PTD 2006 Judgments

2006 P T D (Trib.) 818

[Customs, Central Excise and Sales Tax Appellate Tribunal]

Before Raj Muhammad Khan, Member (Judicial)

Appeal No. Cus. 2/PB of 2006, decided on 31st January, 2006.

Customs Act (IV of 1969)---

----Ss. 156(1)(8)(89) 157, 2(s) & 16---Import and Export (Control) Act (XXXIX of .1950)---Punishment for offences---Redemption fine, quantum of---First Appellate Authority ordered to release seized goods on payment of redemption fine equal to 35% of the appraised value in addition to duty and taxes leviable thereon---Personal penalty and 5% of the appraised value of the goods was also imposed upon each owner of the goods---Validity---Quantum of redemption fine imposed against the goods in lieu of confiscation @ 35% was on the higher side, as normally and by established practice such fine happened to be 25% . of the appraised value of the goods---Seized goods were admittedly non-notified items---Redemption fine could be imposed @ 5.% by the lower fora for the release of such items---Appellate Tribunal ordered the .reduction of redemption fine from 35% to 25% and personal penalty @ 5% imposed against the appellant was remitted by the Appellate Tribunal.

Muhammad Naseem for Appellant.

Jehanzeb Mahmood, D.R. and Pir Izhar-ul-Haq, D.S. for Respondents.

Date of hearing: 25th January, 2006.

2006 P T D (Trib.) 821

[Customs, Central Excise and Sales Tax Appellate Tribunal]

Before Saeed Akhtar, Member (Technical)

Appeal No. S.T.A. 983/LB of 2000, decided on 30th December, 2004.

Sales Tax Act (VII of 1990)---

----S. 33(2)(d)---General penalties---Penalty for short payment---On pointation by the Collectorate, the appellant immediately deposited the short paid amount along with additional tax---Appellant contended that short payment was not intentional and it happened due to miscalculation on the part of the appellant for which he was not liable to penal provision as penalty for miscalculation made for the first time was not in accordance with the law---Validity---Short payment made by the appellant appeared to be a genuine mistake, which was the result of miscalculation due to which correct amount of sales tax was not deposited---Later on appellant deposited the short payment along with additional tax---Held; there was no justification for imposition of penalty for the miscalculation of tax made first time in a year by the appellant---Penalty imposed in the order was remitted by the Appellate Tribunal.

Shaukat Amin, F.C.A. for Appellant.

Khalid Bashir, D.R. for Respondent.

Date of hearing: 23rd September, 2004.

2006 P T D (Trib.) 832

[Customs, Excise and Sales Tax Appellate Tribunal]

Before Saeed Akhtar, Member (Technical) and Pir Akhtar Hussain Bodla, Member (Judicial)

Appeal No. 138/LB of 2004, decided on 30th December, 2004.

Sales Tax Act (VII of 1990)---

----Ss. 3(1), 34 & 33(2)(cc)---Scope of tax---Brief order was passed directing the appellant to deposit evaded amount of sales tax along with additional tax and penalty @3 %---Validity---Adjudicating Officer had passed a brief order without passing a detailed judgment in respect of each allegation ignoring the contentions of the parties---Department had summarily passed the order which was unlawful as contention of the appellant had been completely ignored and a sketchy and non-speaking order had been passed which manifested non-application of judicious mind---Adjudicating Officer was required to give due consideration to the contentions of the parties and then give a detailed judgment in respect of each allegation---Order was set aside and case was remanded to Adjudicating Officer for de novo consideration on merit after giving due consideration to the contentions/arguments advanced at the time of hearing and affording opportunity of hearing to the parties concerned.

Shahab Qutab for Appellant.

Babar Iqbal, Auditor for Respondent.

Date of hearing: 27th October, 2004.

2006 P T D (Trib.) 849

[Customs, Central Excise and Sales Tax Appellate Tribunal]

Before Saeed Akhtar, Member (Technical) and Pir Akhtar Hussain Bodla, Member (Judicial)

S.T.A. No. 691/LB of 2002, decided on 29th December, 2004.

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

---Ss. 22, 23 & 26---Maintenance of records---Sales tax system is based on self-clearance procedure and the registered person is required to maintain sales tax records under Ss. 22, 23 and 26 of the Sales Tax Act, 1990.

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

----S.3---Scope of tax---Chargeability---Sales tax is chargeable on supply and not on production.

(c) Sales tax---

----Bagasse---Determination of production---Principles---Total quantity produced was normally not supplied and levy of sales tax on total quantity was not justified---Adverse environmental conditions namely windstorm, rain and chemical action etc. affected and carried away some portion of the produce---Bagasse also loses weight with the passage of time due to dryness---Production figures were not reliable for the calculation of sales tax and these need to be reduced considering the loss of produce due to adverse factors---Appellant had stated that 40% of the produce was lost by adverse environmental factors, however, Appellate Tribunal allowed an allowance of 10% at the maximum which was considered sufficient to cover for the lost weight and appellant agreed to the same allowance.

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

----S.7---S.R.O. 178(1)/2002, dated 29-3-2002---Determination of tax liability---Levy of sales tax on bagasse---Determination of value of bagasse---Central Board of Revenue had determined the value of bagasse of Rs.200 per M. Ton after considering the views of Sugar Mills Association and the value fixed through a Notification was for uniform application throughout the country---Reduction in value n bagasse is not justified---Collectorate was directed to recalculate the sales tax liability after reducing the production figures by 10% on account of wastage and calculate sales tax at the value of Rs.200 per M, Ton as determined by the Central Board of Revenue---Appellant was directed to deposit sales tax as calculated by the Department---Additional tax and penalty had been remitted by the Appellate Tribunal---Order was modified accordingly.

Malik Muhammad Akram for Appellant.

Muhammad Anwar and Hamyun Sarfraz, Auditors for Respondents.

Date of hearing: 25th October, 2004.

2006 P T D (Trib.) 857

[Customs, Central Excise and Sales Tax Appellate Tribunal]

Before Yasmin Abbasey, Member (Judicial-III)

Customs Appeal No.K-895 of 2004, decided on 4th March, 2005.

(a) Constitution of Pakistan (1973)----

----Arts. 4, 8, 9, 18, 23, 24 & 25---Natural justice, principles of---Rights guaranteed under Constitution---Where there was a conflict between a basic natural right born out of natural justice and a provision of law, the former (basic natural right born out of natural justice), would prevail, even though right was not specifically mentioned in the list of rights guaranteed under the Constitution---Person could not be denied their natural right of security merely on technical ground of jurisdiction.

(b) Import and Trade Procedure Order, 2000---

---Cl. "HI" of Negative List-Consignment found unfit for human consumption---Authority of Customs Officer---Consignment of imported goods, if not found fit for human consumption would be hit by CI. HI of Negative list of appendix `A' of S.R.O. 489(I)/2000 dated 17-7-2000---Customs Officer would be authorized to enter into the matter and take cognizance of it---Plea that after segregation of infected portion of consignment the rest be released, was untenable as it was impossible to segregate infected one.

Messrs Shehla Zia v. WAPDA PLD 1994 SC 693 ref.

Nadeem Mirza, A.R. for Appellant.

Muhammad Ilyas, A.O./D.R. for Respondent.

Date of hearing: 4th March, 2005.

2006 P T D (Trib.) 955

[Customs, Central Excise and Sales Tax Appellate Tribunal]

Before Mrs. Khalida Yasin, Member (Judicial-I) and Zafar Iqbal, Member (Technical-I)

Appeal No. C.E. 159 of 2005, decided on 4th February, 2006.

Central Excise Act (I of 1944)---

----Ss. 4(3), 3-D & 35-B---Central Excise Rules, 1944, Rr.96ZZE & 96ZZF---S.R.O. 546(I)/96 amended by S. R. O. 456(1)/96, dated 13-6-1996---Insurance Company---Levy of duty---National Insurance Company, a Government Institution having not hired any agent to whom agency commission was being paid, to procure business, show-cause notice to the said company alleging that Insurance Company was legally collecting the excise duty from the agent against the amount of commission and withholding the same, was not warranted by law and was liable to be set aside.

Liaquat Hussain for Appellant.

Arshad Mehmood, Law Officer for the Respondent.

Date of hearing: 3rd February, 2006.

2006 P T D (Trib.) 981

[Customs, Central Excise and Sales Tax Appellate Tribunal]

Before Sher Zaheer Ahmad Khan, Member (Judicial) and Sarfraz Ahmad Khan, Member (Technical)

S.T.As. Nos. 551 to 554/LB of 2002, decided on 9th June, 2003.

Sales Tax Act (VII of 1990)---

----Ss. 13, 7 & Sixth Sched., Item No.49---S.R.O. 839(1)/98 dated 23-7-1998---Exemption---Appellant was directed to pay sales tax with additional tax and penalty on the ground that since sale of tractors took place in commercial quantity for commercial purposes and not for agricultural purposes to institutions like Development Authority, Dryport Trust and Punjab Cooperative Banks etc., which obviously had no agricultural purpose---Validity---Tractors supplied by the appellants were agricultural tractors of HS Code Heading 87.01---Department had not placed on record any evidence that supplies of those tractors was not for agricultural purposes---Audit objection was based on mere presumption that since the buyers like Development Authority, Dryport Trust, and Punjab Cooperative Banks etc., acquired tractors in commercial quantity from the appellants and they being obviously not agriculturists, those were put to non-agricultural use and refund was not available---No law existed empowering the appellants to check the use of tractors after sale to the buyers; it was impossible for appellants to ensure its use---No evidence had been brought on record by the Department that agricultural tractors in question were not being used for agricultural purposes by the respective buyers---Mere presumption, on the basis of the name of the buyers of tractors was not sufficient to burden the appellants with heavy liabilities to pay sales tax along with penalties etc.---Department had not brought on record any evidence that the appellants supplied the tractors for any other purpose than agricultural---Appeals were accepted and the orders were set aside by the Appellate Tribunal.

Appeal Nos. 2262/LB of 2001, 2263/LB of 2001 and 2608/LB of 2001 rel.

Malik Muhammad Rafique Rajwana for Appellant.

M.B. Tahir, S.D.R. assisted by Akhlaq Ahmad, Auditor for Respondents.

Date of hearing: 9th June, 2003.

2006 P T D (Trib.) 1004

[Customs, Excise and Sales Tax Appellate Tribunal]

Before Saeed Akhtar, Member (Technical) and Pir Akhtar Hussain Bodla, Member (Judicial)

Appeal No. S.T.A. 1622/LB of 2003, decided on 29th October, 2004.

Sales Tax Act (VII of 1990)---

----S. 34---Additional tax---Default not wilful or intentional---Appellant contended that superior Courts in a number of cases have waived additional tax and penalties where default was not wilful or intentional---First Appellate Authority observed that default was not wilful and remitted penalties imposed by the Adjudicating Officer---Appellate Tribunal found no justification for imposition of additional tax and the same was remitted in the light of observation of first appellate authority.

PTCL 1995 CL 415; PLD 1991 SC 963 and 2004 SCMR 456 = 2004 PTD 1179 rel.

Falak Sher, Consultant for Appellant.

Khalid Bashir, D.R. assisted by Asim Ahmad Khan, S.A. for Respondents.

Date of hearing: 31st August, 2004.

2006 P T D (Trib.) 1033

[Customs, Excise and Sales Tax Appellate Tribunal]

Before Saeed Akhtar, Member (Technical) and Pir Akhtar Hussain Bodla, Member (Judicial)

Appeal No. S.T.A. No. 586/LB of 2002, decided on 18th December, 2004.

Sales Tax Act (VII of 1990)---

----Ss. 34 & 33---S.R.O. 127(1)/1996, dated 10-11-1996---Purchase of bales of cotton lint---Non-payment of sales tax in the manner as provided in S.R.O. 127(I)/1996, dated 10-11-1996 and demand of wrong adjustment of input tax against the due output tax---Appellant contended that staff member incharge on sales tax affairs was on leave and in his absence inadvertently the amount of sales tax could not be paid and assessee had no intention to evade sales tax and same was deposited as soon as it was pointed out by the auditors---Adjudicating Officer adjudged sales tax along with additional tax and penalty @ 3% of the principal amount of sales tax involved-Validity-Payment of additional tax was allowed in view of the beneficial amendment made in S.34 of the Sales Tax Act, 1990 which was presently applicable---Section 33 of the Sales Tax Act, 1990. having not been mentioned in the show-cause notice, penalty imposed was remitted---Collectorate was directed to verify, payment of the principal amount of sales tax and if , the whole principal amount or any part thereof had already been paid the same may be adjusted against the adjudged liability---Collectorate was further directed to calculate additional tax at the rate which was presently applicable in view of the beneficial amendment made in S.34 of the Sales Tax Act, 1990---Penalty was remitted by the Appellate Tribunal in the circumstance.

Rana M. Afzal for Appellant.

Ahmad Khan for Respondent.

Date of hearing: 17th December, 2004.

2006 P T D (Trib.) 1056

[Customs, Central Excise and Sales Tax Appellate Tribunal]

Before Zafar Iqbal, Member Technical and Mst. Yasmeen Abbsey, Member Judicial

Central Excise Appeal No. K-2370 of 1999, decided on 27th September, 2004.

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

--- S. 2(25)---Sales Tax Act (VII of 1990), S. 2(16)---"Manufacture"---Consensus on the interpretation of the word by the superior Courts.

Civil and Military Press Ltd. v. Pakistan 1985 CLC 1021; Municipal Council Domoh v. Vrajlal Manilal & Co. AIR 1982 SC 844; Union of India v. Delhi Cloth' and General Mills AIR 1963 SC 79 and Mewa Lal v. Tara Rain AIR 1973 All. 165 ref.

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

----S. 2(25)---Sales Tax Act (VII of 1990), S.2(16)---"Manufacture"---In order to bring an article within the framework of word "manufacture" an article must change shape; emerge as a newer product; be identifiable and commercially marketable and be an altogether different product.

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

----First Sched.---Customs Act (IV of 1969), First Sched.---First Schedule to the Customs Act, 1969 containing General Rules for interpretation is to be read as part of the First Schedule under Central Excise Act, 1944.

(d) Central Excise Act (I of 1944)---

----Ss. 2(25) & 3---"Manufacture"---Tea bag/paper bag---Department's action to treat tea bag/paper bag as an act of "manufacture" was wrong as in fact no independent product ever came into existence from the process of inserting the paper with the blended tea which in fact was a necessary act to use the paper pouches---Contravening act never assumed the status of manufacture---Demand of duty on paper bags used in the packing of tea as a result of a continuous process was not justified---Appeal was allowed and order was set aside by the Appellate Tribunal.

Collector of Customs v. Abdul Majid Khan and others 1977 .SCMR 317 and Madina Ghee Mills (Pvt.) Ltd. v. The Collector of Customs Adjudication, Faisalabad 85 Tax 263 rel.

Abdul Sattar Solat for Appellant.

Abdul Khaliq Senior Auditor/D.R. for Respondent.

Date of hearing: 27th September, 2004.

2006 P T D (Trib.) 1096

[Customs, Central Excise and Sales Tax Appellate Tribunal]

Before Raj Muhammad Khan, Member (Judicial) and Muhammad Wali Khan, Member (Technical)

Appeal Nos. S.T. 58/Remand/PB of 2005, Old No. 7(1633)ST/IB of 2001(PB) and S.T. 76/PB of 2004, decided on 3rd June, 2005.

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

--Ss. 3, 33 & 34---S.R.O. 900(I)/93, dated 5-10-1993---S.R.O. dated 2-7-1995---Fixed 842(I)/94, dated 5-9-1994--S.R.O. 710(I)/95, Amount of Sales Tax Rules, 1997---S.R.O. 1247(I)/97, dated 18-12-1997---S.R.0.1258(I)197, dated 18-12-1997---S.R.O. 1259(I)/97, dated 18-12-1997---Simplified Sales Tax Rules, 1999, R.1(2) & (3)---S.R.O. 458(I)/99, dated 6-4-1999---S.R.O. 392(I)/2001, dated 18-6-2001---S.R.O. 393(I)/2001, dated 118-6-2001---Sales Tax General Order 2/2001, dated 30-6-2001---Scope of tax---Manufacture of aluminum utensils---Levy of sales tax, besides additional tax payable thereon, on the basis of their turnover as declared to the Income Tax Department on the ground that taxpayer had paid tax during 1996-97 on ad valorem (at statutory rate) basis but paid the sales tax on fixed tax basis during 1997-98 under Notification No. S.R.O. 1259(1)/97, dated 18-12-1997 in clear breach of provisions of the said notification---Validity---Denying the fixed tax facility to the taxpayer was not justified---Under S.R.O. 392(I)/2001, dated 18-6-2001 read with the Sales Tax General Order No.2 of 2001, dated 30-6-2001 the taxpayers were entitled to the exemption of the whole amount of sales tax in excess of what was liable to be paid at the rates specified under any applicable fixed sales tax rules up to the 30th June, 1998, the Simplified Sales Tax Rules, 1999 or under any written instructions from the Central Board of Revenue since they fulfilled the conditions of these S.R.Os. in that they were working under the Fixed Sales Tax Regime under S.R.O. 710(I)/95, dated 2-7-1995, S.R.O. 1258(I)/97, dated 18-12-1997, S.R.O. 1259(I)/97, dated 18-12-1997 and S.R.O. 458(I)/99, dated 6-4-1999 and were regularly paying tax due under such schemes up to 30-6-1999 and switched over to the VAT mode from 1-7-1999; that no arrears of sales tax were outstanding against them till their switching over to the VAT mode of sales tax; that no case of tax fraud was outstanding against them for the period up to 30th June, 1999 and that they were registered person and were regularly paying sales tax at the rate specified in S.3(1) of the Sales Tax Act, 1990 since their switching over to the VAT mode of sales tax---Appellants were entitled to the Fixed Sales Tax Scheme facility during the years, 1996-97, 1997-98 and 1998-99.

Appeal No. 7 (1633) ST/IB of 2001(PB) ref.

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

----Ss. 7 & 8---Determination of tax liability---Sales tax on gas bills---Assessee, a aluminum utensils manufacturer---Subject to S.8 of the Sales Tax Act, 1990, the assesses were entitled to the input tax deduction from their output tax liabilities, if the gas bills were in the name of the registered person and they had used the gas in the taxable activity within the compound where aluminum utensils were manufactured---Sales tax paid on such consumption of gas will be treated as input tax paid by them and adjustment thereof will be allowed, but if the gas was consumed outside the manufacturing compound of the taxpayer, they will not be entitled to such deduction.

Messrs Cherat Cement Company Ltd., Nowshera v. The Collector of Customs, Sales Tax and Central Excise (Adjudication), Rawalpindi, Regional Office. Custom House, Peshawar Appeal No. S.T. 285/PB of 2003; Messrs Premier Sugar Sugar Mills, Mardan v. Collector , Central Excise and Sales Tax Peshawar Appeal Nos.783/PB of 2002. and Messrs Pioneer Cement Ltd., Khushab v. Collector Sales Tax, Faisalabad S.T.A. 807/LB of 2002 rel.

Issac Ali Qazi for Appellant.

Qurban Ali Khan, D.R. and Fazal Hameed, Senior Auditor for Respondents.

Date of hearing: 13th May, 2005.

2006 P T D (Trib.) 1147

[Customs, Central Excise and Sales Tax Appellate Tribunal]

Before Pir Akhtar Hussain Bodla, Member (Judicial) and Saeed Akhtar, Member (Technical)

S.T.A. No. 2261/LB of 2001, decided on 4th May, 2004.

Sales Tax Act (VII of 1990)---

----Ss.8(1)(a), 7, 13, 33 & 34---S.R.O. 839(I)/98, dated 23-7-1998---Tax credit not allowed---Exemption---Supplies of agricultural tractors---Adjudicating Officer ordered the appellant to pay sales tax along with additional tax on the ground that there was no rule for refund of input tax paid on parts, components and consumable items used for such supplies---Claim of exempt supplies made during 12-6-1998 to 22-7-1998 was not admissible under S.8(1)(a) of the Sales Tax Act, 1990 as exemption from input tax was granted with effect from 23-7-1998 vide S.R.O. 839(I)/98 dated 23-7-1998 having no retrospective effect---Appellant contended that Government exempted agricultural tractors from levy of sales tax vide Budget Instructions C. No.1/10-STB/98 dated 12-6-1998, which had force of law---Validity---Instructions conveyed through Secretary (Sales Tax Budget) categorically and repeatedly emphasized that the same will take effect immediately i.e. from 12-6-1998---Action of appellant in having the amount as input adjustment was not in accordance with the explicit provisions of S.8 of the Sales Tax Act, 1990 and adjudicating Officer correctly ordered the appellants to pay the said amount, however, in the circumstance of the case, there was no justification for the levy of additional tax and order was modified to that extent only by the Appellate Tribunal.

Muhammad Rafique Rajwana for Appellant.

Khalid Bashir, D.R. assisted by Ikhlaq Ahmad, Auditor for Respondents.

Date of hearing: 4th May, 2005.

2006 P T D (Trib.) 1174

[Customs, Central Excise and Sales Tax Appellate Tribunal]

Before Mian Muhammad Jahangier, Member (Judicial) and Mehmood Alam, Member (Technical)

Excise Appeal No. 698/LB of 2003, decided on 28th September, 2005.

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

----S. 3-D---Collection of excess duty, etc.---Claim of refund as on 7-6-1994 for the period 1/1991 to 6/1993 showing the refundable amount of central excise duty on account of sale of liquor---Claim was rejected on the ground that claimants had not been able to show that the incident of subject central excise duties had not been passed on to the consumers and the refund was not due in terms of S.3-D of Central Excise Act, 1944---Validity---Refund for period prior to 1-7-1993 could not be declined to assessee on his failure to establish that the burden of excise duty had not been passed on the consumer--Application of S.3-D of the Central Excise Act, 1944 on part of adjudicating officer, the subject claim was inappropriate so far as it related to the, period prior to 1-7-1993 and the claim in question should have been examined without recourse to the provisions of S. 3-D of the Central Excise Act, 1944.

Rupaly Polyestor v. Federation of Pakistan 199. PTD 54 rel.

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

----S. 3-D---Collection of excess duty, etc.---Retrospective effect of the provisions---Language and expression used in the enactment does not suggest its application with retrospective effect---Section 3-D of the Central Excise Act, 1944 is prospective in nature and it cannot be applied retrospectively to the excess payments of excise duties prior to 1-7-1993.

Rupaly Polyestor v. Federation of Pakistan 1997 PTD 54 rel.

(c) Central Excise Rules, 1944---

----R.11---Central Excise Act (1 of 1944), S.3-D---No refund of charges erroneously levied or paid unless claimed within one year---Claim of refund as on 7-6-1994 for the period 1/1991 to 6/1993---Claim was rejected being time barred under R.11 of the Central Excise Rules, 1944---Validity---No suo motu power vested with the Central Excise Officer to grant refund--Refund could only be granted if an application was made by the person claiming refund within time of one year---Refund claim for the period 1 of 1991 to 6 of 1993 was lodged long after the expiry of the of the prescribed period of one year---Central Excise Officer had no discretion to condone the prescribed limitation---Refund claim was time-barred under R.11 of the Central Excise Rules, 1944 and being so it was liable to rejection---Order of the adjudicating officer was upheld by the Appellate Tribunal.

Deputy Collector Issued Vide Order-in-Original No.246, decided on 28-8-1993 and Civil Appeal Nos. 101-K to 107-K of 1982, decided on 7-10-1991 ref.

Koh-i-Noor Industries v. Government of Pakistan. 1994 CLC 994 distinguished.

Waqar Azeem for Appellant.

Shamim Ahmad, Superintendent for Respondents.

Date of hearing: 2nd May, 2005.

2006 P T D (Trib.) 1180

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

Before Mrs. Khalida Yasin, Member (Judicial-I)

Customs Appeal No. 430 of 2005, decided on 14th January, 2006.

Customs Act (IV of 1969)---

----S. 13(3)---Power to license private bonded warehouses---Non-renewal of licence---Licence was cancelled and establishment charges were ordered to be recovered on the ground that neither the appellant applied for renewal of licence nor paid establishment charges---Validity---No mandatory provision existed in the Customs Act, 1969 by which the licence holders were bound to renew the licence and to pay establishment charges if their licenses had expired---Department failed to show that even after expiry of their licence the appellant was receiving the goods for its private bonded Warehouse---Appellant having not received the goods at its private bonded Warehouse and for the reason that it had not got the licence renewed which had expired it was not liable to pay the establishment charges as such---Order-in-Original was set aside by the Appellate Tribunal in circumstances.

Imran for Appellant.

Sanuallah for Respondent.

Date of hearing: 9th January, 2006.

2006 P T D (Trib.) 1216

[Customs, Central Excise and Sales Tax Appellate Tribunal]

Before Mian Muhammad Jahangier, Member (Judicial) and Mehmood Alam, Member (Technical)

Appeal No. 543/LB of 2005, decided on 15th June, 2005.

