSIONER OF INCOME-TAX

Versus

IMRAN SIDDIQUE

I.T.A. No. 18 of 1999, decided on 19th November, 2003.

Income Tax Ordinance (XXXI of 1979)---

----Ss. 13(1)(d), 65 & 136---Re-opening of assessment---Definite information-- Assessing Officer, on an information received, issued a show-cause notice to assessee suggesting that value of shop purchased by him in a particular locality was understated---Assessing Officer, after discarding submissions of assessee made in reply to show-cause notice, proceeded to make addition under S.13(1)(d) of Income Tax Ordinance, 1979---Appellate Tribunal found that assessment could not be re-opened merely because assessee had-purchased certain property, unless there was a definite information regarding understatement of investment--­Issue, whether a definite information existed enabling the Revenue to re­open a case under S.65 of Income Tax Ordinance, 1979, was necessarily a question of law, all the more so when Department failed to bring home any evidence to support its view that value of the property had been understated---Mere fact that in another Commercial Centre a shop with similar area was purchased by another assessee at a higher rate would not amount to definite information enabling Revenue to re-open a case---High Court declined to entertain and rule upon said question.

Shahid Jamil Khan for Appellant.

Date of hearing: 19th November, 2003.

2005 P T D 108

[Lahore High Court]

Before Nasim Sikandar and Muhammad Sair Ali, JJ

Mst. ZARINA VOUSAF

Versus

INSPECTING ADDITIONAL COMMISSIONER OF INCOME-TAX/WEALTH TAX, SIALKOT RANGE, SIALKOT and another

Wealth Tax Appeals Nos.97, 98, 99, 259 and 260 of 2002, heard on 1st September, 2004.

(a) Wealth Tax Act (XV of 1963)---

----Second Sched., Cl.7(i) & (ii) [as added by Finance Act (IX of 1996)]---Interpretation of Cl.7 of Second Schedule of the Wealth Tax Act, 1963---Claim of exemption from levy of wealth tax in respect of property having been purchased by the assessee out of foreign remittances---Claim was duly supported by a bank statement of the husband of the assessee---Validity---Concession given by the statute is necessarily relatable to the assets and not to an assessee---Any asset created by an assessee is entitled to enjoy exemption subject to the only condition that it was created out of remittances received in or brought into Pakistan through normal banking channel---Cl.7(i) of second Schedule of the Wealth Tax Act, 1963 does not speak of the recipient of the remittances at all---Asset once having qualified for exemption will remain so even if it changes hands or ownership by way of death, gift or even sale for statutory period---Principles.

The interpretation in the present case by the Revenue authorities of sub-clause (i) of clause (7) of the second schedule to the Wealth Tax Act, 1963 as maintained by the Tribunal is necessarily incorrect. Earlier these provisions were part of the statute exactly in the same manner as section 5 of the late Act. The said provision of law was added to the Wealth Tax Act as second schedule by way of Finance Act, 1996.

Reading to the said clause allowing exemption leads to conclude, that the concession given by the statute is necessarily relatable to the assets and not to an assessee as wrongly concluded by the members of the Tribunal. The opening part of clause (7) of the second schedule makes it clear that these two sub-clauses (i) and (ii) encompass two different situations. The principle however, remains the same that exemption is relatable to the assets and not to the assessee as such. In the first sub-clause the assets brought or remitted by an assessee into Pakistan or received by him from outside Pakistan are exempted for five years starting from the year in which they were brought, remitted or received. The case of the present assessee obviously is not covered by sub-clause (i) which was again wrongly thought to be so by the Revenue authorities as well as the members. Then sub-clause (ii) talks of creation of assets by an assessee "out of remittances received in or brought into Pakistan through normal banking channel" during and for the period referred to in sub-clause (i). Sub-clause (ii) without any iota of doubt visualizes a situation different from sub-clause (i). According to this sub­-clause any asset created by an assessee is entitled to enjoy exemption subject to the only condition that it was created out of remittances received in or brought into Pakistan through normal banking channels. This sub-clause does not speak of the recipient of the remittance at all. The only condition being that the remittances were received or brought into Pakistan through normal banking channels.

This interpretation is closer to the object of creating exemption which is to allure people to bring more and more foreign exchange in Pakistan through recognized banking channels. If the interpretation of the Revenue as well as the members of the Tribunal is accepted as correct, then there would hardly be any difference between the cases covered by sub-clause (i) and sub-clause (ii). Reading of clause does not lead us to conclude as the members of the Tribunal did that the emphasis in the language of the statute was totally on creating exemption to an assesses for an asset created by him out of remittances received by that assessee. The condition of being a direct recipient of remittances is not discernable from the said sub-clause (ii) which is relevant to .the claim of the assessee in the present case. Therefore, to say that foreign remittances being in the name of the husband of the assessee and, therefore, it was only he who could avail the concession both in clause 7 (i) and clause 7(ii) and none else is not a correct reading and interpretation of that clause. The assessing officer in the first instance was correct in accepting the claimed exemption:

In line with the interpretation of the Revenue and the Tribunal one will have to assume existence of at least four situations in one case which is not possible on a plain reading of both sub-clauses. The first sub-clause (i) clearly contemplates three situations only. It is that an asset is brought or remitted by an assessee himself into Pakistan or is received by him from outside Pakistan. This bringing, remitting and receiving is connected and relatable directly to an assessee. In sub-­clause (ii) the 4th situation is clearly evident in which the assessee only creates an asset. The only condition being that creation of such asset happens to be out of remittances received in or brought into Pakistan in the said manner.

Connecting an assessee personally to the exemption is likely to defeat the very purpose of exemption. For, if having been allowed exemption in respect of an asset, he dies before the expiry of statutory period of five years and that asset devolves upon his legal heirs by operation .of law the exemption will come to an end. That does not appear to be the intention of the law makers. An asset once having qualified for exemption will remain so even if it changes hands or ownership by way of death, gift or even sale. Till the period of expiry of the said period, it will carry its exemption along with it even in the hands of a third party. In other words, any person who inherits, or obtains by gift or sale an asset in respect of which an exemption was allowed in accordance with law, will not be liable to wealth tax in respect of that asset for the statutory period. This clearly appears to be the purpose of allowing exemption in order to encourage people to bring foreign exchange through regular banking channels.

If two reasonably acceptable interpretations of a provision of law are possible then the one that goes to the benefit of the subject should be adopted.

The exemption contemplated in sub-clause (ii) of clause 7 of the said schedule is available to an asset which had been created by remittances received through normal banking channels. Also that in view of the clear words of the statute it is not necessary that an assessee should personally be -its recipient.

Masud Ahmad v. The State PLD 1962 (W.P.) Lah. 878 ref.

(b) Interpretation of statutes---

---Courts are to presume that absurdity was not intended by law makers.

(c) Interpretation of statutes---

----If two reasonably acceptable interpretations of a provision of law are possible then the one that goes to the benefit of the subject should be adopted.

Ahmad Shuja Khan for Appellant.

Muhammad Ilyas Khan for Respondents.

Date of hearing: 1st September, 2004.

2005 P T D 116

[Lahore High Court]

Before Nasim Sikandar and Muhammad Sair Ali, JJ

COMMISSIONER OF INCOME-TAX

Versus

Messrs REHMAN TRADERS

P.T.R. No.281 of 2003, decided on 2nd October, 2003.

Income Tax Ordinance (XXXI of 1979)---

----S.136---Income Tax Appellate Tribunal Rules, 1981, R.11---Civil Procedure Code (V of 1908), O.XLI, R.1---Appeal---Maintainability--­Non-filing of certified copy of order---Income Tax Appellate Tribunal rejected appeal of the Department on the ground that certified copy of the order under appeal had not been filed with the, memorandum of appeal---Validity---High Court had already held in case titled C.I.T v. Muhammad Tariq Javaid, reported as 2000 PTD 2165, that R.11 of Income Tax Appellate Tribunal Rules, 1981, had an independent status and had no nexus with O..XLI, R.1 C.P.C.---In the matters of collection of Revenue, disputes could not be allowed to be determined in a perfunctory manner as had been done by the income Tax Appellate Tribunal---Order passed by the Tribunal was set aside and the appeal filed by the Revenue authorities would be deemed to be pending before the Tribunal to be heard and disposed of on merits in accordance with law---Appeal was allowed accordingly.

CIT v. Muhammad Tariq Javaid 2000 PTD 2165 and Pakistan Industrial Gases Ltd. v. CIT and another 2000 PTD 2903 fol.

Shahid Jameel Khan for Appellant.

Date of hearing: 2nd October, 2003.

2005 P T D 119

[Lahore High Court]

Before Ali Nawaz Chowhan, J

MEHMOOD BARNI, PROPRIETOR INTERHOME, GUJRANWALA

Versus

I.A.C., COMPANIES RANGE, GUJRANWALA

Writ Petition No.4367 of 2004, decided on 14th May, 2004.

Income Tax Ordinance (XXXI of 1979)---

----Ss.134 & 156---Constitution of Pakistan (1973), Art. 199---petition---Wavering attitude of Appellate Tribunal--Appeal filed by petitioner/assessee under S.134 of Income Tax Ordinance, 1979 was rejected by Tribunal, but later on pursuant to miscellaneous application made by petitioner, his appeal was accepted--Subsequently Department re-agitated the matter by filing application under S.156 of Income Tax Ordinance, 1979 and Tribunal by passing ex parte order recalled its earlier order whereby appeal filed by petitioner was accepted and previous order was cancelled---Inaction on the part of Tribunal in not deciding miscellaneous application of petitioner challenging said latest order of Tribunal was also very exceptional act and a very strange working---Matter, in circumstances was referred to Chairman, Income Tax Appellate Tribunal for constituting a Bench other than the Bench which was already seized of the matter so that entire case could be reconsidered and infirmities corrected in accordance with law.

Shahbaz Butt for Petitioner.

Yawar Ali Khan, Dy. A.-G. and Muhammad Ghias ud Din, Assistant Registrar for Respondent.

Date of hearing: 14th May, 2004.

2005 P T D 147

[Lahore High Court]

Before Nasim Sikandar, J

H & SONS

Versus

CENTRAL BOARD OF REVENUE

Writ Petition No. 11062 of 2002, decided on 15th March, 2004.

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

----Ss. 59 & 61---Constitution of Pakistan (1973), Art. 199--­Constitutional petition---Making of assessment order in respect of return--- Petitioner, who was an Association of Persons filed return for assessment year 2000-01---Case of petitioner initially was not selected for total audit, but notice was issued to petitioner under S.61 of Income Tax Ordinance, 1979 for its compliance till 30-12-2001---Issuance of said notice was challenged by petitioner/assessee on ground that subsection (4) inserted in S.59 of Income Tax Ordinance, 1979 through Finance Ordinance, 2001 had provided that no order would be made in any case after thirtieth day of June of financial year next following income year in respect of which a return of total income had been furnished---Provisions of S.59(4) were very clear that no order under subsection (4) of S.59 of Income Tax Ordinance, 1979 could be made after 30th day of June of financial year next following income year--­Service of notice under S.61 of Income Tax Ordinance, 1979 after 30-6-2001 on petitioner was not legally justified as newly added provision had barred framing of assessment on expiry of certain period.

(b) Interpretation of statutes---

---- Fiscal statute---Where two equally acceptable interpretations of a provision of law were possible, one favouring taxpayer needed to be adopted.

Siraj-ud-Din Khalid for Petitioner.

Shahid Jamil Khan for Respondent.

Date of hearing: 23rd July, 2004.

2005 P T D 152

[Lahore High Court]

Before Muhammad Muzammal Khan, J

Ch. MUHAMMAD HUSSAIN and others

Versus

COMMISSIONER OF INCOME-TAX

Writ Petitions Nos.9926, 10056 to 10059, 10103, 10104, 10108, 10124, 10126, 10132, 10148 to 10150, 10238, 10578, 10579, 10591 to 10601, 10667 to 10676, 10686, 10874 to 10878, 10925, 10927, 10929, 11082 to 11084, 11091 to 11107, 11123, 11255 to 11270, 11348 to 11350, 11354 to 11366, 11373, 11374, 11381 to 11383, 11432, 11562, 11726 to, 11731, 11740, 11799, 11800, 12053, 12056, 12066 to 12070, 12081 to 12085, 12158, 12279, 12280 of 2004, decided on 21st July, 2004.

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

----Ss. 114, 120 & 177---Central Board of Revenue's Circular No.5, dated 30-6-2003---General Clauses Act (X of 1897), S. 24-A---Return under "Universal Self-Assessment", acceptance of---Selection of return for audit---Scope---Return under S.114 of Income Tax Ordinance, 2001 by virtue of S.120 thereof would become assessment order the moment same was filed and receipt thereof was acknowledged by department after finding same to be complete and in absence of issuance of notice under S.120(3) to assessee---Commissioner did possess discretion of selecting any person for audit having regard to categories of persons detailed in S.177 of Income Tax Ordinance, 2001---Clause (d) of S.177 of Income Tax. Ordinance, 2001 was much wider in scope as compared to other clauses thereof---Such discretion was open to excessive use and abuse of power---Where wide-worded powers conferring discretion existed, there would always remain need to structure discretion---For an action under S.177 of Income Tax Ordinance, 2001, Commissioner was bound to detail the basis of his selection, give reasons for selection, mention clause thereof under which return was selected for audit--­General audit of assessee would result in prejudice to him as he would become subject to scrutiny even regarding his meals and wearing--­Before exercising powers under S. 177 of Income Tax Ordinance, 2001, Commissioner was bound to give notice to assessee, in spite of absence of specific provision of notice in such law--­Absence of any reason in order/intimation of selection for audit would depict non-application of conscious judicial mind by Commissioner before issuing same, rather would appear to have acted mechanically---Order/notice of Commissioner lacking such essentials required by law would be deemed as abuse of exercise of vested discretion and would not be sustainable at law---Principle illustrated.

Director Food, N.-W.F.P. and another v. Messrs Madina Flour and General Mills Pvt. Ltd. and 18 others PLD 2001 SC 1; Aman Ullah Khan and others v. The Federal Government of Pakistan through Secretary, Ministry of Finance, Islamabad and others PLD 1990 SC 1092; Mst. Sattan and others v. Group Captain Masroor Hussain Officer Commanding P.A.F. Station Sargodha Cantt. PLD 1962 Lah. 151; Abdul Rashid v. Government of the Punjab through the Chief Conservator of Forests, Lahore and 2 others 198.5 CLC 199; Mst Abeda Begun: v. Government of Pakistan and others 1985 CLC 2859; Muhammad Tufail v. Government of Punjab 1990 MLD 327; Gul Muhammad and 8 others v. Puxal and 2 others 1991 CLC 229; Messrs Murree Brewery Company Limited v. Director-General, Excise and Taxation and 3 others 1991 MLD 267; Fateh Muhammad v. Mushtaq Ahmad and 9 others 1981 SCMR 1061; Mst Zahida Sattar and others-1v. Federation of Pakistan and others PLD 2002 SC 408; Assistant Collector Customs and others v. Messrs Khyber Electric Lamps and 3 others 2001 SCMR 838 and Government of N.-W.F.P. through Secretary and 3 others v. Mejee Flour and General Mills (Pvt.) Ltd. Mardan and others 1997 SCMR 1804 rel.

(b) Notice---

---- Notice to party to be proceeded against---Scope---No one is to be condemned unheard---Provision of notice to the person, against whom one proposes to proceed, has to be read in every statute irrespective of the fact that no such provision is incorporated therein.

Mst. Sattan and others v. Group Captain Masroor Hussain. Officer Commanding P.A.F. Station Sargodha Cantt. PLD 1962 Lah. 151; Abdul Rashid v. Government of the Punjab through the Chief Conservator of Forests, Lahore and 2 others 1985 CLC 199; Mst. Abeda Begum v. Government of Pakistan and others 1985 CLC 2859; Muhammad Tufail v. Government of Punjab 1990 MLD 327; Gul Muhammad and 8 others v. Puxal and 2 others 1991 CLC 229; Messrs Murree Brewery Company Limited v. Director General, Excise and Taxation and 3 others 1991 MLD 267; Fateh Muhammad v. Mushtaq Ahmad and 9 others 1981 SCMR 1061; Mst. Zahida Sattar and others v. Federation of Pakistan and others PLD 2002 SC 408 and Assistant Collector Customs and others v. Messrs Khyber Electric Lamps and 3 others 2001 SCMR 838 rel.

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

----S. 24-A---Exercise of statutory powers by authority/officer--­Principles stated.

Under a law, a power to make any order or to give any direction conferred on any authority, officer of person, has to be exercised reasonably, fairly, justly and for advancement of the purpose of the enactment. If such an authority does not demonstrate application of its anxious mind to the case by giving reasons, one cannot assess that the order has been passed in advancement of the purpose of the enactment under which the same is passed. Section 24-A of General Clauses Act, 1897 requires, as far as necessary, giving of reasons for making an order or issuing any direction.

Col. (Retd.) Ayub Ali Rana v. Dr. Carlite S. Pune and another PLD 2002 SC 630 and Messrs Airport Support Services v. The Airport Manager, Quaid-e-Azam International Airport, Karachi and others 1998 SCMR 2268 fol.

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

----Ss. 208 & 215---Press release (Circular) issued by Central Board of Revenue subsequent to filing of return by assesses---Effectiveness---Such press release would not work retrospectively as same was not in knowledge of assesses at the time of filing of their returns.

Sadiq Brothers Poultry, Rawalpindi v. Appellate Additional Commissioner I.T./W.T., Rawalpindi 2003 PTD 122 and 2003 PTD 1780 rel.

Dr. Ilyas Zafar, Shahbaz Ahmed Butt, Shafqat Mehmood Chohan and Muhammad Latif Qureshi for Petitioners.

Shahid Jamil Khan, Legal Advisor for Respondent.

Date of hearing: 21st July, 2004.

2005 P T D 165

[Lahore High Court]

Before Muhammad Muzammal Khan, J

MAHMOOD BARNI

Versus

INSPECTING ADDITIONAL COMMISSIONER OF INCOME-TAX, GUJRANWALA and another

Writ Petition No.9953 of 2004, heard on 29th July, 2004.

Income Tax Ordinance (XXXI of 1979)---

----Ss. 59-A, 66-A, 80-C(7), 143-B & 166---Income Tax Ordinance (XLIX of 2001), S. 221---General Clauses Act (X of 1897), S. 24-A--­Constitution of Pakistan (1973), Art. 199---Constitutional petition--­Administration of justice---Judicial powers, exercise of---Non-speaking order---Assessee being aggrieved of order passed by Income .Tax Appellate Tribunal had assailed the same on the ground that the order was not the speaking order---Plea raised by the assessee was that the Tribunal, in its order, had only reproduced the arguments of both the parties spread over ten pages whereas the operative part of the order was only one lined---Validity---Officials/authorities dispensing justice and exercising judicial powers were supposed to apply their mind to the cases and to determine respective stances taken by the parties and after evaluating the stances to give their own verdict justified by reasons--­Order passed by Income Tax Appellate Tribunal was not a judicial order which was set aside and the matter was remanded to the Tribunal for deciding the appeal of assessee afresh after hearing the parties---Petition was allowed accordingly.

Messrs Airport Support Services v. The Airport Manager, Quaid-e-Azam International Airport, Karachi and others 1998 SCMR 2268 and Col. (Retd.) Ayub Ali Rana v. Dr. Carlite S. Pune and another PLD 2002 SC 630 ref.

Shahbaz Butt for Petitioner.

M. Ilyas Khan for Respondents.

Date of hearing: 29th July, 2004.

2005 P T D 184

[Lahore High Court]

Before Nasim Sikandar and Muhammad Sair Ali, JJ

COMMISSIONER OF INCOME-TAX AND WEALTH TAX, SIALKOT ZONE, SILAKOT

Versus

Messrs ITTEFAQ TRADERS, MANDI SAMBRIAL

I. T. A. No. 456 of 1998, decided on 11th March, 2004.

Income Tax Ordinance (XXXI of 1979)---

----Ss.80-D & 136---Appeal to High Court---Calculation of Tax--­Liability to turnover tax ---Assessee dissatisfied with remand order passed by Commissioner Income Tax (Appeal) filed appeal before Tribunal which was allowed by Single Bench by way of impugned order--­Department had assailed order of Tribunal contending that only two questions of law had arisen out of order of Tribunal; firstly whether on the facts and in the circumstances of the case, Tribunal was justified to hold that business of assessee firm being on wholesale/commission basis, its turnover was not liable to minimum tax tinder S.80-D of Income Tax Ordinance, 1979, whereas .Explanation to its subsection (2) expressly provided that turnover included gross receipts from sales of goods; and secondly that if answer to said question was in affirmative, whether Tribunal was justified to hold that assessee firm doing business on wholesale/commission basis was not liable to minimum tax under S.80-D of Income Tax Ordinance, 1979, whereas said section did not lay down any such distinction and gross commission receipts would be the turnover in terms of provisions of Explanation to subsection (2) of S.80-D of the Ordinance---Order of Tribunal did not show that issue of turnover of assessee as a Commission Agent of Company was the basis for holding in favour of assessee---Explanation to S.80-D of Income Tax Ordinance, 1979 was neither discussed nor ruled upon---Order of Tribunal had shown that First Appellate Order was maintained mostly for the reasons that assessment was made by Assessing Officer of a different circle and it was not sustainable---Second question did not arise out of said impugned order of the Tribunal and even otherwise it was more in the nature of an argument rather than raising a legal controversy to be resolved by the Court---High Court refused to consider the two questions and to rule upon them.

Mian Yousaf Omar for Appellant.

Syed Abid Raza for. Respondent.

Date of hearing: 11th March, 2004.

2005 P T D 192

[Lahore High Court]

Before Nasim Sikandar and Mian Hamid Farooq, JJ

COMMISSIONER OF INCOME-TAX AND WEALTH TAX; SIALKOT ZONE, SIALKOT

Versus

Messrs GLORIOUS MERCANTILE CORPORATION (PVT.), LTD., SIALKOT

I.T.A. No. 305 of 1998, decided on 17th July, 2004.

Income Tax Ordinance (XXXI of 1979)---

----Ss.30, 136 & 156--- Appeal to High Court---Export rebate on interest income-- Revenue/Department had claimed that common question of law had arisen out of consolidated impugned order of Tribunal viz., "whether in the facts and circumstances of case Income Tax Appellate Tribunal was justified to uphold the decision of Commissioner Income Tax (Appeals) that Export rebate was allowable to assessee Company in interest income received on T.D.R's. whereas interest income on T.D.R's. was assessable under S.30 of Income Tax Ordinance, 1979 being income from other sources and was distinguishable from export business income" ---Issue of allowing of export rebate on interest income received in T.D.R's was neither considered nor ruled upon by Appellate Tribunal---Division Bench of Appellate Tribunal confined itself to adjustment of interest income paid on borrowed capital---Question of allowing of export rebate on interest income having never been ruled upon by Appellate Tribunal, High Court refused to entertain question for consideration and reply as question raised did not arise out of order of Appellate Tribunal.

Nemo for Appellant.

Nemo for Respondent.

Date of hearing: 13th July, 2004.

2005 P T D 200

[Lahore High Court]

Before Muhammad Akhtar Shabbir and Nasim Sikandar, JJ

COMMISSIONER OF INCOME-TAX

Versus

Messrs HAFIZ ABDUL WAHEED & BROTHERS

C.T.R. No. 111 of 1997, decided on 3rd June, 2003.

Income Tax Ordinance (XXXI of 1979)---

----Ss.50(4), 80(c), 136(2) & 143---Reference to High Court---Credit sales not being treated as supplies---Questions "whether Income Tax Appellate Tribunal was justified to hold that credit sales could not be treated as supplies for the purpose of application of S.80(c) of Income Tax Ordinance, 1979, when tax had already been deducted under S.50(4) of said Act" and also that a penalty for default in submission of statement under S.143 of Ordinance, as framed, did not arise out of order of Income Tax Appellate Tribunal---No ruling was recorded on application of provisions of S.80(c) of Income Tax Ordinance, 1979 to credit sales---Effect---Question of law could be said to have arisen out of an order of Tribunal only when it was duly raised before and ruled upon by Tribunal---Tribunal in the present case had not discussed nature of credit sales nor the issue as to why provisions of S.80(c) of Income Tax Ordinance, 1979 were not attracted in the case of assessee---Since findings on the issue or at least the reasons which weighed with Tribunal while deciding ease, were not before High Court it was not in a position to judge legality or otherwise of those questions---Tribunal should not have made reference to High Court in circumstances.

Muhammad Ilyas Khan for Appellant.

Syed Abrar Hussain Naqvi for Respondent.

Date of hearing: 3rd June, 2003.

2005 P T D 449

[Lahore High Court]

Before Ali Nawaz Chowhan and Rustam Ali Malik, JJ

NAZIR MUHAMMAD

Versus

CUSTOMS CENTRAL EXCISE AND SALES TAX (APPELLATE) TRIBUNAL, ISLAMABAD and another

Custom Appeals Nos. 12 to 20 of 2004, heard on 28th October, 2004.

(a) Protection of Economic Reforms Act (XII of 1992)‑‑‑

‑‑‑‑S.4(2) [as amended by Protection of Economics Reforms (Amendment) Ordinance (XXI of 1999)]‑‑‑Customs Act (IV of 1969), S.196‑‑‑Freedom to bring, hold, sell and take out foreign currency‑‑­Scope‑‑‑No bar existed against the possession of currency which may have been purchased from sources other than prescribed under S.4(2), Protection of Economic Reforms Act, 1992 [as amended]‑‑‑Onus to establish any infringement of law was fully on the department and even if the person infringing the law failed to indicate the sources, the best evidence to whittle away his case was through production of some evidence to establish that foreign currency was purchased from one of the sources referred to in S.4(2), Protection of Economic Reforms Act, 1992 (as amended), otherwise the benefit had to be given to the said person by presuming that the currency might have been purchased from the open market, if not from an authorized money changer; such a purchase too would have not attracted the penal clause of Protection of Economic Reform Act, 1992.

Irshad Ahmad Shaikh v. The State 2000 SCMR 814 fol.

(b) Protection of Economic Reforms Act (XII of 1992)‑‑‑

‑‑‑‑S.4(2) [as amended by Protection of Economic Reform Act (Amendment) Ordinance (XXI of 1999)]‑‑‑Customs Act (IV of 1969), Ss.194‑A, 194‑B, 194‑C & 196‑‑‑Appeal to Appellate Tribunal‑‑‑Scope‑­Appellate Tribunal had failed to appraise evidence as was required of it as it had to give its own opinion on the factual side, which was not done at the stage of second appeal‑‑‑Tribunal, who had also to give its views with respect to the fact that in case the appellant failed to establish having purchased the foreign currency from an authorized money changer or dealer, what effect would this have on the case of appellants‑-Validity‑‑‑Findings of the Tribunal, in circumstances, being infirm High Court accepted appeal and remitted the case to the Tribunal for decision afresh on the basis of the observations made by the High Court and the relevant law and parties were also ordered to be heard afresh and if any new point was raised, same was also to be allowed.

Athar Minallah for Appellant.

Majeeb‑ur‑Rehman Warraich for Respondents.

Date of hearing: 28th October, 2004.

2005 P T D 493

[Lahore High Court]

Before Muhammad Sair Ali, J

Sh. AMANAT ALI

Versus

INCOME TAX APPELLATE TRIBUNAL, LAHORE and another

Writ Petition No.6152 of 2003, heard on 9th December, 2004.

Income Tax Ordinance (XLIX of 2001)‑‑‑

‑‑‑‑S.133‑‑‑Constitution of Pakistan (1973), Art. 199‑‑‑‑Constitutional petition‑‑‑ Contention of the petitioner was that during pendency of appeal or Reference, no second assessment/re‑assessment could be carried out by the taxing authorities‑‑‑Counsel appearing for the department assured the Court that department will not proceed with re‑assessment of the matter in post remand proceedings till the Reference was decided by the High Court‑‑‑High Court while disposing of the Constitutional petition observed that in view of the undertaking given by the counsel for the department, the petition had fructified and it goes without saying that the undertaking amounted to an injunction.

Muhammad Inayatullah Cheema v. Ali Raza Masood Qazilbash 2002 PTD 1195; Mst Inayat Begum v. Commissioner of Income Tax, Lahore 1985 PTD 375 and (2003) 87 Tax 165 (Tribunal) ref.

Ali Imran Rizvi for Petitioner.

Muhammad Ilyas Khan for Respondents.

Date of hearing: 9th December, 2004.

2005 P T D 647

[Lahore High Court]

Before Nasim Sikandar and Muhammad Sair Ali, JJ

Messrs SHAJAR PAK (PVT.) LIMITED, Lahore

versus

ASSISTANT COLLECTOR SALES TAX AND CENTRAL EXCISES, LAHORE and others

Customs Appeal No. 25 of 2003, decided on 5th March, 2003.

Sales Tax Act (III of 1990)‑‑‑

‑‑‑‑Ss.33 & 4.7‑‑‑Imposition of penalties‑‑‑Appeal to High Court‑‑­Allegation against appellant was that he cleared material produced by him during different periods in year 1996‑97 without payment of sales tax‑‑‑Appellant company having failed to demonstrate by documentary evidence that allegations made by Department were incorrect, it was found liable to pay sales tax with additional tax and penalty under S.33 of Sales Tax Act, 1990‑‑‑No question of law had arisen out of order of the Tribunal which was sine qua non to approach the High Court in appeal‑‑‑Appellant had mainly stressed that it was not allowed ample opportunity to rebut allegations contained in show‑cause notice issued to it‑‑‑Such assertion was not supported by the record‑‑‑Even in grounds of appeal before Tribunal, appellant never agitated issue of lack of proper opportunity‑‑‑Original order specifically mentioned that appellant had failed to participate in original proceedings despite opportunities and in fact he absented after having once participated in the proceedings‑‑­Order of Tribunal not giving rise to any question of law, appeal against said order was dismissed.

Shafaqat Mehmood Chohan for Appellant.

Date of hearing: 5th March, 2003.

2005 P T D 662

[Lahore High Court]

Before Muhammad Sair Ali, J

FAUJI SUGAR MILLS

versus

ASSISTANT COLLECTOR SALES TAX and others

Customs Appeal No. 250 of 2001, decided on 22nd December, 2003.

Sales Tax Act (VII of 1990)‑‑‑

‑‑‑‑Ss.7, 47 & 59‑‑‑Input tax adjustment on raw material/goods‑‑‑Claim for‑‑‑Appeal to High Court‑‑‑Sugar was exempt from sales tax till 31‑3‑1998 and raw material/goods were purchased by appellant prior to 1‑4‑1988 during exemption‑‑‑Such material was consumed in manufacture stocks of sugar sold during April, 1998 after 1‑4‑1998 when exemption from sales tax on sugar was withdrawn‑‑‑Appellant claimed input tax adjustment on raw material so consumed in the manufacture of taxable supplies on ground that stocks produced up to 31‑3‑1998 during exemption period were partly sold only and unsold stocks of sugar held by appellant and further production made in April, 1998, were sold during April 1998‑‑‑Appellant claimed that as on such sales appellant was liable to pay sales tax, he had the right to claim input tax adjustment‑‑‑Tribunal held in impugned order that as sugar was exempt from sales tax till 31‑3‑1998, appellant was entitled to adjust input tax paid on raw material purchased prior to 1‑4‑1998, even if supplies of sugar were made after withdrawal of exemption because S.59 of Sales Tax Act, 1990 had been omitted in 1997‑‑‑Validity‑‑‑Principles as contained in S.59, prior to its deletion in 1997, catered for some situations of the nature arising in case‑‑‑After omission of S.59 by Finance Act, 1997, a substituted S.59 was re‑introduced through Finance Act, 1999‑‑‑Intervening period of 1998, was thus the uncatered for period and led to a void and anomalous situation affecting taxpayers like appellant‑‑‑During interregnum of 1998, the void, anomalous and ambiguous situation could not be used against fundamental interest of taxpayers‑‑‑In order to avoid double taxation, vacuum during 1998 was to be provided for by applying principle of S.59 of Sales Tat .pct as nearly as possible to case like that of appellant‑‑:‑ Appellant could not be made to pay sales tax on raw material twice‑‑‑ Appellant, in circumstances, was entitled to‑input tax adjustment as claimed in the return of April, 1998.

M.M. Akram for Appellant.

A. Karim Malik for Respondent.

Date of hearing: 22nd December, 2003.

2005 P T D 676

[Lahore High Court]

Before Nasim Sikandar, J

FAUJI SUGAR MILLS

Versus

ASSISTANT COLLECTOR OF SALES TAX and others

Sales Tax Appeal No. 360 of 2001, decided on 3rd December, 2003.

Sales Tax Act (VII of 1990)‑‑‑

‑‑‑‑Ss.2(25), 3 & 47‑‑‑S.R.O. No. 207(1)/98‑‑‑Vires of S.R.O.‑‑­Jurisdiction of Appellate Tribunal‑‑‑Appellate Tribunal was not vested with any jurisdiction to hold that S.R.O. No.207(I)/98 as amended vide S.R.O. No.751(I)/2000, was ultra vires‑‑‑S.R.O. 751(1)/2000 was merely an amending S.R.O. which had brought about an amendment in original S.R.O. No. 207(1)/98 and it being beneficial in nature could be retrospective as well to that extent‑‑‑Benefit of fixation of value under S.R.O. No.207(I)/98 was only confined to the Sales Tax as contemplated under S.3(1) of Sales Tax Act, 1990 and was not available in case of further tax which was chargeable under S.3(1‑A) of said Act.

2002 PTD 632 ref.

M.M. Akram for Appellant. A. Karim Malik for Respondent.

Date of hearing: 3rd December, 2003.

2005 P T D 700

[Lahore High Court]

Before Nasim Sikandar and Muhammad Sair Ali, JJ

Messrs JAWA CHEMICALS (PVT.) LTD.

versus

ASSISTANT COLLECTOR OF SALES TAX, LAHORE

Sales Tax Appeals Nos. 373, 374 and 375 of 2002, decided on 23rd February, 2004.

Sales Tax Act (VII of 1990)‑‑‑

‑‑‑‑Ss.2(37), 3, 6, 22, 23, 26; 46 & 47‑‑‑Remand of case by Tribunal‑‑‑ Appeal to High Court‑‑‑Local office of Sales Tax Department on scrutiny of sales tax/private record of two appellants Companies found that companies had supplied taxable goods to different persons without payment of sales tax and further tax‑‑‑Companies accordingly were charged with contravention of different sections of Sales Tax Act, 1990 and were proceeded against‑‑‑Appeal filed by appellant companies was pending before Tribunal‑‑ ‑Appeal filed by Revenue was also pending‑‑­Tribunal by way of impugned order disposed of two appeals filed by appellants Companies and the other filed by Department by remanding matter to original Authority‑‑‑Validity‑‑‑Remand of matter for fresh adjudication was not warranted and remand was directed on ground which was not even the grievance of the Revenue‑‑‑Tribunal aught to have recorded its finding on the legal objections raised before it against maintainability of Departmental appeal‑‑‑Remand of a matter to a lower Authority should only be made if material already available on record was not sufficient to dispose of the issues‑‑‑In Revenue matters benefit of any defaults on the part of detecting agency or Assessing Officer were to go to taxpayers‑‑‑In the present case, Tribunal apparently avoided ruling upon legal objection raised before it‑‑‑High .Court set aside impugned order of Tribunal with direction that ' Tribunal would dispose of legal as well as factual issues raised before it by both Revenue as , well as taxpayers/two Companies‑‑‑Two appeals by tax payer companies and one by Revenue, would be deemed pending before Tribunal to be decided after hearing parties within specified period.

Imtiaz Rashid Siddiqui for Appellant.

Qamar‑ud‑Din Ahmad Mian for Respondent.

Date of hearing: 23rd February, 2004.

2005 P T D 743

[Lahore High Court]

Before Nasim Sikandar, J

Syed MUHAMMAD SHAH & CO.

versus

COLLECTOR OF SALES TAX and others

Sales Tax Appeal No. 170 of 2002, decided on 27th October, 2003.

Sales Tax Act (VII of 1990)‑‑‑

‑‑‑‑Ss.2(25), 3(1A) & 47‑‑‑Further tax‑‑‑Further tax envisaged under S.3(1A) of Sales Tax Act, 1990, was not leviable in .respect of supplies made to persons who were liable to be registered with Sales Tax Department even though they were not in actual fact so registered‑‑­Provisions of S.2(25) of Sales Tax Act, 1990 having been added in the year 2002, were not applicable retrospectively to the period 1999‑2000.

Nomor Akram Raja for Appellant.

A. Karim Malik for Respondent.

Date of hearing: 27th October, 2003.

2005 P T D 751

[Lahore High Court]

Before Tanvir Bashir Ansari and Muhammad Sair Ali, JJ

Messrs GULBERG KABANA RESTAURANT through General Manager

versus

ADDITIONAL COLLECTOR, CENTRAL EXCISE NO.II, LAHORE and 2 others

Appeal C.A. No. 54 of 1999, decided on 15th December, 2004.

Central Excises Act (I of 1944)‑‑‑

‑‑‑‑Ss.9, 11 & 36‑C‑‑‑Appeal to High Court‑‑‑Non‑payment of Central Excise Duty in time‑‑‑Imposition of penalty‑‑‑Appellant made substantial payment of Central Excise Duty levied upon it, but could not pay balance amount in time and penalty was imposed upon it for such default‑‑‑ Appellate Tribunal reduced amount of penalty holding that non‑payment of Excise Duty by appellant was not deliberate or wilful‑‑‑Penalty imposed on appellant was set aside by High Court with direction to deposit balance amount within a period of seven days failing which its appeal would stand dismissed.

Sahibzada Riaz Anwar for Appellant.

Abdul Karim Malik for Respondent.

2005 P T D 803

[Lahore High Court]

Before Nasim Sikandar and Mian Hamid Farooq, JJ

A BBAS CORPORATION

versus

APPELLATE TRIBUNAL and another

Sales Tax Appeal No. 111 of 2003, decided on 31st March, 2004.