Customs Act (IV of 1969)---

----Ss. 19, 20, 21, 32(2), 156(1)(10-A)(11)(14)(19) & 194-A---S.R.Q. 506(I)/88, dated 26-6-1988---Sale of Car imported under diplomatic exemption---Payment of duty and taxes and imposition of penalty---Appeal to Appellate Tribunal---Car in question was sold by Embassy without obtaining prior permission from Ministry of Foreign Affairs and Central Board of Revenue and same was being used by unauthorised person in clear violation of S.R.O. 506(I)/88, dated 26-6-1988---Adjudication Officer by his order, had ordered confiscation of the car---Option to redeem car in question on payment of duties and taxes leviable at the time of sale, however was given along with redemption fine of Rs.two lacs---Appellant/purchaser of car offered to pay duties and taxes in case car was released, which offer was accepted by the Authority but dispute left behind was as to whether imposition of penalty of Rs. two lacs as redemption fine was in accordance with law or not---Point for determination was as to what were legal consequences in case of violation of Notification-S.R.O. 506(I)/88, dated 26-6-1988 which dealt with Vehicles brought under diplomatic exemption---Perusal of said Notification had revealed that directly or indirectly, legal consequences were not served---Adjudication authority, in circumstances would see express or implied provisions of Customs Act, 1969 or any other law/rules in force---Clause 10(a) of S.156 of Customs Act, 1969 which dealt with those exemptions which were granted under sections 19 & 20 of Customs Act, 1969, were not applicable in exemption granted to diplomates---Section 32(2) of Customs Act, 1969 was applicable when collusion was proved, but it being difficult to prove any sort'of collusion between diplomat and purchaser/appellant, that provision was also not applicable---Provisions of subsection (1) of S.156 of Customs Act, 1969 were general in nature under which every sort of contravention was covered even the slackness on the part of a person who purchased a vehicle brought into Pakistan under diplomatic exemption---In such case of violation of exemptions, purchaser must pay duties and taxes as required under law and penalty should be imposed under said provision of law---Impugned order was set aside and car was released under direction to make assessment of legal dues and penalty in accordance with subsection (1) of S.169 of Customs Act, 1969 applicable to the case.

Mian Abdul Ghaffar for Appellant.

Tausif Ahmad, D.R. assisted by Khalid Rashid, S.I.O. for Respondent.

Date of hearing: 9th June, 2005.

2006 P T D (Trib.) 1220

[Customs, Central Excise and Sales Tax Appellate Tribunal]

Before Saeed Akhtar, Member (Technical) and Pir Akhtar Hussain Bodla, Member (Judicial)

Appeal No. S.T.A. 328/LB of 2004, decided on 18th December, 2004.

Sales Tax Act (VII of 1990)---

----Ss. 73 & 23---Certain transactions not admissible---Tax invoices---Payment through crossed traveller cheques from business account instead of bank account---Validity---Appellant failed to produce the requisite invoices issued in terms of S.23 of the Sales Tax Act, 1990 in spite of providing sufficient opportunity to produce the same---In absence of such invoices input tax adjustment claimed was illegal---Appellant was bound to meet the requirements of S.73 of the Sales Tax Act, 1990 by making payment exceeding Rs.50,000 from business account in the form of banking instruments---Appellant failed to produce bank statement to substantiate that payments were made in terms of S.73 of the Sales Tax Act, 1990---Appellant also failed to produce evidence to the effect that the traveller cheques were issued from the business account of the buyer and these were crossed in the name of seller---Crossed traveller cheques made from the sources other than business account were not acceptable for the purposes of S.73 of the Sales Tax Act, 1990---Contention of appellant that crossed traveller cheques were issued from the business account instead of bank account, did not meet the requirements of S.73 of the Sales Tax Act, 1990---In absence of valid evidence that the crossed traveller cheques were issued from the business i.e. bank account of the buyer, the requirement of law was not fulfilled.

Messrs Pfizer Laboratories v. Federation of Pakistan; Messrs Pakistan Industrial Development Corporation v. Federation of Pakistan and Messrs Trade Link International v. Collector of Sales Tax, Lahore ref.

Abdul Shakoor Priacha for Appellant.

Ashiq Ali, Senior Auditor for Respondent.

Date of hearing: 1st September, 2004.

2006 P T D (Trib.) 1238

[Customs, Central Excise and Sales Tax Appellate Tribunal]

Before Saeed Akhtar, Member (Technical) and Pir Akhtar Hussain Bodla, Member (Judicial)

Ex. A. No. 1722 of 2002 and S.T.A. No. 1859 of 2002, decided on 19th December, 2004.

(a) Central Excise Rules, 1944---

----R. 6(2)---Central Excise Act (I of 1944), S. 3-D---Sales Tax Act (VII of 1990), S.31---S.R.O. No.448(I)/2000, dated 1-7-2000---Exercise of power and discharge of duties---After creation of a separate Collectorate of Adjudication. all cases pending before various Adjudicating Officers stood transferred to the Collectorate of adjudication---Collector (Adjudication) was fully competent to adjudicate the case though it was remanded to the Deputy Collectorate or the Additional Collector.

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

----Ss. 4(2) & 3-D---Sales. Tax Act (VII of 1990), S.31---Central Excise Rules, 1944, Rr. 6(2) & 10---S.R.O. 232(I)/91, dated 10-3-1991---S.R.O. 448(I)/2000, dated 1-7-2000---C.B.R. Letter C. No. 1(20) CEB/94, dated 9-1-1994---C.B.R. letter C. No. 1(2) CEB/94, dated 1-2-1995---Determination of value for the purposes of duty---Collection of excess duty, . etc.---Recovery of octroi charges---Department contended that octroi was not part of the retail price up to 30-6-1995 and could not be included in the retail price even then it was made a part of the retail price by the appellant and same was charged from the consumer in disregard to the explicit provisions of Central Excise Act, 1944---All such illegal realization of money was required to be deposited with the Federal Government under S.3-D of the Central Excise Act, 1944 and were required to be recovered as arrears of duty---Validity--Octroi charges which were not payable were being extracted from the consumer by the manufacturer and instead of paying the leviable tax, the said amount was being pocketed by misinterpreting the provisions of S.4(2) of the Central Excise Act, 1944---Central Board of Revenue had ruled out that the Octroi charges which had not been paid could not be allowed to be deducted from the retail prices being illegal---Octori charges were not paid on the supplies made within the municipal limits--No justification existed for the appellant. to add such charges in the retail price and if they had done so they could not claim deduction of these charges same having not been paid by them---Such was itself a violation of S.4(2) of the Central Excise Act, 1944 which provided that retail price shall be the price fixed by the manufacturers inclusive of all taxes and charges---Appeal was dismissed.

Zaheer Ahmad Khan for Appellant.

Khalid Bashir, D.R. assisted by Mushtaq Ahmad Khan, S.I.O. for Respondents.

Date of hearing: 19th August, 2004.

2006 P T D (Trib.) 1267

[Customs, Central Excise and Sales Tax Appellate Tribunal]

Before Khalida Yasin, Member Judicial and Zafar Iqbal, Member Technical

Customs Appeal No. K-3 of 2006, decided on 13th February, 2006.

Customs Act (IV of 1969)---

----Ss. 16, 32, 4, 223 & 156(1), Cl. (9)(14)---Imports and Exports (Control) Act (XXXIX of 1950), S. 5(3)---S.R.O. 574(I)12005, dated 6-6-2005---S.R.O. 374(I)/2002, dated 15-6-2002---Customs General Order No.12/02---Power to prohibit or restrict importation and exportation of goods---Stock lot or of job lot quality goods---Department alleged that imported goods were in cut pieces of various sizes and as such the said goods were of stock lot or of job lot quality and attracted the provisions of Customs Act, 1969---Validity---No mis-declaration was found on the part of appellant---Goods in present form were importable and there was no restriction placed by the Import Policy on such import---Examination report did not give reasons for treating the goods as job lot or stock lot---No objective criteria was applied by the examining staff---Benefits having already been availed for the import of goods by the appellant, the provisions of S.R.O. 374(I)/2002 were not applicable retrospectively---Orders were discriminatory and were not sustainable which were accordingly set aside by the Appellate Tribunal.

Muhammad Afzal Awan for Appellant.

Muhammad Qasim, D.R. for Respondent.

Date of hearing: 6th February, 2006.

2006 P T D (Trib.) 1287

[Customs, Central Excise and Sales Tax Appellate Tribunal]

Before Saeed Akhtar, Member (Technical)

Appeal No. S.T.A. 2011/LB of 2001, decided on 22nd October, 2004.

Sales Tax Act (VII of 1990)---

----Ss. 11, 36(1) & 34---S.R.O. 1361(I)/98, dated 9-12-1998---Assessment of tax---Evasion of sales tax by way of suppression of yield and value of cotton seed---Recovery ratio of cotton seed was declared @ 54.9% against the normal recovery ratio of 58.62%---Value of seed, suppressed/supplied without issuance of sales tax invoices---Supplies of cotton seed were made at the value which was lower than the minimum value of Rs.245 per maund fixed by the Central Board of Revenue vide Notification S.R.O. 1361(I)/98, dated 9-12-1998---Appellant was directed to deposit the adjudged amount of sales tax along with additional tax---Validity--Recovery of cotton seed ranging between 58 to 59 per cent was determined by the Central Board of Revenue---Appellant declared recovery of 54.9% while the auditors calculated the recovery of cotton seed at the minimum yield percentage of 58% for which the appellant was charged for sales tax---Appellant also supplied cotton seed at the value which was lower than the minimum value of supply fixed by the Central Board of Revenue---Evasion of sales tax against suppression of value of supply was correctly pointed out---Findings of Adjudicating Officer for recovery of principal amount were confirmed and appeal in this regard was dismissed by the Appellate. Tribunal---Tribunal directed the additional tax should be calculated at the rate which ,was presently applicable because of beneficial amendment made in S.34 of the Sales Tax Act, 1990---Order was modified accordingly and appeal was partly accepted.

Rana Muhammad Afzal for Appellant.

Pervaze Alam, Auditor for Respondent.

Date of hearing: 5th October, 2004.

2006 P T D (Trib.) 1328

[Customs, Central Excise and Sales Tax Appellate Tribunal]

Before Saeed Akhtar, Member (Technical)

Appeal S.T.A. No. 676/LB of 2004, decided on 28th May, 2005.

Sales Tax Act (VII of 1990)---

----Ss. 11, 33 & 34---Assessment of tax---Supply of cotton seed---Decrease in weight due to evaporation of moisture---Order passed for recovery of sales tax along with additional tax was. upheld by the First Appellate Authority on the ground that sales tax was not deposited on the supply of cotton seed weighing 71,988 kgs.---Registered person claimed that quantity of cotton seed mentioned in the ginning register was the quantity produced at the time of manufacturing while sales tax had been paid on the quantity of cotton seed supplied, which decreased in weight due to evaporation of moisture---Validity---Central Board of Revenue in Textile Industry allowed yield of cotton seed within the range of 58% to 59% for the purposes of levy of sales tax---Declared yield of cotton seed at the time of production was 63.17% while sales tax was paid at the percentage of 61.70%---Loss of weight of 1.47% was due to loss of moisture as the cotton seed, at the time of production, was always in wet condition, which loses weight with the passage of time due to environmental factors---Appellant deposited sales tax on the yield ratio, which was much above the ratio fixed by the Central Board of Revenue and yield ratio allowed in different cases by the Appellate Tribunal---Cotton seed was produced in wet condition which loses weight due to long storage and other environmental factors---Appeal was accepted and the order in appeal as well as order-in-original were set aside by the Appellate Tribunal.

1993 PTD 206 and 2004 SCMR 456 ref.

2003 PCTLR 671 rel.

Mirza Waheed and Ms. Sidra Khalid for Appellant.

Ahmad Raza Khan, D.R. for Respondents.

Date of hearing: 22nd May, 2005.

2006 P T D (Trib.) 1346

[Customs, Central Excise and Sales Tax Appellate Tribunal]

Before Raj Muhammad Khan, Member (Judicial)

Appeal No. Cus. 1119/PB of 2002, decided on 15th August, 2005.

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

----S.181---Redemption fine---Quantum of redemption fine imposed in lieu of the release of the goods normally and by established practice was one sixth of the value of goods.

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

----Ss. 201(1), 2(s), 16, 156(1)(9)(90), 181, 194-B, 215---Imports and Exports (Control) Act, (XXXIX of 1950), S. 3(1)(3)---Procedure for sale of goods and application of sale proceeds---Seizure of foreign origin petrol---No option was given for release of such goods on payment of leviable duty and taxes---Sale of such petrol without issuance of notice under S.201 of the Customs Act, 1969---Application for refund of sale proceeds---Validity---Admitted position was that no notice under S.201 of the Customs Act, 1969 had been issued to the owner of the goods before auction---Petrol was disposed of in auction just on the second day from the seizure of the auctioned goods took place much before the issuance of show-cause notice---Haste in disposal of goods indicates that sample drawn from the petrol was yet to be sent to the Officer Incharge of Petroleum Testing Laboratory for analytical test report---Issuance of notice was mandatory under S.201 of the Customs Act, 1969 as the goods were auctioned in exercise of powers laid down under S.169 of the Customs Act, 1969---Provision of S.201 of the Customs Act, 1969 provided for sale of goods "other than confiscated goods" and application of sale proceeds---Prerequisite for the sale of goods was the issuance of due notice to the owner of the goods---Notice was mandatory prior to the sale of goods under S.169 of the Customs Act, 1969 and such notice had to be served through registered post as required under S.215 of the Customs Act, 1969---Seized goods were non-notified item and so could be released under 5.181 of the Customs Act, 1969---Orders of the two authorities below was to be considered modified to the extent of providing release of the petrol against payment of duty and taxes with fine @ 25% of its value---Since petrol had been auctioned in violation of the provisions of S.201(1), read with S.169 of the Customs Act, 1969, it was ordered that the sale proceeds of the auctioned goods shall be refunded to the owner of the goods in accordance with the provisions of S.201(2) & (3) of the Customs Act, 1969.

Nowsherawan v. Collector of Customs, Peshawar S.A. No.25 of 2002, decided on 18-3-2003 rel.

PTCL 2002 CL 92 distinguished.

Arbab Saiful Kamal for Appellant.

Qurban Ali Khan, D.R. and Azam Khan, D.S. for Respondents.

Date of hearing: 16th June, 2005.

2006 P T D (Trib.) 1428

[Customs, Central Excise and Sales Tax Appellate Tribunal]

Before Muhammad Anwar Ali, Chairman, Syed Sultan Ahmed, Member (Judicial) and Muhammad Wali Khan, Member (Technical)

Appeal No. 3/ST/IB of 2003, decided on 25th February, 2006.

(a) Words and phrases-

-Service-Meaning.

Black's Law Dictionary, Sixth Edn. and Chambers Twentieth Century Dictionary, 1972 Edn. ref.

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

----Ss.7, 8, 66 & Sr.3 (vii) of Sixth Sched.---Punjab Sales Tax Ordinance (II of 2000), S. 3 & Sched. Sr. 1 (a) of ---Notification S.R.O. 578(I)/98, dated, 12-6-1998---Sales tax, recovery of---Adjustment of input tax in providing taxable services---Appellants being a five star hotel were providing different services to its guests and Adjudicating Officer found that the appellants had claimed wrong input tax on different items which were not used/consumed in their taxable supply and the same was in violation of Ss.7 and 8 of Sales Tax Act, 1990---Contention of the authorities was that most of items in question were covered by notification S.R.O. 578(I)/98, dated 12-6-.1998, therefore, adjustment of input tax paid thereon could not, be allowed---Validity---Appellants were entitled to deduct input tax paid during a tax period from the output tax due from them on taxable services provided or to be provided by them during such period to' determine their output tax liabilities---Since sales tax was a value-added tax charged, levied and paid at the stage of each value addition, the tax burden was ultimately to be passed on to consumers---Inbuilt mechanism of input tax deduction from output tax liability of a taxpayer in terms of S.7 of Sales Tax Act, 1990, or its refund in terms of S.66 of Sales Tax Act, 1990, was 'provided in law to guard against fraudulent input tax deduction and to avoid double taxation---To check misuse of facility of input tax deduction and to ensure value addition safeguards had been provided under Ss.7 (2) and 8 of Sales Tax Act, 1990---Items in question were nothing but inputs for providing services by the appellants---Section 7 of Sales Tax Act, 1990, nowhere provided that in respect of hotels input tax adjustment was restricted to food items only---There was nothing on record to show that adjustment of input tax in respect of items in question was made without adhering to the provisions of S.7 (2) of Sales Tax Act, 1990, or were used for any purpose other than taxable services rendered or provided by appellants within the meaning of S.8 (1)(a) of Sales Tax Act, 1990, or the adjusted tax was paid under S. 3 (5)(1A) of Sales Tax Act, 1990---Goods referred to in S.8 (1)(a) of Sales Tax Act, 1990, were not hit by notification S.R.O. 578(I)/98, dated 12-6-1998, even if some or all the goods used for taxable services were listed in the S.R.O.---Contention of the authorities was that since most of items in question were covered by notification S.R.O. 578(I)/98, dated 12-6-1998, adjustment of input tax paid thereon could not be allowed as it would give overriding effect to clause (b) of the notification issued thereunder over S.8(1)(a) of Sales Tax Act, 1990, which if accepted, would render clause (a) redundant and no redundancy could be attributed to legislation---Adjustment of input tax paid on the items in question by the appellants was justified---Charge of wrong input tax adjustment could not be established by the Authorities and demand of such amount along with additional tax and penalty from the appellants was not justified---Order of Adjudicating Officer was set aside in circumstances.

1999 SCMR 1422; 1999 PTD 1892; PTCL 2002 CL 115; 2002 PTD 976; GST 2002 CL 18 and 2002 PTD 2077 ref.

2004 SCMR 456 and Princples of Statutory Interpretation, Ninth Edn., 2004 by G.P. Singh at pp. 131 & 32 rel.

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

----Ss. 7, 8, 66 & Sr.3 (vii) of Sixth Sched.---Punjab Sales Tax Ordinance (II of 2000), S. 3 & Sr. 1 (a) of Schedule---Notification S.R.O. 578(I)/98, dated, 12-6-1998---Sales tax, recovery of---Adjustment of input tax in providing taxable services---Appellants being five star hotel were providing different services to its guests and adjudicating officer found that the appellants had claimed wrong input tax on electricity during the month of April, 2000 to June, 2001, which was in violation of Ss.7 and 8 of Sales Tax Act, 1990---Validity---Appellants did not put forth any cogent reasons justifying deduction of input sales tax paid on electricity for the relevant months from their output tax liabilities to such months---No legal justification existed with the appellants for the deduction of the tax paid on electricity in the relevant months as input tax, while determining their output tax liabilities for the months---Such being the factual and legal position, Appellate Tribunal did not find any illegality in the decision of Adjudicating Officer in holding the appellants liable to pay the amount of sales tax along with additional tax and penalty---Order of Adjudicating Officer was maintained in circumstances.

(d) Interpretation of statutes---

----Where there is doubt in the matter, interpretation favourable to the subject should be preferred.

?

AIR 1963 AU 153; PLD 1972 Kar. 210; PLD 1975 Lah. 158; PLD 1976 Kar. 673; PLD 1979 Kar. 545; 1990 PTD 62; 1990 PTD 385 and 1990 PTD 886 rel.

(e) Interpretation of statutes---

----Taxing provisions should be strictly interpreted and benefit or ambiguity, if any, should go to the subject.

(1994) 50 Tax 79 rel.

(f) Interpretation of statutes-

----Fiscal statutes---Imposing of charge---Principles---Charge upon the subject are to be imposed by clear and unambiguous words---No room for any intendment nor there is any equity or presumption as to a tax---Fiscal provision of a statute is to be construed liberally in favour of taxpayer and in case of any substantial doubt, the same is to be resolved in favour of the citizen.

1992 SC 980 (sic) and (1992) 55 Tax 246 (SC Pak) rel.

(g) Interpretation of statutes---

----Doubt---Resolution---Adding of explanation---Scope---Doubt has to be resolved in favour of the citizen---Lawmaker can clarify its intention by adding an explanation, which cannot be legitimately objected to.

1996 PTD 489 rel.

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

----Ss.3 (1), 6. (2), 7, 8, 66 & Sixth Sched., Sr.3 (vii)---Punjab Sales Tax Ordinance (II of 2000), S. 3 & Sched: Sr. 1 (a)---Apportionment of Input Tax Rules, 1996, R.3 (3)---Notification S.R.O. 578(I)/98, dated, 12-6-1998---Sales tax, recovery of---Supply of food to employees---Adjudicating Officer imposed sales tax on the appellants, a five star hotel, on the food supplied to their employees on job during working hours, on the ground that such supply was violation of Ss.3 (1) and 6 (2) of Sales Tax Act, 1990---Plea raised by the appellants was that the food consumed by employees on job during working hours at canteen was an exempt supply in terms of serial No.3, clause (vii) of Sixth Schedule to Sales Tax Act, 1990---Validity---Employees of appellants who were provided food from employees kitchen were workers of a particular class for the purpose of item No.(vii) of S.No.3 of Sixth Schedule to Sales Tax Act, 1990---Food supplied to employees of appellants from a separate kitchen/canteen meant for employees was exempt from sales tax in terms of Entry No (viii) of Serial No.3 of Sixth Schedule to Sales Tax Act, 1990, as such kitchen/canteen was an industrial canteen for supply of food to the employees of the hotel---Appellants had made adjustment of input tax paid on supplies of goods received by them and some of such goods were used for preparation of food in separate kitchen/canteen for serving to the employees---Service of food to the employees was not a taxable supply since it was exempt from sales tax---Adjustment of input tax paid on items used in supply of exempt goods/services was not justified within the meaning of S.8 of Sales Tax Act, 1990---Appellants would pay the amount of input tax which they adjusted against exempt supplies in accordance with R. 3 (3) of Apportionment of Input Tax Rules, 1996---Main allegation against appellants having not been established, therefore, Appellate Tribunal, remitted additional tax and penalty imposed on appellants in circumstances.

Abdul Bari Rashid for Appellants

Dr. Kamal Azhar Minhas, Additional Collector/Departmental Representative (D.R.) for Respondent.

Date of hearing: 15th February, 2006.

2006 P T D (Trib.) 1453

[Customs, Central Excise and Sales Tax Appellate Tribunal]

Before Raj Muhammad Khan, Member (Judicial) and Mumtaz Haider Rizvi, Member (Technical)

Appeal No. S.T. 185/PB of 2005, decided on 7th March, 2005.

Sales Tax Act (VII of 1990)---

----Ss. 7, 7-A, 8, 46. & 66---S.R.O. 578(I)/98, dated 12-6-1998---Refund of input tax---Application for---Dismissal of application---Appeal to Appellate Tribunal---Appellants filed an application under S.66 of Sales Tax Act, 1990 for refund of input tax paid on purchase of High Speed Diesel, left unadjusted in the relevant tax period---Since adjustment of input tax paid on purchase of High Speed Diesel was held not admissible in terms of Sr. No.(11) of S.R.O. 578(I)/98 dated 12-6-1998, a show-cause notice was issued to appellants and after hearing parties, Adjudicating Officer; rejected refund---Appeal filed against rejection order having been dismissed by Collector, appellants had filed appeal to Appellate Tribunal---Claim of appellant was "that they had purchased High Speed Diesel .for consumption in their "Power-House" for generation of electricity which was used in manufacturing and production of taxable goods---Intention of appellants at the time of. purchase of diesel was nothing, but to generate power through which appellants could operate their machines for production of taxable goods---Purpose for which supplies were received as also the amount of input tax paid, having never been doubted" at least by "Departmental Authorities, their refusal to allow either refund or adjustment, could not be supported on any premise---Once a registered person established that the goods in question on which input tax had been paid were used or to be used for the purpose of manufacture or production of taxable goods or for taxable supplies made or to be made by him, then subject to terms of S.7 of Sales Tax Act, 1990, he would become entitled to the deduction of said input tax paid by him for the said purpose from output tax that was due from him in respect of particular tax period---Appellate Tribunal directed that input tax refund/adjustment be allowed on High Speed Diesel which had been used or to be used for, manufacture or production of taxable goods or for taxable supplies made or to be made by appellants.

Messrs Sheikh Spinning Mills Ltd. v. Federation of Pakistan and others 2002 PTD 2959 and Central Board of Revenue,, Islamabad v. Sheikh Spinning Mills Limited, Lahore and others 1999 SCMR 1442 ref.

Asim Zulfiqar Ali, Sr. Manager for Appellant.

Sharifullah, Sr. Auditor and Aziz-ur-Rehman, Sr. Auditor for Respondent.