Sales Tax Act (III of 1990)‑‑‑

‑‑‑‑Ss.45 & 47‑‑‑Appeal‑‑‑Maintainability‑‑‑Maintainability of appeal had been injected to on the ground that only Appellate Tribunal and Caector (Adjudication) had been arrayed as parties in the appeal while in scheme of law Collector (Adjudication) was a person who had concern only with adjudication matters and had nothing to do with recovery of sales tax‑‑‑Validity‑‑‑Only the Collector of Sales Tax appointed under subsection. (a) of S.30 of Sales Tax Act, 1990 as distinguished from Collector of Sales Tax (Adjudication) appointed under subsection (b) of $.30 of said Act could either be an appellant or a respondent‑‑‑Appeal in absence of Collector of Sales Tax, who could under law be a respondent, was not properly filed‑‑‑Even otherwise appeal filed by appellant was barred by time and no request for condonation of delay was made‑‑‑Appeal was dismissed on account of its having been filed without impleading necessary party and on ground of limitation.

2002 CLC 705 ref.

Hamid Khan for Appellant.

Izhar‑ul-Haq and Dr. Sohail Akhtar for‑Revenue.

Date of hearing: 31st March, 2004.

2005 P T D 812

[Lahore High Court]

Before Nasim Sikandar, J

COLLECTOR

versus

Messrs RIAZ BOTTLERS

Sales Tax Appeals Nos. 126, 132 and Customs Appeal No. 129 of 2003, decided on 7th October, 2003.

Sales Tax Act (VII of 1990)‑‑‑

‑‑‑‑S.47‑‑‑Central Excises Act (I of 1944), S.36‑C‑‑‑RiN al appeals‑‑­Remand of case‑‑‑Registered person/private firm was charged under various provisions of Sales Tax on different allegations‑‑‑Order in original recorded by Collector (Adjudication) was assailed before Tribunal with partial success as Tribunal maintained findings of Collector (Adjudication) on two charges while findings on the third charge were set aside‑‑‑Registered person and Revenue Department both aggrieved by judgment of Tribunal, filed respective appeals before High Court‑‑‑When both parties felt aggrieved of impugned order, it needed to be set aside in its entirety so that matter remained open for both of them to re‑assert their legal and factual positions‑‑‑Impugned order was set aside and appeal filed by registered person/tax payer would be deemed pending for fresh hearing and decision on all issues involved.

Sultan Mahmood for Appellant.

Nasar Ahmad for Respondent.

Date of hearing: 7th October, 2003.

2005 P T D 830

[Lahore High Court]

Before Syed Hamid Ali Shah

Sheikh SAADAT ALI

versus

FEDERATION OF PAKISTAN and 3 others

W.P. No. 19415 of 2004, decided on 24th December, 2004.

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

‑‑‑‑S.50 (2) & Second Sched., Part‑I, C1. (78‑E)‑‑‑Constitution of Pakistan (1973), Art. 199‑‑‑Constitutional petition‑‑‑Conversion of foreign currency account‑‑‑Deduction of withholding tax ‑‑‑Exemption‑‑­Petitioner encashed his foreign currency account and deposited the same in saving scheme‑‑‑Investments and profits derived from such scheme were re‑invested by the petitioner‑‑‑Grievance of petitioner was that the amount and profits received by him from re‑investment were subject to exception from withholding tax in view of exemption granted under Cl. (78‑E) of Part‑I of Second Schedule of Income Tax Ordinance, 1979‑‑‑Validity‑‑‑Profit or interest derived from Pak. Rupee account or certificates of deposit which had been created by conversion of foreign currency account were exempted under CI. (78‑E) of Part‑I of Second Schedule of Income Tax Ordinance, 1979, from withholding tax‑‑­Further investment of encashment of the amount converted and yield thereon in purchase of saving certificates could not be termed as conversion of a foreign currency account‑‑‑Such re‑investment did .not fall within the ambit of Cl. (78‑E) of Part‑I of Second Schedule of Income Tax Ordinance, 1979‑‑‑Petition was dismissed accordingly.

Central Insurance Company v. Central Board of Revenue 1993 PTD 766 = 1993 SCMR 1232; The Central Board of Revenue v. Sheikh Spinning Mills Ltd. 1999 SCMR 1442 = 1999 PTD 2174 and Union Bank Limited v. Federation of Pakistan 199& PTD (Trib.) 2116 ref.

(b) Taxation‑‑‑

‑‑‑‑ Levy of taxes‑‑‑Exemption‑‑‑Object, scope and purpose‑‑‑Exemption from taxes‑‑‑Principles‑‑‑Taxes are means by which State maintains its existence and anyone who claims exemption from such tax must on that account be clearly defined and founded on plain language ‑‑‑There must not be any doubt or any ambiguity upon which the claim to an exemption is founded‑‑‑Where claim is based upon plain and clearly expressed intention of legislature, it is not justified to construe liberal interpretation‑‑‑Provisions regarding exemption from levy of tax are not required to be interpreted liberally rather such provisions are to be interpreted and complied strictly.

(c) Interpretation of statutes‑‑‑

‑‑‑‑ Fiscal statute‑‑‑Provisions regarding exemption from levy of tax are not required to be interpreted liberally rather such provisions are to be interpreted and complied strictly.

Siraj‑ud‑Din Khalid for Petitioner.

Pervez Ahmad Malik, A.‑G. on Court call, Tahir Mehmood Gondal, Asstt. A.‑G. and Muhammad Alyas Khan for Respondent No.3.

2005 P T D 849

[Lahore High Court]

Before Nasim Sikandar and Muhammad Sair Ali, JJ

COMMISSIONER OF INCOME TAXIWEALTH TAX COMPANIES ZONE, FAISALABAD

versus

Messrs K.A. ENTERPRISES (PVT). LTD., FAISALABAD

P.T.Rs. Nos. 78 of 2001 and 223 to 226 of 2003, heard on 4th November, 2004.

Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑S:80‑D‑‑‑Workers Welfare Fund Ordinance (XXXVI of 1971), S.4‑‑‑Industrial. establishment covered by the provisions of S.80‑D, Income Tax Ordinance, 1979 was not liable to charge of the Fund contemplated in S.4, Workers Welfare Fund Ordinance, 1971‑‑­Principles.

Commissioner of Income Tax and Wealth Tax, Sialkot Zone, Sialkot v. Messrs Thapur (Pvt.) Sialkot 2002 PTD 2112 and C.Ps. Nos.38 of 2000, 156 to 180, 199 to 276, 278 to 283, 285 to 320, 323 to 411 and 518 to 534 of 2000 ref.

Mian Yousaf Umar for Appellant.

Date of hearing: 4th November, 2004.

2005 P T D 858

[Lahore High Court]

Before Sardar Muhammad Aslam and Muhammad Nawaz Bhatti, JJ

Syed AKHTAR AHSAN through Legal heir

versus

INCOME TAX OFFICER, CIRCLE 05, ZONE‑B, LAHORE and 4 others

P.T.Rs. Nos.2 and 3 of 1994, decided on 14th December, 2004

Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑S.136‑‑‑Reference to High Court‑‑‑Interest paid on loan by the assessee‑‑‑Claim for admissibility of same as expenses‑‑‑Question of fact‑‑‑Assessing Officer, Income Tax Commissioner and Income Tax Appellate Tribunal had found no nexus between the loan and interest to determine the admissibility of assessee's claim for expenses‑‑‑Such being a question of fact on which concurrent findings had been recorded by the forums below, High Court declined to answer the Reference.

Moeen Qureshi for Petitioner.

Muhammad Ilyas Khan for Respondents

2005 P T D 862

[Lahore High Court]

Before Ali Nawaz Chowhan, J

DATA ELECTRONICS (PVT.) LTD., LAHORE

versus

FEDERATION OF PAKISTAN through Secretary Finance, Finance Division, Islamabad and 3 others

W.P. No. 4749 of 2003, decided on 19th January, 2005.

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

‑‑‑‑S.129‑‑‑Decision in appeal‑‑‑Scope‑‑‑Where no notice under the provisions of S.129(7), Income Tax Ordinance, 200.1 is given, the benefits as prescribed ' by S.129(5) of the said Ordinance cannot be availed.

Section 129 (5) of the Income Tax Ordinance, 2001 enjoins upon the Commissioner of Appeals to take a decision in appeal before the expiration of 3 months from the end of the month in which the appeal was lodged and if he fails to act as law requires him and there is no delay through adjournment or otherwise caused by the appellant in this connection, the relief sought by the appellant was to be construed as having been granted to him under the Ordinance.

However, section 129 (7) of the Ordinance was stipulated to put the Commissioner on notice for purposes of fulfilment of his obligations under the provisions of section 129(5) and in case a notice is served to him informing him that the order which was required to be made within the periphery of time so prescribed has not been made, he should take action within the next 30 days of this notice for passing such an order in appeal.

Where no notice under the provisions of section 129(7) of the Ordinance is given, the benefits as prescribed by section 129(5) cannot be availed.

Messrs Aasmi Packages (Pvt.) Ltd. v. Commissioner of Income Tax (Appeals) Zone‑A, Lahore, and three others 2000 PTD 39 and Ch. Irshad Ahmad Virk v. Commissioner Appeals Income Tax and others 1996 PTD 279 ref.

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

‑‑‑‑S.129(5)(6) & (7)‑‑‑Constitution of Pakistan (1973), Art.199‑‑‑ Decision in appeal‑‑‑Provisions of 5.129(5)(6) & 7, Income Tax Ordinance, 2001, were mandatory‑‑‑Notice‑‑‑Format‑‑‑Benefit as prescribed under 5.129(5), Income Tax Ordinance, 2001 when a vested right of the assessee‑‑‑Letter addressed by the authorised representative of the assessee to the Commissioner making, request for an early hearing of appeal did mention the provisions of 5.132(6), Income Tax Ordinance, 1979 (S'.129(5) of the Income Tax Ordinance, 2001) which was sufficient enough to convey a warning to the Commissioner to act within the next 30 days as envisaged in law or suffer the consequences‑‑­Service which is a sine qua non, for the benefit to be given under the provisions of S.129(5), Income Tax Ordinance, 2001 was served in circumstances‑‑‑Contention of the department was that said letter ought to have been diarized according to the procedure laid down for filing the appeals, otherwise such letter was no notice in law and that the, letter having been given directly to the Commissioner, he might not have studied the same and understood its implications particularly, when the caption of the letter did not sufficiently carry‑the word "notice"‑‑­Validity ‑‑‑What ought to have been the format of the notice was not answered by the Income Tax Ordinance, 2001‑‑‑Law expects a notice as such to be couched in a reasonable language easily understandable conveying a warning if not acted upon‑‑‑Keeping such test and the fact that the Income Tax Ordinance, 2001 was destitute of prescribing any model of such a form and going through the letter itself it could be concluded that it sufficiently conveyed the intention of the assessee against the relief he was to ask upon failure of the Commissioner to act in accordance with law‑‑‑Where there was a failure to fulfil an explicit legal requirement and there was no default on the part of a tax‑payer, what the law proposed for him as a benefit as was the case of S.129(5) of the Ordinance, the same became a vested right‑‑‑Principles.

Letter addressed to the Commissioner shows that the provisions of the old Ordinance i.e. section 132(6) do find a mention in the last paragraph of the letter which was sufficient enough to convey a warning to the Commissioner to act within the next 30 days as envisaged in law or suffer the consequences.

So the service of notice which is a sine qua non for the benefit to be given under the provisions of section 129(5), Income Tax Ordinance, 2001, was served.

Department took the view that the notice ought to have been diarized according to the procedure as laid for filing the appeals, otherwise this is no notice in law and the letter having been given directly to the Commissioner, he may not have studied it and understood its implications particularly, when the caption of the notice did not sufficiently carry the word "notice".

What ought to have been the format of the notice is not answered by the Ordinance, whereas the Income Tax Ordinance, 2001 while referring to the appeals in section 127 lays down what were the requirements to be fulfilled before an appeal is lodged and mentions about a prescribed form to be used for filing the appeals, whereas no such form is prescribed by the provisions of section 129 of the Ordinance or 132 of the repealed Ordinance. Therefore, the law expects a notice as such to be couched in a reasonable language easily understandable conveying a warning if not acted upon. Keeping this test in view and the fact that the Ordinance was destitute of prescribing any model of such a form and g9ing through the notice itself, it sufficiently conveys the intention of the assessee about the relief he was to ask upon failure of the Commissioner to act in accordance with law.

Procedures, are even otherwise, not meant to defeat the ends of justice or to put traps for the litigants as if a game of chess was being played in which the consequences were related only to the moves made during the game and where the playing of the game was its own end nor can a cause be defeated merely because of any defect in the language and' as long as it is able to convey what is intended, to the authority concerned.

Inaptitude, laxity and careless working at the end of senior officers particularly working in the fiscal areas where the laws are to be stringently interpreted, cannot be pressed as an excuse for any lapse. Therefore, the contention of the department that unless the letter had been diarized it may have been then full attended to, has no impact.

The Commissioner in the present case immediately on the receipt of the letter should have opened the statute book to appreciate the implications showing a complete sensitivity which was required of him and if he has not done so, excuses are of no avail for defeating the benefits which the law has consciously given to the taxpayers.

In fact the rationale behind these provisions of law was based on a desire to activate the Tax Authorities so that they adjudicated the causes in appeal with convenient dispatch particularly when a taxpayer is required to pay the amount of tax due from him before he files an appeal and gives a due notice.

When there is a failure to fulfil an explicit legal requirement and there is no default on the part of a taxpayer, what the law proposes for him as a benefit, as is the case of section 129(5) of the Ordinance, it becomes a vested right.

The assessee did fulfil the requirements of section 132 of the old law and section 129 of the fresh law and no default on his part has been cogently pointed out and, therefore, a vested right accrues to him as is bestowed by the provisions of section 129(5) of the Ordinance and which is a right complete and consummate and of such a character that it cannot be divested without the consent of the person to whom it belongs and is no longer open to any controversy, therefore, the relief he sought in the appeal shall be deemed to have been given to him under the law without any further question.

In tax statutes those provisions, which are enacted for the benefit of a taxpayer are mandatory and those provisions enacted merely to secure the orderly transactions of business are directory.

Whenever the law requires a thing to be done for the protection of the taxpayer, it is usually mandatory.

A clause is directory where the provisions contain a mere direction and nothing more, bur in case they are followed by such words as "that anything done contrary to these provisions shall be of no effect" then they are no longer directory but mandatory. Where a mandatory provision is invoked, the Courts are left with no discretion in their administration except to enforce it.

When the given periphery of time is not followed, the department is then at a loss because his appeal in terms of the relief sought is to be accepted which obviously indicates that the failure in accomplishing what is envisaged by section 129 of the Ordinance results in penalizing the department through the statutory grant of relief sought. The provisions of section 129(5)(6) & (7) of the Income Tax Ordinance, 2001 are mandatory and not directory or regulatory.

Messrs Aasmi Packages.(Pvt.) Ltd. v. Commissioner of Income Tax (Appeals Zone‑A, Lahoie, and 3 others 2000 PTD 39; Ch. Irshad Ahmad Virk v. Commissioner .Appeals Income Tax and others 1996 PTD 279; 1993 PTD 332: 2000 PTD 2872 (AJK); PTD 1974 SC 134; 1995 SCMR 1249: 2000 SCMR 1305; 1992 ITR 548 (Ind. HC); 2003 CLD 1406; 2002 CLD 557: 2002 CLD 1431; 2002 CLD 1018; State ex rel. Milligan Ritter's Estate, Ind. App.,4.6. N.E. 2d 736, 743; Corpus Juris Secundum Vol. 82 Pg. 875; U.S. Cohn' v. Little, D.C. Ark., 101 F. Supp. 683, affirmed, C.A. 199 F.‑ 2d 28; Cal. Skelly Estate Co. v. City and County of San Francisco, 69 P. 2d 171, 9'Ca1. 2d 28‑Rayan v. Byram, 51 P. 2d 872, 4 Cal. 2d 596; City of Scranton VO' Malley Mfg. Co. 19A. 2d 269, 341 Pa. 200 and Pears v. Morrice (1834) 2A, E. 84, 96 ref.

(c) Interpretation of Statutes‑‑‑

‑‑‑‑ Fiscal Statute ‑‑‑Mandatory/directory provisions‑‑‑Provisions which are enacted for the benefit of a taxpayer are mandatory and provisions enacted merely to secure the orderly transactions of business are directory.

Corpus Juris Secundum Vol. 82 Pg. 875; U.S. Cohn v. Little, D.C. Ark., 101 F. Supp. 683, affirmed, C.A. 1.99 F. 2d 28; Cal. Skelly Estate Co. v. City and County of San Francisco, 69 P. 2d 171, 9 Cal. 2d 28‑Rayan v. Byram, 51 P. 2d 872, 4 Cal. 2d 596; and City of Scranton VO' Malley Mfg. Co. 19A. 2d 269, 341 Pa. 200 ref.

Ch. Anwar‑ul‑Haq for Petitioner.

Shahid Jamil Khan for Respondents.

Date of hearing: 14th January, 2005

2005 P T D 891

[Lahore of High Court]

Before Nasim Sikandar and Mian Hamid Farooq, JJ

Messrs MIANSONS COTTON FACTORY (PVT LTD through Chief Executive

versus

COMMISSIONER OF INCOME TAX, BAHAWALPUR ZONE, BAHAWALPUR

I.T.A No. l of 1997, heard on 12th May, 2004.

Income Tax Ordinance (XXXI of 1979)‑‑‑

‑‑‑‑Second Sched., Part I,, Cl. (118‑A)‑‑‑Industrial unit set up in specified area during particular time‑‑Leasing out such unit to another person‑‑‑Income derived by owner from lease‑‑‑Exemption from levy of tax‑‑‑Entitlement‑‑‑Mere such leasing would neither be relevant for purpose of the exemption nor would derogate from basic object and purpose of exemption clause‑‑‑Principles.

(b) Taxation‑‑‑

‑‑‑‑Exemption‑‑‑Revenue representing the State, after holding out a promise of exemption, should honour the same‑‑‑Practice of Revenue to pick up faults and insignificant factors to deny exemption, deprecated‑‑­Not just and fair to refuse exemption on far fetched ideas and narrow interpretation of clauses allowing them.

(c) Taxation‑‑‑

‑‑‑.No one could hold a brief for a defaulter or tax‑evader.

Mirza Muhammad Waheed Baig for Appellant.

Muhammad Ilyas Khan for Respondent.

Date of hearing: 12th May, 2004.

2005 P T D 1012

[Lahore of High Court]

Before Syed Zahid Hussain and Muhammad Sair Ali, JJ

COMMISSIONER OF INCOME TAX (APPEALS-I), FAISALABAD

versus

Messrs FLORA FOOD INDUSTRIES (PVT.) LTD., FAISALABAD

P.T.R. No.59 of 2001, decided on 21st September, 2004.

Income Tax Ordinance (XXXI of 1979)---

----Ss. 136(2), 108(b), 139 & 142---Appeal to High Court---Penalty---Question as proposed for determination by High Court, was already proposed and raised by Revenue in an identical appeal and other cases of similar nature---High Court returned a negative answer to the question as framed in the case for determination---Other questions framed in the case had no relevancy to the order of Tribunal and the grounds stated therein while rejecting departmental appeal---High Court declined to answer any of said questions as no distinguishing features had been pleaded by the department.

Mian Yousaf Umar for Petitioner.

Date of hearing: 21st September, 2004.

2004 P T D 1027

[Lahore of High Court]

Before Nasim Sikandar and Sardar Muhammad Aslam, JJ

COMMISSIONER OF INCOME TAX, LAHORE

versus

TAIWAH CHINESE RESTAURANT (PVT.) LTD., LAHORE

P.T.R. No. 66 of 2001, decided on 5th October, 2004.

Income Tax Ordinance (XXXI of 1979)---

----Ss. 136(2), 50, 52, 108(b) & 142---Appeal to High Court---Question of law arising out of order of Income Tax Appellate Tribunal sought to be referred to High Court for consideration and answer was to the effect, "whether on the basis of fact and circumstances of case Tribunal was justified in deleting the penalties levied for default of S. 142 of which statement is clearly prescribed in S. 201 of Income Tax Rules, 1982 by relying on a judgment dealing with non-applicability of S. 142 on prescribed statement on Rules 53, 61 & 61-A"---Said question having not arisen out of order of Tribunal, High Court declined to admit the same for consideration for two reasons; firstly, the original assessment under S.52 of Income Tax Ordinance, 1979 was cancelled by Commissioner (Appeals) and that cancellation was maintained by Tribunal and Revenue had not challenged that cancellation and secondly, before Tribunal, at time of hearing of appeal, issue as to an obligation of assessee to file a statement under S.142 of Income Tax Ordinance, 1979 was neither mooted nor it was ruled upon by Tribunal---Tribunal had recorded finding of fact that no statement under S. 142 of Income Tax Ordinance, 1979 was required to be filed by assessee for the two assessment years in view of capital involved in business---Such finding had not been challenged on any legal basis nor same was alleged to be against record---Question as framed could not be said to have arisen out of order of Tribunal.

Muhammad Ilyas Khan for Petitioner.

Date of hearing: 5th October, 2004.

2005 P T D 1038

[Lahore High Court]

Before Nasim Sikandar and Muhammad Sair Ali, JJ

COMMISSIONER OF INCOME TAX AND WEALTH TAX, SIALKOT

versus

Messrs POPULAR INDUSTRIES S.I.E., SIALKOT

Income Tax Appeal No.518 of 1998, decided on 31st August, 2004.

Income Tax Act (XXXI of 1979)---

----Ss. 59 & 136--Appeal to High Court---Question arising out of order of Income Tax Appellate Tribunal, was "whether or not under the facts and circumstances of the case Income Tax Appellate Tribunal was justified in directing to accept assessee's returned income under Self-Assessment Scheme when definite information was available regarding less declaration of net profit"---Issue of a return filed by an assessee qualified for acceptance under Self-Assessment Scheme, was necessarily based upon facts and it did not involve or raise a substantial legal controversy between Revenue and assessee---Every question of law need not be referred to High Court and that only a question having some substance needed to be referred---Question raised in the case was neither of law nor had arisen a substantial legal controversy between parties---High Court declined to answer said question.

Shahid Jameel Khan for Appellant.

Date of hearing: 31st August, 2004.

2005 P T D 1044

[LahoreHigh Court]

Before Nasim Sikandar and Muhammad Muzammal Khan, JJ

ABDUL WAHEED

versus

ASSISTANT COMMISSIONER OF INCOME TAX/WEALTH TAX and 2 others

Wealth Tax Appeal No.77 of 2002, decided on 24th June, 2004.

Wealth Tax Act (XV of 1963)---

----S. 27---Wealth Tax Rules, 1963, R. 8(3)(4)---Appeal to High Court---Income Tax Appellate Tribunal, while deciding appeal, maintained estimated value of two properties of appellant after finding the same to be fair and at the same time, the Tribunal maintained remand of issue of liabilities by Commissioner Income Tax (Appeals) to the Assessing Officer---Validity---Tribunal ought to have ruled upon legal issues namely whether two properties in question could be evaluated/assessed only under sub-rule (4) of R. 8 of Wealth Tax Rules, 1963 and not under sub-rule (3) of said Rule---Remission of matter to Assessing Officer to seek supporting documents of claim of liability, could be fruitful only if in principle, applicable rule was identified by First Appellate Authority or Tribunal---Order of Commissioner Income Tax (Appeals), as maintained by Tribunal as a matter of fact suffered from apparent contradiction inasmuch as on one hand estimated value under R. 8(3) of Wealth Tax Rules, 1963 had been maintained, while Assessing Officer had been directed to probe into the liabilities---Such probe would necessarily be an exercise in futility as estimated value made by Assessing Officer under R. 8(3) of Wealth Tax Act, 1963 had already been maintained---High Court allowing appeal, set aside impugned order---Appeal filed by assessee before Tribunal would be deemed pending for decision afresh after hearing parties.

Ghulam Hussain v. Jamshaid Ali and others 2001 SCMR 1001 and Abdul Aziz Khan Niazi v. Federation of Pakistan (The Chairman, C.B.R.), Government of Pakistan, Islamabad and 3 others 1995 PTD 1087 ref.

Shahbaz Butt for Appellant.

Muhammad Ilyas Khan for Respondent.

Date of hearing: 24th June, 2004.

2005 P T D 1126

[Lahore High Court]

Before M. Bilal Khan and Sh. Azmat Saeed, JJ

MUSA KHAN

versus

DEPUTY SUPERINTENDENT CUSTOMS (ASO), SARGODHA and 2 others

C.A. 69 of 2004, decided on 28th January, 2005.

Customs Act (IV of 1969)---

----S. 196---General Manifest No. 1781/95 dated 25-11-1995---S.R.O. No. 506(I)/88 dated 26-6-1988---Exemption No. 10684 issued by the Ministry of Foreign Affairs---Appeal to High Court---Question of fact---Sale of vehicle which had been imported free of customs duty by a foreign diplomat---Tribunal as well as Adjudicating Officer had found that the vehicle in question had been disposed of/sold to someone who in fact was stated to have raised the plea that he was the owner of the vehicle and was ready to pay all the customs duty and other taxes due upon the said vehicle---Said person did not challenge the order of the Adjudicating Officer---Record showed that diplomatic status of the gentleman who imported duty/tax free vehicle had ceased to exist since 4-12-1995 and privileges associated therewith automatically came to an end and thus, the contention of the appellant/former diplomat that he continued to stay in Pakistan would lose its significance---Held, the case appeared to be one of gross abuse of the hospitality extended to a foreign diplomat---Jurisdiction invoked by the appellant (former diplomat) under S. 196, Customs Act, 1969 was limited only to deal with the questions of law and in pith and substance the contentions of the appellant raised a factual controversy which was beyond the jurisdiction and scope of S.196, Customs Act, 1969---Appeal was dismissed in circumstances.

Muzammal Akhtar Shabbir for Appellant.

2005 P T D 1131

[Lahore High Court]

BeforeMaulvi Anwarul Haq and Farrukh Lateef, JJ

Messrs HAMZA SUGAR MILLS LTD. through General Manager

versus

COLLECTOR OF SALES TAX and 2 others

Sales Tax Appeal No.12 of 2004, decided on 9th December, 2004.

Sales Tax Act (VII of 1990)---

----Ss. 7 & 47---Appeal to High Court---Tax liability, determination of---Scope---Provision of S. 7, Sales Tax Act, 1990, leaves little to imagination and it is only the input tax paid during the tax period and for the purpose of taxable supplies made, that a registered person is entitled to adjust the same from the output tax that is due from him in respect of the said tax period---Subsections (2)(i) of S. 7, further conditions the said entitlement upon possession of tax invoices in respect of the supply for which a return is furnished.

Messrs Fauji Sugar Mills v. Assistant Collector of Sales Tax and others GST 2004 CL 268 distinguished.

Muhammad Akram Nizami for Petitioner.

2005 P T D 1137

[Lahore High Court]

Before Nasim Sikandar and Muhammad Sair Ali, JJ

Haji MEERA JAN

versus

THE STATE through Superintendent of Customs, Anti-Smuggling Organization, Lahore and 2 others

Customs Appeal No.539 of 2003, decided on 27th October, 2004.

Customs Act (IV of 1969)---

----Ss. 156(1)(8), 181 & 196---Appeal to High Court---Confiscation of smuggled goods---Anti-Smuggling Staff intercepted a truck and found therein machine made carpets of foreign origin and also free wheels for cycles made in India---Truck driver submitted a photocopy of bill of entry to show import of carpets, but no document was presented in respect of other goods---Addl. Collector (Adjudication) finding that charges of smuggling had been established, against appellant ordered confiscation of said goods in favour of Government---Owner of said goods, however was given option to redeem same on payment of Rs.500,000 as redemption fine and owner was also burdened with personal penalty of Rs. 200,000---Tribunal, by way of impugned order, maintained findings so recorded by Collector, but order of imposition of personal penalty on owner of goods was found harsh and remitted in toto---Appellant/owner was not able to challenge impugned order of Tribunal as well as that of Adjudicating Authority on any cogent ground and failed to produce any proof of lawful import and possession of goods in question---Treatment meted out to appellant owner by two forums below was not open to exception---Contention of appellant owner, that redemption fine of Rs.500,000 on goods was on higher side, was accepted and same was reduced to Rs. 150,000.

Muhammad Ghafoor Khatak for Appellant.

Dr. Sohail Akhtar for Respondents.

Date of hearing: 27th October, 2004.

2005 P T D 1142

[Lahore High Court]

Before Nasim Sikandar and Muhammad Muzammal Khan, JJ.

COMMISSIONER OF INCOME-TAX/WEALTH TAX COMPANIES ZONE, FAISALABAD

versus

Messrs TAJ FLOUR MILLS (PVT.) LTD.

Income Tax Appeal No.173 of 1997, decided on 24th June, 2004.

Income Tax Ordinance (XXXI of 1979)---

----Ss. 62 & 136---Reference to High Court---Assessment---Claim of interest paid against loan taken from private parties---Assessee which was a private limited company, obtained two kinds of loans one from a Bank and other from two private persons and paid interest on all said loans---Assessee, for relevant assessment year declared loss and Assessing Officer in the process of framing assessment admitted amount of interest paid by assessee to the Bank on loan obtained by assessee, but amount of interest paid by assessee to private parties was disallowed and said amount of interest was added towards total income of assessee by Assessing Officer---Assessee failed before Commissioner Income Tax who being Appellate Authority maintained disallowance for similar reasons which earlier weighed with the Assessing Officer---Tribunal, however, disapproved disallowance holding that in interest paid on capital borrowed for expanding business was allowable expense---Assessing Officer in the present case did not doubt the incurring of loan liability of assessee for the purpose of business at the relevant time---Mere fact that at a later stage business/manufacturing unit was leased out by assessee to a third party, would not derogate from the claim of interest which was earlier duly recognized and allowed as deduction by Revenue Officer during the period the unit remained operative under the assessee---Second question raised by Revenue Department, did not arise out of order of Tribunal appealed against as distinction pointed out in said question was neither mooted upon before Tribunal nor it was ruled upon by the Tribunal---High Court refused to answer said second question.

Calico Dyeing and Printing Works v. Commissioner of Income Tax, Bombay City II 34 ITR 265 Bombay ref.

Muhammad Ilyas Khan for Appellant.

Nemo for Respondent.

Date of hearing: 24th June, 2004.

2005 P T D 1145

[Lahore High Court]

Before Muhammad Sair Ali and Sh. Azmat Saeed, JJ

COMMISSIONER INCOME TAX AND WEALTH TAX, GUJRANWALA ZONE, GUJRANWALA and others

Versus

Messrs ASIF INDUSTRIES, ALIPUR CHATTA, WAZIRABAD and others

I.T.As. Nos. 374, 89, 526, 359, 15, 16, 17 of 1999 and 466 of 2000, decided on 15th February, 2005.

(a) Contract---

----CIF (Cost, Insurance & Freight)---Concept.

CIF (Cost, Insurance & Freight) refers to a contract, whereby the seller assumes the responsibility to make available the goods at the port of loading of the ship on which the goods are to be dispatched, make payment of all handling, transport and insurance charges up to the time the goods are loaded on to the ship, and thereafter meet the charges including insurance and freight incurred in connection with the goods till the same are unloaded at their destination. The property in the goods may pass on shipment or tender. The possession usually does not pass to the seller until documents of shipment are handed over in exchange for the price.

The two terms (CIF and FOB) pertain to two types of contract relating to sale and purchase of exported goods determining the nature and extent of the responsibilities and liabilities of the buyer and seller and the events whereupon the property in the goods is transferred from the buyer to the seller. The nature of the contract has no nexus or connection to the method of accounting for determining the income, profits or gains derived therefrom.

(b) Contract---

----FOB (Free on board)---Concept.

FOB (free on board) relates to a category of contracts whereby the seller assumes the responsibility for all charges incurred till the goods are loaded on to the ship at the port of loading, whereafter, the buyer alone is responsible for all subsequent charges such as storage on board, freight, insurance and unloading charges.

The two terms CIF and FOB pertain to two types of contract relating to sale and purchase of exported goods determining the nature and extent of the responsibilities and liabilities of the buyer and seller and the events whereupon the property in the goods is transferred from the buyer to the seller. The nature of the contract has no nexus or connection to the method of accounting for determining the income, profits or gains derived therefrom.

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

----Ss. 32, 60, 61, 62, 63, 64 & 65---Income Tax Rules, 1982, R.216(3)(a)---Method of accounting---Computation of export profits and tax attributable to export sales---CIF and FOB contracts---Provision of S. 32, Income Tax Ordinance, 1979 refers and deals with the method of accounting to be employed and does not deal with the nature of the contract, under which the business has been carried out---FOB and CIF contracts have no connection to the method of accounting to be employed, therefore, S. 32 of the Ordinance has no nexus with the determining the liability of the assessee whose liability for payment of income tax would be determined by Ss. 60, 61, 62, 63, 64 & 65 of the Income Tax Ordinance, 1979 and other related provisions.

Section 32 of the Income Tax Ordinance, 1979 pertains to the method of accounting to be employed for determining the income, profits and gains in various eventualities. The method of accounting is a manner in which the incomes and expenses are recorded in the books of account of any business venture. Two principal methods of accounting are employed commonly referred to as the cash system and the mercantile system. In the former, only the actual receipts and disbursements are recorded in the books of accounts while in the latter, in addition to the actual receipts, liabilities incurred are also recorded. The method of accounting primarily refers to the mode for maintaining the books of account and incorporating the entries of the business activity therein. It is only the tools or a system for keeping accounts & financial record. In the above perspective, section 32 of the Income Tax Ordinance, 1979 including subsection (3) thereof, refers and deals with the method of accounting to be employed and does not deal with the nature of the contract, under which the business has been carried out. While on the other hand, FOB and CIF contracts have no connection to the method of accounting to be employed, therefore, section 32 of the Income Tax Ordinance, 1979 has no nexus with the determining of the liability of the assessee whose liability for payment of income tax would be determined by sections 60 to 65 of the Ordinance and other related provisions.

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

----Ss. 32 & 136---Income Tax Rules, 1982, R. 216(3)(a)---Appeal to High Court---Method of accounting---Computation of export profits and tax attributable to export sales---Questions raised to be decided by the High Court were to the effect “whether on facts and circumstances of the case, the Tribunal was justified in directing that while computing the income of assessee CIF sales be adopted and that whether the Tribunal was justified in giving the said directions to adopt CIF sales in spite of the provisions of S. 32(3), Income Tax Ordinance, 1979 and Income Tax Rules, 1982, R. 216(3) when the trading results were discarded by the Assessing Officer”---Validity---Held, question of law purported to be raised did not arise in the facts and circumstances of the case requiring the expression of an opinion by the High Court.

The Commissioner of Income Tax Zone Gujranwala v. Messrs Anwar Enterprises Sialkot 1999 PTD 1329 fol.

Sardar Ahmed Jamal Sukhera for Petitioner.

2005 P T D 1150

[Lahore High Court]

Before Nasim Sikandar and Mian Hamid Farooq, JJ

SHAHABAL KHAN

versus

COMMISSIONER OF INCOME TAX/WEALTH TAX, ZONE-I, LAHORE

W.T.As. Nos. 194, 195 and 196 of 2001, decided on 7th October, 2004.

Wealth Tax Act (XV of 1963)---

----Ss. 5(xv)(ii) & 27---Appeal to High Court---Exemption---Appellant who was an individual, for three assessment years, had declared certain movable assets, part of which were stated to have been created out of encashment of Foreign Exchange Bearer Certificates and claimed exemption in respect therefor in terms of provisions of S. 5(xv)(ii) of Wealth Tax Act, 1963---Assessing Officer refused the claimed exemption and First Appellate Authority maintained said refusal order---Validity---Any conversion/encashment of Foreign Exchange Bearer Certificates whether in the form of Pakistani rupees or a property, both movable or immovable purchased in local currency, was not entitled to exemption---Foreign Exchange Bearer Certificates in the present case, were neither brought or remitted or received by assessee/appellant from outside Pakistan nor were created directly out of remittance received in or brought into Pakistan through normal Banking Channels---Legal position was that only certificate and not its equivalent in Pakistani currency after encashment, was entitled to exemption---Appeal against concurrent judgments of forums below, was rejected.

Shahbaz Butt for Appellant.

Muhammad Ilyas Khan for Respondent.

Date of hearing: 16th March, 2004.

2005 P T D 1157

[Lahore High Court]

Before Nasim Sikandar and Jawwad S. Khawaja, JJ

Messrs ROYAL TRAVEL SERVICE (PVT.) LTD., FAISALABAD through Chief Executive

versus

INCOME TAX APPELLATE TRIBUNAL OF PAKISTAN and 2 others

I.T.A. No. 535 of 1999, heard on 7th February, 2005.

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

----Ss. 50(4A), 52 & 136---Appeal to High Court---Deduction of tax at source---Liability of persons failing to deduct or pay tax---Assessee in default---Conditions---“Commission” and “discount”---Connotation---Assessee Company, deriving income from selling Airline tickets on commission basis---When two basic conditions required to attract the provisions of S. 50(4A), Income Tax Ordinance, 1979 namely a kind of obligation to pay and the actual payment made on account of brokerage or commission, are absent in the case of assessee, the assessee was not liable nor he could possibly be treated as an assessee in default---Neither trade discount allowed by the assessee could be treated as payment made under S. 50 attracting section 52 of the Income Tax Ordinance, 1979 nor passing of discount from principal Airline to purchaser and in turn seller at the tail end, could be treated as commission---Recipient of air tickets price could not be treated as payer responsible to deduct income tax under S. 50(4A) of the Income Tax Ordinance, 1979---In the absence of any relationship of agency between the assessee and purchaser of air tickets for sale at their end, the purchasers could not be treated as sub-agents of the assessee---Principles.

Provision of S. 50(4A), Income Tax Ordinance, 1979 when read with its section 52 leads to a definite conclusion that the liability of a person to be treated as an “assessee in default” is co-related to the default made under section 50(4A). That provision in turn is clear that a person falling in the categories contemplated in the said provisions making any payment in full or in part, shall be required to deduct tax at the time of making such payment at the rate specified in the First Schedule. Obviously, in case of default the provisions of section 52 will come into motion and that person shall be deemed to be an “assessee in default” in respect of such tax. In the present case it was not disputed that the assessee, as an agent of the airline, ceded part of its commission to walk in passenger i.e. tickets sold at the counter as also to other persons who acted as sub-agents directly or indirectly. It is also not disputed that the assessee-Company did not make any cash payment to any sub-agent. The question of cash payment to a walk in passenger or over the counter had hardly arises at all. The form in which part of the commission was ceded certainly means selling of air tickets at a rate lower than the one on which the assessee was allowed by its principal airline to sell the tickets. Therefore, the contention that at best the ceding of a part of commission was a discount both in case of walk in passengers as well as sub-agents bears weight.

If one looks at the provisions of section 50 (4A) of the Ordinance once again it would be seen that the first condition that a person “responsible” for making any payment in full or in part is certainly missing in the present case. The assessee as a commission agent was not responsible to make any payment either while selling tickets over the counter or through sub-agents. It is correct that the words “discount” and “commission” have two different connotations and even results. It is that the word “commission” generally signifies disbursement of an amount relatable to the total amount involved in a transaction. It can be any percentage or any sub-division of the amount involved in the transaction. On the other hand, the word “discount” signifies a certain amount of money normally identified by percentage, which is taken away from the face value of the security or property which is subject-matter of the transaction. It is certainly correct that the payment of a sum as “commission” as visualized in the provision by and on behalf of the entities stated therein is squarely hit by the mischief of the provision. However, in the case of the assessee in the present case as a travel agent the term “commission” with its significance is not attracted for the simple reason that his commission from the principal air lines already stands determined. Whatsoever he is ceding or parting with is a chunk of his own commission earlier allowed to him on every ticket.

Also the use of the word “responsible” in the said provision indicates some kind of duty or obligation on the part of the person to make the payment on behalf of the entities identified in the provision. The word “commission” in that sense signifies that a transaction was reached between two persons, a buyer and a seller of commodities and services etc. which were done and completed through the medium of a third person who, besides doing many other acts, brought the two parties together. Such person or commission agent plays a key role keeping in view the trust and confidence reposed in him both by the seller as well as the purchaser of the commodity or services. Not only that he acts on behalf of both parties but also his judgment as to the quality, quantity and standard of the thing or services sought to be bargained is accepted by the parties. The earning of that amount, of course subject to the deduction of admissible expenses, is the income of the commission agent. Most significant character of this kind of income is its receipt or payment in cash or in any other form to be categorized as an “amount”.

On the other hand, in case of a commission agent selling out either the product of his principal or providing services as in the case of a travel agent, he does not pay any “amount” either as discount or as commission. Therefore, the basic ingredient to attract the provision i.e. “making any payment in full or in part” is absent in such cases. It further needs to be noted that in cases of sub-agents, though they fall in the same character, yet they also like the assessee as travel agent, are neither “responsible” to make any payment to an air passenger nor any payment is made to them by the travel agent. A sub-agent in this line of business only purchases a ticket from the agent at a rate lesser than the one shown on its face. In that manner he only shares part of the commission earlier allowed to the agent but does not receive any cash payment from the agent nor he makes any payment to the end customer, i.e. the air passenger.

Since the two basic conditions required to attract the provisions of section 50(4A) i.e. a kind of obligation to pay and secondly the actual payment made on account of brokerage or commission are absent in the case, the assessee was not liable nor he could possibly be treated as an assessee in default.

(b) Words and phrases---

----“Commission”---“Commission agent”---Connotation.

Syed Zia Haider Rizvi for Appellant.

Muhammad Ilyas Khan for Respondents.

Date of hearing: 7th February, 2005.

2005 P T D 1169

[Lahore High Court]

Before Nasim Sikandar and Mian Hamid Farooq, JJ

COLLECTOR OF CUSTOMS, CUSTOM HOUSE, NABHA ROAD, LAHORE

versus

GHULAM BARI AKBAR

C.As. Nos. 543 to 545 of 2003, heard on 7th July, 2004.

(a) Finance Act (IV of 1999)---

----S.18(7)(b)---S.R.O. 116(I)/2000 dated 7-3-2000---S.R.O. having been issued on 7-3-2000 would take effect from the date of its publication in the official Gazette on 10-3-2000---Bills of entry having been filed, in the present case, on 9-3-2000, was a past and closed transaction when the S.R.O. in question was published on 10-3-2000.

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

----Ss. 19(2) & 30---Finance Act (IV of 1999), S. 18(7)(b)---S.R.O. 116(I)/2000 dated 7-3-2000---Exemption/refund---Date for determination---S.R.O. 116(I)/2000 dated 7-3-2000 was issued by the Federal Government in exercise of the powers conferred by S. 18(7)(b), Finance Act, 1999 and not under S. 19, Customs Act, 1969---Even otherwise in the absence of mentioning of a specific date of enforcement or coming into force of the said S.R.O., the provisions of S. 19(2), Customs Act, 1969 would not apply and the general rule applicable with regard to the notifications would be applicable.

2002 CLC 1275 ref.

(c) Finance Act (IV of 1999)---

----S. 18(7)---Customs Act (IV of 1969), Ss. 19(2) & 30---S.R.O. 116(I)/2000 dated 7-3-2000---Refund---Date for determination---S.R.O. 116(I)/2000 dated 7-3-2000 though was issued on 7-3-2000 but took effect from 10-3-2000 when it was published in the official Gazette, and therefore, the importer was entitled to claim refund which was not hit by the mischief of the provisions of Ss. 19(2) and 30 of the Customs Act, 1969.

Ch. Muhammad Zafar Iqbal for Appellant.

Mian Abdul Ghaffar for Respondent.

Date of hearing: 7th July, 2004.

2005 P T D 1176

[Lahore High Court]

Before Ali Nawaz Chowhan, J

FAISALABAD DRY PORT TRUST, through Manager (Admn. & Legal)

versus

ASSISTANT COLLECTOR CUSTOMS and 4 others

Writ Petition No.14260 of 2004, heard on 17th January, 2005.

Customs Act (IV of 1969)---

----Ss. 82, 82-A, 203, 201 & 169(5)---Constitution of Pakistan (1973), Art. 199---Constitutional petition---Payment of wharfage in respect of storage of confiscated/uncleared goods kept in Dry Port by the Department---Procedure---Contentions of the petitioner, the Dry Port, was that for a period of seven days such storage was permissible gratis but beyond that a reasonable rent was to be paid and that the other Ports in the country, particularly the biggest Port of the country was paying wharfage for storage of such goods which did not get cleared within a period of 30 days as required by S. 82, Customs Act, 1969---Customs Department could not satisfy the Court with respect to the demand which had been raised by the Port/petitioner through the Constitutional petition as well as the relief being asked in that connection---Held, when a dispute had arisen the precedents of biggest Port and the other Ports became relevant and were to be followed---Senior hierarchy of the Customs Department was duty bound to look into the matter and then decide whether the audit objection which had been taken in respect of future wharfage fee be paid to the petitioner/Port and against the fee already paid call for a review and whether the audit objection was based on correct considerations of law, past practice and the provisions of the Customs Act, 1969---High Court, in circumstances, directed to the Collector Customs concerned to decide the issue forthwith after consulting with his counterparts at the different Ports and to place on the record the inter-office notes which he might be receiving from the counterparts for the purpose of adjudication---If it was discovered that the audit objection was based on a wrong consideration, then he shall override the same through an order in accordance with law---Such exercise shall be accomplished within two months from the present order of the High Court and the report shall be submitted by the Collector Customs to the High Court by the specified date.

Mian Abdul Ghaffar for Petitioner.

Sarfraz Ahmed Cheema for Respondents.

Date of hearing: 17th January, 2005.

2005 P T D 1189

[Lahore High Court]

Before Nasim Sikandar and Muhammad Sair Ali, JJ

Haji MUHAMMAD IQBAL and 7 others

versus

COLLECTOR OF CUSTOMS (APPRAISEMENT) DRY PORT MUGHALPURA, LAHORE and another

Customs Appeal No.9 of 2000, heard on 19th October, 2004.

Customs Act (IV of 1969)---

----Ss.194-B, 196 & 156---Appeal to High Court---Allegation of smuggling---Imposition of fine---Member of the Appellate Tribunal disposed of the appeal by using general, vague and uncertain observations which were devoid of reasons---Operative part of the order of the Tribunal was not an effective disposal of the appeal before judicial forum---Such kind of order could be suffixed to any factual background---Such order showed rather lack of proper application of mind---Not the conclusion but the reason was the hallmark of a judicial order---Contentions placed before the Collector were wrongly rejected which were not even considered and ruled upon by the Members of the Tribunal---High Court accepted the appeal and set aside both the orders of the forums below and fine imposed by the Collector on the appellants was ordered to be remitted altogether---Principles.

Mian Abdul Ghaffar for Appellants.

Muhammad Zafar Iqbal Choudhry for Respondents.

Date of hearing: 19th October, 2004.

2005 P T D 1200

[Lahore High Court]

Before Maulvi Anwarul Haq, J

Messrs ZIKERIA ENTERPRISES through Partner

versus

MUHAMMAD MUSHARAF and 7 others

Writ Petitions Nos.6270, 4581, 6772 and 6773 of 2004, decided on 15th February, 2005.

Sales Tax Act (VII of 1990)---

----Ss.40-A, 40 & 38---Constitution of Pakistan (1973), Art.199---Constitutional petition---Search without warrant---Officials of the department purporting to act under Ss.38/40, Sales Tax Act, 1990 conducted raid at the premises of the petitioners to search for some documents, which, were consequently seized and taken into possession---Validity---Documents purported to be a “statement of belief” did not at all contain the statement as required by S.40-A(1) of the Sales Tax Act, 1990 and search was conducted and documents were removed in clear violation of the said provision---Requirements to be fulfilled and procedure to be followed for such raid, search and seizure elaborated---High Court allowed Constitutional petition and declared that the proceedings of raid, search and seizure of record from the premises of the petitioners were illegal and without lawful authority and of no legal effect---Department was directed to immediately return the said record and other articles so seized to the petitioners in these cases---Documents or their copies shall not be used against the petitioners in any proceedings---High Court, however clarified that the department would be at liberty to act strictly in accordance with law upon fulfilment of the conditions laid down therein---Principles.

Officials did not obtain any search warrant in the manner prescribed in section 40 of the Sales tax Act, 1990 and purported to act under section 40-A of the Act.

None of these documents constituted even remotely compliance with the provisions of law.

Requirements of section 40-A of Sales Tax Act, 1990, are as follows:--

(i) Any Officer of Sales Tax not below the rank of an Assistant Collector of Sales Tax has reasons to believe.

(a) that any documents or things which, in his opinion, may be useful for, or relevant to, any proceeding under the said Act are concealed or kept in any place; and

(b) that there is a danger that they may be removed before a search can be effected under section 40;

(ii) he may, after preparing a statement in writing of the grounds of his belief for which search is to be made, search or cause search to be made for such documents or things in that place.

(iii) Any officer or person who makes a search or causes to be made shall leave a signed copy of the statement referred to in that section in or about the place searched and shall, at the time the search is made or as soon as is practicable thereafter, deliver a signed copy of such statement to the occupier of the place at his last known address.

Document being relied upon did not at all constitute a statement envisaged by subsection (1) of section 40-A(1) and further there was no prima facie evidence of the compliance of subsection (2) of section 40-A.

The said documents purported to be statement of belief did not at all contain the statement as required by section 40-A(1) of the Sales Tax Act, 1990.

Finding that the search was conducted and documents were removed in clear violation of said provisions of Sales Tax Act, 1990, High Court allowed writ petitions and declared that the proceedings of raid and search and seizure of record from the premises of the writ petitioners were illegal and without lawful authority and of no legal effect whatsoever. The department was directed to immediately return the said record and other articles so seized to the petitioners in these cases. The documents or their copies shall not be used against the petitioners in any proceedings. However, it was clarified that the department will be at liberty to act strictly in accordance with said law upon fulfilment of the conditions laid down therein.

Collector of Customs (Preventive) and 2 others v. Muhammad Mahfooz PLD 1991 SC 630 fol.

Federation of Pakistan through Ministry of Finance, Islamabad v. Master Enterprises (Pvt.) Ltd. and 4 others 2003 PTD (SC) 1034; Messrs Ahsan Yousaf Textile Mills (Pvt.) Ltd. Faisalabad v. Federation of Pakistan through Ministry of Finance, Islamabad and 4 others 2003 PTD 2037; Messrs Food Consults (Pvt.) Ltd. Lahore and others v. Collector (Central Excise and Sales Tax), Lahore and 2 others 2004 PTD 1731 and N.P. Water Proof Textile Mills (Pvt.) Ltd. through Director, Karachi v. Federation of Pakistan through Secretary, Revenue Division/ Chairman, Central Board of Revenue, Islamabad and another 2004 PTD 2952 ref.

Mian Abdul Ghaffar for Petitioner.

Ch. Saghir Ahmad, Standing Counsel for Pakistan.

2005 P T D 1325

[Lahore High Court]

Before Nasim Sikandar and Jawwad S. Khawaja, JJ

COLLECTOR, CENTRAL EXCISE, CUSTOMS HOUSE, LAHORE

Versus

Messrs SHEZAN INTERNATIONAL LIMITED, LAHORE

Customs Appeals Nos.61 to 66 and 70 of 1998, heard on 8th February, 2005.

Central Excises Act (I of 1944)---

----S. 4(2)---Determination of value for the purposes of duty---Excise duty though a tax still was not includable in fixing the retail price---Principles.

Collector of Customs and Central Excise, Customs House, Multan v. Messrs Pakistan Daries, Kabirwala and others Civil Petitions Nos.1527-L to 1530-L and 1576-L to 1579-L of 2000; Customs Appeal No.41 of 1998, dated 12-4-2000 and Pakistan Beverages Limited v. Federation of Pakistan and others Constitutional Petition No.D-1926 of 2002 fol.

A. Karim Malik for Appellant.

Ali Sibtain Fazli, Ashtar Ausaf Ali and Ahmad Jamal Sukhera for Respondents.

Date of hearing: 8th February, 2005.

2005 P T D 1337

[Lahore of High Court]

Before Nasim Sikandar and Jawwad S. Khawaja, JJ

COLLECTOR OF SALES TAX, FAISALABAD

versus

Messrs ARAFAT CHEMICAL (PVT.) LTD., FAISALABAD.

Customs Appeal No.103 of 1998, heard on 10th March, 2005.

Sales Tax Act (VII of 1990)---

----Ss. 18, 14, 23 & 59---Commercial importer had imported Chemicals through various bills of entry prior to 17-8-1996 and at that time importer was not obliged to register itself compulsorily under S.14, Sales Tax Act, 1990 as an importer---Importer however, opted for voluntary registration under S. 18 of the Act and was registered as such on 17-8-1996---Importer, thereafter, supplied the imported Chemicals to registered manufacturers and also issued replacement invoices in respect of such supplies---Department had taken the objection that the importer had passed on the incidence of Sales tax to registered persons under the cover of S.59, Sales Tax Act, 1990 although the benefits of the said section were not available to persons who had opted for voluntary registration under S.18 of the Act and that as a result of the replacement, invoices issued by the importer a huge loss was caused to the exchequer---Importer was therefore, charged with the violation of Ss.18 & 59 of the Sales Tax Act, 1990 and was called upon to show cause as to why sales tax along with additional tax should not be recovered from it---Validity---Held, importer, being a registered importer, was fully authorized to issue replacement invoices---Department had no statutory basis for the objection in view of clear and unambiguous wording of S.18, Sales Tax Act, 1990, at the relevant time whereby importer was duty bound to issue replacement invoices where it had opted for voluntary registration---Principles.

A. Karim Malik for Appellant.

Latif Ahmad Qureshi for Respondent.

Date of hearing: 10th March, 2005.

2005 P T D 1346

[Lahore High Court]

Before M. Bilal Khan and Sh. Azmat Saeed, JJ

Messrs SFS CORPORATION, LAHORE

versus

COLLECTOR OF CUSTOMS (APPRAISEMENT) and another

Customs Appeal No. 71 of 1999, heard on 11th February, 2005.

Customs Act (IV of 1969)---

----S. 4---Public Notice No.19/93(A) dated 28-4-1993---Collector of Customs (Appraisement) was not vested with the jurisdiction to conduct its proceedings in part behind the back of the importer and based its decision on information obtained through private enquiry---Principles.

All Tribunals, Judicial or Quasi Judicial, must conduct their proceedings in presence of the parties. There is no concept that such Tribunals can, under the law, embark on private inquiries conducted behind the back of the party and base its decision on information obtained through such inquiry with which the party to the proceedings has had no opportunity to respond or rebut. In the circumstances, it is held that Collector of Customs (Appraisement) could not have conducted the proceedings or any part thereof behind the back of the importer or base its decision on information of which the importer had as no notice or opportunity to respond to or rebut.

Mian Abdul Ghaffar for Appellant.

A. Karim Malik for Respondents.

Date of hearing: 11th February, 2005.

2005 P T D 1361

[Lahore High Court]

Before Nasim Sikandar and Jawwad S. Khawaja, JJ

Messrs RIAZ BOTTLERS (PVT.) LTD., LAHORE

versus

CENTRAL BOARD OF REVENUE through Chairman, Islamabad and 3 others

Writ Petition No.18494 of 1999, heard on 8th February, 2005.

Central Excises Act (I of 1944)---

----S. 4(2)---Determination of value for the purposes of duty---Taxes referred to in S.4(2), Central Excises Act, 1944 meant the taxes other than the excise duty which was imposable independently under the charging provisions of Central Excises Act, 1944---Excise duty could not be treated as part of "retail price" for the purpose of calculation of duty of excise payable under the Act.

Collector of Customs v. Messrs Shezan International Limited and others C.A. No.61 of 1998; C.A. No.41 of 1998, Civil Petitions Nos. 1527-L to 1530-L and 1576-L to 1579-L of 2000; Pakistan Beverage Limited v. Federation of Pakistan and others Constitutional petition No.D-1926 of 2002, dated 14-1-2005 and Messrs Luckey Cement Limited v. C.B.R. and others W. P. No.1144 of 1997, dated 25-5-2001 ref.

Ali Sibtain Fazli for Petitioner.

A. Karim Malik for Respondent.

Date of hearing: 8th February, 2005.

2005 P T D 1368

[Lahore High Court]

Before Muhammad Sair Ali, J

Messrs PEARL CONTINENTAL HOTEL, LAHORE through Director Finance and another

versus

CUSTOMS, EXCISE AND SALES TAX APPELLATE TRIBUNAL, LAHORE and another

Writ Petition No.17947 of 2004, decided on 23rd November, 2004.

Sales Tax Act (VII of 1990)---

----S. 46(4)---Constitution of Pakistan (1973), Art. 199---Constitutional petition---Recovery of sales tax---Appeal to Appellate Tribunal---Appellate Tribunal, pending appeal through a conditional stay order stayed recovery of three-fourth principal amount of sales tax, additional tax and penalty amount subject to deposit of one fourth of principal amount---Petitioners having not complied with the condition of deposit of one-fourth of demanded amount, stay application was deemed to have been dismissed, but subsequently Appellate Tribunal again granted to petitioners stay order with the same condition---Said condition was complied with by petitioners and they deposited one-fourth of principal amount of sales tax---Appeal thereafter was adjourned sine die in compliance with some executive order which remained pending---Authorities had raised a demand for recovery of impugned amount, the subject-matter of appeal, as stay granted by Appellate Tribunal was effective for six months in terms of S.46(4) of Sales Tax Act, 1990 and Authorities had also threatened petitioners with coercive measures on failure to pay said amount---Petitioners, in their Constitutional petition, had sought a writ for restraint of threatened coercive measures during pendency of petitioner's appeal before Appellate Tribunal and also for direction to fix appeal for early hearing---Validity---Delay in decision of appeal before Appellate Tribunal was not attributed to petitioners as their appeal was adjourned sine die in compliance with some executive order---To avail order of stay petitioners had complied with condition of deposit of one-fourth of Sales Tax; it would be a travesty of justice in circumstances, to allow Authorities to adopt coercive measures for recovery of amount which was subject-matter of pending appeal---During pendency of such an appeal and for effectiveness of right to maintain the appeal, petitioners were entitled to protection against coercive measures for effective dispensation of justice and law in absence of any other efficacious remedy---Petitioners could make an application before Appellate Tribunal for seeking early hearing of appeal; in the mean-while Authorities were restrained by the High Court from adopting any coercive measure against petitioners for recovery of amount under appeal---Constitutional petition was disposed of accordingly.

Syed Mansoor Ali Shah for Petitioners.

Ch. Muhammad Zafar Iqbal for Revenue.

Date of hearing: 23rd November, 2004.

2005 P T D 1378

[Lahore High Court]

Before Muhammad Sair Ali and Sh. Azmat Saeed, JJ

COLLECTOR, SALES TAX AND CENTRAL EXCISE, NABHA ROAD, LAHORE

versus

Messrs PATTOKI SUGAR MILLS LTD. through General Manager and another

Custom Appeal No. 162 of 2001, heard on 7th March, 2005.

Central Excise Rules, 1944---

----R. 10(1)(2)(3)---Recovery of excise duty---Limitation---Provisions of R. 10, Central Excise Rules, 1944---Applicability---Scope---Pursuant to a trade agreement between the Government of Pakistan and the Government of India, a memo. of understanding was signed on 25-9-1998 by the Government of Pakistan through the Secretary, Ministry of Finance and the Chairman CBR with Pakistan Sugar Mills Association for exporting sugar to India, inter alia, on "zero" rated central excise duty and the sales tax---Certain sugar Mills exported different quantities of sugar to India in 1997-1998 and 1998-1999 without payment of central excise duty and the sales tax---Show-cause notices were issued to the exporters between April 2000 and Oct./Nov. 2000 seeking from each of the exporter to show cause against imposition of the central excise duty, additional duty and the penalty on sugar exports between 1997-1998 and 1998-1999---Exporters contended that the show-cause notices issued to each exporter were barred by limitation and it was so held by the Appellate Tribunal---Validity---Held, Schedule of dates of the show-cause notices issued to the exporters when compared with the date of completion of the export (April 1999) proved that the show-cause notices were issued beyond the period of one year of the export---Said show-cause notices were thus beyond the time prescribed under R.10(1), Central Excise Rules, 1944---Show-cause notices did not specify or allege "mis-declaration"; "false information"; "collusion"; "false documentation"; "counterfeiting seal or impression" or any other heinous offence---Such show-cause notices, therefore could not fall within the larger period of limitation of three years or ten years respectively prescribed in R. 10(2)(3) of Central Excise Rules, 1944---Show-cause notices, in fact, lacked in essential ingredients and did not meet the mandatory pre-conditions for the attractibility of R.10 of the Rules---Mere allegation of non-payment of the central excise duty was not an adequate reason to invoke R.10, Central Excise Rules, 1944 charging or imposing the central excise duty on a citizen---In the absence of specific allegations in terms of R.10(1)(2)(3), show-cause notices could not be presumed to fall within the scope of a particular provision of law to attract a particular period of limitation---Show-cause notices in question therefore were patently illegal, without lawful authority and beyond the period of limitation.

Messrs Atlas Tyres (Pvt.) Limited, Sheikhupura v. Additional Collector (Adjudication), Collectorate of Central Excise Lahore and another 2003 PTD 1593; Messrs Zamindara Paper and Board Mills (Pvt.) Ltd. v. Collector, Central Excise and Sales Tax PTCL 2004 CL 212 and Assistant Collector Customs and others v. Messrs Khyber Electric Lamps and others 2001 SCMR 838 = PTCL 2002 Cl. 1 fol.

Aftab Hassan for Appellant.

Ijaz Ahmad Awan for Respondent.

Date of hearing: 7th March, 2005.

2005 P T D 1412

[Lahore High Court]

Before Tassaduq Hussain Jilani and Bashir A. Mujahid, JJ

Messrs CRESCENT ENTERPRISES

versus

ASSISTANT COLLECTOR OF CUSTOMS and others

Custom Appeal No.76 of 2003, decided on 14th May, 2003.

Customs Act (IV of 1969)---

----S. 196---Appeal to High Court---Perishable items---Provisional release of---Appellant had submitted that goods subject-matter of appeal were perishable item and that there was a provision of provisional release of such goods and that same Adjudicating Officer before whom his case was fixed had granted relief of provisional release qua same kinds of goods to other party, but same had been refused to appellant without any justifiable reason---High Court declined comments on merits as Collector Adjudication was already seized of the matter and directed the appellant to appear before the Collector who would ensure that matter was decided on next date fixed before him.

Mian Abdul Ghaffar for Appellant.

2005 P T D 1429

[Lahore High Court]

Before Maulvi Anwarul Haq and Syed Zahid Hussain, JJ

Messrs SAMEER ENTERPRISES

versus

ASSISTANT COLLECTOR CUSTOMS

C. A. No. 105 of 2003, decided on 26th June, 2003.

Customs Act (IV of 1969)---

----Ss. 25 & 196---Determination of customs value of goods---Appeal to High Court---Collector of Customs, Sales Tax and Central Excise (Adjudication) ordered assessment of imported goods at the unit price of US $ 243 per set and ordered the importer to pay amount accordingly as duty/Taxes along with penalty and said order was maintained by Appellate Tribunal---Validity---Held, in the face of validity of transaction value of identical goods, it was not possible to approve deductive value in terms of subsection (7) of S.25 of Customs Act, 1969---Unit value of US $ 243 per piece, in circumstances, was correctly determined by Adjudicating Officer and was rightly maintained by Appellate Tribunal---View so expressed and finding so recorded had not been shown suffering from any illegality, rather it found support from subsection (10) of S.25 of Customs Act, 1969---No question of law having arisen to warrant interference by High Court under S.196 of Customs Act, 1969, appeal was dismissed.

Syed Nazir Hussain Shah for Appellant.

Date of hearing: 26th June, 2003.

2005 P T D 1456

[Lahore High Court]

Before Mian Hamid Farooq and Syed Hamid Ali Shah, JJ

COMMISSIONER OF INCOME-TAX, FAISALABAD

versus

Messrs RASHID TEXTILE

C.T.R. No.189 of 1997, decided on 14th March, 2005.

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

----S. 136(1)---Reference to High Court---Additional question---Limitation---Reference to High Court as to the additional question, on time barred application, cannot be made---High Court declined to entertain such additional question.

N.A. Industries v. Commissioner of Income-tax 1992 PTD 50 fol.

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

----S. 136(1)---Reference to High Court---Question of fact---Question as to whether the land in question was sold at a price as has been stated in the sale deed or at a higher price is a question of fact---Determination of the value of the landed property and substitution of one estimate against another, could not, by any stretch of imagination be described as a question of law.

Commissioner of Income Tax v. Sarfaraz Ali Sh. 2000 PTD 374 fol.

Muhammad Ilyas Khan for Appellant.

Zia H. Rizvi for Respondent.

2005 P T D 1467

[Lahore High Court]

Before Muhammad Sair Ali and Nasim Sikandar, JJ

COMMISSIONER OF INCOME-TAX/WEALTH TAX, FAISALABAD

versus

Messrs MULTI COMMERCE (PVT.) LTD.

P.T.R. No.86 of 2003, decided on 4th November, 2004.

Income Tax Ordinance (XLIX of 2001)---

----S. 133(4)---Reference to High Court---Application for reference was filed praying for consideration and answer of three questions of law detailed therein which statedly arose out of order of Income Tax Appellate Tribunal---Matter in issue had already stood resolved by High Court in an other Income Tax Appeal and in the light of various reasons in said order passed in that appeal, High Court returned a negative answer to the question detailed in the application for reference---Other questions having no relevancy with order of Appellate Tribunal and grounds stated therein while rejecting Departmental appeal, High Court declined to answer to any of said questions.

I.T.A. No.402 of 1998 ref.

Miana Yousaf Umar for Petitioner.

Date of hearing: 4th November, 2004.

2005 P T D 1489

[Lahore High Court]

Before Ch. Ijaz Ahmad, J

NAVEED ENTERPRISES and others

versus

ADDITIONAL COLLECTOR OF CUSTOMS

Writ Petitions Nos.13198, 13167 to 13197 and 13199 to 13213 of 2004, decided on 16th August, 2004.

Constitution of Pakistan (1973)---

----Arts. 199, 201 & 4---Customs Act (IV of 1969), Ss. 25 & 26---General Clauses Act (X of 1897), S.24-A---Constitutional petition---Show-cause notices---Petitioners had challenged vires of show-cause notices issued to them on ground that said show-cause notices had been issued on the basis of Circular which had been declared to be without lawful authority by High Court---Additional Collector had issued impugned notices to petitioners without application of mind to the fact that show-cause notices were being issued on basis of letter which had already been declared without lawful authority by High Court---Public functionaries must have passed order after application of mind within reasonable time and with reasons which was envisaged by Art.4 of the Constitution as well as S.24-A of General Clauses Act 1897---No body should be penalized by inaction of public functionaries---Impugned show-cause notices were set aside on technical ground as same were issued on basis of circular which had already been declared without lawful authority by High Court and said judgment of High Court was binding on each and every organ of the State.

Messrs Airport Support Service's case 1998 SCMR 2268 and Ahmad Latif Qureshi's case PLD 1994 Lah. 3 ref.

A. Karim Malik for Petitioners.

Izhar-ul-Haq for Respondents.

Date of hearing: 16th August, 2004.

2005 P T D 1498

[Lahore High Court]

Before Muhammad Sair Ali and Syed Zahid Hussain, JJ

COLLECTOR OF CUSTOMS, SALES TAX AND CENTRAL EXCISE, LAHORE

versus

Messrs GLAMOUR TEXTILE MILLS LIMITED.

Sales Tax Appeal No. 61 of 2004, decided on 22nd November, 2004.

Sales Tax Act (VII of 1990)---

----Ss. 33(2)(cc), 46(4) & 47---Delayed payment of Sales Tax---Imposition of penalty---Powers of Appellate Tribunal---Appeal to High Court---Assessee was proceeded against for delayed payment of Sales Tax and was imposed a penalty by Adjudicating Officer which was maintained by Collector---Appellate Tribunal, vide its order, modified said orders partly allowing appeal---Collector of Customs had filed appeal before High Court against order of Appellate Tribunal---Appellate Tribunal, under S.46(4) of Sales Tax Act, 1990, was empowered to pass any such order as it thought fit---View reducing/altering penalty taken by Appellate Tribunal, in exercise of its discretionary jurisdiction, would hardly call for interference by High Court particularly when no question of law, as contemplated by S.47 of Sales Tax Act, 1990, had arisen in the matter---Appeal before High Court being bereft of any merit, was dismissed.

Zahid Farani Sheikh for Appellants.

Date of hearing: 22nd November, 2004.

2005 P T D 1499

[Lahore High Court]

Before Nasim Sikandar and Muhammad Sair Ali, JJ

KHAWAJA & COMPANY FRUIT PRODUCTS (PVT.) LTD. through Director

versus

SECRETARY, CENTRAL BOARD OF REVENUE (SALES TAX WING), REVENUE DIVISION, GOVERNMENT OF PAKISTAN, ISLAMABAD and 3 others

W.P. No. 12094 of 2003, decided on 20th September, 2004.

Sales Tax Act (VII of 1990)---

----Ss. 11(2), 34 & 72---SRO 555(I)/2002 dated 23-8-2002---CBR Instruction No.19 of 2003 dated 15-8-2003--Customs Import Tariff, Ch.30, PCT heading, 30.03---Constitution of Pakistan (1973), Art.199---Constitutional petition---Murabbajaat---Held, in view of their basic nature and use, "murabbajaat" as specified cannot be classified under Chapter 30 of Customs Import Tariff or item 28.08 dealing with foods, nuts and other edible parts of plants but are properly classifiable under PCT Heading 30.03 having medicinal qualities and thus exempt from levy of Sales Tax---Chutney and pickles, however, do not fall in the same classification---Principles---Show-cause notice raising demand of Sales tax on murabbajaat under S.11(2) Sales Tax Act, 1990 was declared to be without lawful authority.

Burmah Oil Co. v. Trustees of the Port of Chittagong PLD 1962 SC 113; M.Y. Khan v. M.M. Aslam and 2 others 1974 SCMR 196; Messrs Chenab Cement Product (Pvt.) Ltd. v. Banking Tribunal Lahore and others PLD 1996 Lah. 672; Collector of Customs v. S.M. Ahmed and Co. 1999 SCMR 138; Messrs Hoechst Pakistan Ltd. Karachi v. Government Pakistan PLD 1980 Kar. 434 and Messrs Sterling Products (Pakistan) Ltd. v. Deputy Collector Central Excise and Land Customs, Karachi and another PLD 1979 Kar. 643 ref.

M. Saleem Sehgal for Petitioner.

Dr. Sohail Akhtar for Respondents.

Date of hearing: 25th June, 2004.

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2005 P T D 1913

[Lahore High Court]

Before Mian Saqib Nisar and Sh. Azmat Saeed, JJ

COMMISSIONER OF INCOME-TAX/ WEALTH TAX, FAISALABAD ZONE, FAISALABAD

Versus

Messrs ZARI INDUSTRIES

Income Tax Appeal No.237 of 1998, decided on 13th March, 2004.

Income Tax Ordinance (XXXI of 1979)---

----Ss. 59, 136 & Second Sched., cl. (98)---Filing income tax return by new assessee under Self-Assessment Scheme---Appeal before High Court---Assessee filed income tax return as a new assessee claiming to be qualified under Simplified Assessment Procedure for a new assessee, but same was disallowed by Assessing Authority---Commissioner Income Tax and Appellate Tribunal, however found that assessee's return of income fully qualified for acceptance under Self-Assessment Scheme---Validity---Assessee was a registered firm which derived income from manufacture of agricultural implements and clause (98) of 2nd Schedule to Income Tax Ordinance, 1979 inserted by Finance Act, 1985 had exempted the income from manufacture of various agricultural machinery---Presumption would be that machinery manufactured by assessee fell within types of machinery specified in the said clause---Commissioner Income Tax and Appellate Tribunal, in circumstances had rightly found that return of income of assessee fully qualified for acceptance under Self-Assessment Scheme---In absence of any omission or illegality in impugned order, appeal against the order was dismissed.

Shahid Jamil Khan for Appellant.

Date of hearing: 13th December, 2004.

2005 P T D 1918

[Lahore High Court]

Before Mian Saqib Nisar and Sh. Azmat Saeed, JJ

Messrs HYBRID TECHNICS (PVT.) LTD.

Versus

INCOME TAX APPELLATE TRIBUNAL and others

Income Tax Appeal No. 358 of 1998, decided on 15th December, 2004.

Income Tax Ordinance (XXXI of 1979)---

----Ss. 55, 80-C & 136 & Sched. II, Part 4, cl.(9)---Option for, assessment---Appeal before High Court---Assessee, for the assessment year 1995-96, which was for the income year 1994-95, was assessed under provisions of S.80-C of Income Tax Ordinance, 1979---Contention of assessee was that according to Sched-II, Part 4, cl.(9) Income Tax Ordinance, 1979 which was amended through Finance Act, 1996, option had been given to assessee, either to be assessed under the provisions of S.80-C or under the normal law---Validity---Before the said amendment, no option was available to assessee except to be assessed under S.80-C of Income Tax Ordinance, 1979---As case of assessee was for the year prior to the amendment which had no retrospective effect, S.80-C of Income Tax Ordinance, 1979 was inapplicable to the case of assessee.

Zia Haider Rizvi for Appellant.

Shahid Jamil Khan for Respondents.

Date of hearing: 15th December, 2004.

2005 P T D 1920

[Lahore High Court]

Before Nasim Sikandar and Jawwad S. Khawaja, JJ

COLLECTOR OF SALES TAX, LAHORE

Versus

Messrs PACKAGES LIMITED, LAHORE and others

Customs Appeal No. 60 of 1998, heard on 7th March, 2005.

Sales Tax Act (VII of 1990)---

----Ss. 7, 33, 34 & 47---Appeal to High Court---Demand of additional tax, surcharge and imposition of penalty---Remission or reduction of additional tax and penalties imposed---Jurisdiction of Tribunal---Appellate Tribunal had found in its order that demand of additional tax, surcharge and imposition of penalty on the registered person was without lawful authority---Revenue challenged the impugned order of Appellate Tribunal on two grounds: Firstly that amendment made in Sales Tax, 1990 by Finance Act, 1996 was given retrospective effect by the Members of Appellate Tribunal and Secondly that Appellate Tribunal was not competent to remit or reduce additional tax and penalties imposed under Ss. 33 & 34 of Sales Tax Act, 1990---Validity---Was not correct that Tribunal had given retrospective effect to amendment made in S.7 of Sales Tax Act, 1990---Whether a party acted bona fide in particular situation was essentially a question of fact which could not be resolved by High Court in its appellate jurisdiction under S.47 of Sales Tax Act, 1990 which was necessarily akin to referable jurisdiction---Appellate Tribunal had jurisdiction to waive or remit additional tax or penalty in view of provisions of S. 34 of Sales Tax Act, 1990 even after amendment and insertion of the word "shall" in subsection (1) of S.34 of Sales Tax Act, 1990.

Messrs Friends Sons and Partnership Concern v. The Deputy Collector Central Excise and Sales Tax Lahore PLD 1989 Lah. 337; Federation of Pakistan and others v. Khurshid Spinning Mills Ltd. 1998 SCMR 2173 and Messrs Millat Tractors Ltd. Lahore v. Collector of Sales Tax and Central Excise, Lahore 2000 PTD 1445 ref.

A. Karim Malik for Appellant.

Ashtar Ausaf Ali for Respondents:

Date of hearing: 7th March, 2005.

2005 P T D 1923

[Lahore High Court]

Before M. Bilal Khan and Sh. Azmat Saeed, JJ

MUKHTAR AHMAD

Versus

COLLECTOR OF CUSTOMS and 3 others

Customs Appeal No. 28 of 2005, decided on 29th April, 2005.

Customs Act (IV of 1969)---

----Ss: 156 & 196---Confiscation of goods---Appeal to High Court---Customs Authorities intercepted vehicle and its driver who failed to produce Registration Book or any legal proof of its import---Chassis number of said vehicle was found to have been tampered with---Only explanation offered was that vehicle could have been involved in an accident requiring repair---No specific assertion to that effect was made--Order confiscating vehicle was based on facts and appellant was given opportunity of hearing---No question of law had arisen requiring any expression of opinion by High Court---Appeal was dismissed, in circumstances.

Muhammad Akram Nizami, Advocate.

2005 P T D 1925

[Lahore High Court]

Before Nasim Sikandar and Jawwad S. Khawaja, JJ

ASSISTANT COLLECTOR OF SALES TAX, ENFORCEMENT AND COLLECTION DIVISION, SIALKOT and another

Versus

Messrs ADIL BEVERAGES CO. (PVT.) LTD., LAHORE

Customs Appeal No. 14 of 2002, heard on 28th March, 2005.