Date of hearing: 23rd February, 2006.

2006 P T D (Trib.) 1466

[Customs, Central Excise and Sales Tax Appellate Tribunal]

Before Raj Muhammad Khan, Member (Judicial)

Appeal No. Cus. 264/PB of 2005, decided on 23rd February, 2006.

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

---Ss. 2(s), 16, 156(1), (8), (9), (89), 187 & 194-A---Imports and Exports (Control) Act (XXXIX of 1950), S. 3(1)---Penal Code (XLV of 1860), Ss. 279, 320 & 337---S. R. O. 374(I)/2002, dated 16-6-2002---Smuggle---Seizure of car on the ground that bill of entry was not relevant to the seized car and the same was of other model and that the chassis plate of the seized vehicle had not been repaired but the whole chassis plate was replaced one---Owner of the vehicle contended that welding marks found on its chassis could be the result of the repair of the vehicle and replacement of damaged parts with parts of model 1986 for model 1983 due to non-availability of the old parts in the market and modification of parts including seat belt or mudguards, etc. or fabrication 'could not constitute smuggling---Validity---Seizing agency had termed the seized vehicle to be smuggled one, mainly on the grounds that physically the vehicle was 1986-87 model with white colour, while as per registration book, it was 1983 model with green colour and the laboratory report, had reported that its chassis number was replaced and welded---Material relied upon by seizing agency was variable factors and the contention of the owner that the vehicle had met a fatal accident had not been rebutted---Modification and fabrication in the body and replacement of parts with parts of different model vehicle could not be ruled out during the repair after the accident---Laboratory report had been obtained without prior notice to the owner and at his back---Seizing agency had to brought the laboratory report on file in accordance with law, so that the owner could have an opportunity to cross-examine the expert official, who had produced the said report in evidence against them---Vehicle was duly registered and the bill of entry contained the same chassis number, which the seized vehicle had got---Vehicle was an old one of 1983 model, which must had undergone alteration and addition of parts thereto, particularly, when the prosecution had not been able to account for any imaginary vehicle to be other than the seized one---Seized vehicle had also not been examined by any Motor Vehicle Examiner or any dealer as to whether its chassis frame was of 1983 model or otherwise---Every doubt would exist in believing that the seized vehicle was not the same, which was imported as per bill of entry---Benefit of such doubt would naturally extend to the possessor of the vehicle in circumstances---Appeal of the Department was dismissed by the Appellate Tribunal.

(b) Word and phrases---

----"Aggrieved Person"---Connotation---Expression "aggrieved person" denotes a person who has got a legal grievance i.e. a person is wrongfully deprived of anything to which he is legally entitled and not merely a person who suffers some sort of disappointment but does not suffer any personal injury or whose interest is adversely affected by a decree or judgment---Detecting officer or any such agency representing the prosecution was not an "aggrieved person".

Director General of Intelligence and Investigation, Customs & Excise, Karachi v. Messrs Al-Faiz Industries (Pvt.) Ltd. Special Custom (Appeal) No.282 of 2002 and Civil Petitions Nos.287-K of 2004 ref.

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

----S. 194-A---Appeal to the Appellate Tribunal---Appeal purported to have been filed by the Collector but not signed and verified by him and instead was signed or verified either by the Deputy Collector or Assistant Collector of Customs, would also be deemed not to have been filed in accordance with law.

Civil Petitions Nos.287-K of 2004 ref.

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

----S. 194-A---S.R.O. 1/2005, dated 6-1-2005----Appeal to the Appellate Tribunal---Although, the Additional Director, Intelligence and Investigation (Customs & Excise), was competent to exercise powers and discharge the duties of officers of customs under various provisions of the Customs Act, 1969 including 5.194-A of the Customs Act, 1969, but neither the Deputy Director nor the Intelligence Officer were, so authorized to exercise such powers and so they both could not sign or give affidavit to the appeal, where nomenclature of the appellant was shown as Additional Director.

Haji Abdullah Jan and others v. The State 2003 SMR 1063 rel.

Abdul Latif, I.O. and Rehan Gul, 1.0. for Appellant.

Irshad Ahmad Durrani for Respondents Nos. 1 & 2.

Pir Izhar-ul-Haq D.S. Dustoms for Respondent No.3..

Date of hearing: 24th January, 2006.

2006 P T D (Trib.) 1553

[Customs, Central Excise and Sales Tax Appellate Tribunal]

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

Customs Appeal No.525/LB of 2004, decided on 19th October, 2004.

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

----Ss. 156(1) 89/90 & 2(s)---Imports and Exports (Control) Act (XXXIX of 1950), S.3(1)---Provincial Motor Vehicles Ordinance (XIX of 1965), S.33----Punishment for offences---Smuggling---Confiscation of vehicle on the ground that the same was smuggled and subsequently had been "shifted and mounted on the chassis frame of deteriorated Pickup to camouflage the same under the cover of its registration documents"---Validity---In terms of S.33 of Provincial Motor Vehicles Ordinance, 1965, when such an alteration is made in a vehicle that particulars contained in the certificate of registration no longer remain accurate the owner of the vehicle had to intimate the same to the Motor Registering Authority within 14 days along with certificate of registration of the vehicle accompanied by. the prescribed fee and the Motor Vehicle Registering Authority wuld enter the alteration in the registration documents---Customs Department had no jurisdiction under the Customs Act, 1969 to impound the vehicle on the basis of alteration done in terms of S. 33 of the Provincial Motor Vehicles Ordinance, 1965.

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

----S. 2(s)---Smuggling---Replacement of bodies/parts of vehicle---In absence of any evidence substantiating the charge of smuggling against the appellants, the matter did not fall in the jurisdiction of the Customs Authorities under the Customs Act, 1969 even if bodies/parts of those vehicles were replaced---That action in itself could not be called an act of smuggling.

Syed Muhammad Mohsin Hamdani for Appellant.

Tanveer Ahmed Malik for Respondents.

2006 P T D (Trib.) 1639

[Customs, Central Excise and Sales Tax Appellate Tribunal]

Before Khalida Yasin, Member Judicial and Zafar Iqbal, Member Technical

Customs Appeal No. K-603 of 2005, decided on 20th March, 2006.

Customs Act (IV of 1969)---

----Ss. 19, 20, 33 & 194-A---S.R.O. 1076(I)/95 dated 15-11-1995, C.B.R. Letter No.6/6/Mach/96 dated 20-5-1996---Tax exemption---Refund---Claim for---Appeal to Appellate Tribunal---Claim of appellant was that vide S.R.O. 1076(I)/95 dated 5-11-1995, Government having granted tax exemption across the board irrespective of the fact whether or not the goods were corresponding to the definition of `machinery' read with its table specifying relevant tariff headings, he was entitled to said exemption---Appellant had further claimed that in terms of Central Board of Revenue's Letter No.6/6/Mach/96 dated 20-5-1996, his claim for exemption and refund was very much in order---Claim of appellant was rejected by the Authority on grounds that Central Board of Revenue had clarified that refund would be admissible to those importers who were subjected to statutory duty merely on ground that ring spinning frames were being manufactured locally and who otherwise were eligible for concession in accordance with S.R.O. 1076(I)/95 dated 5-11-1995---Board's letter dated 20-5-1996, relied upon by appellant had provided that one had to meet with criteria for getting paid duty and taxes back; Importers who had not entered into litigation with the Departments; Importers who were asked to pay statutory duty on the ground that imported goods were locally manufactured; and (c) Importers who were eligible for concession in terms of S.R.O. 1076(1)/95 dated 5-11-1995---Admitted facts were that benefit of exemption was not extended to appellant on the ground that spinning machines were manufactured locally; that statutory duty was paid; that claim of appellant was entertained by the Board for decision on merits and that no litigation took place between the parties on said issue---Appellant, in circumstances, was qualified for obtaining refund in terms of Board's letter dated 20-5-1996---Authorities had erred in holding that Central Board of Revenue had directed for refund only in those cases where assessment had been made provisionally, because provisional assessment was only made under the orders of High Court where the importers had commenced litigation---Board's order clearly and exclusively covered those classes of cases, where provisional assessment was not made and machinery was released on payment of cash duties---Question of limitation did not apply in case of appellant as government vide letter dated 20-5-1996 had ex gratia allowed all importers claim subject to qualifying condition and said decision was applicable with retrospective effect.

Javaid Umar for Appellant.

Waseem Anwar and Saeed Ahmed, D.R. for Respondent.

2006 P T D (Trib.) 1751

[Customs, Central Excise and Sales Tax Appellate Tribunal]

Before Muhammad Anwar Ali, Member (Technical)/Chairman and Syed Sultan Ahmad, Member (Judicial)

Appeal No.7(357)CE/IB of 2002, decided on 8th December, 2005.

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

----S. 3-B---Central Excise Rules, 1944, R. 210---Notification No.PL-3(169-A)/99 dated 23-9-1999 of Ministry of Petroleum and Natural Resources---Levy of additional duty--Opportunity of being heard---Case was decided on the basis that "case cannot be kept pending due to non-appearance of respondents and was therefore, decided on the basis of evidence/documents available on record"---Validity---Style of passing the order would be regarded as defiance of mandatory requirement of law by attempting to arbitrarily exercising of authority in flagrant disregard of prescribed procedure as exercise of authority without proper legal notice to respondent offended against principles of natural justice and would be void, illegal and arbitrary---Appellant had inalienable right of hearing and could not be condemned unheard before taking an action which was punitive in nature---Appeal was accepted by the Appellate Tribunal---Order was set aside and case was remanded to the original Adjudicating Officer with the direction to give de novo consideration to the dispute involved by providing fair opportunity of being heard to appellants and after looking into their oral as well as documentary evidence.

PLD 1971 SC 192; 1986 CLC 2643; 2003 CLC 1011 and 2000 CLC 1257 rel.

(b) Central Excise Rules, 1944---

----S.213---Service of notice---Sufficient time for service of notice---Service of notice in accordance with law had to be proved---Where sufficient time was not available for the respondent to appear and answer, the service cannot be deemed to be `due service'.

Sheikh Naveed Anwar for Appellant.

Dr. Naeem Khan, Additional Collector/D.R. and Nizam-ud-Din, Superintendent for Respondents.

2006 P T D (Trib.) 1839

[Customs, Central Excise and Sales Tax Appellate Tribunal]

Before Raj Muhammad Khan, Member (Judicial) and Mumtaz Haider Rizvi, Member (Technical)

Review Petition No. 7/PB of 2005 in Appeal No.7(295)ST/IB of 2000 (PB), decided on 10th September, 2005.

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

----Ss. 46 & 13---S.R.O. 580(I)/91, dated 27-6-1991---Appeal to Appellate Tribunal---Review---Order of Appellate Tribunal was assailed on the ground that Appellate Tribunal had not considered the explanation regarding "set up" embodied in the Notification No.S.R.O. 580(I)/91 dated 27-6-1991 and had nullified' the legal aspect of the case, which amounted to error apparent on the face of the record---Termset up' had already been explained in the said notification and did not require recourse to be taken to dictionary meaning thereof---Term set up' under the notification was to mean the date on which the industrial unit commenced its production including trial production---Testation of taxpayer's plant and machinery through experiment amounted to trial production---Department prayed for dismissal of appeal by declaring that the taxpayer's industry was set up at the moment when it was ready for trial production---Validity---Scope ofreview' in its intrinsic sense was limited and could not be extended to include re-opening of an order! judgment---Department wanted that the Tribunal should rehear the case afresh and reconsider earlier interpretation of the concerned S.R.O. and terms used therein---Department was indifferent in stating its case in as much as while on the one hand it was stated that the judgment had led to nullify the legal aspect of the case and had created a legal infirmity in terms of the explanation available at the end of the said notification having the force of law under S.13 of the Sales Tax Act, 1990 on the other hand the Department had admittedly not deemed it appropriate to file an appeal against the judgment of the Tribunal, as according to the Department, it could not agitate factual aspects of the case in such appeal---Term `set up' had been explained in the said notification, the notification remained scant to define or explain the term "trial production"---Appellate Tribunal did not find any reason to consider the issue any further---No mistake apparent existed to be rectified or amended---Petition was rejected by the Appellate Tribunal being not maintainable.

AIR 1967 SC 509 ref.

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

---S.46---Civil Procedure Code (V of 1908), O.XLVII---Appeal to Appellate Tribunal---Review---Order XLVII, C.P.C. provided for review, however, this review is confined only a review of a decree or order of Civil Court.

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

---S.46---General Clauses Act (X of 1897), S.21---Appeal to Appellate Tribunal---Review---Section 21 of the General Clauses Act, 1897 provides for amendment etc., in Notification, Order, Rule or By-laws and did not provide for `review' in the legal sense as was embodied in the Customs and Central Excises Laws---Such power could not be stretched and placed at par with order of Authority reviewing its own decision under the authority conferred by statute.

Ishtiaq Ahmad, A.C. (Legal Division) Collectorate of Sales Tax and Central Excise, Peshawar, Jehanzeb Mahmood, D.R. and Sharifullah, Senior Auditor for Petitioner.

Qazi Waheeduddin for Respondent.

Date of hearing: 7th September, 2005.

JUDGEMENT

MUMTAZ HAIDER RIZVI, MEMBER (TECHNICAL).---This is review petition preferred by the Collector of Sales Tax & Central Excise, Peshawar against the judgment of this Tribunal dated 29-4-2005 passed in Appeal No. 7(295) ST/IB of 2000 (PB) in the case titled Messrs Majeed Soap and Chemical Industry, Gadoon Amazai, Swabi v. Collector of Sales Tax & Central Excise, Peshawar and other.

1. The background of the case is that the auditors of the petitioner's Collectorate had dug out that while enjoying exemption from payment of sales tax on their supplies by the respondent unit under S.R.O. 580(1)/91 dated 27-6-1991, they had continued to make supplies of taxable goods (soap) without payment of sales tax livable thereon even after he expiry of exemption date 12-10-1997 and this way, evaded sales tax td the tune of Rs. 9762172 during the period November, 1997 to January, 1999. They were further alleged to have failed to register themselves with the Collectorate after the said expiry date and to have wrongly claimed input tax and so all these taxes were recoverable from them along with additional tax and penalty, Thus after issuing show-cause notice to them by the Additional Collector of Sales Tax and Central Excise, Peshawar as adjudicating authority and hearing the parties, Order-in-Original No.39 of 2000 dated 15-5-2000 was passed against them, whereby they were directed to pay the determined tax liability along with the additional tax under section 34 of the Sales Tax Act, 1990 (hereinafter referred to as the Act) and penalty of 5% and 10% of the tax involved, which was imposed under sections 33(2)(cc) and 33(3)(a) respectively of the Act.

2. Aggrieved of the Order-in-Original, the respondent unit had lodged appeal in this Tribunal, which was accepted by the Bench comprising the undersigned [Mr. Raj Muhamad Khan, Member (Judicial)] and Muhammad Wall Khan, Member (Technical) vide judgment dated 29-4-2005 leading to setting aside the Order-in-Original No.39 of 2000. The petitioner feeling aggrieved of the judgment of this Tribunal has now filed the present review petition.

3. The impugned judgment of this Tribunal has been assailed by the petitioner, inter alia, on the grounds that this Tribunal has not considered the explanation regarding set up' embodied in the Notification No.S.R.O. 580(I)/91 dated 27-6-1991 and thus hasnullified' the legal aspect of the case, which amounts to error apparent on the face of the record. That the judgment has created a legal infirmity in terms of the explanation regarding set up and due to the said legal infirmity in the order, the petitioner has deemed it appropriate to file his review petition instead of filling appeal before the Hon'ble Peshawar High Court, Peshawar, since the petitioner will not be in a position to question factual aspect of the case in such appeal. That the survey report dated 13-10-1992 was an undisputed document, which revealed actual production of soap made under half boiled system, but the petitioner was given by the Tribunal the benefit of non-compliance of law. It was added that the term set up' had already been explained in the aforesaid notification and did not require recourse to be taken to dictionary meaning thereof. The termset up' under the notification was to mean the date on which the industrial unit commenced its production including trial production. The survey report had incorporated the result of production when the respondent's plant and machinery were tested through experiment and the same amounted to trial production w.e.f. 13-10-1992 on which 2025 Kgs. of soap was produced. The petitioner relied on the authority reported as AIR 1967 SC 509 in giving meaning to the word `set up' and prayed for dismissal of the appeal by declaring that the respondent's industry was set up at the moment when it was ready for trial production.

4. We have heard Departmental Representatives of the petitioner Collectorate and counsel for the appellant/respondent and have gone through the record of the case at length.

5. At the outset, it may be stated that the Sales Tax Act, 1990 does nowhere provide for review of any order of this Tribunal unlike analogous provisions available under the Customs Act, 1969 as per section 194-B (2) thereof and in section 35-C (2) of the Central Excise Act, 1944 both of which provide that the Appellate Tribunal may, at any time within three years from the date of order, with a view to rectifying any mistake apparent from the record, amend any order passed by it under subsection (1) and shall make such amendments, if the mistake is brought to its notice by the Collector of Customs or the other party to the appeal. Unfortunately, as stated earlier such provision is not embodied in the Sales Tax Act, 1990 under which the impugned judgment has been delivered and is sought for to be reviewed.

6. Realizing non-maintainability of the present review petition under the Act, the petitioner has resorted to quote Order XLVII of the Civil Procedure Code, 1908 read with section 21 of the General Clauses Act, 1897 in the subject of the petition, under which he has statedly filed this review petition.

7. Order XLVII of the Civil Procedure Code, 1908 provides for review. However, this review is confined only to review of a decree or order of a Civil Court. Similarly, section 21 of the General Clauses Act, 1897 provides for amendment etc., in Notification, Order, Rule or By-laws and does not provide for `review' in the legal sense as is embodied in the Customs and Central Excises Laws quoted above. Such power cannot be stretched and placed at par with order of Authority reviewing its own decision under the authority conferred by statute.

8. The scope of `review' in its intrinsic sense is limited and cannot be extended so as to include re-opening of an Order/Judgment. By way of the present petition for review, the Collectorate of Sales Tax and Central Excise, Peshawar wants us to rehear the case afresh and reconsider earlier interpretation of the concerned SRO and terms used therein. The Collectorate is indifferent in stating its case in as much as while on the one hand it is stated that the impugned judgment had led to nullify the legal aspect of the case and has created a legal infirmity in terms of the explanation available at the end of the aforesaid notification having the force of law under section 13 of the Act, on the other hand the Collectorate has admittedly not deemed it appropriate to file an appeal against the impugned judgment of this Tribunal, as according to them, they could not agitate factual aspects of the case in such appeal. In these circumstances, we are constrained to reproduce para-8 of the impugned judgment as under:

"After hearing arguments from both sides, examining record of the case carefully and going through the judgment of the Honourable Peshawar High Court cited by the learned counsel for the appellants the position that emerges is that the department's case is based on the first survey report. The appellants also rely on this report along with other documents as mentioned above. Therefore there is no dispute that the contents of the first survey report are accepted by both sides. Similarly, other letters/report of the Customs, Central Excise and Sales Tax Department relied upon by the appellants have not been disputed by the department. The only contention of the department is that experimental production of soap on 13-10-1992 means trial production and hence the five years' period for exemption of sales tax has to be calculated from this date. Perusal of the documents relied upon by the learned counsel for the appellants including the first survey report which is also relied upon by the department makes it difficult for us to agree to the viewpoint of the department. From the judgment of the Honourable Peshawar High Court the meaning of the expression set up' is crystal clear i.e. theset up' is complete once production for business commences and before that `set up' is not complete. In this view of the matter production means including trial production means production for commercial consideration. Production of 2025 kgs. on experimental basis cannot be termed as production for commercial consideration by an industry with huge investment. Records of the department relied upon by the learned counsel for the appellants and not disputed by the department show that installation of machinery was not complete on 13-10-1992. These records also show that raw materials were imported and entered in the prescribed record (RG-2) in January 1994 and not before that date. Again entry of manufactured goods i.e. soap was made for the first time in the RG-1 record on 20-2-1994. Both the entries in these records are properly authenticated by the Deputy Superintendent Incharge of the unit. From the contents of CBR's letter referred to above, it is very much clear that it was meant for determination of quota of raw materials of the appellants unit for which even experiment of production was not necessary if the quota could be determined by comparing the unit with other similar units located in and outside Gadoon. Therefore an experiment made at a plant not fully operational can by no stretch of imagination be termed as trial production for the purposes of S.R.O. 580(I)/91, dated 27-6-1991 specially when the unit was neither producing goods before the two hours experiments nor thereafter. No industrial unit can wait for two years for producing goods if it was installed fully as it involves huge investments and no one can afford such a delay. In the absence of evidence showing use of raw materials for production of soap and supply of the goods produced by the appellants during the disputed period, it is difficult for us to hold that the unit started production on 13-10-1992 since the evidence available on record shows otherwise i.e. production was actually started on 8-1-1994."

1. It may be added that the authority of the Hon'ble Indian Supreme Court reported as AIR SC 509 relied upon by the petitioner in support of his contention, has already been mentioned by this Tribunal in its impugned judgment vide para-6 thereof. While the term `set up' has been explained in the aforesaid notification, the notification remains scant to define or explain the term "trial production". It is because of this deficiency in the notification that the petitioner is also obliged to rely on a judgment of the Hon'ble Indian Supreme Court. This Tribunal has already given its verdict in this regard and does not find any reason to consider the issue any further.

2. Otherwise too, there is no mistake apparent in the impugned judgment to be rectified or amended. This review petition is not maintainable and stands rejected accordingly.

2006 P T D (Trib.) 1869

[Customs, Central Excise and Sales Tax Appellate Tribunal]

Before Mian Muhammad Jahangier, Member Judicial and Mehmood Alam, Member Technical

Appeal No.525/LB of 2000, decided on 13th April, 2005.

(a) Baggage Rules, 1998---

----R.20---Customs Act (IV of 1969), Ss.2(s), 16, 17, 32, 139 & 142---Imports and Exports (Control) Act (XXXIX of 1950), S.3(1)---S.R.O. 570(1)/98, dated 12-6-1998---Allowance admissible to Indian national---Outright confiscation of goods (cloth) recovered from the possession of an Indian national---Validity---Allowance was not admissible in case the goods were in commercial quantity and so far as the concession for passengers arriving from India was concerned, there was no reference of cloth to bring the same free of customs duty and taxes, meaning thereby that the cloth was such an item that if it was brought from India and declared in accordance with law, the customs duty and other taxes had to be paid---Order was set aside with the direction that cloth recovered shall be returned to Indian national for taking away back to India or if same was to be utilized in Pakistan then certainly it would be subject to payment of customs and other duties as required under the law.

(b) Baggage Rules, 1998---

----R.20---Allowance admissible to Indian national---Commercial quantity---Cloth---Bringing the goods in commercial quantity from India---No limit of cloth for import from India was prescribed in the Baggage Rules or in other words the commercial quantity was not defined, therefore, it could be argued that the quantity of cloth brought might be for the use of relatives and friends and if the goods were to be treated as commercial quantity, the 10 yards of cloth may be observed as commercial quantity as same could be sold in the open market under a necessity therefore, if the cloth was brought in huge quantity it could be cleared on payment of customs and other duties and the same principle should be followed in case of a passenger who was coming for first time from India to Pakistan as such like mistakes as made in declaration were expected from a passenger.

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

----5.139---Declaration of baggage by passenger/crew--Oral declaration--Validity---Appellant made declaration orally before the customs authority---Such type of verbal declaration was permitted under S.139 of the Customs Act, 1969 but it gave birth to many apprehensions and may force one to believe as if stereo type proceedings had been completed---In order to make the situation transparent the declaration made by the passenger like other documents may be written---If the declaration made by the passenger was verbal in nature, it must be brought into writing by the Customs Officer---Application moved to Assistant Collector could not be treated as a declaration.

Mian Abdul Ghaffar for Appellant.

Asad Farooq, Inspector for Respondent.

Date of hearing: 22nd March, 2005.

2006 P T D (Trib.) 1952

[Customs, Central Excise and Sales Tax Appellate Tribunal]

Before Mian Muhammad Jahangier, Member (Judicial) and Mehmood Alam, Member Technical

Appeal No.1292/LB of 2001, decided on 7th January, 2006.

Customs Act (IV of 1969)---

----Ss. 156(1)(89) & 2(s)---Punishment for offences---Smuggling---Confiscation of vehicle on the ground that chassis number without code was self-punched/tampered on other than its original place---Validity---Vehicle in question was admittedly assembled by local firm as reflected from the report---Someone purchased the vehicle and he could not be asked to prove that the vehicle in question was the smuggled one and if any such information was to be collected, it could be collected from Assembler of the vehicle---If the vehicle had the chassis number but the Model code was missing even then the Assembler could be asked to resolve the controversy, therefore, statement of the representative of Assembler should have been recorded---When such statement was recorded, it transpired that after 1985 and up till now the chassis number was manually punched over the chassis frame and it was not machine punched---Held, it made no different if the chassis number on the vehicle was manually punched, or grinded at the place other than the original one---If the prosecution insisted on a specific place as original place on the chassis frame, then prosecution must prove as to where was that original place on the chassis frame, otherwise when the chassis number was manually punched, it was not possible that it shall be affixed again and again on a same place and there was possibility of change or difference so far as the place on the chassis frame was concerned---Report of Forensic Science Laboratory was not worthy of reliance as the same had been obtained without association of the appellant---Prosecution failed to establish its case and order-in-original could not sustain in the eye of law---Order-in-original was set aside by the Appellate Tribunal and directed that vehicle shall be released and handed over to the appellant immediately and that bank guarantee also stood released.

PTCL 2000 CL 782 ref.

Mian Abdul Ghaffar for_Appellant.

Khalid Mehmood D.R. and Rana Irshad, I.O. for Respondents.

Date of hearing: 22nd November, 2005.

2006 P T D (Trib.) 2111

[Customs, Central Excise and Sales Tax Appellate Tribunal]

Before Justice (Retd.) Abdul Majeed Tiwana, Chairman, Mian Abdul Qayyum, Member (Judicial), and Falak Sher, Member (Technical)

Appeals Nos.702/LB and 703 of 1999, decided on 18th May, 2001.

(a) Qanun-e-Shahadat (10 of 1984)---

----Arts. 59 & 60---Expert report---Statement of expert going beyond his. report---Effect---Such report liable to be discarded.

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

----S. 16-Ban on import of lard oil, imposition of---Applicability---Such ban would apply to purest edible form of such oil, but not to its blended form while becoming unfit for human consumption and usable only for industrial purposes.

Mian Abdul Ghaffar for Appellant.

Ms. Rukhsana Yasim, D.R. along with Maqsood Javed, Appraiser for Respondents.

Date of hearing: 18th May, 2001.

2006 P T D (Trib.) 2124

[Customs, Central Excise and Sales Tax Appellate Tribunal]

Before Ch. Farrukh Mahmud, Member (Judicial) and Saeed Akhtar, Member (Technical)

S.T.A. No.232/LB of 2004, decided on 1st April, 2006.

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

----S. 46---Appeal by Revenue---Delay of more than two years, condonation of---Plea of Revenue was that concerned file was misplaced due to shifting of office to another place and that frequent transfers of concerned officers took place during such period---Validity---Revenue would be treated as any other ordinary person---No preferential treatment would be given to Revenue against an ordinary person---Affidavit attached with application for condonation of delay was unattested, which could not be treated as an affidavit in eye of law---Such inaction and negligence on the part of Revenue was not excusable--Appeal was dismissed being time-barred.

2000 SCMR 1371; 2002 SCMR 1642; 2003 CLC 269 and 1998 SCMR 307 rel.

Messrs Ashraf Dawa Khana v. Additional Collector 2003 PTD 1329; Miss Reta v, Government of Sindh 2001 CLC 1825; AIR 1988 SC 897 and AIR 1936 All. 666 distinguished.

(b) Limitation---

---Condonation of---Unattested affidavit attached with application for condonation---Effect---Such affidavit could not be treated as an affidavit in the eye of law.

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

----S. 46---Appeal by Revenue---Condonation of delay---Discretion by Tribunal, exercise of---Pre-conditions---Revenue would be treated as any other ordinary person---No preferential treatment would be given to Revenue against an ordinary person---Discretion of Tribunal to admit appeal after period of limitation was subject to its satisfaction as to sufficient cause for not presenting appeal within prescribed period.

Ms. Kausar Akhtar for Appellant.

Imtiaz Rashid Siddiqui and Abdul Bari Rashid for Respondents.

Date of hearing: 5th December, 2005.

2006 P T D (Trib.) 2405

[Customs, Central Excise and Sales Tax Appellate Tribunal]

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

Appeal No. 1317 of 1999, decided on 10th October, 2001.

Sales Tax Act (VII of 1990)---

----S. 8 & Second Sched:---Sales Tax (Third Amendment) Ordinance (XXI of 1996), Preamble---Finance Supplementary (Amendment) Act (IV of 1997), Preamble---S.R.O. 1199(I)/96, dated 21-10-1996---Tax Credit not allowed---Pharmaceutical product---Stock---Input tax---Adjustment of---Input tax was claimed up to 21-10-1996 and did not claim input after 22-10-1996 since end product was exempted---Department raised a demand for the recovery of input tax already adjusted on stocks (materials, in process and finished)---Validity---Claim of tax adjustment by the pharmaceutical manufacturers was correct and legal---Appellate Tribunal allowed the appeal and set aside the order.

1997 PTCL CL-232 and Metalex Corporation Ltd. v. Commissioner of Sales Tax 1991 SCMR 2475 rel.

Aziz A. Shaikh for Appellant.

Iftikhar Ansari, Senior Auditor for Respondent.

2006 P T D (Trib.) 2407

[Customs, Central Excise and Sales Tax Appellate Tribunal]

Before Malik A.R. Arshad, Member Judicial and Khalil Masood, Member Technical

S.T. Appeal No. 1208 of 1999, decided on 24th October, 2000.

Sales Tax Act (VII of 1990)---

----Sixth Sched., S. No.3 (iv), Ss.65, 33, 34 & 36(2)---Customs Act (IV of 1969), S.31-A---Constitution of Pakistan, 1973, Part-II, Chap. 1 & Art.25---S.R.O. 674(I)/97, dated 29-8-1997---S.R.O. 51(I)/96, dated 16-1-1996---Customs General Order 4 of 1995, PCT heading 1901.1010---Exemption---Tax period January, 1998 to March, 1998---Import of nutritional products---Liability of sales tax along with additional tax and penalty was unforced on the ground that in view of substitution in Sixth Schedule no exemption of sales tax was available either under the Sixth Schedule or notification---Validity---Government had already allowed exemption under S.65 of the Sales Tax Act, 1990 to similar products supplied by a company while similar product of appellant was denied exemption---Appellant was discriminated though placed in similar situation---Appellant had finalized the Letters of Credit and contracts before the date of issuance of the withdrawal notification for this limited period---No rebuttal or denial was made that the contracts were not finalized with the foreign suppliers prior to the abrupt issuance of the withdrawal notification--Federal Government itself rescued the competitors of the appellant, despite the fact that the period involved therein was much longer than that of the appellant---Appeal was allowed as prayed---Penalty and additional tax was remitted and department was directed by the Appellate Tribunal to recalculate the refundable amount to milk food preparations for infants and invalids, falling under PCT heading 1901.1010.

PLD 1964 SC 21; 1988 SCMR 691; PLD 1994 SC 621; PLD 1996 Kar. 68; 1985 CLC 2796; 1986 CLC 612; PLD 1961 SC 963; NLR 1994 Tax 14; 1986 SCMR 1917 and 1999 SCMR 412 ref.

Aziz A. Sheikh for Appellant.

Shad Mohiuddin, Senior Auditor for Respondent.

2006 P T D (Trib.) 2533

[Customs, Central Excise and Sales Tax Appellate Tribunal]

Before Muhammad Wali Khan, Member (Technical) and Syed Sultan Ahmed, Member (Judicial)

Appeal No. 115/ST/IB of 2005, decided on 6th April, 2006.

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

----S. 36---Recovery of tax not levied or short_ levied or erroneously refunded---Non-mentioning of section in the show-cause notice---Effect---Section 36 of the Sales, Tax Act, 1990 relating to assessment and recovery of the escaped tax was not mentioned in the show-cause notice---Due to such omission, which was a matter of fact, the show-cause notice could not be termed as illegal since the material facts available on record ,led" the Adjudicating- Officer to conclude that it was a' case of wilful evasion of tax in terms of S.36(1) of the Sales Tax Act, 1990---Plea of the appellant that the show-cause notice was defective since S.36 of the Sales Tax Act, 1990 had not been' invoked and resultantly the subsequent order of the Adjudication Officer was illegal did not hold the ground and was rejected by the Appellate Tribunal.

Assistant Collector Customs v. Messrs Khyber Electric Lamps Ltd. PTCL 2002 CL. 1 and Messrs Zamindara Paper Mills v. Collector PTCL 2004 CL. 212 overruled.

Collector Customs, Central Excise and Sales Tax (Adjudication) v. Pakistan Tobacco Company, decided on 27-12-2005; Babar Shahzad v. Said Akbar and another 1999 SCMR 2518;. Fazal Muhammad Chaudhari v. Ch. Khadim Hussain and 3 others 1997 SCMR 1368 and Chaudhry Muhammad Saleem v. Fazal Ahmad and 2 others 1997 SCMR 315 rel.

(b) Sales tax---

----Output tax---Doctrine of undue enrichment---Assessees by not depositing the output tax due from them by due dates had not only evaded the said tax but had also betrayed the trust reposed on them by the Government to receive the tax from their buyers and to deposit the same in the treasury by due dates---Holding the assessees to be not liable to pay the sales tax would amount to giving them undue benefit which could not be allowed under the doctrine of undue enrichment as the appellants had no right to retain the tax beyond due dates.

Messrs Fecto Belarus Tractors Ltd. v. Government of Pakistan PTCL 2005 Cl. 754 rel.

(c) Sales tax--

--Estoppel, doctrine of---Applicability---Where a demand order had been acted upon voluntarily by the assessees, they were barred by the law of estoppel to go against the action taken by them voluntarily.

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

----Ss.34 & 33---S.R.O.679(I)/99, dated 12-6-1999---Default surcharge--Additional tax---Penalty---Amnesty-.Benefit of confusion---Subsequent to initiation and finalization of adjudication proceedings the taxpayers/ appellants not only made payment of the due amount of tax along with an amount of, additional tax availing the amnesty Was also paid---Sales tax authorities and the taxpayers/appellants were initially not clear about their tax liability---Benefit of the-confusion must go to the taxpayers/appellants---Additional tax and penalty adjudged against the taxpayers/appellants by the Adjudication.. Officer over and above the one paid by the taxpayers/appellants during the amnesty period was remitted by the Appellate Tribunal as it was a case of confusion rather than wilful evasion that resulted in non-payment of the sales tax especially when taxpayers had subsequently made payment of more sales tax than what was actually due from them.

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

----S.7(2)---Special Procedure for Ginning Industry Rules, 1996, Rr.5 & 6---Determination of tax liability---Avoidance from bogus claims of input tax adjustments---Where a taxpayer claims deduction of input tax from the output tax due from him he was legally bound to show evidence of payment of input tax be it a case of Rr.5 & 6 of the Special Procedure, for Ginning Industry Rules, 1996 or that of S.7(2) of the Sales Tax Act, 1990; there was no exception to this law which was necessary to avoid bogus claims of input tax adjustments.

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

----Ss. 34 & 33---Special Procedure for Ginning Industry Rules, 1996, R.6(2)(3)---C.B.R. Letter C. No.3(13) STP/96 (Pt.1), dated 24-8-2002---Additional tax-Penalty-Not wilful. evasion of tax---Department as well as assessees were not sure about the exact liabilities of tax and the exact liabilities were determined through verification of facts and reconciliation of figures after finalization of adjudication proceedings and the assessees also made payment of not only the principal amount but also of an excess amount---Assessees could not be blamed to have wilfully evaded the sales tax in circumstances and deserved to be treated leniently---Imposition of additional tax and penalty adjudged against them over and above what had been paid by them during the amnesty period was not justified---Appellate Tribunal remitted the additional tax which they had already paid under amnesty scheme and the entire amount of penalty adjudged against them by the Adjudication Officer---Assessees had already deposited the entire principal amount as had been verified and confirmed by the sales tax authorities through reconciliation report, as such nothing was outstanding against them---For excess amount paid by the assessees they may approach the appropriate authorities in accordance with law.

Farhat Nawaz Lodhi for Appellant.

Dr. Kamal Azhar Minhas, Additional Collector/D.R. for Respondent.

2006 P T D (Trib.) 2587

[Customs, Central Excise and Sales Tax Appellate Tribunal]

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

Customs Appeals Nos. K-530 and K-531 of 2001, decided on 29th May, 2003.

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

----Ss. 30-B, 32 & 104---S.R.O. 502(I)/94, dated 9-6-1994---S.R.O. 225(I)/97, dated 28-3-1997---Show-cause notice for recovery of enhanced rate of duty from 30% to 40%---Ex parte order was passed and appellant was denied adjournment of case on a flimsy ground---Validity---Opportunity in order to be a reasonable opportunity, must be a real opportunity, which would make it possible for a taxpayer to persuade the competent authority to come to a different conclusion, from the one at which he had tentatively arrived, and the Courts and judges can test the opportunity from this angle---Proceedings conducted by the Adjudication Officer suffered from procedural impropriety---Order was set aside and case was remanded to the Adjudication Officer with the direction that a fair opportunity be extended to the appellant; it should be determined whether or not the demand is time barred and it should also be determined whether or not the ex-bond bill of entry on which assessment was completed on 5-3-1997 was valid or not on the day the duty was paid.

Farid Son's case PLD 1961 SC 537 rel.

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

----S.46---Appeal to Tribunal---Reasonable opportunity---Requirement of---Requirements of a reasonable opportunity are that the person proceeded against should be clearly and specifically told the charges standing against him; that he should be given full and adequate opportunity to explain and establish his innocence; that he should be allowed to show cause against the punishment; that there must not be any mala fides anywhere and that whole thing must be honest and fair deal done with a sense of responsibility.

Aziz A. Shaikh for Appellant.

Departmental Representative for Respondent.

2006 P T D (Trib.) 2633

[Customs, Central Excise and Sales Tax Appellate Tribunal]

Before Saeed Akhtar, Member (Technical)

Appeal S.T.A. No.707/LB of 2005, decided on 12th August, 2005.

Sales Tax Act (VII of 1990)---

----Ss. 3, 13, 14, 22, 33, 34 & 46---Appeal to Appellate Tribunal---Liability to pay sales tax along with additional tax and penalty---Deputy Director (Adjudication), directed appellant to pay adjudged amount of sales tax along with additional tax and penalty for relevant period---Order of Deputy Director having been upheld by Collector in appeal, appellant had filed appeal to Appellate Tribunal against impugned order---Appellant though had got himself registered as importer voluntarily under S.14 of Sales Tax Act, 1990, but during relevant period neither he made any import nor had transacted any business as importer---Appellant, in circumstances was not required to maintain Sales Tax record under S.22 of the Sales Tax Act, 1990---Appellant, though made retail sale/purchase of certain goods and issued cash memos, but he was not registered as retailer and was not competent to issue Sales 'Tax invoice as retailer---As the annual turnover of appellant from the retail sale was much below the turnover threshold of Rs.10,00,000 (one million), appellant was exempt from payment of sales tax under Sixth Schedule to Sales Tax Act, 1990---Impugned orders were set aside, in circumstances.

Ch. Muhammad Amin for Appellant.

Nasir Abbas, Auditor for Respondent.

Date of hearing: 11th August, 2005.

2006 P T D (Trib.) 2673

[Customs, Central Excise and Sales Tax Appellate Tribunal]

Before Muhammad Anwar Ali, Member (Technical)/Chairman

Appeal No.19/ST/IB of 2006, decided on 24th February, 2006.

Sales Tax Act (VII of 1990)---

----Ss. 3, 6, 14, 19, 22, 23, 26, 33, 34 & 36---Sales Tax General Order No. 1 of 1999, dated 6-4-1999---S.R.O. No. 500(I)/2003, dated 7-6-2003---C.B.R. Letter C. No.3(2)M(Audit)/2002, dated 12-6-2002--Scope of tax---Registration---Levy of sales tax, additional tax and penalty on the difference of taxable supplies declared on the income tax side and in sales tax return and for the period before registration for which the unit was liable to be registered---Validity---Department had made out the case on the basis of difference of value of supplies taken from the income tax returns as compared to the sales tax returns filed to the Sales Tax Department---Section 14 of the Sales Tax Act, 1990 dealing with the requirements of sales tax registration was substituted in the Finance Act, 1998 which became effective with effect from 1-7-1998 and it required all wholesalers (including dealers) and distributors to be registered in spite of the legal requirement and appellants did not obtain registration till 20-5-1999---No notice for compulsory registration as envisaged under S.19 of the Sales Tax Act, 1990 appeared to have been issued by the Sales Tax Department---Contravention for the period 1-7-1998 to 20-5-1998 had been made purely on the basis of the income tax returns---Demand of sales tax liability along with additional tax and penalty. adjudged solely on the basis of income tax returns prior to the date of registration i.e. 20-5-1999 was aside by the Appellate Tribunal---Liabilities adjudged on the basis of reconciliation reported ascertained after the date of registration were upheld as all such persons who obtained registration from a particular date were duty bound to maintain the actual records of sales and to make the payment of sales tax on such supplies at the standard rate of sales tax---Order-in-appeal was modified accordingly by the Appellate Tribunal.

Z.U. Enterprises, Deska, Sialkot v. Collector Sales Tax, Gujranwala GST 2002 CL 236 and Appeal No. 151/ST/IB of 2005 ref.

Appeal Case No.33 of 1999 and Appeal Case No. 398 of 2000 rel.

Malik M. Irfan I.T.P. for Appellant.

Moeen Uddin Wani, D.C./D.R. and Muhammad Akram, Auditor for Respondents.

Date of hearing: 20th February, 2006.

2006 P T D (Trib.) 2763

[Customs, Central Excise and Sales Tax Appellate Tribunal]

Before Mrs. Khalida Yasin, Member (Judicial) and Zafar Iqbal, Member (Technical)

Sales Tax Appeal No.K-139 of 2005, decided on 15th September, 2005.

Sales Tax Act (VII of 1990)---

----Ss. 2(20), 3, 7, 13 & 46---Customs Act (IV of 1969), First Sched., Chap. 30, Heading 30.03---Exemption from Sales Tax---Appeal to Appellate Tribunal---Appellant had claimed that Nitrous Oxide' supplied by him to hospitals and clinics since 1968 had been exempted from sales tax since then by notification---Basis for said exemption was thatNitrous Oxide' was classified as a Medicament' under Chapter 30 of First Sched. to Customs Act, 1969 whereby all the medicaments were exempt from tax---Subsequently, Superintendent, Central Excise and Land Customs, decided thatNitrous Oxide' was not exempt under said Notification and that sales tax was payable by appellant on supplies made by him---Such action of Superintendent was challenged by appellant before High Court through constitutional petition and High Court decided that Nitrous Oxide was a `Medicament' falling under Heading 30.03 of Chapter 30 of Customs Tarrif which was in force and was exempt from payment of sales tax under notification and Supreme Court upheld findings of the High Court---Legal position remained the same even today as anesthesia agents used for medical purposes were still classified under Heading 30.03-As there was no dispute over the character and use of product of appellant (Nitrous Oxide), findings given by High Court and upheld by Supreme Court, was valid in the field as no fresh reasoning had been given by the respondent---Tribunal concluded that disputed goods (Nitrous Oxide) was covered under Heading 30.03 and was thus exempt from payment of tax.

Ms. Fizza Kazmi for Appellant.

Azam Nafees, Senior Auditor for Respondent.

Date of hearing: 7th September, 2005.

2005 P T D 340

[Federal Tax Ombudsman]

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

Messrs PACE INTERNATIONAL, RAWALPINDI

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.805 of 2003, decided on 2nd August, 2004.

Sales Tax Act (VII of 1990)---

----S. 11---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Assessment of tax---Limitation---Section 11 of the Sales Tax Act, 1990 provided that order of assessment of sales tax shall be made within 45 days of the issuance of how-cause notice or within an extended period not exceeding 90 days---how-cause notice was issued on 16-6-2002 and order-in-original was passed on 13-5-2003 after about 11 months of the issuance of the notice which was clearly hit by time limitation as provided in law---Maladministration was established and Federal Tax Ombudsman recommended the competent authority to cancel the order-in-original.

Faraz Fazal Sheikh, ITP for Appellant.

Amir Rasheed, D.C. for Respondent.

Date of hearing: 2nd August, 2004.

2006 P T D 1333

[Federal Tax Ombudsman]

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

Messrs IHSAN SONS (PVT.) LTD., KARACHI

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Review No.60 of 2005 in Complaint No. 558-K of 2004, decided on 24th December, 2005.

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

----S.18---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---S.R.O. 450(I)/2001---Goods dutiable---Federal Tax Ombudsman recommended to remit the demurrage charges and reimburse the amount already paid---Karachi Port Trust contended that it was working within the ambit and scope of its own laws and could not be directed to accept the said detention certificate and waive demurrage charges as it was neither part of Revenue Division nor the amount of demurrage was a tax---Validity---Karachi Port Trust was acting for and on behalf of Customs Authorities relating to a matter as to payment of custom duty, etc., as such, its legal status in relation thereto was that of assignee or agent of Customs Authorities---For such limited purpose, Karachi Port Trust was as much part of Revenue Division as its principal was for whom they were detaining the goods---Karachi Port Trust was bound to clear goods without charging demurrage once a certificate was issued by the Customs Authorities---Application was dismissed by the Federal Tax Ombudsman and the Karachi Port Trust was directed to implement the recommendations of remission of the amount of demurrage to the complainant by refunding the amount already received by it.

Constitutional Petition No. 2518/D of 2001 distinguished.

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

----Preamble---Demurrage is a tax---Since the demurrage normally was payable by the importers in a case where detention was prolonged on account of non-payment of customs duty or other taxes due as such, it was in the nature of penalty on delayed payment of taxes, therefore, it was also a part of tax.

Muhammad Iqbal, Manager.

Faisal Khan, A.C. (Appraisement)

Masood Sabir, A.C. Customs (Exports)

Syed Faisal Aijaz, Law Officer, KPT.

Aslam Yousaf, Traffic Officer, KPT.

2006 P T D 1476

[Federal Tax Ombudsman]

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

MUHAMMAD MUSHTAQ

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.853-L of 2004, 'decided on 29th December, 2004.

Income Tax Ordinance (XXXI of 1979)---

----Ss. 138 & 62---Income Tax Ordinance (XLIX of 2001), S.122A---Finance Act (1 of 2003), Preamble---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Revision by Commissioner---Revision petition under S.138 of the Income Tax Ordinance, 1979 was filed before the Commissioner by the complainant/ assessee under the belief that the assessment year to which matter pertained was covered by the Income Tax Ordinance, 1979, especially when final assessment order was also passed under S.62 of the Income Tax Ordinance, 1979---Commissioner of Income Tax did not entertain such petition on the ground that in the year, 2004 when the matter came before him, the Income Tax Ordinance, 1979 stood repealed---Validity---View of Commissioner was not in accordance with law because though the Income Tax Ordinance, 2001 initially did not contain any provision parallel to 5.138 of the Income Tax Ordinance, 1979, S.122A of the Income Tax Ordinance, 2001 was incorporated vide Finance Act, 2003 which was parameteria with S. 138 of the Income Tax Ordinance, 1979-Section 122A of the Income Tax Ordinance, 2001 had been placed in Chapter-X dealing with the "Procedure"---Procedure was applicable retrospectively---Revision petition filed under S.138 of the Income Tax Ordinance, 1979 in the year, 2004 should in all fairness have to be treated as having been filed under S.122A of the Income Tax Ordinance, 2001---Adjudicating Authority should apply the correct law even if the contestants were ignorant of, it---Section 122A of the Income Tax Ordinance, 2001 required the Commissioner to proceed suo motu to make "such enquiry as was necessary" and to "make such revision to the order as the Commissioner deems fit"---To dispose of the petition legally pending before the Commissioner, Federal Tax Ombudsman recommended that the Commissioner treating the petition pending before him as having been filed under S.122A of the Income Tax Ordinance, 2001 proceed to adjudicate it on merits.2003 PTD 2109 rel.

Nemo for the Complainant.

Muhammad Naeem, DCIT for Respondent.

2006 P T D 1486

[Federal Tax Ombudsman]

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

Messrs LAHORE CONTINENTAL HOTEL,LAHORE CANTT.