Sales Tax Act (VII of 1990)---

---Ss. 34, 36 & 47---Short payment of Sales Tax---Appeal to High Court---Issue of sale of scrap was not considered by the Tribunal with seriousness it deserved---Issue of wastage of concentrate to calculate total production per unit was also intermingled with the issue of disposal of scrap---Mere fact that scrap comprised of material on which earlier sales tax had been paid, did not, by itself, exempt it from the levy of sales tax, if otherwise its disposal amounted to taxable activity and taxable supply in furtherance of business of registered person---Issue in hand only revolved around the disposal of scrap and levy of sales Tax thereon---Since issue of taxability of scrap was not looked into in the manner it required, impugned order of Tribunal to that extent was set aside---Tribunal would re-consider and rule upon the issue of levy of sales tax on the scrap disposed of by registered person during the year concerned---Tribunal, if so required by any of the parties, would rule upon admissibility of input tax in case they would approve of sales tax on it.

Collector of Customs, Central Excise and Sales Tax, Karachi (West) v. Novartis Pakistan Ltd. 2002 PTD 976 and Messrs Mayfair Spinning Mills Ltd. Lahore v. Customs, Excise and Sales Tax Appellate Tribunal, Lahore and 2 others PTCL 2002 CL 115 ref.

Izhar-ul-Haq for Appellant.

Zaheer Ahmad Khan for Respondent.

Date of hearing: 28th March, 2005.

2005 P T D 1949

[Lahore High Court]

Before Bashir A. Mujahid and Mian Muhammad Jahangir, JJ

MUHAMMAD ASLAM AZAD

Versus

COLLECTORATE OF CUSTOMS through Collector 2 others

Customs Appeal No. 25 of 2002, heard on 22nd May, 2002.

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

----Ss. 156(1)(9)(90), 162, 163, 171 & 196---Seizure of vehicle---Appeal to High Court---According to Laboratory test report and photographs obtained from Forensic Science Laboratory, Chassis number of vehicle was found tampered with after Chemical treatment and "X" stood for digits which could not be deciphered---Documents attached with appeal were also produced before Department and before Tribunal--Appellant in a letter also produced copy of Pakistan Passport issued in the name of Importer of vehicle in question from whom it was purchased by appellant---Appellant also produced an import certificate issued by Government of Pakistan for import of the same vehicle and a copy of Vouchers whereby he had paid Customs duty and Sales Tax---Vehicle was registered in the name of appellant from Registration Office after purchasing same from its importer---From all said documents, it was clear that vehicle was imported by the person from whom it was purchased by appellant who claimed to be a bona fide purchaser of vehicle---Vehicle was duly registered in England in the name of its importer who imported the same by payment of customs duties and other dues---In view of said peculiar circumstances of case, giving benefit of doubt in favour of appellant, his appeal was accepted.

Haji Abdur Razzaq v. Pakistan PLD 1974 SC 5 ref.

(b) Words and phrases---

----`Deciphered', meaning and connotation.

Farhad Nawaz Lodhi for Appellant.

Khalil-ur-Rehman Abbasi for Respondent.

Date of hearing: 22nd May, 2002.

2005 P T D 1953

[Lahore High Court]

Before Nasim Sikandar and Jawwad S. Khawaja, JJ

COLLECTOR OF SALES TAX, FAISALABAD

Versus

Messrs FAROOQ TRADERS, JHAWARIAN, DISTRICT SARGODHA

C.A. No.546 of 2002, decided on 16th May, 2005.

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

---Ss. 33, 34 & 46---Power of Appellate Tribunal to remit, reduce or delete amount of penalty and additional tax---Scope---Tribunal had jurisdiction to waive or remit additional tax or penalty in view of provisions of S.34 of Sales Tax Act, 1990 even after amendment and insertion of word "shall" in subsection (1) thereof---Provisions of S.46 of Act, 1990 were neither governed nor controlled by provisions of Ss.33 and 34 thereof---Imposition of penalty and additional tax with reference to such provisions would not at all be sacrosanct for appellate forums including Tribunal---Principles.

Messrs Millat Tractors Ltd., Lahore v. Collector of Sales Tax and Central Excise, Lahore 2000 PTD 1445 fol.

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

---Ss. 33 & 34--Penalty or additional tax should not invariably be imposed for simple reason that it is legal to do so.

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

----S. 47(1)---Appeal to High Court---Exercise of discretion by Tribunal for valid reasons to remit additional tax and penalty---Validity---No question of law could be said to have arisen out of impugned order.

A. Karim Malik for Appellant.

Nemo for Respondent.

Date of hearing: 30th March, 2005.

2005 P T D 1956

[Lahore High Court]

Before Muhammad Sair Ali and Sheikh Azmat Saeed, JJ

Messrs S.K. TEXTILE PROCESSING MILLS (PVT.) LTD., LAHORE through Chief Executive

Versus

INCOME TAX APPELLATE TRIBUNAL OF PAKISTAN, LAHORE BENCH, LAHORE and 2 others

I.T.As. Nos. 196 to 198 of 2000, heard on 14th April, 2005.

(a) Income Tax Ordinance (XXX1 of 1979)---

----S. 50(10) & (4)---S.R.O. 368(I)/94 dated 7-5-1994---Notification S.R.O. 368(I)/94 dated 7-5-1994 although was validated and continued through S.50(10) of the Income Tax Ordinance, 1979, yet exemption granted to the Companies with paid-up capital below Rs.1.5 million was discontinued---Legislative history of S.50, Income Tax Ordinance, 1979 recorded.

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

----S. 136---Appeal to High Court---Question proposed was neither raised nor considered or adjudged upon by the Appellate Tribunal---Question not arising from the order of the Tribunal did not deserve expression of opinion of the High Court.

Zia Haider Rizvi for Appellant.

Muhammad Ilyas Khan for Respondents.

Date of hearing: 14th April, 2005.

2005 PTD 1964

[Lahore High Court]

Before Nasim Sikandar, J

Messrs SHAHEEN TRADING CORPORATION through Proprietor

Versus

DEPUTY COLLECTOR OF CUSTOMS (APPRAISEMENT GROUP-III) and 5 others

Writ Petition No.13748 of 2004, heard on 25th October, 2004.

Customs Act (IV of 1969)---

---Ss. 32 & 81---Warehousing of goods provisionally on basis of declared value pending ascertainment of value at the time of ex­ bonding---Final assessment of duty---Blocking entry in computer restraining importer from paying duty and taxes already assessed---Validity---Such action was, illegal---Revenue however, would be at liberty to take appropriate action in accordance with law, of possessing sufficient material to justify proceedings under S.32 of Customs Act, 1969---Principle illustrated.

Messrs Zeb Traders through Proprietor v. Federation of Pakistan 2004 PTD 369 rel.

Mian Abdul Ghaffar for Petitioner.

Khawar Ikram Bhatti for Respondents.

Date of hearing: 25th October, 2004.

2005 P T D 1968

[Lahore High Court]

Before Nasim Sikandar, J

Messrs TRADE INTERNATIONAL through Proprietor Habib-ur-Rehman

Versus

DEPUTY COLLECTOR OF CUSTOMS (BANK GUARANTEE SECTION) and 3 others

Writ Petition No. 16248 of 2004, decided on 4th April, 2005.

Customs Act (IV of 1969)---

----Ss. 25(1) & 81---Non-acceptance of declared value of goods---Provisional assessment of duty---Release of goods on furnishing bank guarantee---Non-finalization of assessment within statutory period---Plea of Revenue for not returning bank guarantee after expiry of statutory period was pendency of appeal in another case of importer---Validity---On failure of revenue to complete final assessment within period prescribed in S.81 of Customs Act, 1969, only assessment in field being at declared value, would mature into final assessment---Revenue would have absolutely no authority to retain bank guarantee after expiry of statutory period---Such plea would hardly be a good defence to secure the differential in another case---Importer could seek remedy at law against Revenue as well as its individual officers responsible directly or indirectly to retain illegally bank guarantee after expiry of statutory period for finalization of assessment.

Messrs Farooq Woollen Mills v. Collector of Customs and others 2004 PTD 795 fol.

Mian Abdul Ghaffar for Petitioner.

M. Shahid Mughal for Revenue.

2005 PTD 1978

[Lahore High Court]

Before Nasim Sikandar and Jawwad S. Khawaja, JJ

COLLECTOR OF SALES TAX, FAISALABAD

Versus

KASHIF ENTERPRISES, FAISALABAD

C.A. No.567-S of 2002, decided on 16th May, 2005.

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

----Ss. 33, 34 & 46---Power of Appellate Tribunal to remit, reduce or delete amount of penalty and additional tax---Scope---Tribunal had jurisdiction to wave or remit additional tax or penalty in view of provisions of S.34 of Sales Tax Act, 1990 even after amendment and insertion of word "shall" in subsection (1) thereof---Provisions of S.46, Sales Tax Act, 1990 were neither governed nor controlled by provisions of Ss. 33 and 34 thereof---Imposition of penalty and additional tax with reference to such provisions would not at all be sacrosanct for appellate forums including Tribunal---Principle's.

Messrs Millat Tractors Ltd., Lahore v. Collector of Sales Tax and Central Excise, Lahore 2000 PTD 1445 fol.

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

---Ss. 33 & 34---Penalty or additional tax should not invariably be imposed for simple reason that it is legal to do so.

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

---S. 47(1)---Appeal to High Court---Exercise of discretion by Tribunal for valid reasons to remit additional tax and penalty---Validity---No question of law could be said to have arisen out of impugned order.

A. Karim Malik for Appellant.

Habib Ullah for Respondent.

Date of hearing: 30th March, 2005.

2005 P T D 1984

[Lahore High Court]

Before Nasim Sikandar and Jawwad S. Khawaja, JJ

COLLECTOR OF SALES TAX, FAISALABAD

Versus

Messrs COCA COLA BEVERAGES PAKISTAN LTD., FAISALABAD

C.A. No. 568-S of 2002, decided on 16th May, 2005.

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

---S. 47(1)-Appeal to High Court---Tribunal maintaining charges against registered person for reasons earlier weighed with Adjudicating Authority---Absence of solid reasons to challenge such findings---No case was made out for interference.

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

----S. 47(1)---Appeal to High Court---Plea not raised before, Tribunal could not be entertained by High Court.

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

----S. 47(1)---Appeal to High Court---Plea raised before High Court based upon consideration of evidence---Such plea neither ruled upon by Tribunal nor agitated by registered person---Effect---No question of law in such regard could be said to have arisen out of impugned order of Tribunal.

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

----S. 47(1)---Appeal to High Court---Issue pertaining to factual aspects of case---Validity---No question of law would arise therefrom.

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

----Ss. 33, 34 & 46---Power of Appellate Tribunal to remit, reduce or delete amount of penalty and additional tax---Scope---Tribunal had jurisdiction to waive or remit additional tax or penalty in the face of provisions of S.34 of Sales Tax Act, 1990 even after amendment and insertion of word "shall" in subsection (1) thereof---Provisions of S.46 of Sales Tax Act, 1990 were neither governed nor controlled by provisions of Ss. 33 and 34 thereof---Imposition of penalty and additional tax with reference to such provisions would not at all be sacrosanct for appellate forums including Tribunal---Principles.

Messrs Millat Tractors Ltd., Lahore v. Collector of Sales Tax and Central Excise Lahore 2000 PTD 1445 fol.

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

----Ss. 33 & 34---Penalty or additional tax should not invariably be imposed only for the reason that it is legal to do so.

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

----S. 47(1)---Appeal to High Court---Exercise of discretion by Tribunal for valid reasons to remit additional tax and penalty---Validity---No question of law could be said to have arisen out of impugned order.

A. Karim Malik for Appellant.

Nemo for Respondent.

Date of hearing: 30th March, 2005.

2005 P T D 1995

[Lahore High Court]

Before Nasim Sikandar and Jawwad S. Khawaja, JJ

COLLECTOR OF SALES TAX, FAISALABAD

Versus

NATIONAL SUGAR MILLS LTD., LAHORE

C. As. Nos.474, 475 and S.T.As. Nos.467 and 468 of 2002, decided on 16th May, 2005.

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

----Ss. 33, 34 & 46---Power of Appellate Tribunal to remit, reduce or delete amount of penalty and additional tax---Scope---Tribunal had jurisdiction to waive or remit additional tax or penalty in view of provisions of S.34 of Sales Tax Act, 1990 even after amendment and insertion of word "shall" in subsection (1) thereof---Provisions of S.46 of the Sales Tax Act, 1990 were neither governed nor controlled by provisions of Ss. 33 and 34 ,thereof---Imposition of penalty and additional tax with reference of such provisions would not at all be sacrosanct for appellate forums including Tribunal---Principles.

Messrs Millat Tractors Ltd., Lahore v. Collector of Sales Tax and Central Excise, Lahore 2000 PTD 1445 fol.

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

---Ss. 33 & 34---Penalty or additional tax should not invariably be imposed for simple reason that it is legal to do so.

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

----S. 47(1)---Appeal to High Court---Exercise of discretion by Tribunal for valid reasons to remit additional tax and penalty---Validity---No question of law could be said to have arisen out of impugned order.

A. Karim Malik for Appellant.

Muzamil Akhtar Shabbir for Respondent.

Date of hearing: 30th March, 2005.

2005 P T D 2020

[Lahore High Court]

Before Muhammad Sair Ali and Sh. Azmat Saeed, JJ

COMMISSIONER OF INCOME-TAX/WEALTH TAX (APPEALS), COYS-III, LAHORE

Versus

Messrs SHAHZADA A. MANOO

Income Tax Appeal No. 651 of 2000, decided on 17th February, 2005.

Wealth Tax Rules, 1963---

----R. 8(2)(c)(ii)---Wealth Tax Act (XV of 1963), S. 27---Appeal to High Court---Ascertained liability of company---Question of law involved was as to whether provision for taxation and/or deferred 'taxation was the ascertained liability of company in terms of rule 8(2)(c)(ii) of Wealth Tax Rules, 1963 and was deductible in determining the break-up value of shares---Rule 8(2)(c)(ii), Wealth Tax Rules 1963 did not in any manner prohibit exclusion of provision for taxation while computing the value per share of a non-listed company but only required that a provision for liabilities in the balance-sheet should be carefully scrutinized by the Assessing Officer with a view to exclude therefrom items which should really form part of reserves---Appeal was decided accordingly.

Shahid Jamil Khan, Sardar Ahmed Jamal Sukhera and Mian Yusuf Umar for Appellant.

Muhammad Iqbal Kh. for Respondent.

2005 P T D 2022

[Lahore High Court]

Before Nasim Sikandar and Jawwad S. Khawaja, JJ

COMMISSIONER OF INCOME TAX COMPANIES ZONE-I, LAHORE

Versus

SIMNWA POLOY PROPYLENE PRODUCTS (PVT.) LTD.

C.T.R. No. 19 of 2002, decided on 10th March, 2005.

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

----S. 12(18)---Share deposit money shown in books of accounts and balance sheet of a company-Treating such money as a "loan" Scope---Joint stock company was at liberty to increase and decrease its paid-up capital---Revenue had no business to pick up faults with intention and motive of a company to increase its capital---Assessing Officer could probe, look into and judge exact nature of a receipt or an entry in books of accounts---Entries made by assessee in books of accounts- would not be determinative question, whether such amount had been paid as capital asset or a stock-in-trade---Share deposit money could not be or would not amount to a "loan", which necessarily being a sum to be returned after a certain or uncertain period with or without interest---Amounts deposited by share-holders were proper share capital and issuance of share certificate to existing share-holders would not be necessary---Prior to amendment made through Finance Act, 1998 in S.12(8) .of Income Tax Ordinance, 1979, express mention of word "loan" therein excluded all other similar or equivalent terms, transactions or nature of receipts---No addition of such kind could possibly be made nor defence taken by the assessee could be rejected without recording a finding of fact that alleged share deposit money was factually used in business, thus, could be taken as "loan" taken for catering capital needs of company---Principles illustrated.

Venkatakrishna Rice Company v. CIT (1987) 163 ITR 129; CIT Patiala v. Piara Singh (1972) 83 ITR 678; Abdul Hameed Sahib and others v. Rehmat Bi AIR 1965 Madras 427 (V 52 C 151) and Mian Abdul Hameed Puri and 5 others v. Federation of Pakistan PLD 1979 Lab. 252 ref.

Gurcharan Das and another v. Ram Rakha Mal AIR 1937 Lah. 81; C.W.T. Southern Region, Karachi v. Abid Hussain 1999 PTD 2895; CIT North Zone (W.P.) Lahore v. Crescent Textile Mills Ltd. (1974) 29 Tax 242; Duggal and Co. v. CIT (1996) 220 ITR 456 and K. A. Rmaswamy Chettiar and another v. CIT (1996) 220 ITR 657 rel.

(b) Interpretation of statutes---

----Fiscal statutes---Letter of law in a taxing statute would be interpreted in the sense in which it had been used and expressed.

(c) Interpretation of statutes---

----Fiscal statutes---Provisions creating a legal fiction have to be interpreted in such a manner as same do not cause injustice to a party.

CIT v. Nathimal Gayalal (1973) 89 ITR 190 fol.

(d) Equity---

----When Court steps into the world of legal fantasy, then principles of equity and justice cannot be lost sight of.

CIT v. Nathimal Gayalal (1973) 89 ITR 190 fol.

(e) Interpretation of statutes---

----Whenever a statute limits a thing to be done in a particular form, it necessarily includes in itself a negative, viz. that the thing shall not be done otherwise.

Chairman Evacuee Trust Property West Pakistan, Lahore v. Muhammad Din and another PLD 1971 Lah. 217 fol.

(f) Interpretation of statutes---

----Amendment in a statute---Effect---Amendment is brought to bring out a change in law unless same is clarificatory or declaratory in nature.

Prime Commercial Bank and others v. Assistant Commissioner of Income Tax (1997) 75 Tax 1 (H.C. Lahore) and K.G. Old Principal Christian Technical Training Centre Gujranwala v. Presiding Officer, Punjab Labour Court Northern Zone and 6 others PLD 1976 Lah. 1097 fol.

(g) Interpretation of statutes---

----Fiscal statutes---Where two interpretations are equally possible, then the one favourable to the subject would be adopted---Such principle could be extended to factual situations warranting application of deeming provisions meaning thereby that when a transaction could equally be placed within or outside the dividing taxing line, then the one falling outside should be preferred against the one falling inside.

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

----S. 66-A---Original assessment neither erroneous nor prejudicial to interest of Revenue---Effect---Exercise of revisional jurisdiction would be illegal.

Sajjad Ali Jafri for Appellant.

Nemo for Respondent.

Date of hearing: 10th March, 2005.

2005 P T D 2037

[Lahore High Court]

Before Nasim Sikandar and Jawwad S. Khawaja, JJ

COMMISSIONER OF INCOME-TAX, ZONE-II, LAHORE

Versus

Messrs CANDOUR INTERNATIONAL (PVT.) LIMITED, LAHORE

Reference Case No. 16 of 2002, decided on 10th March, 2005.

Income Tax Appellate Tribunal Rules, 1981---

----R. 10---Appeal---Grounds set-forth in memorandum of appeal being in argumentative and narrative form, appeal was dismissed---Validity---Such dismissal was not in accordance with law---High Court set aside impugned order and remanded case to Tribunal for its decision on merits.

CIT v. Muhammad Tariq Javed (2000) 82 Tax 67 and Pakistan Industrial Gases Ltd. v. CIT and another 2000 PTD 2903 rel.

Sajjad Ali Jaffri for Appellant.

Nemo. for Respondent.

Date of hearing: 10th March, 2005.

2005 P T D 2064

[Lahore High Court]

Before Muhammad Sair Ali and Sh. Azmat Saeed, JJ

COMMISSIONER OF INCOME-TAX/WEALTH TAX COMPANIES ZONE-I, LAHORE

Versus

ZORAIZ LASHARI

W.T.As. Nos.180, 154 to 161, 198 of 2001, 339 to 342 of 2002 and 35 of 2003, decided on 22nd February, 2005.

(a) Wealth Tax Act (XV of 1963)---

----Second Sched., Cls.7(i) & (ii)---Exemption from Wealth Tax under Cls.7(i) & (ii) of the Second Schedule of Wealth Tax Act, 1963---Scope---Foreign remittance received through normal banking channels---Any asset created from the proceeds of such remittance would also be exempted from the incidence of Wealth Tax for the period specified under Cl. 7(i) of the Second Sched. to the Act; primary basis for the applicability of the exemption under Cls.7(i) and 7(ii) was not the nature of asset but the decisive factors were the origin of the assets or funds, the mode of transmission (of funds only)and the period of exemption i.e. the one mentioned in the said clause---Shares acquired in a private limited company with such funds therefore, were exempt from the incidence of Wealth Tax---Principles.

The exemption under Cls. 7(i) and 7(ii) of Second Sched. of the Wealth Tax Act, 1963 extends to all assets brought or remitted to Pakistan by the assessee for the period specified and such exemption is not limited to or dependant upon the nature of the assets which fact is irrelevant for the purpose of the applicability of Clause 7(i). However, with regard to foreign remittance received through normal banking channels, Clause 7(ii) provides that any asset created from the proceeds of such remittance would also be exempted from the incidence of Wealth Tax for the period specified under Clause 7(i). An analysis of the aforesaid provision of law would make it clear and obvious that the primary basis for the applicability of the exemption under Clauses 7(i) and 7(ii) is not the nature of the assets. The decisive factors are, the origin of the assets or funds, the mode of transmission (of funds only) and the period of exemption i.e. the period specified in the said clause. There is nothing in the said provisions, which can explicitly or impliedly lead to the conclusion that the assessee can only claim exemption with regard to assets acquired through one conversion only. The exemption extends to converted or re-converted assets during the currency and tenure of the exemption' as long as the source of the original funds remains the foreign remittance received through normal banking channels. In this view of the matter, the shares acquired in a private limited company with such funds were exempt from the incidence of Wealth Tax.

(b) Wealth Tax Act (XV of 1963)---

----Second Sched., Cls. 7(i) & (ii)---Exemption from Wealth Tax under Cl. 7(i) & (ii) of the Wealth Tax Act, 1963---Scope---Assets created or recreated from funds, which were the proceeds of the foreign remittances received through normal banking channels which, at the first instance, were utilized for procuring Foreign Exchange Bearer Certificates, thereafter encashed during the exemption period to create the assets---Such assets were exempt from the incidence of Wealth Tax.

Muhammad Ilyas Khan for Appellant.

2005 P T D 2067

[Lahore High Court]

Before Nasim Sikandar and Jawwad S. Khawaja, JJ

ITTEHAD CHEMICALS LIMITED, LAHORE

Versus

CUSTOMS, EXCISE AND SALES TAX APPELLATE TRIBUNAL, LAHORE through Chairman and another

C.A. No. 220 of 2002, heard on 6th May, 2005.

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

----Ss.7(1) & 8(1)(b)---S.R.O. 1307(I)/97, dated 20-12-1997---Registered person claimed input tax credit on purchase/import of spare parts of vehicle which was not permissible under S.R.O.1307(I)/97, dated 20-12-1997---S.R.O.1307(I)/97, dated 20-12-1997 was not in conflict with the provisions of Ss.7 & 8 of the Sales Tax Act, 1990 and after the enforcement of the S.R.O. no registered person could claim or deduct input tax paid on goods, which were not the direct constituent and integral part of taxable goods products, manufactured or supplied---Imported spares parts being not in any manner direct constituents or integral parts of the taxable goods, products, manufactured, or supplied by the registered person, in the present case, High Court refused interference.

The Central Board of Revenue v. Sheikh Spinning Mills Limited, Lahore and others 1999 PTD 2174 ref.

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

----S. 47--Reference to the High Court---Only a question of law mooted before and ruled upon by the Tribunal can be subject-matter of an appeal/reference before the High Court under the provisions of S.47, Sales Tax Act, 1990.

Zaheer Ahmad Khan for Appellant.

A. Karim Malik for Respondents.

Date of hearing: 6th May, 2005.

2005 P T D 2070

[Lahore High Court]

Before Muhammad Sair Ali and Sh. Azmat Saeed, JJ

QAISER A. MANOO

Versus

INCOME TAX APPELLATE TRIBUNAL, LAHORE and 2 others

Wealth Tax Appeal No.592 of 2000, decided on 8th June, 2005.

(a) Wealth Tax Act (XV of 1963)---

-------S. 5(1)(xviii)---Zakat and Ushr Ordinance (XVIII of 1980), S.25(1)(a) & (ii)---Exemption from wealth tax--Object---Deduction of Zakat at source---Conditions to be fulfilled to avail concession of exemption---Provisions of S.25(1)(a)(ii) of the Zakat and Ushr Ordinance, 1980 as well as S.5(1)(xviii) of the Wealth Tax, 1963 allowed exemption from the wealth tax only to such assets which were subjected to the deduction of Zakat at source during the year relevant to the assessment year in question---Said provisions of the two enactments extended exemption to the Zakat paid assets only---Assets created out of encashment proceeds of Khas Deposit Certificates which suffered compulsory levy of Zakat under the Zakat and Ushr Ordinance, 1980 were not entitled to exemption under S.5(1)(xviii) of the Wealth Tax Act, 1963---Principles.

Section 25 of Zakat and Ushr Ordinance, 1980 excluded such assets from the taxable wealth of an assessee, in respect of which Zakat had been deducted at source during the year relevant to the assessment in question. This tax concession was thus, dependent upon fulfilment of the following two conditions:--

(i) deduction of Zakat at source; and

(ii) the deduction of Zakat to be made during the year relevant to the assessment year in question.

If the above two conditions co-existed, the asset in respect of which Zakat had been deducted at source enjoyed exemption from the levy of wealth tax.

The legislative intent in providing such tax concessions was obviously to avoid double taxation. Both Zakat and the wealth tax were the taxes on the wealth' of an assessee. The assets which were liable to compulsory deduction of Zakat at source under the law, were exempted from the levy ofwealth tax' under the Wealth Tax Act, 1963. This exemption was allowed to protect the assessee from the imposition of the double levy.

The tax concession allowed by section 25(1)(a)(ii) of the Zakat and Ushr Ordinance, 1980 was given protection by the Wealth Tax Act, 1963 through insertion of clause (xviii) by the Finance Ordinance, 1979 in subsection (1) of section 5 of the Wealth Tax Act, 1963.

Section 25(1)(a)(ii) of the Zakat and Ushr Ordinance, 1980 as well as section 5(1)(xviii) of the Wealth Tax Act, 1963 allowed exemption from the wealth tax only to such assets which were subjected to the deduction of Zakat at source during the year relevant to the assessment year in question. These provisions of the two enactments extended exemption to the Zakat paid assets only. The exemption was not extendable to the assets created with the cash obtained on encashment of Zakat paid assets.

The assessee in the present case suffered compulsory deduction of Zakat at source on the face value of the K.D.Cs. (Khas Deposit Certificates), which throughout remained exempt from the wealth tax in view of the deductibility of Zakat at the time of their encashment. As long as they were held by the assessee as K.D:Cs. i.e. the assets liable to the deduction of Zakat at source, they enjoyed exemption from the wealth tax. In other words Zakat was the cost of exemption enjoyed by the K.D.Cs. under section 5(1)(xviii) of the Wealth tax Act, 1963. The provisions of the said section 5(1)(xviii) however, provide that the exemption from wealth tax was available only to those assets in respect of which Zakat was deducted at source. In the present case the assets liable to deduction of Zakat at source were the K.D.Cs., and not the cash obtained on their encashment. Such cash was wholly a new asset not liable to the deduction of Zakat at source, which was a sine qua non for availing exemption under section 5(1)(xviii) of the Wealth Tax Act, 1963. Extending the exemption to the encashment proceeds or any further assets created out of the said cash, would amount to stretching the exemption beyond the limits prescribed and permitted by the law.

(b) Interpretation of statutes---

---Exemption provision---Principles of construction.

Exemption provisions are to be given strict construction.

There are two basic principles of construing a provision of statute involving exemption from payment of tax, namely, the first rule is that the burden of proof is on the person who claims exemption. The second rule is that a provision relating to grant of tax exemption is to be construed strictly against the person asserting and in favour of taxing officer.

On the question of taxability of any income, doubt or ambiguity has to be resolved in favour of the assessee. In the case of exemptions however, the Courts have to be cautious. The exemption provisions of the taxing statutes have to be strictly interpreted and applied. If the conditions for availing of an exemption are not fulfilled in entirety, the claim for the exemption must be rejected.

Messrs Army Welfare Sugar Mills Ltd. and others v. Federation of Pakistan 1992 SCMR 1652 ref.

(c) Wealth Tax Act (XV of 1963)---

----Second Sched., Cl. 12(1)---Residential house---Exemption from wealth tax---Exemption clause applied to one residential house owned and occupied by the assessee for the purposes of his own residence---Conditions attracted to the exemption were that the claimed house must be residential and owned and occupied by the assessee and that such occupation by the assessee must be "for the purpose" of his own residence---principles.

The Assessing Officer and the Tribunal in the present case took the view that the house was not "maintained by the assessee for his own residence and that no evidence was produced by the assessee thereto". The exemption was, thus, denied by the Assessing Officer as well as by the Tribunal to the assessee. It was also held by them that "since the assessee was permanently residing in Lahore and had not shifted his residence to Karachi, the exemption claimed was, therefore, not allowed.

Normally, the question as to whether a residential house is occupied for the purposes of assessee's own residence or not is a question of fact which cannot be the subject-matter of further appeal before High Court. In the present case, however, the observations of the Assessing Officer and those of the Tribunal have changed the nature of the litigated question into a question of law. The Assessing Officer and the learned Tribunal denied exemption to the assessee for the reasons that the assessee permanently maintained his residence at Lahore and had not shifted his residence to Karachi and also that there was no evidence produced by him to prove that Karachi house was "maintained by him for his own residence".

The concise issue that legally arises for determination in the present case is as to whether the actual shifting into and maintenance of own residence, was mandatory for the assessee to earn the exemption. The view of the Tribunal is in the affirmative that the assessee must own, occupy and personally reside in the claimed house to avail of the exemption clause.

The Assessing Officer and the Tribunal misconstrued the exemption clause and restricted the scope thereof to a limit that the Legislature had not imposed. An additional condition was read into the exemption clause while no such condition had been so prescribed.

The powers to grant exemption from the wealth tax were provided for in section 5 of the Wealth tax Act, 1963. The exemptions were granted from time to time. The original clause (xvii) was substituted by the Finance Ordinance, 1984 and was later incorporated in clause 12(1) of the Second Schedule of the Act, providing for the exemption of "one residential house" to the assessee.

The exemption from the wealth tax was available to an assessee on:---

(i) One residential house;

(ii) owned by the assessee;

(iii) occupied by such assessee;

(iv) for the `purpose of assessee's own residence.

The exemption clause applied to "one residential house owned and occupied by the assessee for the purposes of his own residence..." the conditions attracted to the exemption were that the claimed house must be residential. It must be owned and occupied by the assessee. And that such occupation by the assessee must be "for the purposes" of his own residence.

Considered in the context of the meaning of the word "purpose", the exemption clause would read that the assessee should own and actually possess the house with an object or a goal or an end of having his own residence therein. Such a house should be in the occupation of the assessee who must hold and possess the same with the object of his own residence therein either at present or in future. The law does not impose upon the assessee the pre-condition of actual shifting into or/and maintaining self-residence in the house. Holding the house for such a purpose is adequate to avail of the exemption.

It appears that the Tribunal omitted to read the word "purpose" in the exemption clause. Instead it attached the exemption to the actual residence of the assessee while no such condition was prescribed by the law givers. In the present case, therefore, it was immaterial that the assessee was residing at Lahore (a property admittedly not owned by the assessee at the relevant time and had not shifted into the Karachi house). The assessee was entitled to the exemption from the wealth tax on one residential house owned and occupied by him anywhere in Pakistan provided the purpose of occupation of such house was his own residence. By claiming exemption of only the Karachi house as owned and occupied by him with the object of his own residence, the assessee had declared his intentic9(p, goal or the purpose. The onus shifted upon the Revenue to prove otherwise through strong evidence that the purpose of such occupation by the assessee was not his own residence. It was not the case of the Revenue that someone else was occupying and residing in the Karachi house though the same was owned by the assessee.

(d) Words and phrases----

---"Purpose"---Definition.

Muhammad Iqbal Khawaja for Appellant.

Muhammad Ilyas Khan for Respondent.

Date of hearing: 3rd May, 2005.

2005 P T D 2082

[Lahore High Court]

Before Maulvi Anwarul Haq, J

FEDERAL BOARD OF INTERMEDIATE & SECONDARY EDUCATION, ISLAMABAD through Secretary

Versus

FEDERATION OF PAKISTAN through Secretary, and 6 others

W.Ps. Nos.121 of 2004 and 1974 of 2001, heard on 7th April, 2004.

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

----S. 14---Income Tax Ordinance (XLIX of 2001), S. 53---Income of University or other educational institutions established solely for educational purposes and not for purposes of profit---Exemption---Conditions.

Any income shall be exempted upon' payment of tax under the Income Tax Ordinance, 1979 and Income Tax Ordinance, 2001 subject to the following conditions:-

(i) if it is an income of any university, or

(ii) if it is an income of other educational institution, (iii) if it is established solely for educational purpose, and

(iv) not for purposes of profits.

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

----Ss. 50(2A), 14 & Sched. II, Item No.86---Punjab Boards of Intermediate and Secondary Education Act (XIII of 1976), Preamble---Federal Board of Intermediate and Secondary Education Act (XVIII of 1975), Preamble---Constitution of Pakistan (1973), Art. 199---Constitutional petition---Income of bank interest of Boards of Intermediate and Secondary Education---Exemption---Contention of the Revenue was that only such Institutions would be exempted where only teaching was imparted in various courses and since the Boards did not involve themselves in the teaching process directly, they would not be entitled to the said exemption---Validity---Held, words used by the Legislature in the statutes creating the Boards were "established solely for educational purposes" as distinct from "for purposes of profits"---Boards had not been established for purpose of profits rather the purposes were duly laid down in the respective statutes creating them--- Profits accruing from the deposits of their funds with Scheduled Banks were accruing not because the purpose of the Boards was to earn profits rather these deposits were in compliance with the provisions of the law governing the Boards---Boards established primarily for the purpose of organizing, regulating, developing and controlling Intermediate and Secondary Education in their respective territories, had been established for education purposes---Act of the Revenue in deducting or causing or directing to deduct any tax under the Income Tax Ordinance, 1979 or Income Tax Ordinance, 2001 qua the said deposits was declared to be void and without lawful authority by the High Court.

Afnan Karim Kundi and Hafiz Muhammad Idrees for Petitioners.

Arshad Majeed Malik and Malik Muhammad Nawaz for Respondents.

Date of hearing: 7th April, 2004.

2005 PTD 2086

[Lahore High Court]

Before Mian Saqib Nisar and Sh. Azinat Saeed, JJ

COMMISSIONER OF INCOME-TAX

Versus

PIONEER CEMENT

I.T.As. Nos.414 and 416 of 1998, decided 15th December, 2004.

Income Tax Ordinance (XXXI of 1979)---

--Ss. 30, 31(1)(b), 66-A & 136---Entitlement of assessee to claim expenses i.e. interest paid to Financial Institution for loan---Reference to High Court---Question posed in reference was "whether the assessee was entitled to claim expenses i.e. the interest paid to financial institutions for the loan under S.31(1)(b) of Income Tax Ordinance 1979---Assessee was entitled to deduction of any amount, which he expended for the purpose of such income, which was chargeable under Income Tax Ordinance, 1979---Assessee for earning the interest upon its deposits, also had to pay the interest upon the loans procured by it and that directly was an expenditure which was expended for earning the interest and was deductible from the income of assessee under relevant head---Question stood accordingly answered.

1992 PTD (Trib.) 1142 ref.

Shahid Jamil Khan for Appellant.

M.M. Akram for Respondent.

Date of hearing: 15th December, 2004.

2005 P T D 2093

[Lahore High Court]

Before Mian Hamid Farooq and Syed Hamid Ali Shah, JJ

COMMISSIONER OF INCOME TAX, COMPANIES ZONE-I, LAHORE

Versus

Messrs GRAYS LEASING COMPANY LIMITED

Income Tax Appeal No.269 of 1998, decided on 14th March, 2005.

Income Tax Ordinance (XXXI of 1979)-

----Ss. 22, 30, 31(1)(b), 34, 66-A & 136---Expenditure against interest income---Reference to High Court---Assessing Officer, took interest income of assessee under S.22 of Income Tax Ordinance, 1979 and allowed preliminary expenditure against ; interest income---Inspecting Additional Commissioner, however, found the order of Assessing Officer as erroneous and prejudicial to the interest of Revenue and initiated proceedings under S.66-A of Income Tax Ordinance, 1979 and denied expenditure against interest income under S. 31(1)(b) of Income Tax Ordinance, 1979---Income Tax Appellate Tribunal accepting appeal against order of Inspecting Additional Commissioner, set aside the same---Validity---Provisions of S.66-A of Income Tax Ordinance, 1979 could only be attracted when decision of Assessing Officer was prejudicial to the interest of Revenue---Provisions of S.34 of Income Tax Ordinance, 1979 had clearly shown that loss in one year could be claimed as set off against the profit in the next year --Assessee, if had shown loss and proved that he had suffered losses, the income computed though could not be prejudicial to the interest of Revenue in that year, but it would lie for set off against the next year and those losses shown would entitle assessee to adjustment which could cause prejudice to the interest of Revenue---Income Tax Commissioner, in circumstance was right in invoking provisions of S.66-A of Income Tax Ordinance, 1979---Impugned order of Income' Tax Appellate Tribunal, was not well ­founded---Interest income shown by assessee could not be 'qualified to be business income---Questions raised from the judgment of Income Tax Appellate Tribunal, were answered in negative and accepting appeal, order passed by Appellate Tribunal was set aside and order of Inspecting Additional Commissioner, was upheld.

Commissioner of Income Tax v. Khulna Railway Company PLD 1962 SC 128 and Genertech Pakistan Ltd. v. Income Tax Appellate Tribunal of Pakistan 2004 SCMR 1319 ref.

Muhammad Ilyas Khan for Appellant.

Zahid Pervaiz for Respondent.

2005 P T D 2099

[Lahore High Court]

Before Nasim Sikandar, J

BOARD OF INTERMEDIATE AND SECONDARY EDUCATION, SARGOHDA through Chairman

Versus

FEDERATION OF ISLAMIC REPUBLIC OF PAKISTAN through Secretary Finance and 3 others

W.P. No. 5671 of 2004, decided on 12th May, 2005.