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.539-L of 2004, decided on 1st March, 2005.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 140 & 146A(1)---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)(vi)---Recovery of tax from persons holding money on behalf of taxpayers---Initiation, validity, etc., of recovery proceedings---Recovery in violation of agreement---It was decided with the Commissioner of Income Tax and the Regional Commissioner of Income Tax to keep the attachment of the account intact but not to recover the tax till the decision of appeal---Appeal was heard of which the decision was yet to be announced---Recovery of the whole amount due was made on the next day of the date of hearing of appeal---Validity---In a meeting in the Regional Commissioner of Income Tax office it was decided that the Bank may retain "a minimum balance of Rs.500,000 which shall remain payable to the Tax Department" of which an intimation was sent to the Bank-Expression "shall remain payable" clearly supported the complainant's contention---Fairness and justice demanded that before any request for its appropriation to Government account was made, a prior Notice should have been sent to the complainant---Such having not been done and recovery made on the very next day of hearing of complainant's appeal by the Commissioner of Income Tax, amounted to arbitrary conduct falling within the scope of Cl. 3(vi) of S.2 of the Federal Tax Ombudsman as `maladministration'---It should be a matter of concern for the high bosses of the Central Board of Revenue that a Commissioner (Appeal) was not pronouncing decision on a matter heard almost 10 months back---Such indifferent attitude was in sharp contrast to the proclamations in the Press/Media about efforts aimed at liquidating arrears of appeals for which more temporary posts of Commissioners (Appeals) were said to have been created---Federal Tax Ombudsman recommended that the Commissioner of Income Tax (Appeals) who heard the complainant's appeal for the.year, 2000-2001 on 28-6-2004 be advised to release the order forthwith and that the reason for keeping the decision pending for over 10 months may be ascertained from the concerned Commissioner of Income Tax (Appeals) for action under the E & D Rules.

Azhar Ehsan Sheikh for Complainant.

Abdul Rehman Warriach DCIT for Respondent.

2006 P T D 1501

[Federal Tax Ombudsman]

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

SABIR HUSSAIN

Versus

SECRETARY REVENUE, DIVISION, ISLAMABAD

Complaint No.688-.L of 2004, decided on 4th February, 2005.

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

----S. 2(3)---Maladministration---Complainant visited office of Regional Commissioner of Income Tax and filed an application mentioning names of certain persons who had acquired properties or were running prosperous business but were evading tax---Certain taxpayers were also identified who were underassessed due to malpractices---Addresses of as many as 80 persons/establishments were provided who were not on tax rolls---Complainant insinuated that no action had been taken in that regard---On enquiry about the progress of the matter from Regional Commissioner of Income Tax Office, complainant was directed to contact an Inspecting Additional Commissioner who "cold-shouldered him" which was indicative of the fact that "she did not perform her duties diligently and honestly"---Federal Tax Ombudsman was requested that in addition to action against tax evaders, those responsible for putting the information in cold storage may also be punished---Validity---Overall picture supported suspicions of a collusion and attempt to cover up, charges alleged by the complainant---Lapses identified betrayed "neglect, inattention, delay, incompetence and inefficiency in the administration or discharge of duties and responsibility" falling in the category of "maladministration"---Federal Tax Ombudsman recommended that the person who received the complaint and misplaced it, be identified and subjected to action under Removal from Service Ordinance, 2000 as amended in 2002; that the officers responsible for delay in the office of Regional Commissioner of Income Tax and the office of Commissioner of Income Tax, be identified and subjected to `warning', copies of which be placed on Performance Evaluation Reports; that Inspecting Additional Commissioner, who promised to tender the evidence next day and defaulted to present the same without any excuse, be called to explain her conduct placing a copy on her Performance Evaluation Report for adverse view and that copy of information submitted by the complainant as admittedly received from the Central Board of Revenue be processed and the outcome communicated within 30 days of the receipt of order.

Rana Qaisar Ali and Gulfam Arshad for the Complainant.

Tallat Altaf Raja (IAC) and Ishtiaq Ahmad (D-CIT) for Respondents.

2006 P T D 1513

[Federal Tax Ombudsman]

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

AAMIR HASSAN

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 1002-L of 2004, decided on 17th February, 2005.

Income Tax Ordinance (XLIX of 2001)---

----S. 236---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S. 2(3)---Telephone users---Purchase of tole-connection activation chip' for Rs.2,999 which, as printed on its folder, included Rs.2000 as Tax---Company issued a certificate only iu respect of tax deduction/collection on sale of "calling cards" but not for the activation of the 'connection'-Central Board of Revenue had not prescribed any procedure for accounting of deductions on activation of cellular phones despite mentioned by the Finance Minister in his Budget speech for 2004-2005 about reduction in tax for this service from Rs.2,000 to Rs.1,000 and complainant could not claim adjustment/ refund of the prepaid tax---Complaint against ---Validity---Regional Commissioner of Income Tax as also the Central Board of Revenue were supposed to explain the procedure, if any, through which collection was being made and through which credit/refund/adjustment could be claimed---Since this was a matter of public importance and enormous revenue was likely to be lost to Government in case no procedure was prescribed for securing the deposits in the Government account of the collection made by the withholding agent---Federal Tax Ombudsman recommended that Central Board of Revenue to make necessary amendment in S.236 of UN Income Tax Ordinance, 2001 by enlarging its scope which presently is restricted toprepaid cards' only, so that amount of Tax collected on sales of chips (activation charges) is also deposited in the Government account and make proper announcement for the guidance of the withholding agent as also for Public at large.

Complainant present in person.

Mumtaz Ahmad, (A-CIT) for Respondent.

2006 P T D 1528

[Federal Tax Ombudsman]

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

Messrs FORTUNE HOUSE, LAHORE

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 904-L of 2004, decided on 19th January, 2005.

Sales Tax Act (VII of 1990)---

----S. 10(2)---Sales Tax Refund Rules 2002, Rr. 7(1)(2) & 5(3)(4)---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S. 2(3)---Excess amount to be carried forward or refunded---Non-payment of refund within 30 days---Department did not pay the refund due to complainant despite the fact that S.10(2) of the Sales Tax Act, 1990 stipulated that input tax incurred in connection with zero rated supply be refunded not later than 30 days of the filing of returns subject to such conditions as the Central Board of Revenue prescribed---Department contended that refund claimed was deferred ' till completion of supplier's audit to avoid sanctioning inadmissible refunds---Validity---Delay was noticeable in respect of refund claimed- -Audit of the supplier initiated or intended to be initiated had not been completed and the complainant's refund claimed had been held up without any justification---Complainant's refund claimed had been subjected to inaction and delay by the Revenue which also tantamount to `maladministration'---Complainant exhibited a positive attitude that complainant's supplier would be prepared for audit of the relevant period and would supply all information and record required for the purpose to enable the Revenue to complete the audit within a period of one month and the complainant would be prepared for the claims to be decided by the Revenue on their merit in accordance with the provisions of law---Maladministration was established, however, considering Revenue's commitment it was directed to complete supplier's audit and other inquiries within one month and to decide complainant's refund claimed on merit---Federal Tax Ombudsman recommended that Central Board of Revenue direct the concerned authority to complete supplier's audit and other inquiries within a period of one month, as promised by the DR, and decide the complainant's refund claims on their merit in accordance with the provisions of law after enlisting complainants point of view and advise the dealing officials to adhere to the provisions of Sales Tax Act, 1990 and the Rules framed thereunder so as to avoid creating unnecessary complications and causing hardship to the dealing public.

Abbas Raza Rizvi CMA for the Complainant.

Dr. Mirza Mubashir Baig, D.C. Sales Tax and Muhammad Ismail, Auditor, Sales Tax for Respondents,

2006 P T D 1546

[Federal Tax Ombudsman]

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

Messrs PRINCE AND SONS, QUALITY MART, MULTAN

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 741-L of 2004, decided on 16th December, 2004.

Sales Tax Act (VII of 1990)---

----Ss. 7, 33 & 34---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Determination of tax liability---Suppression of production/supplies---Direction to pay certain amounts of sales tax, additional tax and penalty adjudged for suppression of production/supplies of finished goods and for making supplies of taxable wastage without payment of sales tax in violation of Federal Tax Ombudsman's recommendation to examine the parties from whom the Department had obtained quotations on the basis of which the weight of complainant's end product was originally determined and who had subsequently dissociated themselves from the quotations relied upon in the Order-in-Original---Validity---Collector did not comply with Federal Tax Ombudsman's recommendations in letter and spirit---Department had not complied with Federal Tax Ombudsman's recommendations, including the specific recommendation for examining the ' firms concerned to ascertain whether or not the quotations obtained from them (which had originally formed the basis for determination of weight of complainant's end products) were authentic---Collector had passed the Order-in-Original in violation of the recommendations of the Federal Tax Ombudsman, ignoring also the point of view of the complainant both in regard to the ratio of production and wastage---Collector's decision, was arbitrary, illegal, unjust, improper and unreasonable within the meaning of definition of `maladministration'---Federal Tax Ombudsman recommended that the Central Board of Revenue should reopen the Order-in-Original No.185 of 2004, dated 16-7-2004 under S.45A of the Sales Tax Act, 1990, set aside the same and decide complainant's case afresh on its merit in accordance with the provisions of law after; that taking into consideration all the points raised by the complainant both in regard to the finished product and the wastage, including examination of the firms who had submitted affidavits dissociating themselves from the quotations relied upon in the D.C's impugned order and allowing the complainant the opportunity of hearing/defence.

Muhammad Arif Amin for the Complainant.

Shafqat Hayat D.C. (Adjudication) for the Respondent.

2006 P T D 1559

[Federal Tax Ombudsman]

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

Dr. Syed ZULFIQAR ALI RAZA

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 729-L of 2004, decided on 16th December, 2004.

Personal Baggage and Gift Schemes (Import of Vehicles) Rules, 2000---

----Cl. 3(4) of Appendix-G---Import Trade and Procedure Order, 2003-2004---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Import of used car on the basis of e-mail information to the complainant by the Central Board of Revenue that "Car, new or more than two years old, is importable under Transfer of Residence Scheme provided that the used car was registered in your name in the country of residence---For further details on Transfer of Residence Facilities please see Baggage Rules on our website under the Head Customs"---Customs authorities did not accept the Central Board of Revenue's letter nor the letter of Embassy of Pakistan, for that matter on the ground that the vehicle imported should had been registered abroad against the complainant's name for a period of one year prior to departure from the country of residence and that if the period of registration abroad was less than one year the condonation of short fall in the requisite period of registration would be required from the Ministry of Commerce---Ministry of Commerce regretted its inability to condone the short fall in the registration period of the vehicle imported under transfer of residence rules---Complainant's personal effects were released while the vehicle was detained without any reason-Validity--Central Board of Revenue advised the complainant specifically that "car, new or more than two years old, is importable under the Transfer of residence scheme provided that the used car was registered in complainant's name in the country of residence"---Complainant was not advised that the car he intended to import had to be registered in his name for a period of one year in the country of residence before his departure for Pakistan---No doubt, the Central Board of Revenue advised him that "for further details on transfer of residence facilities please see Baggage Rules on our website under the head Customs" but a perusal of the text of sub-chapter 6 (Concessions for Import of Baggage on Transfer of Residence) posted on Central Board of Revenue's website indicates that the chapter in question did not provide any information on conditions precedent to the import of a vehicle--Central Board of Revenue, which administers the import policy, should have given complete information to the complainant if it wanted him to adhere to the conditions governing importation of vehicles on transfer of residence---Central Board of Revenue, did not provide correct information to the complainant to enable him to adhere to the prescribed conditions and he imported the vehicle as per advice rendered to him on the e-mail---It was difficult to blame the complainant for importing a car which was not registered abroad for a period of one year before his departure for Pakistan---As per sub-R(4) of R.3 of the Personal Baggage and Gift Schemes (Import of Vehicles) Rules, 2000 no doubt the vehicle (in case of transfer of residence) was required to be registered in the name of the complainant at least one year prior to his departure for Pakistan---Supply of misleading information to the complainant and the subsequent detention of and delay in releasing his vehicle constitute arbitrary, unjust and unreasonable acts amounting to `maladministration'---In view of hardship to which the complainant had been subjected for no fault of his, it was only fair that the Central Board of Revenue find a solution to resolve the problem being faced by him so as to mitigate his hardship---Federal Tax Ombudsman recommended that Central Board of Revenue examine and consider complainant's petition for release of his vehicle sympathetically in coordination with the Ministry of Commerce, if the Central Board of Revenue so wishes so as to mitigate the hardship being faced by him.

Dr. Syed Zulfiqar Ali Raza for the Complainant.

Rizwan Salabat, D.C. Customs Dry Port for Respondent.

2006 P T D 1580

[Federal Tax Ombudsman]

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

Messrs AL-MAKKAH PRESS PVT. LTD., LAHORE

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 902-L of 2004, decided on 30th December, 2004.

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

----Ss. 170(4), 171, 161 & 205---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---C.B.R. Circular No.5 of 2003, dated 30-6-2003---Refund---Additional payment for delayed refund---Withholding of tax at source resulting in excess payment for which application was attached with the Return---Although refund was to be issued within 45 days of the receipt of application, even then reminders sent remained un-responded---Department contended that verification of tax payment was obligatory on the Taxation Officer and mere fact that Return qualifies under Universal Self-Assessment Scheme, did not bar the Department from invoking the provisions of Ss.161/205 of the Income Tax Ordinance, 2001 for determination of default of tax withholdings---Show-cause notice to determine the exact quantum of default of withholdings under Ss. 161/205 of the Income Tax Ordinance, 2001 had been issued---Alternate remedy was also available inasmuch as appeal in term of S. 170(5) of the Income Tax Ordinance, 2001 could be filed for failure of the Commissioner to pass an order under S.170(4) of the Income Tax Ordinance, 2001---Validity---Department was sleeping over the matter and the application attached with the Return and two reminders were ignored till such time as comments were called for through communication on receipt of complaint by the Federal Tax Ombudsman---Department seemed to have awakened to the reality of the situation and hurriedly issued letters to DPC and show-cause notice under Ss.161/205 of the Income Tax Ordinance, 2001 to the complainant on the same date---Maladministration was evident inasmuch as no steps to fulfil the legal obligation cast by S.120(4) of the Income Tax Ordinance, 2001 was taken for over 11 months since the filing of the Return and its acceptance on the same date, as per the provisions of S.120(1) of the Income Tax Ordinance, 2001---To turn back to say that verification of challan was necessary and that the exact quantum of default under Ss.161/205 of the Income Tax Ordinance, 2001 was yet to be determined, was clearly and afterthought because the law had already provided a period of 45 days for such exercise---Default of non-collection of tax on sale of machinery was on the part of seller of the machinery, for which failure, he, being the "withholdings agent" should be penalized but the Department leaving him scot-free, claimed to have issued a show-cause notice to the complainant, who had voluntarily surrendered the amount out of the total refund due to them, by claiming only the net refund---Incompetence, inefficiency and ineptitude in the discharge of duties and responsibilities being manifest, same fell under the definition of "maladministration"---Commissioner failed to carry out his mandatory duty for issuing the refund of overpaid tax, the failure was cognizable as maladministration---Federal Tax Ombudsman recommended that whatever verification is necessary, be carried out within 10 days of the receipt of this order and refund due to the complainants under S.170(3) in respect of Tax year, 2003 along with Additional Payment under S.171 of the Income. Tax Ordinance, 2001 be issued counting three months from the date on which the assessment became final by operation of law and that the Taxation Officer having failed to take cognizance of failure to collect tax on sale of machinery, and the Assessing Officer who wrongly reported facts to the Regional Commissioner of Income Tax about show-cause notice having been issued to the complainant be subjected to enquiry under the relevant Rules for misreporting because nothing had been served on the complainant as there was no affidavit nor there was any proof on record.

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

----Ss. 170 & 120---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Refund---As soon as an assessment attained finality under S.120 of the Income Tax Ordinance, 2001, the Commissioner was competent to demand only the "tax due on the taxable income" and `shall' refund the tax overpaid to the taxpayer---Application under Subsection (1) of 5.170 of the Income Tax Ordinance, 2001 would be necessary only when a refund is determined on an assessment under Total Audit or when giving effect to appellate order etc. because subsection (3) of S.170 of the Income Tax Ordinance, 2001 is independent of the other subsections of S.170 of the Income Tax Ordinance, 2001 and the use of world "shall" made it mandatory for the Commissioner to determine the tax overpaid; to apply the excess in reduction of tax liabilities or other taxes due, and to issue reminder to the taxpayer---No reference in subsection (3) to subsection (1) existed whereas subsection (2) and subsection (4) of S.170 of the Income Tax Ordinance, 2001 were inter-linked with subsection (1) of section 170 of the Income Tax Ordinance, 2001. (2004) 90 Tax 351 FTO rel.

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

---Ss. 170(5)(b) & 127(1)---Establishment of Office of Federal Tax Ombudsman Ordinance(XXXV of 2000), S.2(3)---Refund---Filing of application---Combined reading of S.170(5)(b) of the Income Tax Ordinance, 2001 with S.127(1) of the Income Tax Ordinance, 2001 presents a contradiction because whereas to invoke S. 127 of the Income Tax Ordinance, 2001 existence of an order was necessary to express `dissatisfaction' with an act of commission, S.170(b) of the Income Tax Ordinance, 2001 dealt with an act of omission in not passing an order---To achieve harmonious interpretation and also to avoid difficulty to the subject, it could be safely inferred that refund automatically emerging under S.170(3) of the Income Tax Ordinance, 2001 was to be issued mandatorily requiring no filing of application---Application under S.170(1) of the Income Tax Ordinance, 2001 would only be necessary in such : 2ges Return undergoes a process of assessment/amendment/rectification/appeal/revision resulting in refund for which application under S.170(1) of the Income Tax Ordinance, 2001 would be necessary allowing a period of 45 days to the Department to act.

Abdul Waheed Ch. for the Complainant.

Ch. Jafar Nawaz DCIT for Respondent.

2006 P T D 1602

[Federal Tax Ombudsman]

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

FARHAT MAHMOOD

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 712-L of 2004, decided on 30th December, 2004.

(a) Income Tax Ordinance (XLIX of 2001)

----S. 122---Income Tax Ordinance (XXXI of 1979), Ss. 59(1) & 12(18)---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Amendment of assessment---Issuance of notice under 5.122 of the Income Tax Ordinance, 2001 alleging' "you have wilfully camouflaged expenditure_ _which is not legally permitted" and "you have wilfully camouflaged figures"---Notice proposed addition of an amount said to be hit by the mischief of S.12(18) of the Income Tax Ordinance, 1979 and an amount of tax paid for amnesty but not disclosed---Complainant/assessee contended that initiation of proceedings was based on change of opinion' and on "material already available on record" thus not covered by the provisions of S.122 of the Income Tax Ordinance, 2001---Validity---Contradiction found on record was, that in the notice, dated 7-6-2004 the Assessing Officer alleged that Income waserroneously assessed' but in the notice, dated 20-8-2004 the allegationwas changed to: "You have wilfully furnished camouflaged figures"---Department was not too sure whether it was to proceed to amend the assessment by resort to S.122(1) or S.122 (5A) of the Income Tax Ordinance, 2001---Such distinction was all the more important because after insertion of subsection (5A) through Finance Act,. 2003 in S.122 of the Income Tax Ordinance, 2001, the Central Board of Revenue issued specific instructions on 18-5-2004 that, as required by letter of law, powers under S.12(5A) of the Income Tax Ordinance, 2001 should not be delegated to the Deputy Commissioner of Income Tax but to Inspecting Additional Commissioner and that any authorization if already made to the Deputy Commissioner of Income Tax earlier, be cancelled---All the relevant evidence was available on record and no new definite information' was obtained to lend legality to the amendment proceedings---Department failed to establish any definite evidence unearthed after the framing of the original assessment under S.59 of the Income Tax Ordinance, 1979---Proceedings were not based on bona fides and were being continued arbitrarily ignoring explanation and evidence tendered by the complainant/assessee thus causing maladministration---Federal Tax Ombudsman recommended that Central Board of Revenue should direct the proceedings initiated through notice under S.122 of the Income Tax Ordinance, 1979 on 7-6-2004 and 2-8-2004 be dropped forthwith; that the officer should be advised not to insinuate introduction of evidence on record without conclusive proof because it primarily is the responsibility of thetax functionaries' to ensure safety of record in their office; that it should be ensured that while adhering to the provisions of subsection (5A) of S.122 of the Income Tax Ordinance, 1979 powers assigned to amend an "assessment erroneous and prejudicial to the interest of Revenue" be forthwith withdrawn from Deputy Commissioners of Income Tax and assigned to Inspecting Additional Commissioner, as required by law and directed by the Central Board of Revenue and that it should be investigated with a view to initiate disciplinary action, regarding failure of the concerned' officer to carry out the Central Board of Revenue instruction, dated 18-5-2004.

1994 PSC 621; (2004) 88 Tax 83 (FTO); 1989 PTD 141; 1992 SC 939 (SCC); 1993 SC 1026 (SCC) and 1988 SCC 692 ref.

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

----Ss.122(5A) & 122(1)---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Amendment of assessment---Application of Ss.122(5A) and 122(1) of the Income Tax Ordinance, 2001---Principles---If `existing material' on record has been ignored, the remedy is S.122 (5A) of the Income Tax Ordinance, 2001 and if any "definite information" comes to the possession of the Assessing Officer, the remedy is S.122 (1) of the Income Tax Ordinance, 2001.

C. No. 182-L/2002 and C. No. 823-L of 2004 rel.

Tariq Javed for the Complainant.

Mukhtar Ahmad, D.-C.I.T. for Respondent.

2006 P T D 1630

[Federal Tax Ombudsman]

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

Messrs POLY FLEX SERVICES, KARACHI

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. C-1550-K of 2003, decided on 26th January, 2004.

Sales Tax Act (VII of 1990)---

----Ss. 21 & 37---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---De-registration, blacklisting and suspension of registration---Name of the complainant was included in the list of suspected units without due process of law due to non-providing record within stipulated time---Validity---Audit of four months' record submitted had not been done, which was a clear case of act of omission in exercise of powers conferred on the officers of the Department under the Sales Tax Act, 1990---Retention of complainant's name on the list of suspected units and consequent lack of decision in respect of the refund claims of their customers was a case of delay, inefficiency and oppressive action which constituted maladministration---Federal Tax Ombudsman recommended that Central Board of Revenue may direct the Collector of Sales Tax to carry out verification/audit of the records of the complainants and, if their contention is found justified, action should be taken for deletion of their name from the list of suspected unit and in case the allegation of issuing fake/flying invoices is established, a proper show-cause notice should be issued by the officer of the competent jurisdiction for adjudication proceedings.

Abdul Ghani for the Complainant.

Shafqat M. Sagar for Respondent.

Shahab Imam, Assistant Collector of Sales Tax, Karachi

2006 P T D 1637

[Federal Tax Ombudsman]

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

Haji MUHAMMAD IKRAM

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaints Nos. 1542 and 1543 of 2003, decided on 28th February, 2004.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 170 & 171---Income Tax Ordinance (XXXI of 1979), Ss. 96, 102, 62/65 & 111---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S. 2(3)---Refund---Tax demand and penalties were deleted by the Appellate Tribunal---Request was made to issue refund voucher along with compensation after giving appeal effect--Withholding of such refund on the ground that appeals had been filed before the High Court against the orders of the Appellate Tribunal for cancelling the assessments under Ss.62/65 and deleting the penalties under S.111 of the Income Tax Ordinance, 1979---Validity---No provision existed in the Income Tax Ordinance, 2001 for withholding of a refund on the ground that the order giving rise to the refund had been contested in a higher forum---Commissioner's comments showed that department admitted in principle that refund was due to the complainant subject to verification of payments--Federal Tax Ombudsman recommen­ded that the income-tax refund due to the complainant for the assessment year 1987-88 and 1988-89 be paid expeditiously after necessary verification and that the complainant's claim of compensation under S.102 of the repealed Income Tax Ordinance, 1979/S. 171 of the Income Tax Ordinance, 2001 be also decided.

Iftikhar Ahmad Khan, A.R. for the Complainant.

Shahid Irfan Haider, Taxation Officer for Respondent.

2006 P T D 1644

[Federal Tax Ombudsman]

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

Messrs PAK DUTCH CORPN., SIALKOT

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.1455 of 2003, decided on 22nd March, 2004.

Sales Tax Act (VII of 1990)---

----Ss. 45A(1)(4), 36(1) & 11(2)---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV , of 2000), S.2(3)---Power of adjudication---Recovery of tax not levied or short levied or erroneously refunded---Assessment of tax---Refund was sanctioned---Later on, department observed that refund was not admissible due to the fact that suppliers of the complainant were declared as suspected units involved in issuing fake/flying invoices and deposit of tax by the suppliers remained unverifiable---Ex parte order-in-original was passed holding that the refund claimed on the basis of fake invoices was inadmissible and directed the complainant to deposit the amount of tax along with penalty---Complainant contested that Collector of Sales Tax had no jurisdiction to issue show-cause notice and to disallow refund already sanctioned as S.45 of the Sales Tax Act, 1990 was substituted by Finance Ordinance, 2000 and powers of adjudication in cases falling under Ss.11(2) and 36 of the Sales Tax Act, 1990 covering cases of erroneous refunds were given to Collectorate (Adjudication)---Validity---Collector, Sales Tax was not competent to take action under S.45 of the Sales Tax Act, 1990 as decided by the Appellate Tribunal and order passed by the Collector being contrary to law fell in the definition of maladministration---Federal Tax Ombudsman recommended that Central Board of Revenue vacate the order-in-original of the Collector, Sales Tax and the case be sent to the competent authority for adjudication under the law.

Muhammad Ashraf Hashmi for the Complainant.

Javed Zafar Malik, AC (Sales Tax, Faisalabad) for Respondent.

2006 P T D 1675

[Federal Tax Ombudsman]

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

ABDUL HAMEED

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.C-1525-K of 2003, decided on 28th February, 2004.

Customs Act (IV of 1969)---

----S. 32---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss. 2(3), 9 & 11---Refund claim---Auction of scrap by department on basis of weight and payment of its cost, duty and taxes---Short delivery of scrap to bidder---Non-payment of amount recovered from bidder in excess---Validity---Department had not taken action on complaint, but had ignored orders of the senior officers---Refund claim partly sanctioned had not been paid to bidder---Such was a clear case of maladministration---Department could decide actual amount refundable to bidder by ascertaining quantity of scrap from copies of Bill of Entry, record of Bond Section, CPF Warehouse and the gate---Federal Tax Ombudsman recommended to C.B.R. to direct Collector to refund amount already sanctioned, ascertain correct quantity of scrap delivered to bidder, decide remaining amount refundable and sanction same within specified time.

Complainant in Person.

Mohammad Aleem Khan for Respondent.

Sajjad Haider, Assistant Collector of Customs (Appraisement).

2006 P T D 1688

[Federal Tax Ombudsman]

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

AMIN SOAP AND OIL INDUSTRIES (PVT.) LTD., SWABI

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 1575 of 2003, decided on 20th March, 2004.

Sales Tax Act (VII of 1990)---

----Ss. 7 & 13---S.R.O. 517(I)/89, dated 3-6-1989---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)--Determination of tax liability---Refund---Exemption---Compensation relating to exemption from customs duty and sales tax on raw materials was allowed and subsequently quota was enhanced but it was stated in the memo. that concession would not be available for purposes of sales tax--Constitutional petition was filed and High Court granted interim relief and allowed to tile bank guarantees---File was misplaced by the High Court office---Interim relief had expired and bank guarantees were enforced by the department---File was reconstructed and Constitutional petition was decided in favour of the complainant---Refund became due to the complainant and application for refund was moved with the Collector Customs--No intimation in this regard was given by the department in spite of the fact that complainant approached the concerned authorities from time to time---Department contended that uncertified and unauthenticated judgment of High Court was furnished by the complainant which did not bear the, seal of Court or signatures of Judge and claim was also not supported by mandatory documents---In absence of a verified copy of judgment and relevant supporting documents the refund claimed could not be processed---Validity---Certified copy of High Court judgment was furnished to the officer concerned which fact was duly acknowledged by the department---Department had encashed the bank guarantees and its plea that it had not been informed of the amount of refund was without any force---Documents mentioned in R.401 of the Treasury Rules including Form TR 41 were to be prepared by the authority issuing the refund and not by the recipient of the refund--No reason existed to further delay the refund of the tax recovered through encashment of bank guarantees which had to be furnished because of the totally untenable directions of the Central Board of Revenue that sales tax would be payable by the complainant in connection with the enhanced 25% quota of raw material allowed to it----Federal Tax Ombudsman recommended that the sales tax refund due to the complainant be properly worked out and issued to the complainant without further delay.

Safdar Amin Khawaja, Chief Executive for Complainant.

Amjad-ur-Rehman, Dy. Collector (Customs) for Respondent.

2006 P T D 1695

[Federal Tax Ombudsman]

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

Messrs SIMPSON WIRES (PVT.) LTD' through Director, Karachi

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.1498-K of 2003, decided on 13th February, 2004.

Sales Tax Act (VII of 1990)---

----S. 11-A---Central Excises Act (I of 1944), Ss. 3(b) & 4(2)---Central Excise Rules, 1944, Rr. 10 & 210---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss. 2(3), 9 & 11---Demand of sales tax as consequential and contingent liability on the strength of Order-in-Original passed in pursuance of show-cause notice determining Excise Duty, additional duty and penalty under Central Excises Act, 1944 and Central Excise Rules, 1944---Validity---Central Excises Act, 1944 and Sales , Tax Act, 1990 were two separate enactments having independent provisions for levy and recovery of duty or tax---Show-cause notice had not proposed invoking of provisions of Sales Tax Act, 1990 for recovery of escaped sales tax and its related dues---Order-in-Original had not created liability for sales tax etc., for which separate show-cause notice was a mandatory requirement under Sales Tax Act, 1990---No law existed authorizing automatic or consequential imposition of sales tax (etc.) in wake of Order-in-Original in respect of Central Excise Duty---Demand of undetermined and un­adjudicated sales tax liability on strength of such Order-in-Original would tantamount to harassment---Such acts of omission and commission of authority would fall in category of maladministration---Impugned demand was clearly arbitrary, illegal and ab initio void---Federal Tax Ombudsman recommended for cancellation of impugned demand.

Shamshad Younas, AR for the Complainant.

Dr. Nasir Khan (Assistant Collector, Sales Tax) for Respondent.

2006 P T D 1705

[Federal Tax Ombudsman]

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

Messrs ARAFATEX INDUSTRIES (PVT.) LTD., FAISALABAD

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.911 of 2003, decided on 28th February, 2004.

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

----Ss. 10, 7 & 8---Excess amount to be carried forward or refunded---Refund was withheld on the basis of fake invoices---Federal Tax Ombudsman recommended that refund claimed be processed by concerned officer "restricting the examination to the requirement of the provisions of Ss.7 & 8 of the Sales Tax Act, 1990 to be fulfilled by the complainant"---Show-cause notice was issued on the ground, among others, that only transactions were involved in the case and no physical transfer of goods had taken place---Complainant/assessee contended that issue of physical delivery of goods had already been settled by the Federal Tax Ombudsman and Deputy Collector of Sales Tax could not go beyond the provisions of Ss. 7 & 8 of the Sales Tax Act, 1990---Validity---Federal Tax Ombudsman did not agree with the complainant/ assessee that verification of physical transfer of goods would be outside the scope of Ss. 7 & 8 of the Sales Tax Act, 1990---Federal Tax Ombudsman recommended that the order-in-original be cancelled under S.45A of the Sales Tax Act, 1990 and all relevant aspects of the case such as the payment through cross cheques be re-examined in detail in order to conclusively establish the genuineness or otherwise of the transactions---If any evidence is to be used against the complainant such evidence be made available to it and action to be taken in the light of the verified facts.

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

----S. 2(3)(i)(a) & (b)---Sales Tax Act (VII of 1990) Ss. 10, 7 & 8---Maladministration---Refund---Request for supply of copies of evidence, that was being relied upon against, was refused on the ground of confidentiality and refund claim was rejected and penalty was levied for furnishing fake invoices---Validity---If any evidence was being utilized against the complainant the Deputy Collector (Refund) was under obligation to allow the complainant access to the said evidence and his refusal to do so was an act of maladministration.

(c) 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 to jurisdiction contained in S. 9(2)(b) of the Establishment of Office of Federal Tax Ombudsman Ordinance, 2000 was applicable where it was a matter of plain assessment or valuation etc.

Syed Saghir Tirmizey and Syed Hasan Askari, A.Rs. for the Complainant.

Dr. Moeenuddin Ahmad Wani and Nisar Ahmad, Assistant Collector for Respondent.

2006 P T D 1724

[Federal Tax Ombudsman]

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

Messrs CHERAT CEMENT CO., NOWSHERA

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.1619 of 2003, decided on 28th February, 2004.

Sales Tax Act (VII of 1990)---

----Ss. 7, 8 13 & 66---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S. 2(3)---Determination of tax liability---Stock---Refund---Exemption---Input tax was paid on stock acquired during the period of sales tax exemption---Exemption was withdrawn---Stock was used in taxable supplies---Sales tax paid on existing stock used in taxable supply was claimed as refund---Refund was allowed only for stocks acquired in the 12 months preceding the withdrawal of exemption as admissible under S.66 of the Sales Tax Act, 1990 and remaining amount was deferred for want of clarification from the Central Board of Revenue---Subsequently, senior officers of the Collectorate decided that since the one year limitation contained in S.66 of the Sales Tax Act, 1990 was quite clear there was no need to refer the matter to the Central Board of Revenue---Validity---When in original order clear reference was made to the need for a clarification from the Central Board of Revenue there was no reason why such a clarification should not have been obtained by the Collectorate---Language of S.66 of the Sales Tax Act, 1990 suggested that the one year limitation applied in cases of a refund having not been claimed due to inadvertence, error or misconstruction or input tax deduction not having been claimed where it was otherwise allowable----Input tax could not be claimed at the time of the purchase of the raw material since the end-product was exempt from sales-tax---Whether the limitation in S.66 of the Sales Tax Act,. 1990 would apply in such cases was doubtful---Such issue would probably be involved many cases of manufacturers of cement after the withdrawal of the exemption and a uniform treatment would be desirable---Reference by the Collectorate to the Revenue Division/Central Board of Revenue was considered as necessary by the Federal Tax Ombudsman---Federal Tax Ombudsman recommended that the matter be referred by the Collectorate of Sales Tax to the Central Board of Revenue who would consider the issuance of such clarification as may be considered appropriate.

PTCL 2003 CL 428 and GST 2003 CL 368 irrelivant.

Isaac Ali Qazi for the Complainant.

Imtiaz Shaikh, Deputy Collector for Respondent.

2006 P T D 1735

[Federal Tax Ombudsman]

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

Messrs JAFF TRADE

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. C-28 of 2004, decided on 26th March, 2004.

Sales Tax Refund Rules, 2002---

----Rr. 4 & 9---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss. 2(3), 9 & 11---Refund claim---Non-­processing of claim by department---Complainant alleged to have submitted all documents required under Sales Tax Refund Rules, 2002---Department claiming to be not at fault alleged non-filing of supportive documents by complainant as evident from Computerized Refund Claim Receipt showing type of document and number of documents submitted by him---No explanation was given for not replying to several letters written by complainant---No reason was given for not identifying missing documents and not asking complainant to furnish same---Held: Department had not dealt with claim with seriousness same deserved---Such was a case of maladministration arising out of action contrary to established practice and procedure without valid reasons, neglect, inattention, delay and deliberate withholding of refunds---Federal Tax Ombudsman recommended to C.B.R. to direct Collector to identify and obtain missing documents, decide claim within specified time and fix responsibility against officials responsible for maladministration and take suitable action against them.

Abdul Rahim Lakhany for the Complainant.

S.M. Shoaib, Deputy Collector of Sales Tax (Refund) Enforcement Collectorate.

2006 P T D 1749

[Federal Tax Ombudsman]

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

Messrs SUFI SAJJAD, Proprietor, Islamabad and another

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaints Nos. 1289 and 1290 of 2003, decided on 20th March, 2004.

Sales Tax Act (VII of 1990)---

----Ss. 30 & 45B---S.R.O. 380(I)/2002, dated 15-6-2002---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Appointment of officer---Admittedly, complaints were filed after the filing of appeals with Collector (Appeals) on the grounds that though the appeals had been filed before the Collector (Appeals) but there was no such legally appointed officer because S.30 of the Sales Tax Act, 1990 listing the officers of sales tax to be appointed by the Central Board of Revenue did not mention the Collector, Sales Tax (Appeals) and one of the officers to be so appointed---Validity---According to S.45B of the Sales Tax Act, 1990 any person aggrieved by a decision or order passed under S.11, 36 or 46 by an officer of sales tax below the rank of Additional Collector may prefer an appeal to the Collector of Sales Tax (Appeals)---Collector (Appeals) was a post clearly mentioned in the Sales Tax Act, 1990---No assistance was rendered by either of the parties to search and produce notification authorizing the Collector of Customs to hear the appeal---Responsibility lay on both sides but mainly on the department---Federal Tax Ombudsman Office, after intensive research, was able to locate Notification No. S.R.O. 380(1)/2002, dated 15-6-2002 by which Central Board of Revenue, in exercise of power under S.30 of the Sales Tax Act, 1990, had appointed the Collector, Collectorate of Customs, Sales Tax and Central Excise, to hear the appeals and this clinches the entire issue and cases were closed by the Federal Tax Ombudsman.

Mir Ahmed Ali for the Complainants.

Tariq Ahad Nawaz, Addl. Collector (Adjudication) and Muhammad Nasir Khan, Addl. Collector for Respondent.

2006 P T D 1753

[Federal Tax Ombudsman]

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

MUHAMMAD YOUNIS KHAN

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No.1676 of 2003, decided on 22nd March, 2004.

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

----Ss. 58(2) & 13(1)(d)---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Wealth statement---Revision of---Revised wealth statement was not accepted by the Assessing Officer on the ground that the same was not revised suo-motu but revision was made after a specific notice by the department regarding understatement of the value of property---Validity---Assessing Officer was not justified to hold that the revision of wealth statement was not valid because it had been made after the issuance of notice under S.13(1)(d) of the Income Tax Ordinance, 1979---Law did not provide that a wealth statement could not be revised after a notice relating to it had been issued as long as it was revised before the assessment had been made---If there had originally been a deliberate furnishing of inaccurate particulars the liability incurred under any provision of the Income Tax -Ordinance, 1979 in this regard would not be affected which did not mean that the revised wealth statement could be ignored by the Assessing Officer who could otherwise take such action for originally furnishing inaccurate particulars as may be feasible.

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

----Ss. 13(1)(d) & 58(2)---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S. 2(3)---Unexplained investment etc., deemed to be income---Wealth statement was revised---Source of investment, according to revised wealth statement, were explained---Addition was made by adopting the original declared value of property---Validity---Where Assessing Officer finds that the amount expended on making an investment or in acquiring a valuable article exceeds the amount recorded in the books of account or wealth statement, an addition could only be made under S.13 of the Income Tax Ordinance, 1979 if the assessee offered no explanation about the nature and source of the difference between the declared investment and the investment found by the Assessing Officer to have actually been made---Assessing Officer was required to examine the genuineness of sources and the extent to which those could be considered to have been invested in the properties---Revised value of the properties in the second wealth statement was immaterial because an addition could be made even in the context of the revised value if the sources of the revised value were not explained while on the other hand even if no revision of the value of the assets had been made, no addition could be made if the complainant/ assessee had adequate explanation for even the value proposed by the Assessing Officer---Addition was contrary to law, arbitrary, unreasonable and unjust and was also based on irrelevant grounds---Federal Tax Ombudsman recommended that the assessment for the assessment year, 2000-2001 be cancelled under S.122A of the Income Tax Ordinance, 2001 and a fresh assessment be made in accordance with law after allowing the complainant an opportunity of being heard and after considering the complainant's explanation in the light of the provisions of law.

Raja Saghir Ahmed for the Complainant.

Sajjad Azhar, DCIT for Respondent.

2006 P T D 1761

[Federal Tax Ombudsman]

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

Messrs SARHAD PUNJAB GOODS FORWARDING AGENCY, KARACHI

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. C-1613-K of 2003, decided on 30th June, 2004.

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

--Ss. 143, 102, 99(5), 96 & 50---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.10(3)---Refund---Limitation---Complainant had prayed for issuance of refund after adjustment of wealth tax demand with compensation for delayed refund---Respondents had raised preliminary objection in terms of limitation as provided under section 10(3) of the Establishment of Office of Federal Tax Ombudsman Ordinance, 2000---Document letters issued by Assessing Officer showed that he had called for some information to complete the refund procedure---Such information was already on record in the statements filed under section 143-B of the Income Tax Ordinance, 1979---Circle Assistant Commissioner of Income Tax had issued a letter in the year, 2004 whereby certain information and clarification was requisitioned from the tax payer relating to the claims of refund which had established that the issue relating to the claims of refund from years 1995-96 to 1999-2000 was not closed---Objection .about limitation was rejected by the Federal Tax Ombudsman in circumstances.

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

---Ss.50 & 96--Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Deduction---Excess deductions---Refund---Maladministration---Complainant's claim for refund was resisted on the ground that business was carried out by registered firm, complainant as individual was not entitled to claim refund and claim for refund of period 1990-91 to 1999-2000 was without legal basis as the tax paid/withheld was in full and final discharge of tax under the presumptive tax regime---Validity---Details of excess deduction and claims of refund were provided in all the statements filed under section 143-B of the Ordinance for the years 1995-96 to 1999-2000---Photocopies of all the applications for rectification along with evidence of receipt by the department were furnished by the complainant---Only one rectification application was admitted by the department--Maladministration was established---Federal Tax Ombudsman recommended the Central Board of Revenue to direct the Taxation Officer to make verifications regarding nature of the receipts, the prescribed rates of deduction and determine the amount of excess deductions made relating to the assessment years 1995-96 to 1999-2000 and resultant refund be issued after adjustment of outstanding wealth tax liabilities within 45 days.

Mazhar-ul-Hassan for the Complainant.

Ejaz Asad Rasul, IAC, Zone-C and Zia Agro, DCIT for Respondent.

2006 P T D 1774

[Federal Tax Ombudsman]

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

Rao KHURRAM ALI

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 1468-L of 2003 decided on 19th April 2004

Income Tax Ordinance (XXXI of 1979)---

----Ss.59(1), 61, '62, 63, 80-D & 86---C.B.R. Circular No. 21 of 2000, dated 11-9-2000, para. 4, Cl. (e)---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss.9(2) & 2(3)---Self Assessment---Notice for production of books--Evidence on record---Additional Tax---Jurisdiction---Maladministration---Assessing Officer, after issuing notices framed ex parte assessment under section 63 of the Income Tax Ordinance, 1979---Complainant being aggrieved alleged that Return filed by him was qualified under Self-Assessment Scheme---Representative of Commissioner of Income Tax contended that the matter related to assessment and Federal Tax Ombudsman had no jurisdiction and maladministration was denied---Further plea was that last assessment was made under S.80-D of the Ordinance on basis of turnover as Return had shown a loss which had robbed of the basis for comparison percentage-wise and Assessing Officer had acted in accordance with law---Validity---Declared income for year under consideration was higher than the preceding year---Similar was the position with respect to turnover and the Tax paid---Return qualified for acceptance under Self-Assessment Scheme---Plea that there was no basis for comparison was against Central Board of Revenue's Circular 21 of 2000 para. 2(iv) Explanation (a)---Show-cause notice should have been per para. 5(b) of the Circular prescribing Self-Assessment Scheme---Such inconsistencies/ deficiencies exposed mala fide, neglect/inattention/ inefficiency---Framing of an ex parte assessment was maladministration--Federal Tax Ombudsman recommended the Commissioner to cancel the assessment framed ex parte and Return filed under Self-Assessment Scheme be accepted.

Rana Munir Hussain for the Complainant.

Mahmood Jafary, D-CIT for Respondent.

2006 P T D 1787

[Federal Tax Ombudsman]

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

Messrs MADINA CLOTH HOUSE

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 144-L of 2004, decided on 16th April, 2004.

Income Tax Ordinance (XXXI of 1979)---

----Ss.13, 61, 62, 65 & 66-A---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), Ss.9(2) & 2(3)---Unexplained investment---Notice for production of books of account---Best judgment assessment---Power of revision by Additional Commissioner---Jurisdiction---Maladministration---Complainant, an individual, had filed return under Self-Assessment Scheme---Same was picked up for Total Audit---Wealth Tax Statement had revealed that complainant had purchased a plot and rebuilt his house---Such spendings were not explained---Notices under Ss. 13, 61, 62 & 65 of the Income Tax Ordinance, 1979 were issued and consolidated assessment for relevant years was made---Feeling aggrieved the complaint was filed---Complainant had filed appeal against the assessment order and absented from the proceedings, however Federal Tax Ombudsman found that the record was deficient of order sheet and existing information was utilized which could lead to wrong conclusion hence action should have been taken under section 66-A of the Income Tax Ordinance, 1979 and the report of Income Tax Inspector was undated---Federal Tax Ombudsman termed it as maladministration and recommended Central Board of Revenue to issue instructions to the Additional Commissioners to undertake more vigorous inspection of record and the Taxation Officer to be more punctilious.

None for the Complainant.

Karamatullah, DCIT for Respondent.

2006 P T D 1798

[Federal Tax Ombudsman]

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

Messrs AWT NIAZAMPUR CEMENT PLANT, RAWALPINDI

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 115 of 2004, decided on 6th April, 2004.

Sales Tax Act (VII of 1990)---

----5. 56---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Service of order, decision, etc.---Notice of adjourned hearing through telephone---Hearing were adjourned and fixed as many as five times---Last date of hearing was conveyed to complainant on telephone---Validity---Law did not provide for service of notice through telephone---Method adopted was illegal and could not be treated as a legal and proper service of notice of hearing---No notice for hearing in circumstances, was served on complainant---Complainant though had been seeking adjournments and matter was unnecessarily delayed by him but it did not mean that notice of adjourned hearing should not be given---Order passed without notice was void and illegal and maladministration was proved---Federal Tax Ombudsman recommended with the consent of both the parties that the order in original be vacated in terms of S.45A of the Sales Tax Act, 1990 and the case be finalized on merits after hearing the complainant by a neutral Collector (Adjudication) other than the one who had passed the impugned order within 30 days.

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

Muhammad Nasir Khan, Additional Collector of Customs for Respondent.

2006 P T D 1822

[Federal Tax Ombudsman]

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

Messrs KHYBER GALVANIZED ENGINEERING (PVT.) LTD.

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 621 of 2003, decided on 19th April, 2004.

Income Tax Ordinance (XXXI of 1979)---

----S. 24(c), 50 & 156---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Deduction not admissible---Assessee a private limited company---Salary of Director was disallowed which was subsequently allowed in full for the reason that the . same had already been assessed in his own hands---Again another show-cause notice was issued to make another rectification on the plea that tax had not been deducted from the salary and the same was not allowable as an expense in the light of S.24(c) of the Income Tax Ordinance, 1979---Validity---Addition could be made if the tax on salary had not been paid or had not been deducted and paid under S.50 of the Income Tax Ordinance, 1979---If the tax had been paid by the recipient of the salary the mere failure of the payer to deduct tax could not be the basis for an addition---Question whether tax had been paid by the Managing Director in his individual capacity was a question requiring consideration of fresh facts which was outside the scope of a rectification---Complainant/ company had been unduly harassed by making a second rectification on totally new grounds after its original rectification application had been accepted and by refusing to accept the complainant's plea in the context of second rectification made by the Assessing Officer---Maladministra­tion was thus proved---Federal Tax Ombudsman recommended that the second rectification order under S.156 of the Income Tax Ordinance, 1979 as well as the order under 5.221 of the Income Tax Ordinance, 2001 rejecting the complainant's subsequent rectification application be cancelled under S. 122A of the Income Tax Ordinance, 2001.

Maqbool Saigal, AR for the Complainant.

Faheem Muhammad, DCIT for Respondent.

2006 P T D 1906

[Federal Tax Ombudsman]

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

Messrs AKRAM INDUSTRIES LIMITED through Authorized Attorney

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaint No. 538-L of 2005, decided on 19th July, 2005.

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

----Ss.21-A, 19 & 219---Deferred Payment of Customs Duty Rules, 1991---Contract Act (IX of 1872), S. 72---Constitution of Pakistan (1973), Art. 27---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---S.R.O. 490(I)/91, dated 30-5-1991 (Deferment of Import Duty Rules, 1991)---S.R.O. 1076(I)/95, dated 5-11-1995---S. R.0.476(I)105, dated 19-5-2005---Deferment of collection of customs duties---Customs Department demanded additional amount as surcharge and as delayed payment surcharge due to calculation of surcharge and delayed payment surcharge @ 14% rather than 11%-Complainant contended that Customs Department had failed to encash the bank guarantee in time; that by not encashing bank guarantee the Department had waived their right to object to delay in payment; that delayed surcharge rose due to Department's own default and they could not be allowed to take benefit of their own failure and that levy of additional tax/surcharge/mark-up was illegal---Validity---Department had failed to encash the bank guarantee in time to recover the principal amount as well as surcharge @ 11% as guaranteed---Guarantee put up by the guarantor bank showed that the department had not asked the complainant to get condition 5(4) of the prescribed guarantee incorporated in the actual guarantee put up by the guarantor bank in order to secure surcharge on surcharge from the guarantor bank; yet the department was demanding, apart from 11% surcharge, which was covered by the actual bank guarantee, surcharge upon surcharge also, which was not covered by the guarantee put up by the guarantor bank---Demand raised about an amount chargeable as surcharge over surcharge was not valid and also not in consonance with the correct interpretation of the terms of the judgment of High Court to which the department was not entitled---All this amounted to maladministration---Federal Tax Ombudsman recommended that Central Board of Revenue direct the competent Customs Authorities to exclude from the notice through which demand had been raised, the amount of surcharge over surcharge.

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

---S. 21-A---Constitution of Pakistan (1973)---Establishment of Office of Federal Tax Ombudsman Ordinance (XXXV of 2000), S.2(3)---Deferment of collection of customs duties---Question was whether the Government was legally competent to levy surcharges---Such matter was to be decided by Courts of competent jurisdiction---Complainant may raise such questions of law before a competent Court for finding answer thereto.