Income Tax Ordinance (XXXI of 1979)---

----S.50(2A) & Second Sched., Part-I, cl. 86---Punjab Boards of Intermediate and Secondary Education Act (XIII of 1976), S.37--Constitution of Pakistan (1973), Art.199--Constitutional petition---Provisions of S.50(2A), Income Tax Ordinance, 1979 were not applicable to the interest/profit accruing: on the deposits of the Board of Intermediate and ` Secondary Education with the Banks and Financial Institutions---Act of department in deducting . or causing or directing to deduct any tax under the Income Tax Ordinance, 1979 or Income Tax Ordinance, 2001 qua the said deposits was declared to be void and without lawful authority---Principles.

Federal Board of Intermediate and Secondary Education, Islamabad v. Federation of Pakistan through its Secretary and others Writ Petition No.121 of 2004 fol.

Dr. Muhammad Mohy-ud-Din Qazi for Petitioner.

Muhammad Ilyas Khan for the Revenue.

2005 P T D 2128

[Lahore High Court]

Before Umar Ata Bandial, J

NAZIR AHMED

Versus

FEDERATION OF PAKISTAN through Secretary, Finance Department Government of Pakistan, Islamabad and 2 others

Writ Petition No. 10864 of 2003, heard on 26th April, 2005.

Sales Tax Act (VII of 1990)---

----S. 13---S.R.O. No.555(I)/2002 dated 23-8-2002---Drugs Act (XXXI of 1976), Preamble---Constitution of Pakistan (1973), Arts. 199 & 25---Constitutional petition---Exemption from sales tax---Contention of the petitioner was that adhesive plaster excluded from the exemption, which were retailed by the petitioner, contained pharmacological ingredients applied .to adhesive plaster which ingredients in the form of creams, ointments and gels were granted exemption under S.R.O.555(I)/2002 dated 23-8-2002, and the only apparent basis of exclusion of petitioner's product was because the medicine in question had, for convenience of use been applied to an adhesive plaster which could be used without any further bandage or other cover---Petitioners in circumstances, claimed that he was being discriminated by treating like product differently---Validity---Petitioner had invited the High Court to make a factual assessment about medical properties of the petitioner's product in order to examine the allegation of discrimination---If the allegation that the medical properties of the petitioner's products were the same as other medical products that enjoyed exemption under the said S.R.O., then a case for the intervention of High Court under Article 25 of the Constitution may be made out---Petitioner's grievance could not be adjudicated without a determination about the medical properties and ingredients of its products and whether other products bearing the same properties and ingredients were enjoying the exemption as prayed by the petitioner---For that purpose the matter had to be considered, dealt with and determined in the first instance by the concerned Authorities---High Court, in circumstances, directed that the Central Board of Revenue shall consider and determine the claim of the petitioner that its product contained the ingredients and properties which had been granted exemption under S.R.O. 555(I)/2002 when sold in the form of creams, ointments and gels---If the claim of the petitioner was found to be true, Central Board of Revenue shall set out the grounds, if any for excluding. the products of the petitioner on the basis of their form of use as adhesive plaster rather than other criteria including their pharmacological substance--Central Board of Revenue was directed to grant a hearing to petitioner for determination of the question involved which shall be made by a reasoned order within a period of three months from the date of present judgment.

Muhammad Zikria Sheikh for Appellant.

Malik Pervez Akhtar, Dy. A.-G. for Federation and Syed Tahir Abbas Naqvi for Respondent No.4.

Date of hearing: 26th April, 2005.

2005 P T D 2147

[Lahore High Court]

Before Muhammad Sair Ali and Sh. Azmat Saeed, JJ

COMMISSIONER OF INCOME/WEALTH TAX

Versus

MUHAMMAD ZAKA ASHRAF

W.T.A. No.220 of 2002, decided on 2nd May, 2005.

(a) Wealth Tax Act (XV of 1963)---

----S. 27---Appeal to High Court---Impugned order of the Tribunal revealed that the Tribunal had failed in its duty and declined to exercise its jurisdiction to decide the appeal completely and effectively---Non ­decision of the issues by the Tribunal on the grounds which could only be termed as ruses disguised as reasons to avoid adjudication of the issues in appeal, was disapproved by the High Court---High Court set aside the impugned order of the Tribunal with observation that there could not be a better case than the present one for the remand and directed that appeal filed before the Tribunal shall be deemed to be pending which shall be decided by the Tribunal in accordance with the law---Parties shall be allowed due opportunity to make their respective submissions---Matter being remanded to the Tribunal for redecision, answer to the questions was declined by the High Court.

Examination of the impugned order of the Tribunal reveals that the Tribunal failed in its duty and declined to exercise its jurisdiction to decide the appeal completely and effectively. As per its order, the Tribunal opted not to decide the issue in appeal because:

(i) the issue was quite important;

(ii) further dilation of the issue was required for the decision;

(iii) more assistance of the parties was required; and

(iv) hence the Tribunal's refrained from giving a finding.

Non-decision of the issues by the Tribunal on above recorded grounds therefore cannot be approved. These grounds can only be termed as ruses disguised as reasons to avoid adjudication of the issues in appeal. The line between a ruse and a reason is well-defined in law though it may be thin in the ordinary social parlance.

In the present case ruses have been employed to avoid the duty of decision and adjudication.

Refraining from deciding because of the purported need for further dilation and assistance amounts to denial and abridgement of the right and the remedy of appeal. The grounds cited by the Tribunal for its non-decision were patently illegal, illogical and ill-founded. These grounds were neither convincing nor credible. In the impugned order, the Tribunal painstakingly reproduced the arguments and the grounds of both the parties yet took no pains to deal with and decide the same. Both the parties submitted their case before the Tribunal during the hearing with comprehensive details. Had there been need for further legal assistance, Tribunal could have adjourned the case to demand such assistance from the parties. The Tribunal, instead, decided not to decide the issues involved in the appeal. It was thus a classic case of refusal to exercise jurisdiction vesting in the Tribunal and avoidance to perform its duty to decide a case.

The paradox did not end here. Intriguingly the Tribunal dubbed its own indecision as a situation of "doubt" to be resolved for the assessee. Neither the nature of "doubt" was specified nor was the basis and rationale for the "doubt", if any, was particularized in the impugned order.

(b) Words and phrases----

--"Reason" and "ruse"---Distinction.

"Reasons" is the logical conclusion arising from the application of the power of mind to think, analyse, assess and thus deduce or conclude. "Reasons" is the analytically derived and deducted base of a legal belief or order or judgment. It is the essence of a logical process.

Ordinarily a "Reasons" if good, is fair, just, rational and sensible. Even a good reason is open to attack by a stronger or an equally good reason.

Contrarily "Ruse" is only a pretext or an excuse having no logical or reasonable basis to do or not to do a thing/act. A trained and an experienced human mind can, with a little application, remove the smoke screen of a ruse to discover the truth.

Muhammad Ilyas Khan for Appellant.

Muhammad Iqbal Hashmi for Respondent.

Date of hearing: 2nd May, 2005.

2005 P T D 2175

[Lahore High Court]

Before Nasim Sikandar and Jawwad S. Khawaja, JJ

Messrs FAUJI SUGAR MILLS

Versus

SUPERINTENDENT, CENTRAL EXCISE, SHEIKHUPURA and others

C.A. No. 3 of 2002, decided on 10th March, 2005.

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

---Ss. 3-B & 12-A---S.R.O. 455(I)/96, dated 13-6-1996---S.R.O. 456(I)/96, dated 13-6-1996---Unexported quantity of sugar---Demand of excise duty under S.R.O. 455(I)/96 prescribing compulsory export of sugar and higher rate of duty on unexported quantity of sugar---Payment of duty by manufacturer under S.R.O. 456(I)/96 prescribing lower rate of duty without such compulsory condition---Tribunal upheld order-in ­original---Validity---Provisions of both S.R.Os. were contradictory and could not be reconciled---Manufacturer was justified in seeking application and protection of S.R.O. 456(I)/96 issued later in time on same day as evident from its number---Where two equally reasonable interpretations of a provision were possible, then the one favourable to tax-payer would be adopted---Tribunal in an identical appeal found for tax-payer by observing that tax-payer having elected to follow later S.R.O. 456(I)/96 and paid duty nothing was due to Department---High Court accepted appeal set aside impugned order of Tribunal as well as order-in-original.

(b) Interpretation of statutes---

----Fiscal statutes---When two equally reasonable interpretations of a provision are possible, then the one favourable to tax-payer needs to be adopted.

M. M. Akram for Appellant.

A. Karim Malik for Respondents.

Date of hearing: 10th March, 2005.

2005 P T D 2201

[Lahore High Court]

Before Umar Ata Bandial, J

AL-MUGHNI TRADING CO. through Proprietor

Versus

DEPUTY COLLECTOR OF CUSTOMS, LAHORE and 4 others

Writ Petition No.20375 of 2004, heard on 18th July, 2005.

Customs Act (IV of 1969)---

----S. 25---Constitution of Pakistan (1973), Art.199---Constitutional petition---Valuation advice---Reliance upon the valuation advice simpliciter was not a vailed basis for assessment of imported goods within the framework of S.25 of the Customs Act, 1969---Impugned assessment, in the present case, was based on material that was not contemplated by law---High Court declared the said assessment to be without lawful authority---Department was however at liberty to re-asses the imported goods of the petitioner in accordance with law, in particular the provisions of S.25 of the Act or any other provision applicable to the facts of the case.

Messrs Sohrab Global Marketing (Pvt.) Ltd. v. Deputy Collector of Customs Lahore and others 2005 PTD 67 ref.

Mian Abdul Ghaffar for Petitioner.

Safraz Ahmad Cheema for Respondents.

Date of hearing: 18th July, 2005.

2005 P T D 2209

[Lahore High Court]

Before Muhammad Sair Ali and Sh. Amzat Saeed, JJ

COMMISSIONER OF INCOME TAX/WEALTH TAX COMPANIES ZONE, FAISALABAD

Versus

Messrs BLUE SKY TOUR BUREAU (PVT.) FAISALABAD

P.T.R. No. 190 of 2003, decided on 14th June, 2005.

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

--------S. 136---Appeal to High Court---Adjournment---Another counsel on behalf of the counsel for the appellant (department) stated that counsel for the appellant was busy before another Division Bench of the High Court but he was unable to specify the Division Bench before whom the counsel for the appellant was busy nor was he aware of the case in which counsel for the appellant was busy---Said counsel requested that since counsel for the appellant would not be able to appear, the case be adjourned--Validity---Held, the request for adjournment was too vague and too unspecific to be acceptable---Neither any general adjournment had been sought nor had any application or request specifying the case or the Bench had been made---Adjournment request as made did not merit acceptance and as such was rejected.

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

----S. 136---Appeal to High Court---Service of respondents (assessees)---Office had reported that the appellant (department) had failed to comply with the orders of the Court and despite such orders, it had neither provided fresh addresses of the respondents (assessees) nor the process fee due to which notices could not be issued to the respondents---Counsel appearing on behalf of the counsel for the appellant stated that fresh addresses of the respondents along with the process were dropped in the "Box"---Said counsel could neither produce the requisite receipt nor the diary number in respect thereto as the process fee or addresses etc. were to be deposited at the specified counter against receipt or/and a diary number---Drop Box had been set up for urgent petitions---Office of the High Court, itself had reported on the completion certificate that the notices were not issued as the appellant had not provided the fresh addresses nor the process fee---Appeal was dismissed by the High Court in circumstances.

Rana Muhammad Afzal for Appellant.

2005 P T D 2226

[Lahore High Court]

Before Sh Azmat Saeed, J

INTERNATIONAL BRANDS (PVT.) LTD. through General Manager Finance & Company Secretary

Versus

FEDERATION OF PAKISTAN through Secretary, Revenue Division, Islamabad and 3 others

Writ Petition No.3896 of 2005, decided on 27th May, 2005.

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

----S.195-C---Constitution of Pakistan (1973), Art.199---Constitutional petition---Application of petitioner under S.195-C of the Customs Act, 1969 for an' alternate resolution of dispute had been turned down on the ground that transaction in question was past and closed one---Validity---Provision of S.195-C Customs Act, 1969 provided no limitation---Section195-C, however, could not be interpreted to mean that an application thereunder could be filed regardless of the time that might be lapsed---Said provision could not be applied to a past and closed transaction---Whether present case was a case of past and closed transaction, was an open question and allegedly remedy of revision was available which had not become time-barred on the date application under S.195-C was filed and that the goods had not been auctioned---Such aspects merited consideration---Impugned order did not disclose that such aspects of the matter had been taken into consideration or decided by the Authority---Said order was rather sketchy and terse, in the circumstances and in the interest of justice the impugned order was not sustainable---Order in question was set aside by the High Court and the matter was remanded to .the Authority to decide the application afresh after hearing the petitioner and taking into consideration the legal aspects raised before the High Court or otherwise through the present Constitutional petition.

Khalid Qureshi and 5 others v. United Bank Limited I. I. Chundrigar Road Karachi 2001 SCMR 103 ref.

Mian Abdul Ghaffar and Aziz A. Sheikh for Petitioner.

Malik Waqar Waseem, Dy. A.-G. on Court's call.

Sarfraz Ahmed Cheema for the Customs Department.

2005 P T D 2239

[Lahore High Court]

Before Muhammad Sair Ali and Sh. Azmat Saeed, JJ

COMMISSIONER OF INCOME TAX AND WEALTH TAX, SIALKOT ZONE, SIALKOT

Versus

IJAZ AHMED

W.T.As. Nos. 1339 of 2001 and 84 of 2003, decided on 28th February, 2005.

Wealth Tax Rules, 1963-----

----R. 8(3)---Wealth Tax Act (XV of 1963), Ss.7 & 27---Appeal to High Court---Expression "gross annual letting value" as defined in Explanation to R.8(3) of Wealth Tax Rules, 1963, by itself, implies that it is not necessary for a building or property to have actually been let out for the purpose of application of "gross annual letting value"---Explanation to R.8(3) of the Rules defines "gross annual letting value" to be the one for which the property might reasonably be expected to be let out from time to time---"Gross annual letting value" is only a notional value on which a property could reasonably be expected to be let out from year to year---Actual renting out of property for the purpose of application of "gross annual letting value", is not required at all.

Commissioner of Income Tax/Wealth Tax v. Mst. Kamal Asghar 2005 PTD 50 fol.

Mian Yusuf Umar for Appellant.

2005 P T D 2247

[Lahore High Court]

Before Muhammad Nawaz Bhatti, J

Messrs FECTO SUGAR MILLS LTD., KARACHI

Versus

FEDERATION OF PAKISTAN through Ministry of Finance and Economic Affairs Islamabad and 4 others

Writ Petition No.6751 of 1996, decided on 18th May, 2005.

Sales Tax Act (VII of 1990)---

----S. 6(1A)---Customs Act (IV of 1969), S.31-A---S.R.O.560(I)/96 dated 1-7-1996---Constitution of Pakistan (1973), Art.199---Constitutional petition---Import of machinery---Time and manner of payment of sales tax---Effective rate of duty---Exemption---Scope---When the Bills of Entry were filed by the importer for the release of the machinery in question, S.R.O.560(I)/96, dated 1-7-1996 had already come into force---Section 6(1A) of the Sales Act, 1990 provided that provisions of S.31-A, Customs Act, 1969 shall be deemed to have always been incorporated in the Sales Tax Act, 1990 and S.31-A, Customs Act, 1969 provides that amount of duty may have become payable in consequence of withdrawal of the whole or any part of the exemption or concession from duty whether before or after the conclusion of contract or agreement for sale of such goods or opening of Letters of Credit in respect thereof---If even after the conclusion of contract of sale some duty remained payable the same would be recoverable---Bills of Entry in the present case, having been filed, when S.R.O.560(I)/96, dated 1-7-1996 was in force, the authorities were competent to claim and recover the rate of duty/Sales Tax accordingly.

Al-Samreze Enterprises v. Federation of Pakistan 1986 SCMR 1917; Ahmad Investment (Pvt.) v. Federation of Pakistan 1994 PTD 5757; Fecto Cement Ltd. v. Collector 1994 MLD 1136; Messrs M.Y. Electronics Industries (Pvt.) Ltd. through Manager and others v. Government of Pakistan through Secretary Finance, Islamabad and others 1998 SCMR 1404; Federation of Pakistan v. Punjab Steel Limited 1993 SCMR 2267and Govt. of Pakistan v. Muhammad Ashraf PLD 1993 SC 176 ref.

Malik Muhammad Rafiquc Rajwana for Petitioner.

Ch. Saghir Ahmad, Standing Counsel for Government of Pakistan.

Date of hearing: 20th April, 2005.

2005 P T D 2270

[Lahore High Court]

Before Muhammad Sair Ali and Sh. Azmat Saeed, JJ

COMMISSIONER OF INCOME TAX, SPECIAL ZONE, LAHORE

Versus

Messrs MUSARAT TEXTILE MILLS LTD., FAISALABAD

P.T.Rs. Nos. 4, 400, 426 of 2003, 20, 21, 22, 328 and 338 of 2004, decided on 24th February, 2005.

Income Tax Ordinance (XXXI of 1979)---

----Ss. 108(b), 129, 132, 134 & 135---Imposition of penalty under S.108(b), Income Tax Ordinance, 1979 by Assessing Officer was reduced both by the Appellate Additional Commissioner and the Income Tax Appellate Tribunal---Contention of the Department was that S.108 of the Ordinance specifically quantified the penalty to be imposed and word "shall" had been incorporated therein through an amendment, thereby it was the intention of the Legislature to denude the Deputy Commissioner of Income Tax and the Department of any discretion in the matter of imposing the penalty other than the amount specified in the said provision of law, hence the penalty could not be reduced---Validity--Held, both Income Tax Tribunal and Additional Appellate Commissioner were justified to reduce the penalty under S.108(b)---Principles.

In the present case, the penalty had been reduced by the Additional Appellate Commissioner while hearing the appeal preferred under section 129 of the Income Tax Ordinance, 1979. Section 132 of the Ordinance specifically conferred the jurisdiction upon the Additional Appellate Commissioner to pass the species of orders mentioned therein. Section 132(1)(b) clearly stipulated that in case of an order imposing penalty, the Additional Appellate Commissioner might, on appeal set aside, increase or reduce the penalty. Similarly, the Tribunal while hearing the appeal under section 134 of the Ordinance was vested with the jurisdiction under section 135(4)(5) to cancel or vary the order which was the subject-matter of the appeal.

Shahid Jamil Khan, Advocate.

2005 P T D 2272

[Lahore High Court]

Before Muhammad Nawaz Bhatti, J

Messrs WEL AGRO WISE (PVT.) LTD. through Chief Executive

Versus

FEDERATION OF PAKISTAN through Ministry of Finance, Islamabad and 4 others

Writ Petition No.3639 of 2005, decided on 30th June, 2005.

Sales Tax Act (VII of 1990)---

---S. 46---Constitution of Pakistan (1973), Art.199---Constitutional petition---Appeal of the assessee was stated to be pending wherein interim relief was granted to assessee in the form of injunctive order against the recovery of arrears of the demand raised by the defendant---Injunctive order had lost its efficacy due to lapse of statutory period of six months and department had moved for the recovery of demand--Validity---First appeal of the assessee was pending before the Tribunal and it would be appropriate that same be decided before the recovery proceedings because no recovery could be effected before determination of the liability---High Court directed the Tribunal to dispose of the pending appeal at the earliest but not later than two months from the date of receipt of the present order of the High Court and till disposal of appeal by the Tribunal, no recovery was to by enforced against the petitioner.

Khadim Nadeem Malik for Petitioner.

Ch. Saghir Ahmad, Standing Counsel for Government of Pakistan.

Gul Sher, Auditor, Sales Tax, Multan.

2005 P T D 2281

[Lahore High Court]

Before Muhammad Sair Ali and Sh. Azmat Saeed, JJ

COMMISSIONER OF INCOME TAX/WEALTH TAX, ZONE `"A" EASTERN REGION, LAHORE

Versus

MUHAMMAD RAIZ, Proprietor Messrs Riaz Cloth Merchants, Lahore

I.T.A. No. 551 of 1999, decided on 14th March, 2005.

Income Tax Ordinance (XXXI of 1979)---

---Ss. 13(1)(d) & 136---Income Tax Rules, 1982, 8.207---Reference to High Court-Addition-Income Tax Appellate Tribunal had made observations that "declared value evidenced by a registered deed should have been accepted by the Assessing Officer"---No valid ground had been shown for interference by the High Court with the observations of the Tribunal---Consideration of reference was declined in circumstances.

Ryas Khan for Appellant.

2005 P T D 2283

[Lahore High Court]

Before Jawwad S. Khawaja and Nasim Sikandar, JJ

COMMISSIONER OF INCOME-TAX/WEALTH TAX, COMPANIES ZONE, FAISALABAD

Versus

Messrs KAMIL COTTON INDUSTRIES (PVT.) LTD., TOBA TEK SINGH

P.T.R. No.115 of 2001, decided on 4th April, 2005.

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

----S. 108(b)---Income Tax Rules, 1982, R.61---Provisions of S.108(b), Income Tax Ordinance, 1979 are not attracted in the event of non-compliance of R.61, Income Tax Rules, 1982.

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

----Ss. 139 & 165---Provisions of S.139, Income Tax Ordinance, 1979 read with S.165 of the said Ordinance contain ample authority to make rules and to provide for a time limit for filing of statement contemplated therein---Fact that rule did not mention a particular provision under which it required doing of a particular act is not of much relevance when the provision itself either identifies a particular rule or allows a power for making of such rule through subordinate legislation---Mentioning of certain section of the Ordinance in some of the rules will not, by itself, mean that those rules which do not make reference to any particular provision of the Ordinance lose their efficacy and legal effect.

Khurram Naveed Khan on behalf of Mian Yousaf Umar for Petitioner.

Date of hearing: 4th April, 2005.

2005 P T D 2285

[Lahore High Court]

Before Muhammad Sair Ali and Sh. Azmat Saeed, JJ

COMMISSIONER OF INCOME TAX, SPECIAL ZONE, LAHORE

Versus

Messrs ATTOCK TEXTILE MILLS LTD., FAISALABAD

P.T.R. No. 2 of 2003, decided on 17th March, 2005.

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

----S. 136---Reference to High Court---Reference to High Court showed that the question proposed in the reference application before the High Court had not arisen from the current order of the Tribunal---Such reference could not therefore, be considered by the High Court.

Shahid Jamil Khan for Petitioner.

2005 P T D 2338

[Lahore High Court]

Before Muhammad Sair Ali and Sh. Azmat Saeed, JJ

COMMISSIONER OF INCOME TAX/ WEALTH TAX, ZONE-C, LAHORE

Versus

Messrs MINHAS AUTOMOTIVE INDUSTRIES, LAHORE

P.T.R. No.375 of 2004, decided on 21st February, 2005.

Income Tax Ordinance (XXXI of 1979)---

----Ss.66-A & 136---Reference to High Court---Assessee had filed return of income-tax under the Universal Assessment Scheme, which was accepted by the Assessing Officer---Inspecting Additional Commissioner, subsequently, in the purported exercise of S.66-A, Income Tax Ordinance, 1979 cancelled the assessment and remanded the case to Assessing Officer for a de novo assessment---Tribunal's order made it clear that the same turned on facts---Basis of the Tribunal's order was that the I.A.C. did not apply his independent mind and did not take into consideration the evidence furnished by the assessee---Questions referred to. High Court being misconceived and having not arisen from the order of the Tribunal nor requiring any expression of `opinion from the High Court, was dismissed.

Khadim Hussain Zahid for Petitioner.

2005 P T D 2340

[Lahore High Court]

Before Nasim Sikandar and Jawwad S. Khawaja, JJ

NATIONAL SECURITY COMPANY (PVT.) LTD., LAHORE

Versus

INCOME TAX APPELLATE TRIBUNAL, LAHORE and 2 others

P.T.Rs. Nos. 67 to 71 of 2002, heard on 5th May, 2005.

Income Tax Ordinance (XXXI of 1979)---

----Ss. 80-C, 136(1) & 136(2)---Appeal---Divergent opinions of Benches of Income Tax Appellate Tribunal---Larger Bench, constitution of---Plea raised by assessee was that there were divergent opinions of Benches in two other Provinces and the Bench deciding its case refused to constitute a larger Bench---Validity---When two divergent opinions on the same issue were brought to the notice of the Bench deciding the matter, in all fairness to the assessee its request for constitution of larger Bench ought to have been granted---Refusal on the part of Income Tax Appellate Tribunal resulted in anomalous situation inasmuch as one Bench of the Tribunal was refusing relief to the assessees on the basis of a view adopted by another Bench while the other Bench was allowing relief and accepting the appeals of assessees placed in similar situation---Well considered view of the Tribunal had not so far been formulated in order to create certainty both for guidance of the assessees as well as the Revenue---High Court set aside the judgment passed by Income Tax Appellate Tribunal and remitted the case to the Tribunal for consti­tution of a Full or a larger Bench---Appeal was allowed accordingly.

2004 PTD (Trib.) 1029 ref.

Hammad Aslam for Petitioner.

Muhammad Ilyas Khan for Respondents.

Date of hearing: 5th May, 2005.

2005 P T D 2343

[Lahore High Court]

Before Muhammad Sair Ali and Sh. Azmat Saeed, JJ

COMMISSIONER OF INCOME TAX, COMPANIES ZONE-II, LAHORE

Versus

Messrs IQBAL AVENUES COOPERATIVE HOUSING SOCIETY LTD., LAHORE

P.T.R. No.68 of 2001, decided on 10th March, 2005.

Income Tax Act (XXXI of 1979)---

--------- Ss. 2(16) & 80-B---Cooperative Society registered under the

Cooperative Societies Act, 1925 is not a "Company" within its meaning as defined by Income Tax Ordinance, 1979, S.2(16).

The Commissioner of Income Tax/Wealth Tax v. Messrs Engineering Cooperative Housing Society Lahore 2000 PTD 3388; National Cooperative Supply Corporation Ltd. Federation of Pakistan and 3 others 2000 PTD 811; E.M.E. Cooperative Housing Society v. Federation of Pakistan and 4 others. 2002 PTD 466 and Commissioner of Income-tax v. Messrs Spring Field Secondary School, Karachi 2003 PTD 1264 ref.

Rana Munir Hussain for Petitioner.

Shahid Jamil Khan for Respondent.

2005 P T D 2352

[Lahore High Court]

Before M. Bilal Khan and Sh. Azmat Saeed, JJ

COLLECTOR OF CUSTOMS, GUJRANWALA and another

Versus

SETH RASHID and 5 others

Customs Appeal No. 34-S of 1999, heard on 17th June, 2005.

Customs Act (IV of 1969)---

----Ss. 162, 163 & 194-A---Appeal to High Court---Seizure of Viscose Rayon allegedly of foreign origin by Customs Authorities by carrying out a raid---Department had failed to controvert the evidence/material produced by respondents establishing lawful import of the goods into Pakistan---Raid itself carried out by the department was illegal being in violation of the mandatory provisions of Ss.162 & 163 of the Customs Act, 1969---Such facts had not been controverted by the Department before the High Court during course of proceedings of the appeal---Order of the Tribunal was based on facts and appreciation of material evidence available on record---No illegality had been pointed out in the impugned order of the Tribunal---No question of law requiring an expression of opinion for decision of High Court arose from the impugned order---Appeal was dismissed by the High Court.

Izhar-ul-Haq for Applicant.

Mian Abdul Ghaffar for Respondents.

Date of hearing: 17th June, 2005.

2005 P T D 2354

[Lahore High Court]

Before Muhammad Sair Ali and Sh. Azmat Saeed, JJ

COMMISSIONER OF INCOME TAX/ WEALTH TAX, COMPANIES ZONE, FAISALABAD

Versus

ASIM KHURSHID

W.T.A. No.173 of 2002, decided on 17th February, 2005.

Wealth Tax Act (XV of 1963)---

----Ss.7 & 27---Companies Ordinance (XLVII of 1984), S.235---Reference to High Court---Surplus on revaluation of the fixed assets of the Company could be excluded while determining the break up value of shares.

W.T.A. No.317 of 2002 fol.

Shahid Jamil Khan, Sardar Ahmad Jamal Sukhera and Mian Yousuf Umer for Appellant.

2005 P T D 2362

[Lahore High Court]

Before Muhammad Sair Ali and Sh. Azmat Saeed, JJ

COMMISSIONER OF INCOME TAX, SPECIAL ZONE, LAHORE

Versus

Messrs KOHINOOR FIBER, LTD., LAHORE

P.T.R. No.172 of 2002, decided on 28th April, 2005.

Income Tax Ordinance (XXXI of 1979)---

----S. 80-C---Assessee had imported machinery for installation at its own business premises and for its own use which was exempt in terms of applicable notification---Arrangement of lease finance would neither change the nature of import nor the fact of its installation by the assessee at its own business premises.

Shahid Jamil Khan for Petitioner.

2005 P T D 2364

[Lahore High Court]

Before Maulvi Anwarul Haq and Muhammad Nawaz Bhatti, JJ

ADDITIONAL COLLECTOR SALES TAX, MULTAN

Versus

Messrs AL-GHAZI TRACTORS LTD., DERA GHAZI KHAN and 2 others

Sales Tax Appeals Nos. 482 and 483 of 2002, decided on 31st January, 2005.

Sales Tax Act (VII of 1990)---

----Ss. 3(2)(a), 13 & 47---Notification No. S.R.O. 839(I)/98, dated 23-7-1998---Exemption from input tax on agricultural tractors listed under PCT heading 87.01 of the First Schedule to the Sales Tax Act, 1990---Contention of the appellant (department) was that mere fact that the tractors manufactured by the registered company were supplied to the organization like Civil Aviation Authority, Heavy Mechanical Complex, Housing Cooperative Society and Municipal Corporation would lead to the assumption that the tractors were not supplied for "agricultural purpose" and under the Notification No. S.R.O. 839(I)/98 dated 23-7-1998 exemption would be available to only such tractors as were supplied for "agricultural purpose"---Validity---Held, in view of clear wording of the exemption notification, admitted fact that the tractors were agricultural tractors and the findings of facts recorded that the purchasers were using the tractors for agriculture purpose, there was no question of law arising in the cases within the meaning of S.47, Sales Tax Act, 1990---Appeals were dismissed in limine by the High Court.

Ch. Saghir Ahmad, Standing Counsel for the Federation.

2005 P T D 2366

[Lahore High Court]

Before Muhammad Sair Ali and Sh. Azmat Saeed, JJ

COMMISSIONER OF INCOME TAX, ZONE-A, LAHORE

Versus

Messrs SALEEM BROTHERS

Income Tax Appeal No. 141 of 1999, decided on 14th March, 2005.

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

----Ss.65 & 136---Appeal to High Court---Order of the Tribunal showed that there was no proof of any demand notice served upon the assessee and no assessment order was in the field to justify invocation of S.65, Income Tax Ordinance, 1979---None of the said factual positions had been controverted in the appeal by the Revenue---Question of law as claimed in the appeal did not arise for consideration by the High Court---Appeal was dismissed.

Muhammad Ilyas Khan for Petitioner.

2005 P T D 2368

[Lahore High Court]

Before Maulvi Anwarul Haq and Ijaz Ahmad Chaudhry, JJ

COMMISSIONER OF INCOME TAX/ WEALTH TAX, MULTAN ZONE, MULTAN

Versus

Messrs BABU MUHAMMAD HUSSAIN ANSARI, MULTAN

Tax Reference 45 of 2004, heard on 5th April, 2005.

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

----S. 62---Assessment on production of accounts, evidence, etc.---Deputy Commissioner of Income Tax is mandatorily required to serve a notice upon the assessee under S.62(1) of the Ordinance only where the assessee produces books of account in support of his return and the Deputy Commissioner intends to disagree with such accounts; in fact notice is to be given in respect of the defects to be found by the Deputy Commissioner in the accounts so as to enable the assessee to explain the same---When admittedly the books of account were not produced by the assessee in evidence and there was no question of the Deputy Commissioner proceeding to consider and disagree with the same, there was no occasion for the said officer to serve notice on the assessee under S.62 of the Income Tax Ordinance, 1979.

Ch. Saghir Ahmad, Standing Counsel for Pakistan.

Respondent ex parte.

Date of hearing: 5th April, 2005.

JUDMGENT

MAULVI ANWARUL HAQ, J.---The respondent is an individual assessee. He filed his return for the assessment year 2001-2002. The case was selected for total audit through computer ballet and he was informed. Statutory notices under sections 58(1) and 61 of the Income Tax Ordinance, 1979, were served. The respondent put in appearance.

However, books of accounts were not produced on the ground that the same were not maintained. The Special Officer of Income Tax Circle/ Wealth Tax Circle 15, Multan, completed the assessment on 13-5-2002 and assessed the income at Rs.2,02,041. Feeling aggrieved the respondent field an appeal which was heard by a Commissioner of Income Tax (Appeals), Multan. It was partly allowed inasmuch as the estimate of sales was reduced from Rs.10,00,000 to Rs.800,000. Still feeling aggrieved the respondent filed an appeal which was heard by a learned Judicial Member of the Income Tax Appellate Tribunal, Lahore, Bench, Lahore. Vide order, dated 20-8-2003, the appeal was allowed and the return filed by the respondent determining his income at Rs.1,21,500 was restored.

1. The present Tax Reference has been filed for consideration of the following questions by this Court;--

(i) Whether under the facts and in the circumstances of the case, the learned Tribunal was justified to hold the assessment void ab intio on the reason that notice under section 62 was not issued in no account case.

(ii) Whether it is mandatory upon the Assessing Officer to issue notice under section 62 even in cases where the books of account are produced by the assessee, before completion of assessment proceeding under section 62 of the Income Tax Ordinance, 1979 (Repealed).

1. Learned Standing counsel contends that the impugned order is against the law inasmuch as no circumstance exist in the present case necessitating issuance of a notice under section 62 of the Income Tax Ordinance, 1979. Respondent has been proceeded against ex parte.

2. We have examined the copies of the records. Now we find that the learned Appellate Tribunal proceeded to allow the appeal holding that the assessment was increased without serving a notice upon the respondent under section 62 of the said Ordinance. Now we have already noted above and it is. so noted in the impugned order of the learned Appellate Tribunal that the respondent had not produced the accounts on the grounds that the same were not being maintained. Now we find that section 62(1) of the said Ordinance authorizes the Deputy Commissioner to assess the total income of the assessee and to determine the tax payable by him on the basis of such assessment. This exercise is to be undertaken after considering the evidence on record including evidence produced under section 61 and such other evidence as the Deputy Commissioner may require on specific points.

3. Now the notice referred to by the learned Appellate Tribunal is required to be served under the proviso to section 62(1) of the said Ordinance. We find that the Deputy Commissioner is mandatorily required to serve a notice upon the assessee only where the assessee produces books of account in support of his return and the Deputy Commissioner intends to disagree with such accounts. In fact, the notice is to be given in respects of the defects to be found by the Deputy Commissioner in the accounts so as to enable the assessee to explain the same.

4. To our mind, there was no occasion for the said officer to serve a notice on the respondent for the simple reason that, admittedly, no books of account were produced by him in evidence and there was no question of the said officer proceeding to consider the same and disagree with the same.

5. We, therefore, do find that the learned Income Tax Appellate Tribunal, Lahore Bench, Lahore, has committed a serious error of law while passing the impugned order and proceeding to set aside the assessment made under section 62(1) of the Income Tax Ordinance, 1979, on the grounds stated in the impugned order.

2005 P T D 2370

[Lahore High Court]

Before Muhammad Sair Ali and Sh. Azmat Saeed, JJ

Mst. SHAGUFTA SABA SEEMA

Versus

INCOME TAX APPELLATE TRIBUNAL OF PAKISTAN, LAHORE and 2 others

Wealth Tax Appeal No. 60 of 2004, heard on 28th June, 2005.

(a) Wealth Tax Act (XV of 1963)---

----Second Sched., para. 7(ii), (i) & S.27---Exemption---Entitlement---Requirements---Appeal to High Court---Assessee claimed exemption from incidence of wealth tax upon the machinery brought under N.R.I. Scheme, the sale proceeds thereof and/or the shares issued to the assessee by an incorporated company in line of the sale proceed of said machinery---Validity---Decision of legal question of the entitlement to exemption or otherwise of the sale proceeds of the machinery brought or remitted into Pakistan under N.R.I. Scheme and/or of the shares made from such sale proceeds also required the evidence of machinery remittance into Pakistan by the assessee under N.R.I. Scheme (the assessee had claimed that the entire evidence including bill of lading were on record); sale of the machinery to the incorporated company; the amount of the sale proceeds paid by the company and received or to be received by the assessee and purchase of shares or assets, if any, through these sale proceeds by the assessee or conversion or exchange of the machinery or its sale proceeds into the shares of such company---Tribunal granted opportunity of evidence to the assessee who was found by the Assessing Officer to be unwilling to produce evidence---High Court, in appeal, however, could not re-examine the question as to whether the required evidence was produced by the assessee before the Taxation Authorities or not---Such being a question of fact, could not be probed into unless the assessee was able to unambiguously and irrebuttably prove the availability of the entire evidence on record---Neither the affidavit, as stated by the assessee, nor the evidence in question had been placed on record of the appeal before the High Court-Assessee had not stated before the High Court that any evidence relating to the sale of the machinery, its price and purchase of the shares therefrom in the relevant years, was produced before the Assessing Officer---Tribunal in circumstances, by remanding the case to the Assessing Officer for re-decision after an opportunity of evidence to the assessee, neither caused any prejudice to the assessee nor did it commit any jurisdictional error or illegality to earn interference from High Court in exercise of its limited appellate jurisdiction---In case the Assessing Officer in the post-remand proceedings concluded that para.7(ii) of Second Sched. of the Wealth Tax Act, 1963 was attracted to the case of assessee, he shall, of course, follow the law laid down in Mst. Zarina Yousaf v. Inspecting Assistant Commissioner 2005 PTD 108 and C.I.T., Lahore v. Zoraiz Lashari W.T.A. No.180 of 2001---If, however, on the basis-of evidence, the Assessing Officer formed the opinion that cl.(i) of said para.7 was applicable to the case of the assessee, he shall, through appropriate reasons, decide the question of exemption of the assets recreated by the assessee through the sale or exchange of machinery in question.