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

----S. 10(3)---Procedure and evidence---Limitation---Complainant filed civil petition in Supreme Court of Pakistan, which was subsequently withdrawn as the complainant wanted to avail remedy under the Customs Act, 1969---Supreme Court dismissed the petition as withdrawn---Complainant filed complaint before the Federal Tax Ombudsman just after 18 days of withdrawal of its petition from Supreme Court---Matter was alive before withdrawal of petition---Complaint could not be termed as time-barred in terms of the provisions of Establishment of the Office of Federal Tax Ombudsman Ordinance, 2000 because the complainant had lodged its complaint before Federal Tax Ombudsman almost immediately after withdrawing its petition from the Supreme Court---Federal Tax Ombudsman was competent to investigate the complaint.

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

----S.9---Jurisdiction, functions and powers of the Federal Tax Ombudsman---Territorial jurisdiction---Department's objection that since transactions were made in Karachi the complaint fell outside the territorial jurisdiction of Regional Office, Lahore was misplaced because complainant's had its registered office at Lahore---Complaint could be heard at Regional Office, Lahore.

Sardar Qasim Ahmad Ali for the Complainant.

Javed Iqbal Butt, D.C. Customs for Respondents.

2006 P T D 2453

[Federal Tax Ombudsman]

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

MUHAMMAD TARIQ and another

Versus

SECRETARY, REVENUE DIVISION, ISLAMABAD

Complaints Nos. 94, 95, 96, 97 and 98-L of 2006, decided on 10th April, 2006.

Income Tax Ordinance (XLI of 2001)---

----Ss. 153 & 170---Refunds, claim for---Complaints against denial of refunds---Complainants had alleged that they had filed applications for refund on prescribed format with Taxation Officer, but no action was taken by him within prescribed period of 45 days and said act of Taxation Officer fell within definition of maladministration and insubordination---Complainants had requested that investigation might be conducted in the matter and Taxation Officer be directed to issue refund vouchers---In parawise comments it was submitted by the Department that complainants who derived income from labour contract and filed return claiming refunds, did not file applications for refund and that in absence of any application by complainants, statutory period of 45 days for passing refund orders, was not attracted and that complaints being devoid of any merit, could be rejected---Complainants had firmly stated that refund applications had been duly filed on the prescribed format which were received by Taxation Officer---Authorities having avoided to address the queries raised in the case, it was inferred that complainants did file refund applications which were not disposed of by Taxation Officer---Inaction of Taxation Officer in that regard amounted to maladministration---Ombudsman recommended that concerned Taxation Officer be advised to determine and issue refund amount due to the complainants as per law and that compliance report be submitted within 30 days from the date of receipt of the findings.

Muhammad Arif Malhi for the Complainants.

M. Ghiasuddin, (DCIT) for Respondents.

2006 P T D (Trib.) 16

[Income-tax Appellate Tribunal Pakistan]

Before Rasheed Ahmed Sheikh, Judicial Member and S.A. Minam Jafari, Accountant Member

I.T.As. Nos.177/KB, 921/KB and 103/KB of 2004, decided on 24th September, 2004.

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

----S. 32---Method of accounting---Test reports---Test reports were merely indicator which could not be outright applied on each and every unit of Ghee Mill---If such practice was allowed, the very purpose of maintaining books of accounts by an assessee in accordance with S.32 and the Rules made thereunder would frustrate.

1987 PTD (Trib.) 402 ref.

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

----S. 62---Assessment on production of accounts, evidence etc.---Rejection of accounts----In absence of pointing out specific material defects in the books of accounts and particularly when the declared Gross Profit rate was not ridiculously low, the declared trading account was bound to be accepted.

1986 SCMR 443 rel.

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

----S.62---Assessment on production of accounts, evidence etc.--Rejection of accounts---High consumption of raw material---Merely declaring high consumption of raw material or excessive wastage did not give rise to the basis for rejection of account version.

(1961) 42 ITR 237 (H. C.) rel.

(d) Income-tax---

----Cost of sales account---Showing sale of damaged seed in cost of sales account was not against the principle of accountancy coupled with it.

(e) Income-tax---

----Cost of sales account---Crediting sale of damaged seeds to the cost of sales account could not be termed to be a discrepancy; it could safely be held to be a difference of opinion on recording a transaction and nothing else.

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

----Ss. 62 & 32---Assessment on production of accounts, evidence etc.---Method of accounting---Addition on account of process loss---When the declared gross profit rate and also the declared sale price had been directed to be accepted by the First Appellate Authority and especially when debit side of the trading account had not been objected to then judicial hierarchy demands acceptance of the declared trading version---Making addition on account of process loss in such circumstances would not be sustainable---Such would be burdening the assessee twice; it was so because gross profit rate had been arrived at after excluding debit side of the trading account which includes, inter alia, consumption of raw material---Since loss of quantity of raw material during the course of processing had been included in consumption of raw material meaning thereby that this had become part of the trading account, therefore, it would amount to double jeopardy---Addition made in process loss could not be declared to have been lawfully done---Addition on account of process loss in the case of sunflower seeds and also in rapeseeds was unjustifiably made and the same was deleted by the Appellate Tribunal ---Assessee' appeal was allowed while that of department was dismissed.

1994 PTD 730 rel. Appeal No. 800/2002 ref.

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

----S.62---Assessment on production of accounts, evidence etc.---Estimation of selling price---Average selling price was worked out by taking minimum and maximum selling price declared by the assessee which was multiplied to entire quantity of seeds and in this manner total sales were evolved by the Assessing Officer---Validity---Evolving sales by adopting average selling price in a case where books of accounts were regularly employed and were also audited besides the company was quoted on Stock Exchange, was nothing but a slipshod formula which was highly deprecated---Such fact had also escaped consideration by the Assessing Officer that selling price in consumers goods generally varies on day to day basis apart from considering the other factors---Assessing Officer had miserably failed to bring home any substantial and cogent unequivocal evidence/material to disbelieve the declared selling price---Merely adopting average selling price in an account case was a rough method of computing sales which was disapproved by the Appellate Tribunal.

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

----Ss. 80-C (2)(a)(ii) & 50(5)---Tax on income of certain contractors and importers---Deduction of tax at source---Sale of damaged seed---Provisions of S.80-C of the Income Tax Ordinance, 1979 were applied, by the Assessing Officer assuming that seeds sold were not actually damaged and were sold in the market as such, and such transaction fell within the ambit of S.80-C of the Income Tax Ordinance, 1979---Validity---Since no deduction of tax under S.50(5) of the Income Tax Ordinance, 1979 was made, hence provisions of S.80-C of the Income Tax Ordinance, 1979 were not attracted in such eventuality---Deduction authority was Collector of Customs who had to collect tax under S.50(5) of the Income Tax Ordinance, 1979 at the time of import of goods and in absence whereof the provisions of S.80-C of the Income Tax Ordinance, 1979 were not attracted---Section 80-C(2)(a)(ii) of the Income Tax Ordinance, 1979 provided for presumptive tax in case of importers which were liable to deduction of tax under subsection (5) of S.50 of the Income Tax Ordinance, 1979---Departmental contention was not entertained by the Appellate Tribunal because no tax was collected on import of raw material as such provisions of S.80-C of the Income Tax Ordinance, 1979 were not attracted in such eventuality.

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

----Ss.24 & 50(4)---Deductions not admissible---Advertisement expenses---Addition in spite of deduction of tax---Validity---Details furnished had made it evident that all parties were identifiable and tax under S.50(4) was deducted at the time of making payments to them---In addition to those the parties were limited companies and payments were also made to them by way of crossed cheques---Since the Assessing Officer had categorically admitted that after deducting tax from those parties same was duly deposited in Government treasury, therefore, the assessee could not be saddled with burden of additional tax by disallowing and adding such expenses in its total assessed income---Addition was deleted by the Appellate Tribunal in circumstances being not lawfully made---Order of First Appellate Authority was modified to the extent of allowing advertisement expenses in its entirety.

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

----Ss. 24(c), 52 & 62---Deductions not admissible---Payment of interest---Assessing Officer, after passing order under S.62 of the Income Tax- Ordinance, 1979, whereby the addition was made under S.24(c) of the Income Tax Ordinance, 1979, had also passed another order in terms of S.52 of the Income Tax Ordinance, 1979 holding the assessee to be in default in respect of payment of interest on T.F.C. (s) made to Bankers Equity---Such amount was also charged to tax in terms of S.52 of the Income Tax Ordinance, 1979---Validity---Once the Department had exercised option to charge amount of certain payments to tax under S.52 of the. Income Tax Ordinance, 1979 by holding the assessee to be in default, the said amount could not be subjected to further tax in terms of S.24(c) of the Income Tax Ordinance, 1979 for the same reasons that the assessee had failed to withhold tax from those sums under S.50(4) of the Income Tax Ordinance, 1979 which clearly amounted to double taxation which could not be allowed under the scheme of Income Tax Law---First Appellate Authority was not wrong in deleting the addition and its findings were endorsed by the Appellate Tribunal.

1984 PTD 239 rel.

Javed Iqbal Rana, D.R. for Appellant.

Abdul Rahim Lakhany for Respondent.

Date of hearing: 15th September, 2004.

2006 P T D (Trib.) 46

[Income-tax Appellate Tribunal Pakistan]

Before Rasheed Ahmed Sheikh, Judicial Member

I.T.A. No.1909/LB of 2005, decided on 30th July, 2005.

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

---Ss. 63 & 134---Annulment of ex parte assessment---Appeal to Appellate Tribunal---Statutory notice issued to assessee having not been complied with, Assessing Officer proceeded to finalize assessment ex parte on basis of available facts on record---First Appellate Authority, after weighing pros and cons of facts of the case and on going through assessment record concluded that assessment order of Assessing Officer was not maintainable in law and the assessment order was annulled---Department had filed appeal against order of Appellate Authority below before Appellate Tribunal---Assessment order was completely silent about the date when statutory notices were issued and for which dates those were allegedly properly served and assessee had failed to comply with the terms of notices---Even the date of issuance of last statutory notice on basis of which ex parte proceedings were initiated, had not been incorporated in the body of assessment order---Statutory notices allegedly issued were not available on record---Was imperative on the part of assessing officer to incorporate defaulted date in body of assessment order on the strength of which ex parte proceedings were initiated---Such having not been done, ex parte assessment made under S.63 of Income Tax Ordinance, 1979 had rightly been annulled---Departmental objection was overruled and departmental appeal was dismissed.

Zafar Abbas, D.R. for Appellant.

Azhar Ehsan Sheikh for Respondent.

Date of hearing: 29th July, 2005.

2006 P T D (Trib.) 52

[Income-tax Appellate Tribunal Pakistan]

Before Khawaja Farooq Saeed, Chairperson

I.T.A. No.46/IB of 2005, decided on 24th May, 2004.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 120, 121, 130(8) & 131---Assessment---Appeal to Appellate Tribunal---Income Tax Officer, though was not bound to accept the Sales Tax record, but since the present taxation system was in the phase of development in the manner that the Department was going to accept whatever was declared by assessee as correct income, the reports prepared by other governmental agencies in said background could not straightway be thrown away---Estimate was not a substitute of Sales Tax Audit party report---Department of Sales Tax, was equal in status and competency to Income Tax Department--Ignorance of their finding by Assessing Officer in Income Tax proceedings without some tangible proof could not be appreciated---One should respect statement of tax-payer supported by another agency which was equally responsible and respectable---Since everybody should play his role in making said new improvement of taxation system in the country a success, Assessing Officer should also come out with pragmatic approach, which would not mean that taxpayers should be left unchecked, but things should now improve and Department must use its limits for collecting evidence against persons who were misusing facilities which had been brought to accelerate progressive system of taxation in the country---Government had decided to repose full confidence in the taxpayers by accepting income as declared by them---Betrayal of said confidence should be brought to, task, but on basis of direct proof---Keeping in view the spirit of mutual respect, harmony, success of progressive taxation system in the country and removal of mis-trust between taxpayers and Tax Department, the reports of the sister agencies should not be dis­respected---Declared sales of assessee for relevant year, should be accepted, in circumstances.

Muhammad Aslam Anwar for Appellant.

Shahid Zaman, D.R. for Respondent.

Date of hearing: 24th May, 2005.

2006 P T D (Trib.) 62

[Income-tax Appellate Tribunal Pakistan]

Before Muhammad Ashfaq Balouch, Judicial Member and S. A. Minam Jafri, Accountant Member

M.As. (Rect.) Nos.307/KB and 308/KB of 2004, decided on 24th March, 2005.

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

----S. 156---Rectification of mistake ---Assessee contended that while adjudicating its appeal the arguments, reliances and the case-law had not been mentioned, discussed and adjudicated upon by the Tribunal which constitutes mistake apparent from record warranting recalling the earlier order and re-adjudicating the appeals---Validity---Mistake of non-mentioning of the order sheet entries in their true perspective and not instancing the arguments and the case-law were apparent on record---Such position had resulted into incomplete adjudication of grounds, arguments and reliances---Case-law relied upon by the assessee in respect of scope of rectification application was squarely applicable and when the grounds, arguments and reliances were not mentioned, discussed and adjudicated upon the order was rectifiable---Confirmation of rejection of book version had been made without examining the documents filed and submissions made which actuality had escaped the attention of Appellate Tribunal---Mistake of law had arisen in orders which was floating on the surface of the record and warranted remedial approach to issue under consideration---All the orders passed by the Appellate Tribunal were recalled to be heard afresh.

2002 PTD (Trib.) 1583; 1999 PTD (Trib.) 3892; 2003 PTD (Trib.) 625; 2000 PTD (Trib.) 2193; 1980 PTD (Trio.) 74; 2000 PTD (Trib.) 2157; 2000 PTD 2407 and 79 Tax 108 (Trib.) rel.

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

----S. 62---Assessment on production of accounts, evidence etc.---Where books of accounts were produced in support of declared version same could not be discarded merely on account of history without pointing out the specific defects in the books of accounts.

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

----S. 62---Assessment on production of accounts, evidence etc.---Notice under S.62 of the Income Tax Ordinance, 1979 was issued before production and examination of books of accounts---After examining the books of accounts no further notice under S.62 of the Income Tax Ordinance, 1979 was issued---In the given facts and circumstances the earlier notice became irrelevant and infructuous.

2003 PTD 625 rel.

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

----S. 62---Assessment on production of accounts, evidence etc.---Notice issued before production and examination of books of accounts was irrelevant and rejection of book version without issuing any notice under S.62 of the Income Tax Ordinance, 1979 after examination of the books of account lacked judicial support and amounted to `CASUS OMISSUS'.

(e) Income tax---

----Res judicata---Each year was an independent assessment year and principle of res judicata did not apply to -the income tax proceedings.

(f) Income tax---

----Res judicata---Principle of res judicata could not operate in Income Tax proceedings and every assessment had to be finalized on its own merits.

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

----S. 156---Rectification of mistake---Court or Tribunal can be said to have an inherent power and jurisdiction to rectify a wrong or correct an error committed by itself.

ITAT (1965) 58 ITR 626 (AH) rel.

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

----S. 156---Rectification of mistake---Although the Tribunal has no power to review its own order yet it can certainly correct its mistakes by rectifying the same in case it is brought to its notice that the' material which was already on record before deciding the appeal on merits was not considered by it.

(1986) 158 ITR 755 rel.

Shahid Perveaz Jami for Appellant.

Shaikh Muhammad Hanif, D.R. for Respondent.

Date of hearing: 16th February, 2005.

2006 P T D (Trib.) 76

[Income-tax Appellate Tribunal Pakistan]

Before Esan-ur-Rehman, Judicial Member and Naseer Ahmad, Accountant Member

I.T.A. No.2689/LB of 2002 and W.T.A. No.5282/LB of 2003, decided on 24th March, 2005.

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

----Ss. 80D, 65, 66A & Second Sched. Cl. (126D)---Protection of Economic Reforms Act (XII of 1992), S.6---Minimum tax on income of certain persons---Profit and gains of the assessee were exempt from the levy of income tax under Cl. (126D) of the Second Schedule to the Income Tax Ordinance, 1979---Minimum tax under S.80D of the Income Tax Ordinance, 1979 was charged which was upheld by the First Appellate Authority on the ground that the Appellate Tribunal had categorically held that exemption from payment of tax under S.80D of the Income Tax Ordinance, 1979 was not available to the units whose profits and gains were exempt from tax udder Cl. (126D) of the Second Schedule of the Income Tax Ordinance, 1979---Assessee contended that in the presence of earlier order for the assessment year 1997-98, wherein tax under S.80D of the Income Tax Ordinance, 1979 was not charged on the basis that Cl. (126D) of the Second Schedule of the Income Tax Ordinance, 1979 was covered under the provisions of "otherwise notified" used in S.6 of the Protection of Economic Reforms Act, 1992 which still held the field and had attained finality, the orders were without jurisdiction and void ab initio---Validity ---Legality and the propriety of the decision was open to revisional proceedings under S.66A of the Income Tax Ordinance, 1979 apart from action under S.65 of the Income Tax Ordinance, 1979 on account of definite information but none of the recourse was taken either before passing the orders or even afterwards and as such the decision attained finality and was binding on the Department---Impugned orders had decided the same legal issue against the assessee taking a contrary view of the earlier decision---Vested right had been created in favour of the assessee with the order of the Assessing Officer for the assessment year 1997-98 which could not be taken away in the subsequent year---Re-adjudication of the same issue by the successor Assessing Officer was against the principles of administration of justice and fairplay---Principle that each year involves independent assessment was not applicable in the given facts and circumstances as the issue involved was not a question of fact but a question of law which had attained finality through the order of assessment year 1997-98 especially when Assessing Officer had not given any reason for deviating from the earlier decision---Assessing Officer erred in refusing to rectify the assessment order for the assessment year 1997-98 and to levy minimum tax under S.80D of the Income Tax Ordinance, 1979 in assessment year 2000-2001 and First Appellate Authority had also erred in confirming the treatment of the Assessing Officer---Orders of the authorities below were vacated and levy of tax under S.80D of the Income Tax Ordinance, 1979 was disapproved by the Appellate Tribunal---Assessing Officer was further directed to rectify the order for the assessment year 1998-99 and delete the tax charged under S.80D of the Income Tax Ordinance, 1979---As the appeals were decided on the preliminary issue that two contradictory orders on a question of law could not exist by at one and the same time, other issue/argument was not adjudicated by the Appellate Tribunal.

2004 PTD 3020 rel.

2001 PTD 1829; 2001 PTD (Trib.) 865 and Elahi Cotton Mills Limited v. Federation of Pakistan 1997 PTD 1555 ref.

(b) Income tax---

----In the presence of an earlier order, other orders contrary to the order cannot be allowed to hold the field for the simple reason that two contrary orders on a question of law cannot exist at one and the same time.

Shahid Perveaz Jami for Appellant.

Ghazanfar Hussain, D.R. for Respondent.

Date of hearing: 22nd March, 2005.

2006 P T D (Trib.) 85

[Income-tax Appellate Tribunal Pakistan]

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

W.T.As. Nos. 585/LB, 1919/LB to 1921/LB of 2002, decided on 5th December, 2003.

Wealth Tax Act (XV of 1963)---

----Ss. 2(5)(ii), 7, 17 & 134---Wealth Tax Rules, 1963, R.8(8B)-Leasing out flour mill along with building and machinery---Levy of wealth tax---Appeal to Appellate Tribunal---Assessee, a private limited company leased out flour mill along with building and machinery and Assessing Officer levied wealth tax under S.2(5)(ii) of Wealth Tax Act, 1963 and first appellate authority affirmed order of Assessing Officer---Assessee had challenged 'impugned order in appeal before Appellate Tribunal alleging that both Assessing Officer and Appellate Authority had wrongly interpreted S.2(5)(ii) of Wealth Tax Act, 1963 which had provided for definition of "assets" which were liable to incidence of wealth tax---Said definition of assets had provided that, in case of company, immovable property held for the purposes of business of sale or letting out property was liable to wealth tax---Explanation added to said section 2(5)(ii) of Wealth Tax Act, 1963, had provided that immovable property held for the purposes of letting out or business of letting out of property was liable to be taxed under wealth law---Pre­requisite of bringing on immovable property of a company into wealth tax was that it was held for the purpose of letting out---Object of company in question as given in its Memorandum of Association was milling of flour and said property was never held for the purpose of letting out or business of letting out---Assessee had contended that company in question was incorporated for the purpose of running a flour mill with the sole object of milling flour and leasing out of same was never contemplated by it at the time of commencement of business and that adverse and unfavourable circumstances had compelled it to let out flour mill---As company was formed with sole object of milling flour as evident from Memorandum of Association and that property was not held for the purpose of letting out, it did not come within definition of "assets" given in S.2(5)(ii) of Wealth Tax Act, 1963 and was not liable to wealth tax---Impugned order passed by Assessing Officer and affirmed by First Appellate Authority was vacated and assessments made by Assessing Officer for all the years under consideration, were cancelled.

2000 PTD (Trib.) 1826; PLD 1970 SC 29; PLD 1959 SC (Pak.) 453; 2000 81 Tax 7 (H.C. Lah.) = 2000 PTD 497; Indian Bank Ltd. v. CIT (1985) 153 ITR 282 (Mad.); CIT v. F.X. Periera and Sons (Travancore) (P) Ltd. (1990) 184 ITR 461 (Ker.); Perumai Naicker v. T. Ramaswamy Kore AIR 1969 Mad. 346; AIR 1940 Mad. 527; B.P. Biscuit Factory v. W.T.O. Karachi 1981 PTD 217; 1996 SCMR 1470; Abdul Razzak v. The Collector of Customs 1995 CLC 1435; 2000 PTD (Trib.) 1396; 2002 PTD 63 and CIT Lahore v. Muhammad Allah Bukhsh PLD 1977 Lah. 170 = 1977 PTD 13 ref.

Muhammad Arshad, I.T.P. for Appellant.

M. Moazzam Bashir, D.R. for Respondent.

Date of hearing: 22nd November, 2003.

2006 P T D (Trib.) 98

[Customs, Central Excise and Sales Tax Appellate Tribunal]

Before Saeed Akhtar, Member (Technical)

Appeal S.T.A. No.676/LB of 2004, decided on 28th May, 2005.

Sales Tax Act (VII of 1990)---

----Ss. 3, 11, 33, 34, 36 & 46---Qanun-e-Shahadat (10 of 1984), Preamble---Scope of tax---Cotton Seed---Loss in weight due to evaporation of moisture and sun-shine---Adjudicating officer ordered for recovery of sales tax on supply of cotton seed along with additional tax---Appellant contended that he had wrongly and illegally been charged to sales tax along with additional tax just for loss in weight due to evaporation of moisture and sun-shine without bringing any evidence of supply whereas Qanun-e-Shahadat, 1984 was applicable in the sales tax proceedings being quasi-judicial proceedings---Validity---Appellate Tribunal allowed yield within the range of 58% to 59% for the purposes of levy of sales tax---Central Board of Revenue in Textile Industry Notes allowed yield of cotton seed within the range of 58% to 59% for the purposes of levy of sales tax---Appellant's declared yield of cotton seed at the time of production was 63.17%-Loss of weight of 1.47% was due to loss of moisture as the cotton seed at the time of production was always in wet condition, which loses weight with the passage of time due to environmental factors---Appellant had deposited sales tax on the yield ratio, which was much above the ratio fixed by the Central Board of Revenue in the Textile Industry Notes and the yield ratio allowed in different cases by the Appellate Tribunal---Cotton seed admittedly was produced in wet condition which loses weight due to long storage and other environmental factors---Appeal was accepted and the order in appeal as well order-in-original were set aside by the Appellate Tribunal.

(1992) 66 Tax 89; 2001 SCMR 456 and 2003 PCTLR 671 rel.

Mirza Waheed and Miss Sidra Khalid for Appellant.

Ahmad Raza Khan, D.R. for Respondent.

Date of hearing: 22nd May, 2005.

2006 P T D (Trib.) 107

[Income-tax Appellate Tribunal Pakistan]

Before Muhammad Tauqir Afzal Malik, Judicial Member and

Muhammad Munir Qureshi, Accountant Member

I.T.A. No.2438/LB & 5597/LB of 2004, decided on 25th May, 2005.