(b) Wealth Tax Act (XV of 1963)---

----Second Sched., para.7(ii)---Exemption---Entitlement---Assets created out of the remittances brought into Pakistan, during the specified period, through the normal banking channels, despite change of ownership or the assets recreated from the sale proceeds of such assets, remained exempt throughout the specified period of exemption.

Mst. Zarina Yousaf v. Inspecting Additional Commissioner of Income Tax/Wealth Tax, Sialkot Range, Silakot an another 2005 PTD 108 and C.I.T., Lahore v. Zoraiz Lashari (W.T.A No. 180 of 2001) fol.

Syed Abrar Hussain Naqvi for Appellant.

Shahid Jamil Khan for Respondent.

Date of hearing: 28th June, 2005.

2005 P T D 2376

[Lahore High Court]

Before Mian Hamid Farooq and Syed Hamid Ali Shah, JJ

Messrs PETROSIN RAVI INDUSTRIES LTD., LAHORE

Versus

SUPERINTENDENT SALES TAX, LAHORE and 3 others

Customs Appeal No. 53 of 2000 and C.M. No.1 of 2005, decided on 22nd June, 2005.

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

----S. 47---Appeal to the High Court---Condonation of delay---Only ground taken by the appellant was that it had been agitating the matter before the Federal Government through Privatization Commission---No specific date had been mentioned in the application showing as to when the Federal Court was approached and when the request of the appellant was declined---No proof was available with regard to the fact that, the Government of Pakistan had ever been approached by appellant or its request was ever entertained---Delay of each day had to be explained, which the appellant had failed to do---Application for condonation of delay was dismissed.

Syed Sajjad Hussain Naqvi for Appellant.

2005 P T D 2377

[Lahore High Court]

Before Muhammad Sair Ali and Farrukh Latif, JJ

Messrs SUNRAYS TEXTILES MILLS LTD., through Director

Versus

CUSTOMS, EXCISE AND SALES TAX APPELLATE TRIBUNAL and another

S.T.A. No. 479 of 2002, heard on 8th February, 2005.

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

---Ss. 34, 34-A & 33---S.R.O. No.461(I)/99 dated 9-4-1999---Exemption from additional tax and penalties if the principal amount of "the sales tax due" was paid uptil 30-4-1999---Interpretation and scope of S.R.O. No.461(I)/99 dated 9-4-1999---Provisions of notification had to be given a coherent and credible meaning to allow even-handed and equal treatment to all those availing the Amnesty Scheme---Determination of the amount of "the tax due" involved the procedure of adjudication or at minimum the procedure of assessment---Neither had the adjudicating proceedings concluded into an "adjudicating order" against the assessee nor was an assessment order passed---Amount of Sales Tax stated in the show-cause notice charging the assessee with violation of Ss.2(31), 3, 6, 22, 23 and 34 of the Sales Tax Act, 1990 therefore, did not result into "the tax due" to become outstanding against the assessee ---Assessee, in the present case, on the faith of the promises and the representations contained in the notification, paid the amount of Sales Tax claimed in the show-cause notice to avail the exemptions granted in the notification ---Assessee also had the option to contest show-cause notice; availing of the amnesty in the notification by the assessee meant that on an adverse decision in the adjudication proceedings and/or the appeals arising therefrom, the assessee would not be subjected to the additional tax and penalties ---Assessee had also presumed that its defence against the show-cause notice, in the pending adjudication proceedings, would neither be compromised nor be given up on payment of sales tax under the notification and under cl.(2) of said notification, adjudication on the claimed sales tax and allegation of short payment could still be obtained ---Assessee was not wrong in so presuming and interpreting the notification---No condition, in the notification, existed prescribing that payment of sales tax under the notification would be an admission of "the sales tax due" or its liability; the final adjustment of such liability; and an admission of the allegations levelled by the department in the show-cause notice---Notification also did not debar the registered person (assessee) from seeking adjudication on the legality of the liability for such sales tax or a part thereof---Despite payment of the amount of the claimed sales tax by the assessee under the notification, assessee was entitled to a decision on legality, payability and validly of the claimed sales tax---Determination of legality and validity of the claimed sales tax, in fact, having been left practically undecided by the Tribunal, High Court remanded the case to the relevant Adjudicating Authority in terms of the observations made in the judgment; and the mandate specified hereinabove---Principles.

(b) Appeal---

----Continuation of original proceedings or the suits---If the appeal is the upward continuation of the original proceedings or suits, by the same reason, the original proceedings is the base of the appeal---Two proceedings are inextricable; chain cannot be severed, delinked, broken of discontinued.

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

----Ss. 34, 34-A, 33 & 45---S.R.O. 461(I)/99 dated 9-4-1999---Word "appeal" as used in clause (2) of the S.R.O. 461(I)/99 dated 9-4-1999 included the proceedings of "adjudication" by the Adjudicating Authority---Appeal included the suit or the original proceedings, the order/decree wherein merges into the ultimate appellate judgment or decree---Term "appeal" as used in cl.(2) of the Notification, therefore, incorporated within it the adjudicating proceedings pending to obtain verdict on the legality of the claimed tax.

(d) Words and phrases---

----Accordingly---Connotation.

Malik Muhammad Rafiq Rajwana for Appellant.

Ch. Sagheer Ahmad, Standing Counsel for Respondent.

Date of hearing: 8th February, 2005.

2005 P T D 2386

[Lahore High Court]

Before Nasim Sikandar and Jawwad S. Khawaja, JJ

COMMISSIONER OF INCOME TAX COMPANIES ZONE-I, LAHORE

Versus

SARITOW PAKISTAN LIMITED

P.T.R No. 156 of 2003, decided on 10th March, 2005.

Income Tax Ordinance (XXXI of 1979)---

----Ss. 12(18) & 136---Loan as income of assessee---Determination of---Reference to High Court---Provisions of S.12(18) of Income Tax Ordinance, 1979 were not attracted despite the fact that assessee acknowledged that amount in question was paid by sister concerns on account of business expenses of assessee and that was sufficient to prove that amount in question was `loan' since it was injected into business, was used as working capital (to pay business expenses) and was returnable.

Gurcharan Das and another v. Ram Rakha Mal AIR 1937 Lah. 81; Venkatakrishna Rice Company v. CIT (1987) 163 ITR 129; CIT Patiala v. Piara Singh (1972) 83 ITR 678; Chairman Evacuee Trust Property West Pakistan, Lahore v. Muhanunad Din and another (PLD 1971 Lah. 217); Abdul Hameed Sahib and others v. Rehmat Bi (AIR 1965 Madras 427 (V 52 C 151); Mian Abdul Hameed Puri and 5 others v. Federation of Pakistan PLD 1979 Lah.252; CIT North Zone (W.P.), Lahore v. Crescent Textile Mills Ltd. 1973 PTD 375; Duggal and Co. v. CIT (1996) 220 ITR 456; K.A. Ramaswamy Chettiar and another v. CIT 1996 220 ITR 657; CIT Kanpur v. Nathimal Gaya Lal (1973) 89 ITR 190; Commissioner of Wealth Tax v. Abid Hussain 1999 PTD 2895; Prime Commercial Bank and others v. Assistant Commissioner of Income Tax 1997 PTD 605 and K.G. Old Principal Christian Technical Training Centre, Gujranwala v. Presiding Officer, Punjab Labour Court Northern Zone and 6 others PLD 1976 Lah. 1097 ref.

Sardar Ahmad Jamal Sukhera for Appellant.

Nemo for Respondent.

Date of hearing: 10th March, 2005.

2005 P T D 2392

[Lahore High Court]

Before Nazir Ahmad Siddiqui and Muhammad Nawaz Bhatti, JJ

Messrs PAK-ARAB REFINERY LTD., MUZAFFARGARH

Versus

SUPERINTENDENT, CUSTOMS AND CENTRAL EXCISE, MUZAFFARGARH and 2 others

Customs Appeals No. 12 and 3 of 2003, heard on 14th July, 2005.

Petroleum Products (Development Surcharge) Ordinance (XXV of 1961)---

----Ss.3 & 3-A---Petroleum Products (Development Surcharge) Rules, 1967, R.8 --Central Excise Act (I of 1944), S.3-B---Levy of development surcharge---Charging of additional duty/surcharge, in case the due development surcharge was not paid within prescribed time---Validity---Held, there was no provision in the Petroleum Products (Development Surcharge) Ordinance, 1961 regarding charging of additional duty/surcharge, in case the due development surcharge was not paid within the prescribed time---Provision of S.3-B, Central Excise Act, 1944 could not be made applicable, which would be too far away from the true import of S.3-A (3) of Petroleum Products (Development Surcharge) Ordinance, 1961 and S.3-B, Central Excise Act, 1944---High Court, in appeal, declared the levy of additional duty/surcharge with reference to alleged late payment of development surcharge leviable under the Ordinance, as without lawful authority---Principles.

Messrs Hashwani Hotel Limited through Executive Director v. Government of Pakistan through Secretary Finance and 5 others 2004 PTD 901; Messrs Al-Haj Industrial Corporation (Pvt.) Ltd. Peshawar v. Collector of Customs (Appraisement), Customs House, Karachi 2004 PTD 801 and Messrs Metropole Cinema Pvt. Ltd. through Managing Director and others v. Government of Punjab through Secretary Excise and Taxation Department, Lahore and 4 others PLD 2004 Lah. 351 ref.

Malik Muhammad Akram Bhatti for Appellant.

Ch. Saghir Ahmad, Standing Counsel for Respondents.

Date of hearing: 14th July, 2005.

2005 P T D 2397

[Lahore High Court]

Before Nasim Sikandar and Jawwad S. Khawaja, JJ

Messrs SHAHROON INTERNATIONAL (PVT.) LTD., LAHORE

Versus

COMMISSIONER OF INCOME TAX, COMPANIES ZONE-I, LAHORE

P.T.R. No. 79 of 2001, decided on 5th April, 2005.

Income Tax Ordinance (XXXI of 1979)---

----Ss. 2(43), 62 & 130(1) [as amended by Finance Act (XII of 1994) and Finance Act (IX of 1996)]---Re-opening of assessment for year 1991-92 through order, dated 28-2-1998---Appeal against, such order before Appellate Authority---Payment of Rs.25 instead of Rs.1000 as appeal fee---Non-making good such deficiency by assessee---Validity---Date of filing of appeal would be relevant for payment of such fee, and not the date of filing of return or initiation of proceedings by original Authority---World "tax" as defined in S.2(43) of Income Tax Ordinance, 1979 had nothing to do with rate of appeal prescribed in S.130(1) thereof, which could not be connected with or made relatable to assessment year---Appeal was dismissed as non-maintainable.

Lahore Development Authority, Lahore and another v. Muhammad Saeed Mehdi, Commissioner Lahore Divisions, Lahore and another, 1994 CLC 2313 and Maharajah of Pithapuram v. Commissioner of Income Tax 1945 13 ITR 221 rel.

Ch. Anwar-ul-Haq for Petitioner.

2005 P T D 2400

[Lahore High Court]

Before Umar Ata Bandial, J

Messrs A.B. TRADERS and another

Versus

DEPUTY COLLECTOR OF CUSTOMS, LAHORE and another

Writ Petition No.8408 of 2005, heard on 14th July, 2005.

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

----Ss.83, 168, 171, 179 & 181---Constitution of Pakistan (1973), Art. 199---Constitutional petition---Scope and application of Ss.83, 168, 171, 179 & 181 Customs Act, 1969---Refusal to allow clearance of duty paid imported goods was relatable to a specific prohibition or restriction on their import under the Customs Act, 1969 or any law referred therein, the detention of such goods would not, prima facie, suffer from jurisdictional abuse or excess---Such action was indeed harsh in effect and had to be taken exceptionally and would necessitate prompt service of show-cause notice that discloses the grave violation of the law, including in particular, as in the present case, a prohibition against import of the goods sought to be cleared by the importer---Service of such a notice was not denied by the importer in the present case and record did not show any patent jurisdictional excess that should, notwithstanding the availability or resort to alternate remedies, invited interference in the Constitutional jurisdiction of High Court---Importer/petitioner having already availed a competent remedy provided by law fnd having had raised points regarding importability, discrimination and violation of the due process and safeguard contained in Ss.168, 171, 179 & 181 of the Customs Act, 1969 in case which was pending adjudication, therefore, importer had an adequate remedy before the said forum, which shall consider the objections of the importer on merits and decide them by a speaking order---Constitutional petition was dismissed in circumstances.

Gatron (Industries) Ltd. v. Government of Pakistan and others 1999 SCMR 1072 fol.

Messrs Zeb Traders v. Federation of Pakistan 2004 PTD 369 and Messrs Raza Enterprises (Pvt.) Ltd. v. Deputy Superintendent AFU Customs 2004 PTD 2950 distinguished.

Al Ahram Builders (Pvt. )Ltd. v. Income Tax Appellate Tribunal 1993 SCMR 29 ref.

(b) Trade Marks Ordinance (XIX of 2001)---

----Preamble---Constitution of Pakistan (1973), Art.89---Vires of Trade Marks Ordinance, 2001 on the ground that the said law expired four months after its promulgation---Validity---Held, Law was framed at the time when Art.89 of the Constitution stood suspended---Law making power under Provisional Constitution Order, 1999 read with Provisional Constitution Order (Amendment) Order, 1999 which was free of fetter of expiry was exercised to make the said Ordinance---Objection taken was inapplicable to the Trade Marks Ordinance, 2001 and therefore futile.

Waqar Ahmad for Petitioners.

Izhar ul Haq Sheikh for Respondents.

Date of hearing: 14th July, 2005.

2005 P T D 2403

[Lahore High Court]

Before Nasim Sikandar and Jawwad S. Khawaja, JJ

COMMISSIONER OF INCOME/WEALTH TAX COMPANIES ZONE-I, LAHORE

Versus

HAFEEZ VALQA INDUSTRIES (PVT.) LTD., LAHORE

P.T.Rs. Nos. 20 and 21 of 2002, heard on 10th March, 2005.

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

----S. 12(18)---Share deposit money shown in books of accounts/balance sheet 'of assessee-Company in excess of its authorized capital---Treating such money as loan and its addition towards income under S.12(18) of Income Tax Ordinance, 1979---Scope---Validity---Joint stock company would be at liberty to increase_ and subject to certain conditions prescribed by law to decrease its paid-up capital---Revenue had no business to pick up faults with intention and motive of a company to. increase its capital and reasons therefor---Entries made by assessee in books of accounts would not be determinative of question, whether such amount was paid as capital asset or a stock in trade---Purpose of S. 12(18) of Income Tax Ordinance, 1979 was to check fictitious loans---Express mention of word "loan" in S.12(18) of the Ordinance, excluded all other similar or equivalent terms, transactions or nature of receipts---No such addition could be made nor defence taken by assessee could be rejected without recording a finding of fact that such money was injected in business and used as capital, circulating or otherwise---Principles.

Venkatakrishna Rice Company v. CIT (1987) 163 ITR 129; CIT v. Nathimal Gayalal (1973) 89 ITR 190; C.W.T. Southern Region Karachi v. Abid Hussain 1999 PTD 2895; CIT Patiala v. Piara Singh (1972) 83 ITR 678; Chairman Evacuee Trust Property West Pakistan, Lahore v. Muhammad Din and another PLD 1971. Lah. 217; Abdul Hameed Sahib and others v. Rehmat Bi AIR 1965 Madras 427 (V 52 C 151); Mian Abdul Hameed Puri and 5 others v. Federation of Pakistan PLD 1979 Lah.252; CIT North Zone (W.P.) Lahore v. Crescent Textile Mills Ltd. 1973 PTD 375; Duggal and Co. v. CIT (1996) 220 ITR 456 and K.A. Ramaswamy Chettiar and another v. CIT 1996 220 ITR 657 ref.

Messrs Mr. Fabrics (Pvt.) Limited v. Income Tax Appellate Tribunal, Lahore I.T.A. No.491 of 2000 and Chairman Evacuee, Trust Property West Pakistan, Lahore v. Muhammad Din and another PLD 1971 Lah. 217 rel.

(b) Interpretation of statutes---

----Fiscal statutes---Letter in taxing statute would be interpreted in the sense it had been used and expressed.

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

----S. 12(18)---Provision of S.12(18) of Income Tax Ordinance, 1979---Applicability---Conditions stated.

The provisions of section 12(18) of Income Tax Ordinance, 1979, at the relevant time, did not attract, unless two conditions were answered. Firstly, it was shown that there was a "loan" received by an assessee, and secondly that it was so claimed. Where any of these two requirements were not answered, the provisions would not be attracted.

(d) Interpretation of statutes---

----Fiscal statute---Provisions creating a legal fiction would be interpreted in a manner not causing injustice to a party.

CIT Kanpur v. Nathimal Gaya Lal (1973) 89 ITR 190 fol.

(e) Administration of justice---

----When Court steps into world of legal fantasy, then principle of equity and justice cannot be lost sight of.

CIT Kanpur v. Nathimal Gaya Lal (1973) 89 ITR 190 fol.

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

----S. 12(18)---"Share deposit money" and "loan"---Distinction---Such money could never be or amount to a "loan", which was necessarily a sum to be returned after a certain or uncertain period with or without interest.

6th Edition of Black's Law Dictionary p.936; Shorter Oxford English Dictionary p. 1227 volume-1; Chambers 20th Century Dictionary p.739; Gurcharan Das and another v: Ram Rakha Mal AIR 1937 Lah. 81 and Commissioner of Wealth Tax v. Abid Hussain 1999 PTD 2895 fol.

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

----S. 12(18)---Companies Ordinance (XLVII of 1984), Ss. 73 & 74---Amounts deposited by share-holders---Validity---Such amount was proper share capital---Issuance of share certificates to existing share holders would not be necessary.

(h) Interpretation of statutes---

----Amendment in a statute is generally brought to bring out a change in present state of law---Amendment of a clarificatory or declaratory nature is normally given retrospective effect.

Prime Commercial Bank and others v. Assistant Commissioner of Income Tax 1997 PTD 605 and K.G. Old Principal Christian Technical Training Centre Gujranwala v. Presiding Officer Punjab Labour Court Northern Zone and 6 others PLD 1976 Lah. 1097 rel.

(i) Administration of justice----

---Whenever a statute requires a thing to be done in a particular form, it necessarily includes in itself a negative, viz. that the thing shall not be done otherwise.

Chairman Evacuee Trust Property West Pakistan, Lahore v. Muhammad Din and another PLD 1971 Lah. 217 rel.

(j) Interpretation of statutes---

----Fiscal statute---Two interpretations equally possible ---Effect---Interpretation favourable to the subject would be adopted---Such principle could also be extended to factual situations warranting application of deeming provisions---Where transaction could equally be placed within or outside the dividing taxing line, the one falling outside should be preferred against the one falling inside.

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

----S. 138---Revision by Commissioner---Original assessment neither erroneous nor prejudicial to interest of Revenue---Exercise of revisional jurisdiction would be illegal.

Muhammad Ilyas Khan for Appellant.

Nemo for Respondent.

Date of hearing: 10th March, 2005.

2005 P T D 2412

[Lahore High Court]

Before Mian Hamid Farooq and Syed Hamid Ali Shah, JJ

ADDITIONAL COLLECTOR SALES TAX, LAHORE

Versus

Messrs RUPALI POLYESTER LTD., LAHORE

C.As. Nos. 14-S and 15-S of 1999, decided on 28th April, 2005.

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

----Ss.3, 4, 6, 7, 33 & 34--.Levy of additional tax and imposition of penalty---Validity---Imposition of penalty and additional tax was unjustified in law, with regard to non-payment of sales tax, within tax period which was neither wilful nor mala fide evasion of duty.

"Additional Collector Sales Tax v. Messrs Nestle Milk Pak Ltd." 2005 PTD 1850 fol.

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

----S. 47---Appeal to High Court---Question whether non-payment of sales tax, was wilful and mala fide being a question of fact and not of law, High Court declined to entertain the application under S.47, Sales Tax Act, 1990.

Izhar-ul-Haq for Appellant.

Ali Zafar and Haider Zaman Qureshi for Respondent.

2005 P T D 2413

[Lahore High Court]

Before Nasim Sikandar and Jawwad S. Khawja, JJ

Messrs HAJI TRADERS, Proprietor Tanveer Anjum

Versus

COMMISSIONER OF INCOME TAX, WEALTH TAX, ZONE-B, LAHORE

P.T.R. 165 of 2001 and C.T.R. No. 10 of 2002, decided on 22nd March, 2005.

Income Tax Ordinance (XXXI of 1979)---

----Ss. 62 & 136---Re-opening of assessment---Formula for computation of production achieved by assessee during relevant period---Such formula earlier confronted to assessee by predecessor Assessing Officer was changed by successor Assessing Officer by issuing fresh notice under S.62 of Income Tax Ordinance, 1979---Appellate Authority and Tribunal dismissed appeals filed by assessee---Validity---Nothing was available in law to prohibit Assessing Officer from confronting assessee with a formula proposing adoption of less electricity units to reach production as against the one proposed by his predecessor---Successor Assessing Officer had assigned a valid reason while changing earlier formula---Opinion of Tribunal that production achieved by assessee during relevant period was somewhat lesser than the one estimated by Assessing Officer would not give rise to a question of law to be considered by High Court---Answer to referred questions was refused in circumstances.

Shahbaz Butt for Petitioner.

Muhammad Ilyas Khan for Revenue.

2005 P T D 2419

[Lahore High Court]

Before Muhammad Sair Ali and Sh. Azmat Saeed, JJ

COMMISSIONER OF INCOME-TAX/WEALTH TAX COMPANIES ZONE-I, LAHORE

Versus

MEHFIL, CINEMA (PVT.) LTD.

Wealth Tax Appeal No.232 of 2002, decided on 28th February, 2005.

Wealth Tax Act (XV of 1963)---

----Ss.16(3), 17 & 27---Wealth escaping assessment---Reopening of assessment---Appeal to High Court---Wealth tax assessment for the year 1996-97 was finalized in the year 3-4-1999 but was cancelled on an appeal 1 y the Income, Tax Appellate Tribunal---Subsequently, a notice under S. 17, Wealth Tax Act, 1963 was issued whereafter, the assessment was finalized purportedly under S. 16(3) of the Act---Validity---Income Tax Appellate Tribunal in the facts and circumstances, was justified to cancel the order when the assessment was completed under S.16(3) of the Act after re-opening the case under S.17 subsequent to cancellation of original assessment on technical defects.

Sardar Ahmad Jamal Sukhera for Appellant.

2005 P T D 2424

[Lahore High Court]

Before Muhammad Sair Ali and Sh. Azmat Saeed, JJ

Sh. KHALID IQBAL

Versus

DEPUTY COMMISSIONER OF INCOME TAX/ WEALTH TAX and 2 others

I.T.A. No.287 of 2000, decided on 16th March, 2005.

Wealth Tax Act (XV of 1963)---

----Ss. 18, 17 & 27---Imposition of penalty under S. 18, Wealth Tax Act, 1963---Special fact noted in the case by the Tribunal was that as against total wealth tax demand of Rs. 1,24,281 for all the years together penalty of Rs.291,245 had been imposed---Tribunal, therefore, observed that it was in the fairness of things to restrict the penalty to the tax demand each year---Discretion vested in the Tribunal had been exercised in favour of the assessee based on facts and circumstances of the case---No question of law had arisen from the impugned order of the Tribunal nor any such question of law had been identified in the grounds of appeal or, urged at the bar---Appeal being without any merit was dismissed-by the High Court.

Syed Nasir Ghani for Appellant.

2005 P T D 2427

[Lahore High Court]

Before Mian Hamid Farooq and Syed Hamid Ali Shah, JJ

COMMISSIONER OF INCOME-TAX COMPANIES ZONE-I, LAHORE

Versus

Sufi MUHAMMAD SALEEM

Income Tax Appeal No. 551 of 1998, decided on 13th January, 2005.

Income Tax Ordinance (XXXI of 1979)---

----Ss.13 & 136---Valuation of property---Appeal to High Court---Assessing Officer, by virtue of S. 13, Income Tax Ordinance, 1979 has the power to determine value of the investment made in the property by the assessee---Assessing Officer, in the present case, has given reasons for not considering the value of the property on the basis of rate fixed by District Collector for the purpose of stamp duty---Provisions of S. 13(2), Income Tax Ordinance, 1979 empower the Assessing Officer to form its own opinion for making valuation of the investment in the property, which no doubt has to be based on certain material---Questions whether the property, the value whereof is subject-matter of the appeal to High Court is industrial or agricultural cum-commercial and that whether rate fixed by District Collector is proper rate for which the value of the property can be determined or not are the questions of fact and not of law---Appeal to High Court under S.136(1) of the Ordinance, lies only in respect of any question of law---Proposed questions as framed in the appeal being not questions of law and appeal being based on the grounds of pure question of fact, was dismissed in limine by the High Court.

Shahid Jamil Khan for Appellant.

2005 P T D 2430

[Lahore High Court]

Before Nasim Sikandar and Jawwad S. Khawaja, JJ

Messrs QADRI CLOTH HOUSE, LAHORE

Versus

INCOME TAX APPELLATE TRIBUNAL, LAHORE and 2 others

I.T.A. No. 535 of 1998, heard on 3rd March, 2005.

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

-----Ss.65, 13(1)(d) & 136---Appeal to High Court---Scope---Reopening of assessment---Issue of reopening of assessment cannot be taken at appellate stage before High Court after its earlier confirmation by the Commissioner of Income Tax (Appeals)---Issue of reopening of assessment is not a jurisdictional fact, which can be taken in appeal before the High Court under 5.136, Income Tax Ordinance, 1979, all the more so when said issue does not appear to have seriously been mooted upon before the Tribunal---Appellate jurisdiction of High Court, as vested under S. 136, Income Tax Ordinance, 1979, is comparable to referable jurisdiction which means that before High Court only the facts found by the Tribunal can be made basis of answer to any question of law raised before the High Court---Question of law raised before High Court must arise out of the order of the Tribunal---When the case is remanded by the First Appellate Authority the issue of reopening of the assessment under S.65 of the Income Tax Ordinance, 1979 can be agitated before the Tribunal, that having not been done by the assessee, it became a past and closed transaction.

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

----Ss.13, 65 & 136---Valuation of property predominantly pertains to the fact's of a particular case---Assessing Officer, in the present case, after remand reduced the valuation of the property, which was further reduced by the Tribunal---Further interference in the valuation so determined by the Tribunal will certainly amount to rule upon a factual position which is not possible in appellate jurisdiction of High Court under S. 136, Income Tax Ordinance, 1979 and same remains correct with regard to the contention that the parallel cases considered by the Revenue Authorities as well as Tribunal are not comparable---Registered value of a property and its market value are particular to every case, it cannot be ruled as a principle that the value indicated in registered sale-deed should invariably be accepted by the Revenue Authorities; to do so will amount to strike down "part of the provisions of S.13, Income Tax Ordinance, 1979, which is not possible in appellate jurisdiction of High Court under S.136 of the said Ordinance.

Siraj ud Din Khalid for Appellant.

Muhammad Ilyas Khan for Respondents.

Date of hearing: 3rd March, 2005.

2005 P T D 2436

[Lahore High Court]

Before Nasim Sikandar and Mian Hamid Farooq, JJ

CRESCENT RE-ROLLING MILLS, LAHORE

Versus

ASSISTANT COLLECTOR OF SALES TAX, LAHORE

S.T.As. Nos. 224 and 225 of 2002, decided on 5th July, 2004.

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

----S. 3(1)---Constitution of Pakistan (1973), Arts. 77 & 127---Qanun-e-Shahadat (10 of 1984), Art. 114---Levy of sales tax or change in its rate or process of its collection---Agreement regarding such matter between Revenue and Association of a class of taxpayers---Validity---Such matter could be legally settled through an administrative arrangement---Such Association had no role to play under Sales Tax Act, 1990 or the Rules framed whereunder---Such levy or charge could not be made without there being a superior or subordinate legislation---Mere minutes of meeting between Revenue and such association would neither be a superior nor a subordinate legislation---Such agreement would not be enforceable in law in absence of a delegated power and manifestation of such power through a notification or an amendment in the rules---No levy against express words of the statute could be made on the basis of such agreement---Acceptance of terms of such agreement by parties and their acting upon same for some time would not convert same into a law---Such agreement of it not reduced in the form of a statutory instrument, then any person affected by the agreement could refuse to abide by same even after having initially accepted that---No additional tax or penalties could be imposed for non-compliance with terms of such agreement---Principles.

Mere minutes of meeting between the Association and the Revenue are not enough to change the existing tax regime fully supported by the provisions of section 3(1) of Sales Tax Act, 1990. Such matter cannot be legally settled by way of an administrative arrangement. Not only the imposition of a tax, but also any change even in its rate or process of collection can be made without there being a superior or subordinate legislation. The minutes of the meeting between the Revenue and the Association of a class of taxpayers are neither a superior nor a subordinate legislations. In present taxation system, legislature at times delegates its powers to the Revenue wing of the Government to make changes giving exemptions or altering the rates of levy or the procedure to collect it. Exercise of such power by the executive, however, is certainly conditional to the existence of a delegation in the superior legislation i.e. an Act of the Parliament. In the present case, it was necessary to formally legalize the terms of the agreement either by an Act of the Parliament or if the existing law so permitted, by way of a subordinate legislation in the form of a notification. In absence of a delegated power and manifestation of that power through a notification Or an amendment in the rules, the agreement between the Association and the Revenue is, at best, a promise to pay at a certain rate on the part of one party and to refrain from conducting audit by the other. That set of promise can very well be a gentleman's promise. However, it is not enforceable in law. No levy against the express words of the statute can be made on the basis of such an agreement, much less to impose additional tax or penalties in case of non-compliance with the terms of agreement.

There is no estoppel against law. The agreement between the parties, if not reduced in the form of a statutory instrument, then any person affected by the same can very well refuse to abide by such agreement even after having initially accepted the same. An Association of taxpayers is different from a Collective Bargaining Agent, which is authorized by law to negotiate and bargain on behalf of the labourers, which it represents. An Association of taxpayers has no role to play under the Sales Tax Act nor under any of the rules framed thereunder. It can certainly represent the interest of its members. However, in absence of any support from any law, it cannot bind its members. When it comes to payment of a levy, its rate or even the procedure of its collection. This is clearly discernible from the scheme of Sales Tax Act, 1990. It also means that compliance of most of the members of the Association cannot upgrade the agreement to the status of a statutory instrument. The levy of tax, its rate and collection does not depend upon the will or agreement of some gentlemen, who support or represent other taxpayers of their class. The constitutional prohibition against imposition of tax except under the authority of a law as contained in Article 77 read with Article 127 also extends to the rate of tax and the procedure of its collection, unless the superior legislature has delegated such a power and that power has been exercised strictly in terms and conditions of the delegation. The agreement between the said Association and the Revenue, if not converted into law through the process prescribed in that behalf, then no person can be forced to comply with same. Plea that a person for some time accepted the terms of an agreement and acted upon the same does not convert that agreement into a law.

(b) Qanun-e-Shahadat (10 of 1984)---

----Art. 114---No estoppel against law.

Mian Abdul Ghaffar for Appellant.

A. Karim Malik for Respondent.

Date of hearing: 5th July, 2004.

2005 P T D 2442

[Lahore High Court]

Before Umar Ata Bandial, J

Messrs AYESHA TEXTILE through Managing Partner

Versus

DEPUTY COLLECTOR (INCHARGE AUDIT DIVISION), SALES TAX AND CENTRAL EXCISE, LAHORE and 4 others

W.P. No. 12490 of 2005, heard on 3rd August, 2005.

Sales Tax Act (VII of 1990)---

----S.21(2)---Sales Tax General Order No.6 of 2003 dated 20-12-2003---Sales Tax General Order No.3 of 2004 dated 12-6-2004---Constitution of Pakistan (1973), Art. 199---Constitutional petition --Blacklisting of a registered person---Contentions of the petitioner were that order for blacklisting was passed without prior notice to the petitioner and contained a bald allegation without any reason whatsoever for the penalty imposed which had brought the business of the petitioner to a stand still and that 18 months had elapsed since the aforesaid bare and mechanical order was passed yet no substantive grounds had since been given by the Authorities, to apprise the petitioner as to why the impugned penalty of blacklisting was imposed on it---Validity---Held, blacklisting was a very serious penalty for its paralyzing effect on the business of any commercial enterprise---Such a step ought to be taken after serving prior notice to the affected party as per rule of natural justice which applied to all proceedings unless expressly excluded---Rejection of explanation by the petitioner could not be done without a speaking order---Giving no reasons for bare allegation was contrary to the specific requirement to supply reasons as laid down in Sales Tax General Order No.6 of 2003---Impugned action of the Authorities, in circumstances, was also violative of the departmental law governing its validity and enforcement---Audit report which had been treated to constitute the necessary material for blacklisting the registered person could not be given such power under the law as such power under S.21, Sales Tax Act, 1990 was vested in a senior Officer of the Department and could not be abdicated to the opinion of an auditor appointed on contract by the Department---Principles---High Court declared the impugned order to be illegal and passed without lawful authority---Authorities were directed to pass a fresh speaking order on the basis of the record showing valid and relevant grounds for taking any action against the petitioner including the imposition of the penalty of blacklisting, if it was imposed by the new order.

New Jubilee Insurance Company Ltd. v. National Bank of Pakistan, Karachi PLD 1999 SC 1126 ref.

Malik Muhammad Arshad Hameed for Petitioner.

Kausar Perveen for Respondent.

Date of hearing: 3rd August, 2005.

2005 P T D 2453

[Lahore High Court]

Before Nasim Sikandar and Jawwad S. Khawaja, JJ

Messrs PSIC CUTLERY, WAZIRABAD

Versus

COLLECTOR, SALES TAX AND CENTRAL EXCISE, GUJRANWALA and another

Sales Tax Appeal No.34 of 2004, decided on 23rd May, 2005.

Sales Tax Act (VII of 1990)---

----S.36---Recovery of evaded tax---Show-cause notice, issuance of---Limitation---Service of show-cause notice for disputed period after three years---Plea of assessee being a Provincial Government Agency was that there was no collusion or a deliberate act on its part to evade tax as no individual would gain from such evasion---Validity---Such plea being convincing, case of assessee would fall under S.36(2) of Sales Tax Act, 1990 and would not be covered by subsection (1) thereof---Demand raised for disputed period was, held, to be barred by limitation.

Saood Nasrullah Cheema for Appellant.

Dr. Sohail Akhtar for Respondents.

2005 P T D 2455

[Lahore High Court]

Before Maulvi Anwarul Haq, J

Messrs AHMED HASSAN TEXTILE MILLS LTD. through Chairman

Versus

FEDERATION OF PAKISTAN through Secretary of Law, Justice & Human Right Division, Islamabad and 4 others

Writ Petition No. 4517 of 2005, decided on 27th July, 2005.

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

---Ss. 9, 10, 13, 14 & 32---Customs Act (IV of 1969), S. 19---Constitution of Pakistan (1973), Art. 199---Constitutional petition---Levy of surcharge---Exemption---Complaint before Federal Tax Ombudsman--Reference to the President---Petitioner had claimed that Bank guarantee furnished by him in a sum equal to 30% of Customs duty, was cancelled and that entire amount representing 30% of said duties having been paid he made request for release of said Bank guarantee---Matter was referred to Central Board of Revenue and Secretary C.B.R. intimated that there was no exemption of import surcharge qua locally manufactured machinery and petitioner was called upon to pay the surcharge---On filing complaint by petitioner before Federal Tax Ombudsman, Ombudsman directed release of Bank guarantee to petitioner and advised the Department to pursue recovery of surcharge separately in accordance with law---Representation filed by the Department before the President against order of Ombudsman, having been allowed, petitioner had filed Constitutional petition against said order---Validity---Order of the President conveyed by Federal Secretary Law stated that petitioner was duly confronted with representation and he filed his comments thereto---Reasons recorded were that Ombudsman had not recorded a finding that import surcharge was not payable---Since according to the President surcharge was payable, one of the modes of recovery available would be to adjust said payable surcharge against Bank guarantee furnished by petitioner---Such reasons could neither be stated to be perverse nor illegal within the confines of Constitutional jurisdiction---Constitutional petition was dismissed.

Muhammad Hussain and another v. Federation of Pakistan through Secretary, Law, Justice and another 2003 YLR 2793; Messrs Eastern Leather Company (Pvt.) Ltd. v. Raja Qamar Sultan, Section Officer, Government of Pakistan., Islamabad and 4 others PLD 2004 Lah. 83; Federation of Pakistan through Secretary, Establishment Division, Government of Pakistan, Islamabad v. Muhammad Tariq Pirzada and 2 others 1999 SCN R 2744 and Federation of Pakistan through Secretary, Establishment Division, Government of Pakistan, Islamabad v. Muhammad Tariq Pirzada and others 1999 SCMR 2189 ref.

Omer Arshad for Petitioner.

2005 P T D 2458

[Lahore High Court]

Before Nasim Sikandar and Jawwad S. Khawaja, JJ

COMMISSIONER OF WEALTH TAX, ZONE-B, LAHORE

Versus

Mrs. TEHMEENA AKEEL

W.T.A. No. 38 of 1997, heard on 8th March, 2005.

Wealth Tax Rules, 1963---

----R.8(3)---Wealth Tax Act (XV of 1963), S.27---Stamp Act (II of 1899), S.27-A----C.B.R. Circular No.7 of 1994 dated 10-7-1994---Valuation of land and building---Determination---Principles---Departmental appeal to High Court---Questions stated to have arisen out of the impugned order of the Tribunal were whether the valuation made by the duly appointed valuer was admitted fact on the part of the assessee; whether in the presence of the valuation as admitted fact the Assessing Officer could adopt the value other than the value fixed by the District Collector and whether the Assessing Officer was bound to obey the Circular, issued by C.B.R. in a case where the market price was referred by the assessee as admitted fact and the same value was .determined by the qualified valuer---Held, question as framed for appeal to the High Court could not. be said to have arisen out of the order of the Tribunal inasmuch as it was neither contended nor argued before the Tribunal that the properties in respect of which the valuations were determined by the Assessing Officer were not let out---Revenue had not been able to point out any provision of law or any precedent in support of separate valuation of cost of construction and land for the purpose of assigning of value to a. property---Tribunal was correct in pointing out that the only method provided by law in such cases was R.8.(3) of the Wealth Tax Rules, 1963; Central Board of Revenue's Circular No.7 of 1994 dated 10-7-1994 could not hold good as against R.8(3), Wealth Tax Rules, 1963, any instruction by any administrative authority against the provisions of law or the Rules framed thereunder could not be employed to defeat the law or the procedure to the deteriment of the rights of the taxpayer and no administrative instructions could be issued to an Assessing Officer while he was performing quasi-judicial 'function of making assessment---Any such administrative instructions in the field, therefore, were not binding upon the Assessing Officer and term and expression GALV as defined in explanation to R.8(3), by itself, implied that it was not necessary for a building or property to have actually been let out for the purpose of application of GALV rule---Said explanation defined the "Gross Annual Rental Value" to be the one for which the property might reasonably be expected to be let out from time to time---Definition itself had indicated that GALV was only a notional value on which a property could reasonably be expected to be let out from year to year---Actual renting out of property for the purpose of application of R.8(3), therefore was not required at all---Appeal of the Revenue dismissed in circumstances.

K. T. Kuruvilla v. District Valuation Officer and another. 2001 PTD 848 = 241 ITR 691 not applicable.

Mian Yousaf Umer for Appellant.

Nemo for Respondent.

Date of hearing: 8th March, 2005.

2005 P T D 2518

[Lahore High Court]

Before Mian Hamid Farooq and Syed Hamid Ali Shah, JJ

COMMISSIONER OF INCOME TAX, LAHORE ZONE-B, LAHORE

Versus

Messrs RAHAT BAKERY, LAHORE CANTT.

P.T.R. No. 18 of 1993, decided on 31st May, 2005.

Income Tax Ordinance (XXXI of 1979)---

----S. 136(2)---Reference to High Court---Question of fact---Matter pertained to holding the assessee to be a commission agent rather than a manufacturer which was purely a question of fact and fell outside the purview of S. 136(2) of the Income Tax Ordinance, 1979---High Court declined to answer the question.

Nemo for Petitioner.

2005 P T D 2525

[Lahore High Court]

Before Nasim Sikandar and Jawwad S. Khawaja, JJ

Messrs COLIBRATIVE HEAVY INDUSTRIES (PVT.) LTD., LAHORE

Versus

C.I.T./W.T., COYS ZONE-II, LAHORE

C.T.R. No.20 of 2003, decided on 3rd May, 2005.

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

---S. 12(18) [as substituted by Finance Act (III of 1998)]---Amendment in S. 12(18) of Income Tax Ordinance, 1979 bringing in words "advance or gift"---Applicability---Such amendment had not clarified existing law, but had brought a change therein---Such amendment, thus, would not apply to assessments of earlier years finalized before its coming into force.

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

----S. 12(18) [before amendment] ---C.B.R. Circular No. 6 of 87, dated 5-7-1987---Share deposit money shown in balance sheet/books of accounts of assessee-company---Treating such money as loan and deemed income---Scope---Purpose of S. 12(18) of Income Tax Ordinance, 1979 was to curb only fictitious loan---Share deposit money could never be or amount to a "loan" for being a sum returnable after a certain or uncertain period with or without interest---Assessing Officer could probe, look into and judge exact nature of a receipt or an entry in books of accounts---Revenue would have no business to pick-up faults with intention and motive of a company to. increase or decrease its capital and reasons therefor---Entries in books of accounts of a company would not be determinative of question, whether such amount had been paid as capital asset or a stock-in-trade---Issuance of share deposit certificates to existing share-holders would not be necessary---Express mention of word "loan" in such provision would exclude all other similar or equivalent terms, transactions or nature of receipt---Such provision would become applicable on fulfillment of two conditions; firstly that there was a loan received by assessee; and secondly that same was so claimed or shown---Neither such addition could be made nor defence taken by assessee could be rejected without recording a finding of fact regarding injection of such sums in business and its use as capital---Principles.

6th Edition of Balck's Law Dictionary page 936; Gurcharan Das and another v. Rain Rakha Mal AIR 1937 Lah. 81; Chairman Evacuee Trust Property West Pakistan, Lahore v. Muhammad Din and another PLD 1971 Lah. 217; CIT North Zone (W.P.), Lahore v. Crescent Textile Mills Ltd 1973 PTD 375; Duggal & Co. v. CIT (1996) 220 ITR 4567; K.A. Ramaswamy Chettiar and another v. CIT 1996 220 ITR 657; Commissioner of Wealth Tax v. Abid Hussain 1999 PTD 2895 and Prime Commercial Bank and others v. Assistant Commissioner of Income Tax 1997 PTD 605 ref.

(c) Interpretation of statutes---

----Fiscal statutes---Letter of law in taxing statute would be interpreted in the sense it had been used and expressed.

(d) Interpretation of statues---

----Fiscal statutes---Provision creating a legal fiction would be interpreted in such a manner as it would not cause injustice to a party.

CIT Kanpur v. Nathunal Gaya Lai (1973) 89 ITR 190 fol.

(e) Administration of justice---

----When Court steps into the world of legal fantasy, then principle of equity and justice cannot be lost sight of.

CIT Kanpur v. Nathimal Gaya Lai (1973) 89 ITR 190 fol.

(f) Words and phrases---

----"Loan"---Meaning---Loan is a sum returnable after a certain or uncertain period with or without interest.

6th Edition of Balck's Law Dictionary Page 936; Shorter Oxford English Dictionary page 1227 Volume-I; Chambers 20th Century Dictionary page 739; Gurcharan Das and another v. Ram Rakha Mal AIR 1937 Lah. 81 and Commissioner of Wealth Tax v. Abid Hussain (1999 PTD 2895 rel.

(g) Interpretation of statutes---

----When a statute limits a thing to be done in a particular form, it necessarily includes in itself a negative viz that thing shall not be done otherwise.

Chairman Evacuee Trust Property West Pakistan, Lahore v. Muhammad Din and another PLD 1971 Lah. 217 fol.

(h) Interpretation of statues---

----Amendment in law---Amendment. brings change in existing state of law, unless same was of clarificatory/declaratory nature--- Retrospec­tivity---Normally clarificatory or declaratory amendments would be retrospective in effect---Amendment bringing change in existing state of law, if not given retrospective effect, would be prospective in effect.

K.G. Old Principal Christian Technical Training Centre, Gurjanwala v. Presiding Officer, Punjab Labour Court Northern Zone and 6 others PLD 1976 Lah. 1097 fol.

(i) Interpretation of statutes---

----Fiscal statute---Two interpretations equally possible---Effect---Choice---Interpretation favourable to subject would be adopted---Such principle could be extended to factual situations warranting application of deeming provisions---Principles.

The settled principle of taxing statutes is that where two interpretations are equally possible, then the one favourable to the subject is to be adopted. Such principle can also be extended to factual situations warranting application of deeming provisions. It means that where the transaction equally be placed within or outside the dividing taxing line, then the one falling outside the line should be preferred against the one falling inside.

Mian Ashiq Hussain for Petitioner.

Safdar Mehmood and M. Ilyas Khan for Respondent.

Date of hearing: 3rd May, 2005.

2005 P T D 2537

[Lahore High Court]

Before Mian Hamid Farooq and Syed Hamid Ali Shah, JJ

COMMISSIONER OF INCOME TAX

Versus

Messrs RIZWAN BROTHERS

R.T.Rs. Nos. 204 to 206 of 2003, decided on 17th January, 2005.

Income Tax Ordinance (XXXI of 1979)---

----Ss. 135, 136 & 156---Rejection of application for rectification---Reference to High Court---Limitation---Such unsuccessful application would not give rise to a fresh cause of action for filing reference application, which had become time-barred---Application for reference to High Court under S. 136(1) of Income Tax Ordinance, 1979 was time­ barred---High Court dismissed application for direct reference being time-barred.

Hong Kong Chinese Restaurant v. Assistant Commissioner Income Tax 2002 PTD 1878 rel.

Muhammad Ilyas Khan for Petitioner.

Zia Haider Rizvi for Respondent No. 1.

2005 P T D 2541

[Lahore High Court]

Before Muhammad Sair Ali and Sh. Azmat Saeed, JJ

Messrs ASAD & COMPANY

Versus

INCOME TAX APPELLATE TRIBUNAL, LAHORE BENCH, LAHORE and others

I.T.A. No. 137 of 2000, decided on 30th March, 2005.

Income Tax Ordinance (XXXI of 1979)---

----Ss. 62, 66-A & 135(5)---Re-opening of assessment---Power of Appellate Tribunal---Scope---Initial assessment found to be framed on basis of wrong bank account---Enquiries revealed that such bank account had already been considered in assessment of its true holder and had no relation with present assessee---Tribunal in appeal set aside order of Inspecting Additional Commissioner and remanded case for making further inquiries and investigations---Validity---Tribunal had jurisdiction to vary and change any order in appeal and could pass such order and directions, which would be necessary to meet the ends of law and justice---No exception could be taken to impugned order---High Court dismissed appeal in circumstances.

Latif Ahmad Qureshi for Appellant.

Shahid Jamil Khan for Respondents.

Date of hearing: 3rd March, 2005.

2005 P T D 2547

[Lahore High Court]

Before Umar Ata Bandial, J

Messrs HI-TECH TRADERS

Versus

GOVERNMENT OF PAKISTAN and others

Writ Petition No. 13498 of 2005, heard on 10th August, 2005.

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

---- Ss. 15 & 16---Prohibition---Power to prohibit or restrict importation and exportation of goods---Contravention of prohibition, according to Ss. 15 & 16, Customs Act, 1969 occurs when prohibited goods are "brought into or taken out of Pakistan".

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

----Ss. 18 & 43--- S.R.O.374(I)/92, dated 15-6-2002---S.R.O. 574(I)105, dated 6-6-2005---Constitution of Pakistan (1973), Arts.199 & 12---Constitutional petition---Goods dutiable---Date of determination of rate of import duty---Delivery of import manifest in respect of a vessel---Contention of the importer was that import of goods of the importer at all relevant times was prohibited and those were liable to confiscation, however, on the date when the IGM covering the importer's goods was filed (30-5-2005), S.R.O.374(I)/02, dated 15-6-2002 was still in the field whereunder the importer had a right to have his confiscated goods released against the payment of a redemption fine; that redemption fine constituted the applicable penalty for the import of otherwise prohibited goods; that S.R.O.374(I)/02, dated 15-6-2002 was rescinded by S.R.O.574(I)/05 dated 6-6-2005, whereby the lesser penalty of redemption fine was withdrawn; that such action constituted an enhancement of the penalty provided by law that was applicable at the time of the contravention of the prohibition; that said action amounted to retrospective increase of liability contrary to Art.12 of the Constitution and that S.R.O.574 was illegally enforced retrospectively to defeat rights of the importer---Validity---Chargeable event of import into Pakistan under S.18, Customs Act,1969 occurs when goods enter the territorial waters of Pakistan---Date of bringing into Pakistan or of import of goods, was the date when they entered the territorial waters of the country, this was also the event when a prohibition was attracted---Evidentiary documents under the Customs Act, 1969 in the present context had established that the event of import of goods was the import manifest of conveyance filed by the master of the vessel under S.43, Customs Act, 1969 with the officer of Customs authorised by Central Board of Revenue---Date of such manifest would constitute the date of bringing into Pakistan or import of goods in the present case---Goods declaration filed by the importer, in the present case, revealed the date of import manifest of conveyance as 30-5-2005---Without disclosing any reason, however, the department treated the date of manifest of the importer's Goods Declaration as 16-6-2005 under 5.30, Customs Act, 1969 to be the date of import manifest of the conveyance (30-5-2005) under 5.43, Customs Act, 1969---Such view, was factually incorrect in circumstances and had no basis in law---Penalty of confiscation got attached to importer's goods simultaneously with the contravention of the prohibition which happened on the date of import manifest of their conveyance namely 30-5-2005, as recorded on the Goods Declaration---As relief of redemption fine as a lesser penalty under S.R.O.374, a competent and binding instrument issued pursuant to S. 181 of the Act was still available on 30-5-2005, therefore, it was the lesser penalty that operated to apply simultaneously with the prohibition---Importer acquired a vested right to be burdened with the liability existing on the day when the prohibition was contravened by it---Importer in any event, was also immune from the' impairment of its right by retrospective enforcement of S.R.O.574---Notification which was an executive act could not be given retrospective effect to impair vested rights---Impugned action of the authorities was, therefore, illegal which was declared to be without lawful authority and of no legal effect---Authorities were directed to decide the case of the importer strictly in accordance with law as per the High Court judgment herein.

East and West Steamship Company v. The Collector of Customs and others PLD 1976 SC 618; Collector of Customs and others v. Ravi Spinning Limited and others 1999 SCMR 412 and Ellahi Cotton Mills Ltd. v. Federation of Pakistan PLD 1997 SC 582 ref.

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

---- Ss. 79, 104, 30, 47 & 43---Declaration and assessment for home consumption or warehousing---Clearance of bonded goods for home consumption---Delivery of import manifest in respect of a vessel---Bulk not to be broken until manifest, etc. delivered and vessel entered inwards---Date of determination of rate of import duty---Date of Goods Declaration filed under S.79, Customs Act, 1969 or under S.104 of the Act was relevant for determining the quantum of liability to customs duty payable on goods liable to clearance; it was for the purpose of such assessment that S.30, Customs Act, 1969 extended the chargeable event of import to the date of Goods Declaration and by this means and change occurring in the rate of duty until clearance of the goods was made payable---Such had nothing to do with the act of import through bringing in of foreign goods into Pakistan as demonstrated by the import manifest of conveyance---It was such act of bringing in and. import of prohibited goods that was relevant to the matter of contravention of a prohibition and penalty therefor---Provisions of 5.47 of the Customs Act, 1969 established that an import manifest filed under S.43 of the Act defined and recorded the event of import of goods into the country.

(d) Notification---

----Retrospective effect---Notification being an executive act cannot be given retrospective effect to impair vested rights.

Ellahi Cotton Mills Ltd. v. Federation of Pakistan PLD 1997 SC 582 ref.

Shehzada Mazhar for Appellant.

Aazar Shabbir and Ahmer Bilal Soofi for Respondents.

Date of hearing: 10th August, 2005.

2005 P T D 2566

[Lahore High Court]

Before Mian Hamid Farooq and Syed Hamid Ali Shah, JJ

Messrs POLY PACK LTD.

Versus

CUSTOMS AND CENTRAL EXCISE APPELLATE TRIBUNAL and others

Customs Appeal No.7 of 1999, decided on 2nd May, 2005.

General Clauses Act (X of 1897)---

----S. 24-A---Judicial order---Essentials of---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 case:--Sketchy, slip-shod and devoid of reasons judgment could not be called a "judicial order", thus, would not be sustainable in law being violative of law declared by Supreme Court in various cases---Principles illustrated.

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.

Adnan Ahmed Khawaja for Appellant.

Ch. Zafar Iqbal for Respondents.

Date of hearing: 2nd May, 2005.

2005 P T D 2577

[Lahore High Court]

Before Nasim Sikandar and Jawwad S. Khawaja, JJ

ZAMAN PAPER AND BOARD MILLS

Versus

TAXATION OFFICER, CIRCLE-12, COMPANY ZONE, LAHORE

P.T.R. No.200 of 2002, decided on 12th May, 2005.

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

---- S. 12(18)---Deeming provision of S. 12(18) of Income Tax Ordinance, 1979---Object of such provision was to discourage fictitious loans.

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

----S.12(18)---Return---Revision of---Purchase of land for company by its Director from his own resources by paying its price directly to seller---Showing such amount in first balance sheet as loan and in revised balance sheet as share deposit money advanced to company by its director---Rejection of revised balance sheet and addition in income on basis of first balance sheet---Validity---No legal bar existed in revision of return before completion of assessment proceedings---Error in an entry of books of accounts or an inadvertent declaration made by assessee could be rectified and corrected before framing of assessment---Balance sheet was an integral and important part of return filed by assessee---Disputed amount had never reached coffers of company as same was directly paid to seller of land---Mentioning of disputed amount as loan in first balance sheet was not an uncorrectable mistake---Issuance of share capital in favour of such Director at belated stage could not be outright rejected on account of its allegedly being an afterthought---Share capital had been issued before framing of assessment---Intention of company could not be scrutinized on touchstone of maximum recovery of revenue---Impugned treatment meted out to company by Assessing Officer was ill-founded---Revision of first balance sheet was, held, to have been wrongly disapproved.

Messrs Micropak (Pvt.) Ltd., Lahore v. Income Tax Appellate Tribunal, Lahore and 2 others 2001 PTD 1180 and Inspecting Additional Commissioner of Income-tax and others v. Messrs Micropak (Pvt.) Ltd. and others 2002 PTD 877 rel.

(c) Income-tax---

----Return of income, revision of---Scope---No legal bar existed in such revision before completion of assessment proceedings---Error in an entry of books of accounts or an inadvertent declaration made by assessee could be rectified and corrected before framing of assessment.

Zia Ullah Kiani for Petitioner.

Sajjad Ali Jafri for Respondent.

Date of hearing: 12th May, 2005.

2005 PTD 2583

[Lahore High Court]

Before Nasim Sikandar and Jawwad S. Khawaja, JJ

COMMISSIONER OF INCOME-TAX AND WEALTH TAX, SIALKOT ZONE, SIALKOT

Versus

HAMAYUN IQBAL C/o Prestige Surgical Instruments (Pvt.) Ltd.

Wealth Tax Appeal No.122 of 2002, Wealth Tax Appeals Nos.112 to 126 of 2002 and 508 to 516 of 2003, decided on 9th May, 2005.

Wealth Tax Act (XV of 1963)---

----Ss. 16(3) & 17-B---Refraining of assessment in view of order of Revising Authority---Pendency of appeal before Tribunal against order of Revising Authority---First Bench of Tribunal vacated order of Revising Authority---Appellate Authority in view of order of First Bench of Tribunal vacated order of Assessing Officer refraining assessment---Second Bench of Tribunal in appeal by department set aside order of Appellate Authority while observing that order of First Bench of Tribunal had no force in law---Assessee's appeal against order of Second Bench of Tribunal and Department's appeal against order of First Bench of Tribunal---Validity---Second Bench of Tribunal on judicial courtesy should not have proceeded to decide matter in presence and availability of judgment of a Bench of equal strength in favour of assessee on same legal and factual issues---Such matter ought to have been referred to Chairman for Constitution of a Larger Bench---High Court set aside both impugned order and remanded case to Chairman for Constitution of a Full Bench or Larger Bench not comprising any member of two Division Benches, which had earlier decided appeals.

Mian Yousaf Umar for Appellant.

Shafqat Mehmood Chohan for Respondent.

Date of hearing: 9th May, 2005.

2005 P T D 2596

[Lahore High Court]

Before Mian Hamid Farooq and Syed Hamid Ali Shah, JJ

Messrs MALIK PESTICIDE (PVT.) LTD., LAHORE

Versus

COLLECTOR OF CUSTOMS, DRY PORT, LAHORE, and another

S.T.As. Nos.518 of 2002 and 23-S of 2000, decided on 6th April, 2005.

Sales Tax Act (VII of 1990)---

----Sixth Sched., Items Nos. 12 and 17---"Pesticide" and "Weedicide"---Distinction---Exemption from sales tax---Classification of such products under separate PCT Headings in Pakistan Customs Tariff---Different usages/end use of both such products---"Weedicides" would not fall within definition of "insecticide"---Pesticides are used against live insects, whereas weedicide is used to weed-out herbicides anti-spouting products or for unnecessary plant growth---Exemption to weedicide from sales tax not having retrospective effect.

Dr. Ilyas Zafar for Appellant.

2005 P T D 2599

[Lahore High Court]

Before Nasim Sikandar and Muhammad Muzammal Khan, JJ

Messrs CRESCENT INVESTMENT BANK LTD.

Versus

INCOME TAX APPELLATE TRIBUNAL

Tax Reference No.7 and P.T.Rs. Nos. 128 and 12.9 of 2001, heard on 22nd June, 2004.

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

----S.136(2)---Reference to High Court---Question framed being more in nature of arguments rather than posing a legal controversy to be resolved by High Court---Reference was dismissed in circumstances.

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

----Ss.15, 22, 23(1)(xviii), 27, 28 & Second Sched., Part I, Cl. 116--Sale of shares by an Investment Banking Company---Capital gains arising on sale of shares---Absence of accounts of such sales in respect of expenses relatable to capital gains---Exemption to capital gains, claim for---Plea of assessee was that while carrying on a "composite business", its whole income would be assessable as business income and could not be bifurcated into sub-trades nor expenses could be apportioned against different heads---Validity---Heads of income given in S.15 of Income Tax Ordinance, 1979 were mutually exclusive---Capital gains assessable under S.27 of Income Tax Ordinance, 1979 could not be clubbed or merged into business income assessable under S.22 thereof---Such plea was mutually destructive as assessee wishing its capital gains to be assessed under S.22 of Income Tax Ordinance,. 1979 could not avail benefit of exemption under S.27 read with S.28 of the said Ordinance---Mere fact that an individual or a corporate entity engaged itself in more than one kind of business, would not result in merging of income from different sources---Assessee could not take benefit of its failure to maintain record of transaction in shares---Non-incurrence of expense in earning huge amount of capital gains not acceptable---Non-allocation of expense to such income would increase volume of claimed. exempt income---Concept of "composite business" in case of Bank/Investment Company could not be extended to capital gains as a matter of course---Principles.

Section 15 of Income Tax Ordinance, 1979 provided for charge of tax and computation of total income under six different heads. Two of them being income from business or profession and capital gains. Their fusion is possible or dependent on the condition of indivisibility. In case an assessee wishes his capital gains to be assessed under section 22 of Ordinance, 1979, he cannot avail the benefit of exemption in respect of capital gains, which are assessable only under section 27 (capital gains) read with section 28 (computation of capital gains).

Capital gains assessable under section 27 of Ordinance, 1979 cannot be clubbed or merged into business income by an assessee to be assessed under section 22 thereof. The heads of income given in section 15 of Ordinance, 1979 are mutually exclusive. Mere fact that an individual or a corporate entity engages itself in more than one kind of business will not result in merging of income from different sources.

The concept of "composite business" in case of a Bank or an Investment Company cannot be extended to capital gains as a matter of course. It is simply for the reason that a Bank or Investment Company cannot take shelter behind their own failure to maintain accounts with respect to their different spheres of activities. To say that an Investment Company could not maintain separate accounts with regard to sale and purchase of shares, their retention and then disposal in the market and alleging them to be part of day-to-day business is not acceptable either as a matter of fact or in law. With the availability of professional expertise in financial and accounting matters, the assessee as an Investment Company cannot take benefit of its own default of having failed to maintain record of transaction of shares.

The sale and purchase of shares in a stock market is completely recorded and it is not believable that an Investment Company or a Bank failed to maintain faithful record of these transactions even if these are in thousands. All payments and receipts without any iota of doubt are made through cheques and other banking instruments. In the present case despite repeated notices, the assessee-Company failed to produce the record and still wanted to take benefit of its default of having maintained no independent account of these transactions, thus accrual of claimed capital gains was not proved through production of record and books of accounts. Non-allocation of expense to such income would certainly increase the volume of claimed exempt income.

In case an assessee has returned only capital gains, it cannot refuse allocation of expense. In such situation, provisions of S.32(3) (method of accounting) of Ordinance, 1979 would become applicable. The declaration of higher income from exempted source is as objectionable attempt to inflate losses.

Non-incurrence of expense in earning a huge amount of capital gains would not be acceptable. It is common knowledge that Stock Exchange Brokers charge commission at different rates incase of shares of different values. Also revenue stamps are required to be affixed on transfer deeds of shares. These expenses must be substantial, when transactions are made in thousands of shares and are repeated frequently.

Commissioner of Income-tax v. PICIC 1988 PTD 626 and Rajasthan State Warehousing Corporation v. Commissioner of Income-tax (2002) 82 Tax 565 ref.

Shafqat Mehmood Chohan and Iqbal Naeem Pasha for Petitioners.

Muhammad Ilyas Khan for Respondent.

Date of hearing: 22nd June, 2004.

2005 P T D 2970

[Lahore High Court]

Before Nasim Sikandar and Muhammad Sair Ali, JJ

COMMISSIONER OF INCOME TAX/ WEALTH TAX COMPANIES ZONE, FAISALABAD

Versus

SHARIF ULLAH C/o Safina Industries (Pvt.) Ltd., Faisalabad

W.T.A. No.475 of 1998, decided on 10th September, 2003.

Wealth Tax Rules, 1963---

----R.8(c)(ii)---Valuation of assets other than cash---Shares of unlisted company---Exclusion of---Rule 8(c)(ii), Wealth Tax Rules, 1963 does not in any manner prohibits exclusion of provision for taxation while computing the value per share of a non-listed company---Rule 8(c)(ii) only requires an Assessing Officer that a provision for liabilities in the balance sheet should carefully be scrutinized with a view to exclude therefrom items which should really form part of the reserves---Reserves are to be included in the paid-up capital, while computing valuation per share---Provisions for liabilities, however, are to be excluded with the only rider that the Assessing Officer will examine them on case to case basis in order to see if these provisions really form part of reserves or are required to be taken as a part of liabilities---Provisions for liabilities therefore are to be excluded for calculating the break-up value of a share.

CWT v. L.G. Ramamurthy 1999 PTD 942; Bharat Hari v. Singhania v. CWT (1994) 207 ITR 1; Commissioner of Income Tax v. Udayan L. Gujjar 1999 PTD 3765 and Commissioner of Wealth Tax v. Vikram Swarup 1998 PTD 1164 distinguished.

C.W.T, v. Sheela Bahagat Ram (1971) 81 ITR 11 and CWT v. Fauzia Mughis (1975) 32 Taxation. 1 ref.

Shahid Jamil Khan for Appellant.

Nemo for Respondent.

Date of hearing: 30th June, 2003.

2005 P T D 1314

[Peshawar High Court]

Before Nasir-ul-Mulk, C.J. and Muhammad Qaim Jan Khan, J

COMMISSIONER OF INCOME/WEALTH TAX, ZONE-A, PESHAWAR

versus

ASSOCIATED INDUSTRIES LTD.

Tax Reference No. 15 of 1997, decided on 16th December, 2004.

Income Tax Ordinance (XXXI of 1979)---

----S. 136---Reference to High Court---Limitation---Time-barred---Reference---Principles.

Section 136(2) of the Income Tax Ordinance, 1979 envisages three situations. Under its subsection (1), the Income Tax Appellate Tribunal can, on the application of a party, refer a question of law to the High Court for determination. In case the Tribunal rejects the application the party may, within 120 days, file a Reference Petition directly in the High Court under subsection (2) of section 136. However, if the application to the Tribunal is rejected as time-barred the Reference to the High Court is to be made under subsection (3) of section 136 within 90 days and the High Court is only to determine as to whether the decision of the Tribunal was correct. Since the petitioner's application before the Tribunal was dismissed as time-barred, the present Reference was maintainable under S.136(3) of the Income Tax Ordinance. As the same was not filed within 90 days it was barred by time. Consequently, the Tax Reference was dismissed as time-barred.

Eid Muhammad Khattak for Applicant.

Nazir Ahmad for Respondent.

Date of hearing: 16th December, 2004.

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2005 P T D 1991

[Peshawar High Court]

Before Nasir-ul-Mulk, C.J. and Ejaz Afzal Khan, J

Messrs AMIN HOTEL

Versus

COLLECTOR SALES TAX AND CENTRAL EXCISE, PESHAWAR and another

S.A.O. No.18 of 2004, decided on 3rd February, 2005.

Customs Act (IV of 1969)---

----S. 24---Central Board of Revenue Letter dated 11-10-1992---Central Excise Rules, 1944, R.10(3)---Central Excise Act (I of 1944), S. 36C---Levy of Central Excise duty on the services of meals and lodging provided by Hotel to the passengers of Airline during July, 1990 to June, 1995---Appeal to High Court---Appellate Tribunal had held that by not paying the excise duty, the appellant had committed, "wilful fraud" and thus the time for the issuance of show-cause notice would be ten years under R.10(3), Central Excise Rules, 1944---Validity---No allegation of fraud or any other accusation specified in R.10(3) of the Rules, was mentioned in the show-cause notice to the appellant---No finding to that effect by the Adjudicating Officer was available on 'record and the Appellate Tribunal, on its own enquiry, had given a "finding of fraud" against the appellant---Appellant could not be brought under R.10(3) in the absence of allegation of fraud in the show-cause notice---When duty was not paid on account of misconstruction of provisions of relevant law, the time within which the notice was to be issued was one year as provided by R.10(1) of Central Excise Rules, 1944 and case of the hotel would not fall under R.10(3) of the Rules---Show-cause notice being barred by time under R.10 of the Rules, High Court allowed the appeal of the Hotel and set aside the impugned orders and judgments as well as the show-cause notice---Principles.

Assistant Collector Customs v. Khybar Electronics Lamps 2001 SCMR 838 and Zamindara Paper and Board Mills v. Collector Central Excise and Sales Tax, Lahore 2003 PTD 1257 fol.

Isaac Ali Qazi for Appellant.

Waqar Ahmad Seth for Respondent.

Date of hearing: 3rd February, 2005.

2005 P T D 2012

[Peshawar High Court]

Before Talaat Qayum Qureshi and Salim Khan, JJ

COLLECTOR OF SALES TAX

Versus

DHAN FIBRE LIMITED

S.A.Os. Nos.7 of 2003 and C.M. No.39 of 2003, heard on 5th May, 2005.

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

---Ss. 2(14) & 8---Input tax adjustment---Entitlement---Goods used for a purpose other than production of taxable supplies or goods specified by Federal Government, would not be qualified for such adjustment.

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

----Ss. 2(14), 7 & 8---S.R.O. 1307(I)/97, dated 20-12-1997---Input tax adjustment against purchase of spare parts and lubricants used in machinery for production of textile yarn---Entitlement---Anything contributing directly to production of a taxable supplies would fall within ambit of S.8 of Sales Tax Act, 1990---Input tax credit would be allowed on machinery spare parts and lubricants to lie used to facilitate production/manufacturing of end product---Input tax credit could be claimed on such parts and lubricants, even if not direct 'constituent and integral part of textile yarn/end of product.

Messrs Sindh Alkalis Ltd. v. The Collector of Customs, C. E. & S. Tax (Appeals) 2002 PTD (Trib.) 475; Messrs Muhammad Shafi Tanneries (Pvt.) Ltd. v. The Collector of Customs (Appeals), Karachi and another 2002 PTD (Trib.) 111 and PTCL 2002 CL 150 ref.

Attock Cement Pakistan Ltd. v. Collector of Customs and Central Excise, Quetta and 4 others 1999 PTD 1892; Messrs Muhammad Shafi Tanneries (Pvt.) Ltd. v. The Collector of Customs (Appeals), Karachi and another 2002 PTD (Trib.) 111 and Messrs Sindh Alkalis Ltd. v. The Collector of Customs, C.E. & S. Tax (Appeals) 2002 PTD (Trib.) 475 rel.

Abdur Rauf Rohaila for Appellant.

Barrister Qasim Ali Chouhan for Respondent.

Date of hearing: 5th May, 2005.

2005 P T D 2355

[Peshawar High Court]

Before Malik Hamid Saeed and Ejaz Afzal Khan, JJ

Messrs UNIVERSAL INSURANCE CO. LTD.

Versus

COLLECTOR, CUSTOMS, CENTRAL EXCISE & SALES TAX, PESHAWAR and 5 others

Writ Petition No.249 of 1999, decided on 15th February, 2005.

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

----S. 19---S.R.O. 517(I)/89, dated 3-6-1989---S.R.O. No.419(I)/91, dated 9-5-1991---Constitution of Pakistan (1973), Art.199---Constitutional petition---Notice on the Insurance Company for encashment of guarantees issued by the company on behalf of importer pursuant to an order of High Court---Contentions of the Insurance Company were that Collector of Customs could not encash said insurance guarantees as the raw material and components imported by the importer under S.R.O. 517(I)/89, dated 3-6-1989 were exempt from all the customs duties and other taxes levied thereon; that though the notification was rescinded vide S.R.O. 419(I)/91, dated 9-5-1991, nonetheless it would not affect the exemption when the raw material and other components had admittedly been imported against the irrevocable letters of credit which were opened on 14-3-1991, much before the crucial dated; that where the goods in question were exempt from all the duties and taxes, encashment of the insurance guarantees furnished by the Insurance Company on behalf of the importer could not be justified by any canon of law and equity; that if the insurance guarantees were not encashed within the time stipulated therein they could not be encashed thereafter and in the alternative it was further urged that if by any means, High Court linked the applicability of S.R.O. 517(I)/89 with the fulfilment of the conditions mentioned therein, the relief asked for could be granted subject to the proof of their fulfilment---Validity---Held, there was no doubt that the irrevocable letter of credit for the import of raw material and other components was opened on 14-3-1991, much before the rescission of S.R.O. 517(I)/89, but that alone would not entitle the importer to exemption and relieve the Insurance Company of its liabilities under the insurance guarantees unless the requirements listed and laid down in the said S.R.O. were proved to have been fulfilled---Where no documents and the certificates provided by forms I and II of the S.R.O., had been annexed with the petition or brought to the notice of the High Court, though the petition remained pending for more than five years, or during the course of arguments, which could suggest that the requirements attracting the applicability of the S.R.O. had been fulfilled, all the arguments relating to exemption would collapse, notwithstanding the fact that the letter of credit was opened before the rescission of relevant S.R.O.---High Court, however, observed that the insurance company would be at liberty to produce relevant documents before the concerned forum to bring its case within the mischief of the S.R.O. in question.

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

----S. 202---Contract Act (IX of 1872), Ss.126 & 28---Insurance guarantee---Such guarantee, as a matter of fact, is a contract of guarantee in terms of S.126, Contract Act, 1872 and as such is subject to all the incidents which a contract can possibly be under the Contract Act, 1872---Not open to the parties to any agreement, to contract themselves out of a provision of law under S.28, Contract Act, 1872 so would it be for the parties to a guarantee---As any such clause in a contract would be void so would it be in a guarantee---When an insurance guarantee is a contract to all intents and purposes, the stipulation in the guarantees that the Insurance Company shall be discharged of all the liabilities created thereunder if not encashed or enforced within one week after their expiry would be void within the terms of S.28, Contract Act, 1872, inasmuch as it restricted or ruled out the application of 5.202, Customs Act, 1969, moreso when the guarantees also stipulated that their amount shall be recoverable as arrears of land revenue.

Nathu Mal-Ram Das v. D.B. Rain Sarup & Co. and others AIR 1932 Lah. 169 and Islamic Republic of Pakistan through Defence Secretary, Government of Pakistan, Karachi v. Nazar Din Khattak and Sons PLD 1969 Pesh. 313 ref.

Quetta Textile Mills Ltd. v. Federation of Pakistan and 2 others 1999 CLC 755; Emirate Bank International v. Messrs United Group of Companies 1998 CLC 743 and Messrs Gadoon Polyester v. Collector Customs and others Writ Petition No. 1068 of 1996 distinguished.

Abdul Latif Yousafzai for Petitioner.

S.M. Attiq Shah for Respondents Nos.1 to 4.

Hamid Farooq Durrani, Dy. A.-G. for Respondent No.5.

Date of hearing: 8th February, 2005.

2005 P T D 104

[Supreme Court of Pakistan]

Present: Nazim Hussain Siddiqui, C.J., Javed Iqbal and Abdul Hameed Dogar, JJ

Messrs PAKISTAN TOURISM DEVELOPMENT CORPORATION LTD. and another

Versus

COLLECTOR, CUSTOMS, CENTRAL EXCISE AND SALES TAX, LAHORE and others

Civil Review Petitions Nos.66 and 71 of 2002, decided on 17th September, 2004.

(On appeal from the judgment dated 15-4-2002 of this Court passed in, Civil Appeal No.1587-1999 & C.P. No.2564-L of 2000).

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

----S.2(28)---Term "General Public" occurring in S.2(28), Sales Tax Act, 1990---Meanings---"General Public" is not confined to citizens of a municipality but embraces all the people and is represented by the Legislature---Spirit of the term "General Public" is not to limit its scope but to enhance it and there is no legal justification for a narrow construction of the said term---Word "general" means relating to genus or whole class; including various species; not "Special", not restrict or "specialized" relating to the whole of to all or most.

Words and Phrases Permanent Edn. Vol.18 and Chambers English Dictionary quoted.

Goalundo Ice Association Ltd. v. Commissioners of the Rajabari Municipality PLD 1952 Dacca 12 not approved.

(b) Constitution of Pakistan (1973)---

----Art.l88---Supreme Court Rules, 1980, O. XXVI --- Review of Supreme Court judgment---Points raised in the review petitions were considered and repelled in the impugned judgment---Plea that specified words had not been correctly interpreted by the Supreme Court was no ground for review as review was not for rehearing the matter.

(c) Words and phrases---

------ General public" ---Connotation.

Words and Phrases Permanent Edn. Vol.18 and Chambers English Dictionary quoted.

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

----Taxable supply---Making Taxable supply as a hotel and supply of liquor are distinct and are to be treated as such---Plea that once assessees were registered for making taxable supply as a hotel, they were not required to be registered for second time as retailers of liquor, was repelled.

Ali Sibtain Fazli, Advocate Supreme Court for Petitioners.

Nemo for Respondents.

Date of hearing: 17th September, 2004.

2005 P T D 123

[Supreme Court of Pakistan]

Present: Nazim Hussain Siddiqui, C.J., Javed Iqbal and Abdul Hameed Dogar, JJ

COLLECTOR OF CUSTOMS, LAHORE and others

Versus

UNIVERSAL GATEWAY TRADING CORPORATION and another

Civil Petition No. 1884-L of, 2004, decided on 30th June, 2004.

(On appeal from the order of the Lahore High Court, Lahore, dated 28-5-2004 passed in W.P. No.2812 of 2004).

(a) Constitution of Pakistan (1973)---

----Art.199---Constitutional jurisdiction---Disputed question of fact--­Principle-- Controversial questions cannot be resolved in exercise of Constitutional jurisdiction.

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

----Ss.179, 193, 194-A & 196---Constitution of Pakistan (1973), Art. 199---Constitutional jurisdiction of High Court, exercise of--­Alternate efficacious remedy---Scope-- Constitutional jurisdiction should not have been exercised for the reason that efficacious remedies should have been invoked as were available under Ss. 179, 193, 194-A and 196 of Customs Act, 1969, which could have been conveniently availed by the importers by approaching concerned forum available in the hierarchy of customs, laws---Jurisdiction conferred upon such forum, could not be exercised by High Court under the garb of Art. 199 of the Constitution.

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

----Ss.162 & 163---Search without warrant---Principle---Importers paid customs duty on the goods imported by them but Customs intelligence Authorities conducted raid and intercepted the goods and. seized them on the ground of misdeclaration---Plea raised by importers was that all proceedings initiated against seizure of goods were ab initio void as the mandatory provisions as contemplated in S.163 of the Customs Act, 1969 were trot adhered to in letter and spirit---Validity---Search was conducted without having the search warrants for the reason that it could have been done in view of the circumstances prevalent at the relevant moment which could only be adjudged by the concerned officer under whose supervision the raid was being conducted---As such the same could not be done in a routine practice and every possible effort should be made to comply with the provisions as enumerated in Ss. 162 and 163 of Customs Act, 1969---Plea raised by the importer was repelled.

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

----Ss. 162, 163, 171, 179, 193, 194-A & 196---Notification S.R.O. No.495(I)/85-- Customs duty, levy of---Misdeclaration---Alternate efficacious remedy---Search without warrant--Apprehension of removal of smuggled goods---Registration of case against importers--- Importers paid customs duty on the goods imported by them but Customs Intelligence Authorities conducted raid without warrant, intercepted the goods and seized them on the ground of misdeclaration and registered criminal case against them---Importers assailed the order of Customs Authorities, in Constitutional petition before High Court wherein the Court directed the authorities to release the goods on furnishing of surety bond---Authorities raised the plea that in presence of sufficient and efficacious remedy Constitutional petition before High Court was not maintainable---Validity---Authorities had conducted search in view of strong apprehension of removal of the suspected smuggled goods---Notices under S.171 of the Customs Act, 1969, were also served upon the importers---All legal formalities were completed by the Customs Authorities before searching the godown---Registration of case against importers did not warrant interference by High Court in its Constitutional jurisdiction---Although under ordinary circumstances, provisions as contained in S.162 of Customs Act,1969, must be implemented yet in urgent and emergent situation, search could be conducted without having search warrant subject to conditions as enumerated in S.163 of Customs Act, 1969---Judgment passed by High Court was set aside and the importers were directed to approach the forum concerned available in the hierarchy of customs laws for the redressal of their grievance---Appeal was allowed.

Dr. Sajjad Ahmad v. Dr. Muhammad Bashir PLD 1979 Lah. 304; K.M. Asaf v. Abdullah Malik PLD 1976 Lah. 158; S.M. Yousaf v. Collector of Customs PLD 1968 Kar. 599; Iqbal Akhtar v. Ch. Muhammad Mushtaq PLD 1977 Lah. 1318; State Life Insurance Corporation of Pakistan v. Pakistan Tobacco Co. Ltd. PLD 1983 SC 280; Attaur Rehman Khan v. Dost Muhammad, 1986 SCMR 598; Muhammad Akhtar v. President, Cantonment Board, Sialkot Cantt. 1981 SCMR 291; Mian Muhammad v. Government of West Pakistan 1968 SCMR 935; Zahid Hussain v. Dharmumal 1971 SCMR 110; Zuhra Begum v. Sajjad Hussain 1971 SCMR 697; Landale and Morgan (Poak.) Ltd, v. Chairman, Jute Board, Dacca 1970 SCMR 853; Mahboob Alain v. Secretary to Government of Pakistan 1969 SCMR 217; Umar Daraz v. Muhammad Yousaf 1968 SCMR 880; Saghir Ali v. Mehar Din 1968 SCMR 145; Punjab Beverage Company (Pvt.) Ltd. v. Central Board of Revenue 2001 PTD 3929; Shahid Agency v. Collector of Customs 1989 CLC 1938; Ali Hussain v. Presiding Officer. PLD 1989, Kar. 157; Bhagan v. State PLD 1990 Quetta 41; Mojakkir Ali v. Regional Transport Authority PLD 1967 Dacca 6, Azizur Rahman v. F. A. T. A. Development Corporation PLD 1988 Pesh. 9; Collector of Customs v. Muhammad Mahfooz PLD 1991 SC 630; Shaheen Calico Printing Works v. Mumtaz Ali PLD 1975 Lah. 1442; Muhammad Yousaf v. The Collector of Sea Customs, Karachi PLD 1969 SC 153, S.M. Yousuf v. The Collector of Customs, Karachi 1972 SCMR 87; Sher Bahadur v. Chairman, Industrial Relations Commission PLD 1975 Kar. 483 and Shaukat Hussain v. Zulfiqar Ahmed PLD 1981 Lah. 13 ref.

Ahmer Bilal Soofi, Advocate Supreme Court and Faiz-ur-­Rahman, Advocate-on-Record for Petitioners.

Syed Najmul Hasan Kazmi, Advocate Supreme Court for Respondents.

Date of hearing: 30th June, 2004.

2005 P T D 172

[Supreme Court of Pakistan]

Present: Nazim Hussain Siddiqui, C.J., Javed Iqbal and Abdul Hameed Dogar, JJ

ADEEL-UR-REHMAN and others

Versus

FEDERATION OF PAKISTAN and others

Civil Petitions Nos.2648 to 2650 and Civil Miscellaneous Applications Nos.3165 and 3167 of 2003 in Civil Petition No. Nil of 2003, decided on 17th May, 2004.

(On appeal from the judgment dated 7-10-2003 of High Court of Sindh, Karachi passed in C. Ps. Nos.D-703, 704 and 770 of 2003 etc.)

(a) Qanun-e-Shahadat (10 of 1984)---

----Art.129(e)---Official .acts---Presumption---Although presumption of regularity is attached to official acts and documents yet when genuineness of documents is doubtful, the Court has power to look into their correctness and validity.

Ch. Pervaiz Elahi v. Province of Punjab PLD 1993 Lah. 595 ref.

(b) Good governance---

---- Public health---Principle---Question of public health cannot be left at the discretion of persons who, for their vested interest, can go to any extent.

(c) Import Trade and Procedures Order, 2002-2003---

----Para.6, Appendix A---Customs Rules, 2001, R.226(7)---Pakistan Customs Tariff Heading 0802.9010---Notification. S.R.O. 450(I)2001, dated 18-6-2001---Constitution of Pakistan (1973), Art. 185(3)---Betel nuts, import 'of---Infested consignment not fit for human consumption--­Authorities declined to release the consignments of importers for the reason that according to laboratory reports the same were infested to varying degrees and were not fit for human consumption---Plea raised by the importers was that on the basis of 9.10% infestation, the authorities could not declare the entire consignment unfit for human consumption--­Further plea raised by the importers was that by appropriate process the infestation could be removed and remaining 90.90% consignment could be-made fit for human consumption---Validity---According to Pakistan Customs Tariff; betel nuts were covered under Heading 0802.9010 as edible product---All edible products which were not fit for human consumption were banned items as mentioned in Negative List in Appendix A of Import Policy issued under Para.6 of Import Trade and Procedures Order 2002-2003 which restricted import of such items---Importers had conceded before High Court that 9.10% of infested consignment could not be segregated visually from the entire consignment; segregation could only be made by cutting each betel nut into two parts; and monitoring of separation was not possible---In view of such admission, the test reports (procured by importers) could not be straightaway believed and further investigation about propriety and correctness of report was necessary and same could only be done after the Experts entered the witness box---Importers had not come to the Court with clean hands as they had done whatever possibly they could do to get the consignments released, irrespective of the fact that if released, it could cause `candida albicans' (a serious infectious disease and mould which was another name of allergies caused by fungus and liver cancer)---Importers had not even hesitated to submit fake reports for achieving their purpose---Leave to appeal was refused.

Messrs Al-Hamd Edible Oil P. Ltd. v. Collector of Customs 2003 PTD 552; Messrs Onkarlal Nadal v. State of Rajasthan AIR 1986 SC 2146; Burmah Oil v. Trustees of the Port of Chittagong PLD 1962 SC 113; H.M. Saya & Co. v. Wazir Ali Industries Ltd. PLD 1969 SC 65; M.Y. Khan v. M.M. Aslam 1974 SCMR 196; Fazle Ghafoor v. Chairman Tribunal Land Disputes 1993 SCMR 1073; M. A. Rashid Rana v. Secretary Home, Government of Punjab 1996 SCMR 1145 and Gatron (Industries) Ltd. v. Government of Pakistan 1999 SCMR 1072 distinguished.

Foundations in Microbiology by Kathleep Talaro and Arthur Talalro, 2nd Edn., William C Brown Publishers, London, pp. 146, 535 and 698 and Tobacco Role in the Aetiology of Oral Cancer, Periodontal Disease and other Oral Lesions" by Doctor Heddie O. Sedano published by Periodontics Information Centre, University of California, Los Angeles, p.5 ref.

(d) Constitution of Pakistan (1973)---

----Art.9---Word life'---Interpretation---Wordlife' in the Constitution has not been used in a limited manner---Wide meaning should be given to enable a man not only to sustain life but to enjoy it---Duty of the State is to see that the life of a person is protected as to enable him to enjoy it within the prescribed limits of law---Pollution, environmental degradation and impure food items also fall in the category of deprivation of life.

Ms. Shehla Zia v. WAPDA PLD 1994 SC 693 ref.

Dr. Babar Awan, Advocate Supreme Court and Ejaz Muhammad Khan, Advocate-on-Record for Petitioners (in C. Ps. Nos. 2648 to 2650 of 2003).

Syed Sharifuddin Pirzada, Senior Advocate Supreme Court and Mehr Khan Malik, Advocate-on-Record for Applicants (in C.M.As. Nos.3165 and 3167 of 2003).

Abdul Hafeez Prizada, Senior Advocate Supreme Court and M.M.S. Khattak, Advocate-on-Record for Respondents.

Ms. Naheeda Mehboob Elahi, Advocate Supreme Court, Standing Counsel for Respondents.

Date of hearing: 17th May, 2004.

2005 P T D 194

[Supreme Court of Pakistan]

Present: Syed Deedar Hussain Shah and Sardar Muhammad Raza Khan, JJ

DEPUTY COLLECTOR OF CUSTOMS, RAILWAY STATION, LAHORE

Versus

Messrs ABDUL GHAFFAR ABDUL REHMAN and others

Civil Petition No.364-L of 2002, decided on 6th July, 2004.

(On appeal from the judgment dated 16-11-2001 passed by the Lahore High Court, Lahore in Writ Petition No. 18286 of 2001).

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

----S. 30(c)---Sales tax paid on imported goods---Inclusion of amount of sales tax towards income of importer---Validity---Such amount could not be deemed to be income of importer, thus, could not be subjected to payment of income tax.

Messrs Ramma Pipe and General Mills (Pvt.) Limited v. The Federation of Pakistan 1994 PTD 848 approved.

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

----S. 30(c)---Constitution of Pakistan (1973), Arts. 185(3) & 199--­Imported goods---Collection of income tax by Collector of Customs after making assessment on basis of Bill of Entry including customs duty and sales tax---High Court excluded customs duty and sales tax while assessing income of importer for income-tax purposes---Petition for leave to appeal by Collector of Customs against impugned order---Maintainability---Income Tax Department though party in the Constitutional petition before High Court, had not filed petition for leave to appeal---Collector of Customs, though party in Constitutional petition, had neither contested matter nor appeared nor filed any comments before High Court---Customs Authorities were merely collectors of ,fax on behalf of Income Tax Department---Supreme Court dismissed petition and refused leave to appeal.

Messrs Ramma Pipe and General Mills (Pvt.) Limited v. The Federation of Pakistan 1994 PTD 848 approved.

Ahmer Bilal Sofi Advocate Supreme Court with Mian Ata-ur-­Rehman, Advocate-on-Record for Petitioner.

M. Shahzad Shoukat, Advocate Supreme Court with Tanvir Ahmed, Advocate-on-Record for Respondents.

Date of hearing: 6th July, 2004.

2005 P T D 472

[Supreme Court of Pakistan]

Present: Rana Bhagwandas and Hamid Ali Mirza, JJ

COLLECTOR. CENTRAL EXCISE AND SALES TAX, COLLECTORATE OF CENTRAL EXCISE AND LAND CUSTOMS; KARACHI and another

Versus

DEWAN TEXTILE MILLS LIMITED and others

C.P.L.A. No. 495‑K of 2002, decided on 10th February, 2004.

Sales Tax Act (VII of 1990)‑‑‑

‑‑‑‑S. 13‑-‑S.R.O. 500(I)/(88)‑‑‑Constitution of Pakistan (1973), Art.185(3)‑‑‑Leave to appeal was granted by the Supreme Court to examine questions as to whether respondent Mills were entitled to exemption of Sales. Tax on import of consignment, despite withdrawal of exemption, in view of the fact that consignment landed at port after supersession of S.R.O. 500(I)/88 and whether Mills could maintain Constitutional petition before High Court without exhausting departmental remedies before Sales Tax hierarchy under provisions of Sales Tax Act, 1990.

Fecto Belarus Tractors Ltd. v. Federation of Pakistan 2001 SC 109 ref.

Akhlaq Ahmad Siddiqui, Advocate‑on‑Record for Petitioners.

S. Zaki Muhammad, Dy. A.‑G. of Pakistan on Court notice.

Afsar Ali Abidi, Advocate Supreme Court and K.A. Wahab, Advocate‑on‑Record for Respondent No. 1.

Nemo for Respondents Nos.2 and 3.

Date of hearing: 10th February, 2004.

2005 P T D 480

[Supreme Court of Pakistan]

Present: Muhammad Nawaz Abbasi and Tassaduq Hussain Jillani, JJ

CALTEX OIL (PAKISTAN) LTD.

Versus

COLLECTOR, CENTRAL EXCISE AND SALES TAX and others

C. P.L.A. No. 1968 of 2002, decided on 20th August, 2004.

(On appeal from the judgment, dated 11‑6‑2002 passed by High Court of Sindh Karachi, in Special Sales Tax Appeal No.60 of 2002).

(a) Constitution of Pakistan (1973)‑‑‑

----Art. 185(3)‑‑‑Question of law‑‑‑Raising of such question first time before Supreme Court‑-‑Validity‑‑‑Question of law arising out of the facts of case relating to fundamental issues involved therein, even if was not raised before the lower forum, can be taken before the higher forum‑‑‑Supreme Court for doing complete justice may, if the facts and circumstances so demand, allow to raise a question of law which was not as such taken before High Court‑‑‑Court seized of the matter was supposed to apply the correct law to meet the ends of justice.

Gatron (Industries) Ltd. v. Government of Pakistan 1999 SCMR 1072 ref.

(b) Sales Tax Act (VII of 1990)‑‑‑

‑‑‑‑S. 36-‑‑Non‑levy/short levy/erroneous refund of sales‑tax‑‑‑Categories‑‑Cases of such nature are divided in two categories under S.36 of Sales Tax Act, 1990‑‑‑First category of cases is covered under S.36 (1) of Sales Tax Act, 1990, in which due to deliberate act, tax was not levied or short levied or erroneously refunded‑‑‑Whereas cases, in which sales tax was not levied or short levied or erroneously refunded by reason of inadvertence; error or misconstruction, are covered under S.36(2) of Sales Tax Act, 1990.

(c) Sales Tax Act (VII of 1990)‑‑‑

‑‑‑Ss.36. & 65‑‑‑Sales tax, recovery of‑‑‑Show‑cause notice .not disclosing grounds and reasons for proposed action‑‑‑Evasion of sales tax‑‑‑Plea of inadvertence‑‑‑Contention of the authorities was that for availing the benefit of S.65 of Sales Tax Act, 1990, Central board of Revenue was the proper forum‑‑‑Validity‑‑‑Without completion of pre­requisite of show‑cause notice and supply of the grounds/reasons in clear and explicit words to ascertain as to under which subsection of S.36 of Sales Tax Act, 1990, the case would fall, the demand of the authorities had no legal consequence‑‑‑Such failure of the authorities issuing show‑cause notice to disclose the grounds and reasons rendered the notice invalid‑‑‑Collector concerned initiated the process of issuing show‑cause notice raising the presumption that petitioner company was responsible, for evasion of sales tax therefore, no useful purpose would be served in undertaking the exercise of approaching the Collector for grant of benefit of S.65 of Sales Tax Act, 1990‑‑‑Was essential for the Tribunal to examine the scope of S.65 of Sales Tax Act, 1990, and it should have given clear verdict in the matter‑‑‑Federal Government was competent to exempt the sales tax in a case which was covered by the provisions of S.65 of Sales Tax Act, 1990‑‑‑Question regarding entitlement of the benefit of S.65 of Sales Tax Act, 1990, would need determination by, an independent forum‑‑‑Supreme Court remanded the case to the Tribunal for its determination as the Tribunal had not attended such fundamental question and failed to exercise the jurisdiction vested in it‑‑‑High Court while affirming the judgment of Tribunal committed the same error‑‑‑Supreme Court framed certain questions and directed the Tribunal to decide them afresh-‑‑Appeal was allowed.

Assistant Collector Customs v. Khyber Electric Camps 2001 SCMR 838 and State of Tamil Nadu v. Cement Distributors Pvt. Ltd. AIR 1973 SC 668 ref.

Farogh Naseem, Advocate Supreme Court and Raja Abdul Record for Petitioner.

Raja Muhammad Irshad, D.A.‑G. and M.S. Khattak, Advocate­-on‑Record for Respondents.

Date of hearing: 20th August, 2004.

2005 P T D 498

[Supreme Court of Pakistan]

Present: Iftikhar Muhammad Chaudhry and M. Javed Buttar, JJ

CENTRAL BOARD OF REVENUE and others

Versus

WAPDA and others

Civil Petitions Nos. 1205‑L to 1208‑L of 2004, decided on 3rd August, 2004.

(On appeal against the judgment, dated 22‑1‑2004 passed by the Lahore High Court, Lahore in Writ Petitions Nos. 166, 3501, 3522, 19483 and 19895 of 1996).

Central Excises Act (I of 1944)‑‑‑

‑‑‑‑Sched. I, Item No. 14.14‑‑‑Finance Act (VII of 1992), Ss. 4(8) & 12‑A‑‑‑Notification S.R.O. 519(I)/1992, dated 25‑5‑1992‑‑‑Constitution of Pakistan (1973), Arts.165, 165‑A & 185 (3)‑‑‑Central excise duty, levy of‑‑‑Exemption from central excise duty‑‑‑Leave to appeal was granted by Supreme Court to consider; whether Water and Power Development Authority was not a Government Authority/functionary for the purpose of exemption from the payment of central, excise duty on services in shape of bank loans under the provisions of Notification S.R.O. 519(I)/1992; dated 25‑5‑1992; whether under Arts. 165 and 165A of the Constitution, the Government was ‑empowered to impose tax upon the corporation like Water and Power Development Authority etc. and whether High Court legally was not justified to declare that Water and Power Development Authority a Government functionary for the purpose of exemption of excise tax in view of the judgments of Supreme Court in cases titled Messrs Gadoon Textile Mills and 814 others vs. WAPDA and others, reported, as 1997 SCMR 641 and WAPDA and another v. Administrator, District Council, Swabi and others reported as 2000 CLC 40, because both the judgments dealt altogether different subject and it had not been held therein that the Water and Power Development Authority was Government functionary.

Messrs Gadoon Textile Mills and 814 others v. WAPDA and others 1997 SCMR 641 and WAPDA and another v. Administrator, District Council, Swabi and others 2000 CLC 40 ref.

Izhar‑ul‑Haque, Advocate Supreme Court and Tanvir Ahmad, Advocate‑on‑Record (absent) for Petitioners.

Nemo for Respondents.

Date of hearing: 3rd August, 2004.

2005 P T D 627

[Supreme Court of Pakistan]

Present: Sardar Muhammad Raza Khan, M. Javed Butter and Tassadduq Hussain Jillani, JJ

WATER AND POWER DEVELOPMENT AUTHORITY through General Manager and Project Director, Ghazi Barotha Hyedro Power Project and another

versus

ADMINISTRATOR, DISTRICT COUNCIL SWABI and 5 others

Civil Appeal No, 1313 of 1999, decided on 29th November, 2004.

(On appeal from the judgment, dated 9‑9‑1999 passed by the Peshawar High Court, Peshawar in Writ Petition No. 12 of 1999).

Constitution of Pakistan (1973)‑‑‑

‑‑‑‑Arts.165 & 165‑A‑‑‑Exemption from taxation‑‑‑Federal Government of Pakistan through WAPDA had executed a project and WAPDA had assigned execution on the spot to the contractor and contractor installed a crushing plant and concrete mixing unit for the production of various materials to be used in construction‑‑‑Contractor, for said purpose quarried stones, gravel etc. from the site within the jurisdiction of District Councils "S" and "H"‑‑‑District Council levied export tax and Educational Cess on the production and transportation of the said material ‑‑‑WAPDA's objection on the levy having been turned down, it directed the contractor to pay export tax as demanded which the contractors started making payment under intimation to WAPDA which, in turn, was to reimburse such payment on the basis of written agreement between WAPDA and the contractor‑‑‑Contractor, after having paid such tax for a long time, it was stopped by deriving advantage of some territorial dispute between the two District Councils ‑‑‑WAPDA filed Constitutional petition against the imposition of such tax claiming exemption purportedly under Arts. 165 & 165‑A of the Constitution, which was dismissed‑‑‑Contention of WAPDA before the Supreme Court was that WAPDA, due to executing a project of and on behalf of the Federal Government, its properties and income etc. was exempt from taxation under Arts.165 & 165‑A of the Constitution‑‑‑Validity‑‑‑Held, appellant could not derive benefit from either Art.165 or from 165‑A of the Constitution‑‑‑Contractor, by no stretch of imagination or arguments could equate itself with the Federal Government nor it had claimed so, which was proved by its conduct of having paid such tax for a considerably long time, constituting against it estoppel as well‑‑­Reimbursement of amount of tax was a pure and personal contractual liability shouldered by WAPDA itself in view of the agreement‑ ‑‑Levy of tax being on the contractor, it could not be exempted therefrom‑‑­Whatever WAP.DA had undertaken qua the‑ reimbursement thereof was a contractual liability which could not be evaded on the pretext of exemption‑ ‑‑Lifting of the corporate veil as such was no longer permissible and the distinct juristic personality of the incorporated or statutory body was recognized notwithstanding the control, the destination and the functioning of such‑bodies.

Daewoo Corporation's case 2001 SCMR 1012 and Union Council v. Associated Cement 1993 SCMR 468 ref.

Fida Muhammad Khan, Advocate Supreme Court with Ch. Akhtar Ali, Advocate‑on‑Record for Petitioners.

Jehanzeb Rahim, Advocate‑General N.‑W.F.P., Masood. Kousar, Advocate Supreme Court with M.S. Khattak, Advocate‑on-­Record for Respondents.

Date of hearing: 29th November, 2004.

2005 P T D 880

[Supreme Court of Pakistan]

Present: Syed Deedar Hussain Shah and Hamid Ali Mirza, JJ

COLLECTOR SALES TAX & CENTRAL EXCISE (WEST), KARACHI

versus

Messrs AMSONS TEXTILE MILLS, KARACHI

Civil Petition No.493‑K of 2002, decided on 24th July, 2002.

(On appeal from the judgment, dated 14‑3‑2002 in Sales Tax Appeal No. 137 of 2000 passed by the High Court of Sindh, Karachi).

Sales Tax Act (VII of 1990)‑‑‑

‑‑‑‑Ss. 7, 33, 34 & 36‑‑‑Sales Tax (Processed Fabrics) Rules,1995‑‑­Notification S.R.O. 1185(1)/97, dated 20‑11‑1997‑‑‑Constitution of Pakistan (1973), Art. 185(3)‑‑‑Sales Tax/additional tax, recovery of‑‑­Show‑cause notice‑‑‑Trading Association and Government, remained in negotiation and delayed the issuance of notification‑‑‑Show‑cause notice issued to the respondents was set aside by Sales Tax Appellate Tribunal on the ground that the Notification S.R.O. 1185(1)/97, dated 20‑11‑1997 was issued in furtherance of newly amended law for compliance of the parties who were liable for payment of duties and taxes‑‑‑Sales Tax Appellate‑ Tribunal further found that the authorities could not take a roundabout and inflict the tax‑payer for that period which was consumed in negotiation‑‑‑Order passed‑ by Sales Tax Appellate Tribunal was maintained by High Court in exercise of appellate jurisdiction‑‑‑Sales Tax Appellate Tribunal had given cogent arid valid reasons in arriving at the conclusion and no other conclusion could have been drawn in view of the clear language of notification‑‑‑Supreme Court declined to take any exception to the judgment passed by High Court‑‑‑No legal or factual infirmity in the order having been pointed out and the ‑substantial question of law of public, importance being involved within the purview of Art. 185(3) of the Constitution, leave to appeal was refused.

Akhlaq Ahmed Siddiqui, Advocate‑on‑Record for Petitioner.

M. Farid, Advocate Supreme Court and A.S.K. Ghori, Advocate‑on‑Record for Respondent.

Date of hearing: 24th July, 2002.

2005 P T D 1493

[Supreme Court of Pakistan]

Present: Iftikhar Muhammad Chaudhry, Khalil-ur-Rehman Ramday and M. Javed Buttar, JJ

COLLECTOR OF CUSTOMS, LAHORE and others

versus

FARHAN MAHMOOD and others

Civil Appeals Nos.690 to 693 of 2002, decided on 14th March, 2005.

(On appeal against the judgment dated 15-3-2002 passed by the Lahore High Court, Lahore in Writ Petitions Nos. 22252 to 22255 of 2001)

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

----S. 16---Imports and Exports (Control) Act (XXXIX of 1950), S.3(1)---Passenger Baggage (Import) Rules, 1998, R.2(C)---Import Trade and Procedure Order, 2000---Constitution of Pakistan (1973), Art.185(3)---Contention of authorities was that import of used motorcycles was neither allowed through Passenger Baggage (Import) Rules, 1998, nor the Import Trade and Procedure Order 2000 but High Court, without appreciating the true import of the laws, had allowed the import of used motorcycles in the country---Leave to appeal was granted by Supreme Court to consider the contention of the authorities.

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

----S. 16---Imports and Exports (Control) Act (XXXIX of 1950), S.3(1)---Passenger Baggage (Import) Rules, 1998, R.2(C)---C.B.R. Instruction No. C.No.10(5) L&P/91, dated 2-2-2001---Import of motorcycles in personal baggage---Scope---Motorcycles imported in personal baggage were confiscated by Customs Authorities---High Court in exercise of Constitutional jurisdiction directed the Authorities to release the motorcycles as they were covered under personal baggage scheme---Plea raised by the Authorities was that motorcycles were not covered under personal baggage scheme---Validity---To claim the benefit of C.B.R. Instruction No. C.No.10(5) L&P/91, dated 2-2-2001, burden was upon passengers to prove that they were bringing motorcycles in Pakistan in their baggage as they were using the same---No such evidence had been produced on record, therefore, the C.B.R. Instructions had not advanced the case of passengers in any manner---Available record indicated that passengers left country, a few days before bringing into Pakistan the motorcycles and came back with the motorcycles on the pretext to bring them into country under the Passenger Baggage (Import) Rules, 1998, and for such reason the Customs Authorities were right in seizing the same---Supreme Court, after examining the S.R.Os. and precedent law, had noted that without undertaking exercise in the light of relevant S.R.Os. declaring certain items of gifts to be smuggled one, it would not be fair to hold that Adjudicating Authority had rightly declined redemption of motorcycles to passengers---Supreme Court remanded the matter to the Authorities to decide the cases afresh after following the observations made by Supreme Court---Case was remanded for decision afresh.

Muhammad Arif and others v. Collector of Central Excise and Land Customs, Quetta and others 1998 CLC 1664 and Collector of Customs and another v. Muhammad Ashraf and another 2003 PTD 1879 ref.

A. Karim Malik, Senior Advocate Supreme Court and Mehmood-ul-Islam, Advocate-on-Record (absent) for Appellants (in all cases).

Ch. Naseer Ahmed Bhutta, Advocate Supreme Court and M.A. Qureshi, Advocate-on-Record (absent) for Respondents (in all cases).

Date of hearing: 14th March, 2005.

2005 P T D 1537

[Supreme Court of Pakistan]

Present: Nazim Hussain Siddiqui, C.J., Abdul Hameed Dogar and Mian Shakirullah Jan, JJ

Messrs MASTER FOAM (PVT.) LTD. and 7 others

versus

GOVERNMENT OF PAKISTAN through Secretary, Ministry of Finance and others

Civil Appeals Nos. 435 of 1999, 499, 819, 1344 to 1346 and 1348 of 2000, 63 to 65 of 2001, 1852 of 2002 and 1674 of 2003, decided on 8th March, 2005.

On appeal from the judgments dated 27-10-1998, 10-4-2000, 2-11-2000, 13-10-2002, 13-11-2002, 28-7-2003 of Lahore High Court passed in W.P. Nos. 18667, 7820/1998, 1671, 29629, 23563/1997, 21544/1996, 5738/1998, 136/1998, 20710/1999, 12777/2000, 266/2000, 2042/2003 respectively).

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

----S. 3(b)---Customs Act (IV of 1969), Preamble---Constitution of Pakistan (1973), Fourth Schedule, Federal Legislative List, Part I, Item No. 49 & Art. 185(3)---Scope of tax---Leave to appeal was granted by Supreme Court to consider whether S.3(b), Sales Tax Act, 1990 was repugnant to Item No. 49 of the Federal Legislative List, Fourth Schedule, Part I of the Constitution and that the Customs Act, 1969 and the Sales Tax Act, 1990 were not applicable to the territories of Azad Jammu and Kashmir and the goods in transit were not subject to payment of taxes.

(b) Constitution of Pakistan (1973)---

----Art. 1---Territory of Azad Jammu and Kashmir is not a part of Pakistan.

Noor Hussain v. State PLD 1966 SC 88 ref.

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

----S. 3(1)(b)---Sales Tax Act (III of 1951), Ss. 3 & 2(c)---Constitution of Pakistan (1973), Fourth Schedule, Part I, Federal Legislative List Item No.49--Import---Meaning---Import, export, production, manufacture and consumption are distinct taxable events independent and irrespective of sales of goods---Purpose of Item No. 49 of Federal Legislative List, Part I of Fourth Schedule, of the Constitution was to expand its scope so as to include, inter alia, import as a separate taxable event as had been the position under the Sales Tax Act, 1951---Goods imported in Pakistan, when they entered the territory of Pakistan and became liable to taxation, it was immaterial that ultimately they were to be transported to Azad Jammu and Kashmir---Import into Pakistan was a distinct taxable event independent of any event following thereafter---Principles.

In the present cases precise question for determination was whether the bringing of goods into Pakistan (import) was an independent taxable event attracting sales tax under section 3(1)(b) of the Sales Tax Act of 1990 and was not contingent on the ultimate destination of the goods (in this case AJK), or in other words, sales tax would, constitutionally and lawfully be levied on goods brought into Pakistan at the time they were brought in (imported) and was not dependent on a further event happening in respect of goods in Pakistan, such as mixing of the goods or the sale thereof in Pakistan.

Import, export, production, manufacture and consumption are distinct taxable events independent and irrespective of sales of goods. It is thus clear that the purpose of Entry 49 of Part I, Federal List, Fourth Schedule of the Constitution was to expand its scope so as to include, inter alia, import as a separate taxable event as had been the position under the Act of 1951.

A close scrutiny of the relevant provisions appearing in the Sales Tax Acts of 1951 and 1990 unambiguously reveals that they are part of the same family of laws. Insofar as they relate to the import and export of goods, they are pari materia and that one statute specifies what can be imported while the other regulates the levy and collection of tax on imports. The Sales Tax Act of 1951 predates the Sales Tax Act of 1990, therefore while enacting the latter, the Legislature is presumed to have been aware of the former and in particular of the definition of the word 'import' in section 2(c) thereof, the two statutes have to be construed together and the definition of the word 'import' used in the Sales Tax Act of 1951 would apply to the Sales Tax Act of 1990 and that even if the two statutes are not pari materia, the word 'import' has consistently been given its ordinary dictionary meaning by the Courts in Pakistan.

The Courts in Pakistan have consistently given the word 'import' its natural and ordinary meaning of 'bringing into' the country and have rejected the imposition of artificial constraints on it, such as those imposed by the American doctrine of original package. It being so, there is no scope that the word 'import' should be given a different meaning than what appears in section 3(1)(b) of the Sales Tax Act of 1990, especially when there is nothing in the statute to indicate that different meaning was intended by the Legislature. It appears that the Legislature, by not defining the word 'import' in the Sales Tax Act of 1990 desired the interpretation of said word in accordance with the following principle:- "When a Legislature uses in a statute a legal term, which has received a judicial interpretation, it is to be presumed that the term has been used in the sense in which it has been judicially interpreted, unless a contrary intention appears from the statute".

Thus, the goods were imported into Pakistan when they entered the territory of Pakistan and became liable to taxation accordingly. It is immaterial that ultimately they were to be transported to Azad Jammu and Kashmir. This is for the reason that import into Pakistan is a distinct taxable event independent of any event following thereafter.

Close scrutiny of Entry 49 of the Fourth Schedule, Federal List, Part I of the Constitution and other laws reveal that acceptance of contention that Entry 49 authorizes tax on import only when it is followed by sale or purchase in Pakistan, will render the words 'imported, exported, produced, manufactured or consumed' redundant and also frustrate the whole purpose of Entry 49. If sale and purchase alone were taxable events, then there was no point in adding the words 'imported, exported, produced, manufactured or consumed'. Clearly, no redundancy can be attributed to the Legislature and on this ground the contention is repelled. It is also to be noted that if the contention is accepted, a situation would arise where import into Pakistan may not be taxed at all. Besides, while examining the validity of a statute, the principle is that there is a presumption of constitutionality of a statute and that every explanation in favour of a statute must be found. Keeping in view the complexity of economic problems, great latitude is shown in favour of fiscal statutes.

Noor Hussain v. State PLD 1966 SC 88; Pakistan v. Public at large PLD 1987 SC 304; The Central India Spinning and Weaving and Manufacturing Co. v. The Empress Mills/Municipal Committee, Wardha AIR 1958 SC 341; Brown v. State of Maryland 6 L Ed. 678; Timber Traders Association v. District Board AIR 1965 Pun. 97; Messrs Najhib Zarab v. Government of Pakistan PLD 1993 Kar. 93; 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 PTD 2097 = 2001 SCMR 1376; Pakistan Industrial Development Corporation v. Pakistan 1992 SCMR 891; Riaz Bottlers (Pvt.) Ltd. v. Federation of Pakistan 2000 PTD 485; Pakistan Textile Mill-owners' Association v. Administrator of Karachi PLD 1963 SC 137; East and West Steamship Co. v. Collector of Customs PLD 1976 SC 618; Messrs Tahseen (Pvt.) Ltd. v. Additional Collector of Customs Dry Port, Rawalpindi 1998 PTD 2561; Concise Oxford Dictionary New Edn., p.593; Blacks Law Dictionary, 6th Edn., p.1115; Mushtaq Awan v. Government of Pakistan PLD 1999 Lah. 372; Understanding Statutes by S.M. Zafar, 2nd Edn., pp.696, 697; WAPDA v. Collector of Central Excise and Sales Tax 2002 PTD 2077; Gramophone Co. of India v. Birendra Bahadur Pandey (1984) 2 SCC 534; Zaman Cement v. Central Board of Revenue 2001 CLC 1625; 2002 SCMR 312; Lahore Textile and General Mills Ltd. v. Collelctor of Customs, Lahore PLD 1988 Lah. 563 and Hilal Tanneries Ltd. v. Zila Council, Gujrat 1994 MLD 2366 ref.

(d) Interpretation of statutes---

----No redundancy can be attributed to the Legislature.

(e) Interpretation of statutes---

----Validity of a statute---Principle---While examining the validity of a Statute, principle is that there is a presumption of constitutionality of a Statute and that every explanation in favour of a statute must be found.

Mushtaq Awan v. Government of Pakistan PLD 1999 Lah. 372 and Understanding Statutes by S.M. Zafar, 2nd Edn., pp.696, 697 ref.

(f) Interpretation of statutes---

----Fiscal Statute---Great latitude has to be shown in favour of fiscal statute, keeping in view the complexity of economic problems.

Mushtaq Awan v. Government of Pakistan PLD 1999 Lah. 372 and Understanding Statutes by S.M. Zafar, 2nd Edn., pp.696, 697 ref

(g) Words & phrases---

----"Import"---Connotation.

Concise Oxford Dictionary New Edn., p.593 and Blacks Law Dictionary, 6th Edn., p.1115 ref.

Abid S. Zuberi, Advocate Supreme Court for Appellants (in C.A. No.435 of 1999).

S.M. Zafar, Senior Advocate Supreme Court and Irtaza Naqvi, Advocate for Appellants (in C.A. No.499 of 2000).

Najamul Hasan Kazmi, Advocate Supreme Court for Appellants (in C.A. No.819 of 2000).

Nemo for Appellants (in C.A. No.1344 of 2000).

Mahmoodul Islam, Advocate-on-Record for Appellants (in C.As. Nos.1345, 1346, 1348 of 2000).

Jawahar A. Naqvee, Advocate Supreme Court for Appellants (in C.As. Nos.63 to 65 of 2001).

Ch. Muhammad Akram, Advocate-on-Record for Appellants (in C.As. Nos.1852 of 2002 and 1674 of 2003).

Makhdoom Ali Khan, Attorney-General for Pakistan with Uzair Karamat Bhindari, Advocate and Suleman Hameed Afridi, Barrister (On Court Notice).

Fakhruddin G. Ibrahim, Senior Advocate Supreme Court, Raja Abdul Ghafoor, Advocate-on-Record for Respondent No.3 (in C.As. Nos.435/1999 and 499/2000).

Izharul Haq, Advocate Supreme Court, Raja Abdul Ghafoor, Advocate-on-Record for Respondents (in C.As. Nos.819/2000 and 63 to 65/2001).

Sohail Akhtar, Advocate Supreme Court and Sh. Masood Akhtar, Advocate-on-Record for Respondents (in C.As. Nos.1344 to 1346 and 1348/2000).

Malik Itaat Hussain, Advocate Supreme Court and M.S. Khattak, Advocate-on-Record for Respondents (in C.As. Nos.1852/2002 and 1674/2003).

Dates of hearing: 23rd and 24th November, 2004.

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