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

----Ss. 122 & 131---Finalization of assessment---Addition of amount---Appeal to Appellate Tribunal---Appeal of assessee, had arisen out of order passed by Commissioner of Income Tax (Appeals)---Contention of appellant was that first appellate authority had unjustifiably approved addition under S.12(18) of Income Tax Ordinance, 1979 (since repealed) when amount in question Rs.9 lac was statedly not received by him by way of loan, advance or gift---Plea of appellant was that he had nowhere stated that said amount of Rs.9 lac was in nature of loan, gift or advance and that it was all along his stance that said amount represented "investment" made by his brother in the appellant's business---Assessing Officer found that amount in question had been received by appellant/assessee other than through normal Banking channel and appeared to be in the nature of gift to assessee from his brother and that being so, said amount of Rs.9 lac was found to be hit by mischief of S.12(18) of Income Tax Ordinance, 1979 (since repealed) and brought to tax accordingly---Validity---Assessment for 2000-01 had been finalized under S.59(1) of Income Tax Ordinance, 1979 (since repealed) by operation of law and that assessment had subsequently been taken up for "amendment" under S.122(1) of Income Tax Ordinance, 2001 when on scrutiny that said amount of Rs.9 lac had been received by appellant from his real brother otherwise than through crossed cheque or normal banking channels---Order had rightly been passed on 10-4-2003 under S.122 of Income Tax Ordinance, 2001 as said section was amended through Finance Ordinance, 2002 to extend its applicability to assessment orders issued under Ss.59, 59-A, 63 & 65 of repealed Income Tax Ordinance, 1979---Appellant/assessee had duly participated in assessment proceedings and had responded to notices issued and he never questioned jurisdiction of Assessing Officer---Appellant, in circumstances had acquiesced in the jurisdiction of Assessing Officer--As no assessment proceedings for 2000-01 in the case of Appellant were pending as on 1-7-2002, amendment to assessment finalized under S.59(1) of repealed Income Tax Ordinance, (by operation of law) could only have been made on 1-4-2003 under S.122 of Income Tax Ordinance, 2001---Appellant had described receipt of Rs.9 lac which had been given to him by his brother, as an investment in his business, by so doing he was clearly attempting to escape the mischief of S.12(18) of repealed Income Tax Ordinance, 1979---Ambient circumstances in case of assessee had left no doubt that amount in question could not possibly be appellant's brother's "investment" in the proprietary business of appellant and said amount was either a gift or a loan to appellant and same not having been routed through banking channels, was hit by mischief of S.12(18) of repealed Income Tax Ordinance, 1979---Assessing Officer's failure to properly identify provision parallel to S.12(18) of repealed Income Tax Ordinance, 1979 in Income Tax Ordinance, 2001 which was S.39(3) thereof, was not a fatal mistake.

2002 PTD (Trib.) 141; 2002 PTD 1858; 2004 PTD (Trib.) 1572, 2005 PTD (Trib.), 4534; 2003 PTD 1530; 2004 PTD (Trib.) 70; 2005 PTD (Trib.) 490 and (2005) 91 Tax 60 (FTO Pak) Vol 9. No. 3 Tax Forum 27 ref.

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

---Ss. 55, 60, 61, 62 & 134---Reduction in assessed turnover---Appeal to Appellate Tribunal---Appeal by Revenue Department had arisen out of order passed by Commissioner of Income Tax (Appeals)--Contention of Department was that Commissioner of Income, Tax (Appeals) had unjustifiably reduced assessed turnover from Rs.70 lac to Rs.6450,000----According to Department assessee had failed to produce any books of accounts/supporting documents at assessment stage and declared version in circumstances was rightly discarded and sales reasonably estimated at Rs.70 lac as against declared Rs.51,50,000 and there was no justification for C.I.T.(A) to reduce the same to Rs.64,50,000---Contention of Department was that a speaking order had been passed by Assessing Officer looking into all pertinent aspects having a bearing on determination of assessee's total income for the year---Notice under S.62 was also served---Assessee had contended that his stock position was never properly appraised and notice under S.62 of Income Tax Ordinance, 1979, made no reference to assessee's stock position at all; that being a case of one estimate by Assessing Officer substituted by another estimate by C.I.T (A), the Tribunal need-not interfere in the matter---No proper inventory of assessee's stock position was ever drawn up ,in the manner required by law---Even if it was correct that Circle Inspector did visit assessee's business premises, it did not automatically follow that he also made a proper inventory of assessee's stocks in the manner required by law---Any recommendation made by Inspector regarding assessee's stock to Assessing Officer, would be in the nature of a general estimate only---Relief as accorded by C.I.T(A), was fair and reasonable and called for no interference by Appellate Tribunal---Departmental appeal was rejected, in circumstances.

S.A. Masood Raza Qizalbash, D.R. for Appellant.

Sh. M. Akram for Respondent. Date of hearing: 3rd May, 2005.

2006 P T D (Trib.) 123

[Income-tax Appellate Tribunal Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member and

Shaheen Iqbal, Accountant Member

I.T.As. Nos.1606/KB to 1609/KB of 2003, decided on 9th March, 2005.

Income Tax Ordinance (XXXI of 1979)---

----Ss. 13, 59, 62, 65 & 134---Addition to total income---Appeal to Income Tax Appellate Tribunal---Appellant/assessee had objected to consolidated order of C.I.T.(A) for ielevant years on the ground that no approval was obtained by Assessing Officer while making impugned addition under S.13(1)(c) of Income Tax Ordinance, 1979---Validity---Assessing Officer in the assessment order, had nowhere mentioned any thing regarding approval of Inspecting Additional Commissioner which was mandatory requirement of law as mentioned in last proviso to subsection (1) of S.13 of Income Tax Ordinance, 1979---Assessee had established through evidence that Inspecting Additional Commissioner in response to the letter of Assessing Officer had granted/accorded the "permission" for additions under S.13(1) of Income Tax Ordinance, 1979, which could, in no way, be equated to "Approval" which was the requirement of law---Assessing Officer had failed to subscribe in assessment order under Ss.65/62 for all relevant years under review under which sub-clause, impugned addition was made---Observations made by C.I.T.(A) with regard to production and non-production of Books of accounts in impugned order were contradictory and against the facts of the case, as he had without any justification, rejected contentions raised by assessee and had upheld addition for relevant assessment year and set aside assessments for remaining assessment years---No justification was available for impugned additions as same had been made without prior approval of Inspecting Additional Commissioner for all relevant years---Consolidated impugned order of C.I.T.(A), was vacated and additions made for said years under S.13 of Income Tax Ordinance, 1979, were deleted.

2003 PTD'(Trib.) 1238; 2005 PTD (Trib.) 326 and PLD 2004 AJ&K 30 ref.

Udha Ram Rajput for Appellant.

Ms. Farzana Jabeen, D.R. for Respondent.

Date of hearing: 8th February, 2005.

2006 P T D (Trib.) 155

[Income-tax Appellate Tribunal Pakistan]

Before Rasheed Ahmad Sheikh, Judicial Member and Javed Tahir Butt, Accountant Member

M.As. Nos.287/LB to 289/LB, 331/LB to 333/LB of 2003, decided on 23rd April, 2005.

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

---Ss. 35, 133 & 134---Rectification of earlier order---Powers of Appellate Tribunal---Appellate Tribunal, in hierarchy of Income tax law, being the final fact finding body, its decision on question of fact was not liable to be questioned before the High Court or the Apex Court---Appellate Tribunal was a Court of appeal of fact as well as of law and it could interfere with its order, but could do so only on judicial considerations and on the basis of reasons that suggested clearly that it had committed an error of law or such fact that had vitiated its considerations and gone perverse for such reasons---Appellate Tribunal was certainly not empowered to imply its jurisdiction arbitrarily---Whatever it would do, must be done in consonance with sound judicial principles and in accordance with well-accepted doctrines applicable to judicial bodies and it must maintain judicial balance between the claims of public revenue and the tax payer---Being the final Authority on question of fact, Tribunal in deciding an appeal was bound to consider all evidence and the arguments raised by parties---Was not enough that the Tribunal mere recorded a bare conclusion without setting out any reason in support thereof; if the Tribunal had done so, it could not be assumed that in so recording the conclusion, the Tribunal had considered the evidence---Tribunal had to act judicially in the sense that it had to consider with due care all material facts and evidence in favour and against assessee and record its findings on all contentions raised by assessee or the Commissioner in the light of evidence and relevant law.

2003 PTD 647 ref.

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

----S. 35---Rectification of mistake---Scope and extent---Under provisions of S.35 of Wealth Tax Act, 1963, there was no ambiguity to the factum that a mistake capable of being rectified was not confined to clerical or arithmetical mistake; on the other hand it did not cover any mistake which could be discovered by a complicated process of investigation, argument or proof---Phrase used in S.35 of Wealth Tax Act, 1963 "any mistake apparent from the record" comprehended error which, after a judicious probe into the record from which it was supposed to emanate, were discerned--Mistake was mostly subjective and dividing line in border area was thin and indiscernible and it was something which was duly and judiciously instructed mind could find out from the record---Mistake could be either of law or of fact which could be rectified, which however, would depend on facts and circumstances of each case---If an obvious error a lurking mistake or an omission leading to a mistake was discovered from record, it could be and ought to be corrected and rectified---If it related to a fact it should be possible to say "that was obviously a mistake" when an earlier order passed by an Authority was founded on a mistaken assumption and the error was discovered, the power under S.35 of Wealth Tax Act, 1963 could be resorted to because the very basis of earlier order required rectification--Fact that Tribunal was the last fact finding Court, could not be denied meaning thereby that Tribunal on factual controversy was empowered to rectify its order provided material of primary importance, which was placed on record, had escaped consideration---Had there been any question of law involved and the higher Appellate Court had answered that question against the assessee, the Tribunal would have certainly become functus officio to rectify its order---Section 35 of Wealth Tax Act, 1963, without any uncertainty of meaning, conferred jurisdiction not only upon Wealth Tax Officer, the Appellate Assistant Commissioner, the Commissioner, but also upon the Appellate Tribunal to rectify its order if any mistake apparent from record either on its own motion or any such mistake which had been brought to the notice of said Authorities---Clog, however, had been put on the powers of the Tribunal where, as a result of rectification, enhancement in assessment would occur, no such rectification would be made without giving a reasonable opportunity of being heard to assessee-Limit of time had also been provided in subsection (4) of S.35 of Wealth Tax Act, 1963 whereby rectification of order could be sought; said subsection had provided that rectification of mistake could be made at any time within four years from the date of any order passed by tax authorities.

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

----S. 35---Rectification of mistake---Powers of Authorities---Neither the judgment of Apex Court nor that of High Court would create any hindrance in the way of Tribunal, the Commissioner, the Appellate Assistant Commissioner and the Wealth Tax Officer that it/he could not rectify its/his order where factual controversy had been brought to the notice of said Authorities---Section 35 of Wealth Tax Ordinance, 1963 had extended wide powers to the said Authorities that if they, after examination of record, found out that mistake of law had crept in their orders they could suo motu rectify such orders; in such eventuality Appellate Tribunal was vested with the powers to rectify its order on factual premises, that was why Legislature in its wisdom had conferred jurisdiction not only upon the Tribunal, but also on other tax authorities such as Commissioner, Appellate Assistant Commissioner and Wealth Tax Officer to rectify the mistake, which was apparent from the record and had been brought to its notice or on its own motion, reason being if there was a factual controversy that ought to be rectified at the Appellate Tribunal level or the authorities.

Dr. Shahid Siddique Bhatti, D.R. for Applicant.

Zia H. Rizvi for Respondent.

Date of hearing: 23rd April, 2005.

2006 P T D (Trib.) 172

[Income-tax Appellate Tribunal Pakistan]

Before Muhammad Tauqir Afzal Malik, Judicial Member

Muhammad Munir Qureshi, Accountant Member

M.As. Nos.22/LB and 23/LB of 2005, decided on 24th May, 2005.

(a) Precedent---

----Judgment "per incurium"---No requirement of law existed to the effect that a view once taken wrongly was required to be so taken forever---Indeed it was absurd to hold that a view stated by a Bench to be incorrect, be repeated by that Bench in another judgment simply because it had once acquiesced in the incorrect view---No Judge was expected to be a slave to his own judgment---Judge could become wiser at any time as a result of some discovery' that he made on his own or as the result of something pointed out to him by another Judge or by counsel---Where a cited judgment was shown to be rendered "per incurium", same was of no consequence in the eye of law---When a cited judgment had been held to be renderedper incurium' then there could be no question of following that judgment and "stare decisis" rule would not apply and said judgment could not be referred to a larger Bench on mere asking of a party. [pp. 175, 176, 177] A, B & C

(2004) 89 Tax 234 (Trib.); B.P. Biscuit Factory's case 1996 SCMR 1470; 1997 PTD (Trib.) 879; 1998 PTD (Trib.) 2552; 2003 PTD (Trib.) 835; (2004) PTD 2180; (1998) SCMR 1618; PLD 1963 (W.P.) Kar. 79; 1994 SCMR 1900; PLD 1987 SC 145; PLD 1987 SC 172; 2005 PTD 280 Trib; Govt. of Andhra Pradesh and another v. B. Stayanarayana Rao by (LR's) (2004 (4) SCC 262; State of U.P. and another v. Suynthetics and Chemicals Ltd. and another 1991 (4) SCC 139; Young v. Bristol Aeroplane Co. Ltd. (1944) 1 KB 718 and (1944) 2 All. ER 293 ref.

Wealth Tax Act (XV of 1963)---

----S. 35---Rectification of order---No cause was available for any intervention by Appellate Tribunal under S.35 of Wealth Tax Act, 1963 as no patent mistake, either of fact or law, was floating on the surface of Tribunal's impugned order that could be rectified.

Shahbaz Butt for Applicant.

Mahmood Aslam, D.R. for Respondent.

Date of hearing: 21st May, 2005.

2006 P T D (Trib.) 196

[Customs, Central Excise and Sales Tax Appellate Tribunal]

Before Raj Muhammad Khan, Member (Judicial) and Muhammad Wall Khan, Member (Technical)

Appeal No. S.T. 285/PB of 2003. decided on 27th May, 2005.

Sales Tax Act (VII of 1990)---

----Ss. 2(14), 2(44), 3(1), 6(8), 7(1), 11(2), 33, 34, 36 & 46---General penalties and additional tax---Imposition of---Appeal to Appellate Tribunal---Auditors, during course of audit of record of appellant having pointed out certain discrepancies and irregularities, Adjudication Officer, in the light of report of Auditors, issued notice to appellants alleging violation of relevant sections of Sales Tax Act, 1990 and decided that; appellants would pay additional tax under S.34 of Sales Tax Act, 1990 since they had adjusted wrongly input tax against exempt supplies made by them; that appellants would pay sales tax on fixed assets as and when those were cleared whereas they would not pay sales tax on scrap since the tax thereon had already been paid by them ; that appellants having paid sales tax on advances received by them, the charge of non-payment of sales tax on advances received by appellants was not proved; that since deduction of input tax paid on mobile phones from output tax due from appellants was made in violation of S.7(1) of Sales Tax Act, 1990, appellants would deposit amount of Sales Tax so deducted along with additional tax; that deduction of input tax on electricity consumed in the Canteen, Dispensary, Guest House and Street lights being not admissible under S.8(1) of Sales Tax Act, 1990, appellants would deposit amount to be worked out by the Collectorate along with Additional Tax under S.34 of Sales Tax Act, 1990 till the time of depositing; and that the Adjudication Officer also imposed a personal penalty equal to 3% of total tax imposed on appellants under S.33(2) of Sales Tax Act, 1990---Validity---Held, so far as payment of additional Tax was concerned, appellants had paid amount of input tax so claimed much before issuance of show-cause notice to them without any reservation which had shown that it was due to inadvertence that they made adjustment of input tax against exempted supplies-Conduct of appellants had clearly shown no wilful evasion of tax, imposition of additional tax on appellants was not justified, therefore additional tax imposed on appellants, was remitted accordingly---Appellant had admitted that they had paid tax on scrap as confirmed by Adjudication Officer and demand of Sales Tax on fixed assents was not justified in view of judgment of High Court reported as 2002 PTD 976 and a host of decisions of various Benches of Appellate Tribunal---Department had furnished no evidence to show that a judgment contrary to said judgment of the High Court had been passed either by Supreme Court or any High Court---Order of adjudicating officer directing appellants to pay Sales Tax on fixed assets was' set aside, in circumstances---Appellants being registered person as manufacturer of cement which was liable to Central Excise Duty, their taxable activity was confined to manufacture of cement inside the factory---Extension of manufacture of cement outside the boundary walls of the factory to cover Sales Tax paid on telephone bills in other cities, was stretching scope of definition of "manufacture" too far to justify deduction of input tax paid on telephone bills against output tax due from appellants on manufacture of cement---Since said issue basically cropped up due to interpretation of provisions of law differently by both the sides, appellants were not liable to pay additional Tax and penalty--Electricity used within the compound of cement factory was used for taxable activity of manufacturing of cement---Sales Tax paid on electricity bills by the appellants was added to the value of areas identified by the department in which electricity was consumed---Deduction of input tax paid on electricity consumed in the areas , was admissible under law---Impugned decision of adjudicating officer on that count, was set aside---Appeal was partly accepted and impugned order-­in-original passed by Adjudicating Officer was modified accordingly.

2001 PTD (Trib.) 2590; 2002 PTD 976; Messrs Olympia Industries v. A.C. Sales Tax 2002 PTC 776; D.G. Khan Cement Company Ltd. and others v. Federation of Pakistan and others 2004 SCMR 456 and 2002 PTD (Trib.) 300 ref.

Isaac Ali Qazi for Appellant.

Qurban Ali Khan, D.R. and Fazal Hameed, Sr. Auditor for Respondent.

Date of hearing: 21st May, 2005.

2006 P T D (Trib.) 211

[Income-tax Appellate Tribunal Pakistan]

Before Khawaja Farooq Saeed, Chairperson and Mrs. Abida Ali, Accountant Member

W.T.As. Nos. 140 to 143/PB of 2002, decided on 2nd June, 2005.

Wealth Tax Act (XV of 1963)---

----Ss. 2(16) & 16---Wealth Tax Rules, 1963, R.8(3)---Levy of Wealth Tax on land---Assessee's agricultural land was found located adjacent to his house and was treated as an urban immovable property chargeable to tax---Properties of assessee which had mostly been given on rent were subjected to tax at a rate which was higher than ten times of rented value of the property---Car was also added in the wealth while exemption in respect of a carrier wagon was also disallowed---No distinction existed between an urban agricultural land or rural agricultural land---Land wherever cultivated and so included in revenue record, could be held as an agricultural land---Test was that same was actually cultivated and land revenue was being paid on the same having so registered in the revenue record---Three out of four co-owners of land in question had been allowed exemption, but assessee had been denied the said exemption---Treatment to assessee, in circumstances being unjustified, Assessing Officer was directed to delete entire agricultural land from the wealth of assessee---Premises which had been given on rent by assessee, would be assessed at ten times of actual rent received by assessee and property, if any, which had not been let out would remain at the same value on which Commissioner Income Tax (Appeals) had assessed---Regarding car, Assessing Officer would confirm that assessee was not owner of any car and then exclude the same while calculating the tax afresh--Wagon, however was considered as taxable as no proof for its use for agricultural purpose had been produced at any stage of proceedings.

Mir Asad Khan for Appellant.

Mirza Khan, D.R. for Respondent.

Date of hearing: 2nd June, 2005.

2006 P T D (Trib.) 288

[Income-tax Appellate Tribunal Pakistan]

Before Khawaja Farooq Saeed, Chairperson and Mahmood Ahmad Malik, Accountant Member

I.T.As. Nos. 1356/IB to 1358/IB of 1998-99, 343/IB of 2001-02, 823/IB of 2003, 1079/IB to 1081/IB, 1095/IB to 1097/IB of 2004; 1458/IB to 1460/IB of 1998-99, 295/IB of 2001-02 and 814/IB of 2003, decided on 1st January, 2005.

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

---Second Sched., Part-I Cl. (176) and S.30---Protection of Economic Reforms Act (XII of 1992), Preamble---Power Policy of 1994---Power generation---Exemption---Interest received by the assessee on unutilized balances lying in the bank---Taxation---Validity---Exemption was only and strictly to profit and gains on sale of electricity and it did not in any way provide room for auxiliary or ancillary item either---Interest income from unutilized regular business accounts for the matter was not even an ancillary income to the power generation---Protection of Economic Reforms Act, 1992 was available to the persons who were notified in the Schedule to the said Act.

Genertech Pakistan Ltd. v. ITAT (2004) 90 Tax 33 (SC Pak.) = 2004 PTD 2255 distinguished.

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

---S. 14---Protection of Economic Reforms Act (XII of 1992), Preamble---Notification No.1283(I)/90, dated 13-12-1990---Exemption---Protection of Economic Reforms Act, 1992 provided that the exemption was provided specifically under Notification No.1283(I)/90, dated 13-12-1990 which had been issued under S.14 of the Income Tax Ordinance, 1979---Protection of Economic Reforms Act, 1992 applied only on those projects which were specifically mentioned in its Schedule.

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

---Second Sched: Part-I CI. 176 & S.30---Protection of Economic Reforms Act (XII of 1992), Preamble--Power Policy of 1994---Power generation---Exemption---Interest income---In pre-production period when the actual work had not started, there was no question of exemption either on the main produce or other sources but it did not hold that after setting up of the industry its income from all sources shall be exempted---In statutory construction the provisions with regard to exemption were subject to strict interpretation---Unlike charging provisions doubt was to be resolved in favour of the department---Since law was very clear and exemption was only from power generation, appellate Tribunal did not subscribe to the view that interest income was covered with the protection.

Genertech Pakistan Ltd. v. ITAT 2004 SCMR 1319 = 2004 PTD 2255 distinguished.

General Pakistan Ltd. v. ITAT 2004 SCMR 1319 = 2004 PTD 2255; 1999 PTD (Trib.) 708; (2000) 112 Taxman 629 S.C.; (1999) 102 Taxman 94 (S.C.); (1936) 4 ITR 270 (P.C.) and PLD 1977 Lah. 170 = 1977 PTD 13 rel.

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

---S. 31(1)(b)---Deductions---Interest income---Assessee was entitled to expenses which he had incurred wholly and exclusively for earning interest income---Appellate Tribunal left the matter for the Assessing Officer to determine the actual expenses laid out wholly and exclusively for the income earned from interest---Appellate Tribunal agreed that even for dealing with the bank, maintenance of record etc; some infrastructure was required.

1989 PTD 211; PLD 1972 Kar. 186 and (2003) 87 Tax 416 and (1982) 467 Tax 56 H.C. rel.

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

----Ss. 38(6), 22 & 30---Limitation as to set-off and carry forward of losses in the case of firms, partners, etc.---Setting off of unabsorbed depreciation---Set off and carry forward of depreciation was a statutory allowance and it could not be denied unless claim was proved to be legally defective---Since this situation did not exist setting aside was not the answer in the case---Appellate Tribunal instructed the department to allow the same.

I.T.A. No.636(IB)/1998-99 and 1999 PTD (Trib.) 1528 rel.

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

----S. 12(9A)---Protection of Economic Reforms Act (XII of 1992), Preamble---Power Policy of 1994---C.B.R. Circular No.26 of 1999, dated 30-9-1999---Power generation---Exemption---Income deemed to accrue or arise in Pakistan---Reserve---Assessee contended that First Appellate Authority failed to appreciate that company's reserves represent nothing but its undistributed profits and gains derived from its electric power generation project---Since entire amount of company's profit and gains from its electric power generation project were exempt from tax the First Appellate Authority should have deleted the addition instead of setting it aside on merits---Validity---Held, it was correct that income for power generation was exemption but it did not mean that provisions regarding charge under deemed income also stood eliminated---Section 12(9A) of the Income Tax Ordinance, 1979 provided of an entirely different situation and had come out to protect an ordinary share holder---Only the income power generation was exempt and other sources were taxable---Language of the Power Policy, 1994 did not say that the income from all sources shall be exempt---Neither it allows exemption from all sources nor it suspends Income Tax Ordinance, 1979 while taxing such power generation plants from sources other than power generation itself---Amount of reserve may entirely be from the income of power generation but on such reserves provisions of Income Tax Ordinance, 1979 in terms of S.12(9A) could be applied---Since issue had been set aside, the Assessing Officer being bound by the instructions of Central Board of Revenue could be of more help to the assessee than Appellate Tribunal.

Fecto Belarus Tractors v. Pakistan through Ministt'y of Finance 2001 PTD 1829; Julian Hoshang Dinshaw Trust and others v. ITO 1992 SCMR 250 = 1992 PTD 1; Uthman Gee Industries v. CIT 2002 PTD 63 and Central Insurance Company v. C.B.R. 1993 PTD 766 = 1993 SCMR 1232 ref.

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

---S. 12(9A)---Income Tax Rules, 1982, R.203AA---Protection of Economic Reforms Act (XII of 1992), Preamble---Power Policy of 1994---C.B.R. Circular No.26 of 1999, dated 30-9-1999---Power generation---Exemption---Income deemed to accrue or arise in Pakistan--Reserve---Term "reserves" as defined in R.203AA of the Income Tax Rules, 1982 for the purpose of S.12(9A) of the Income Tax Ordinance, 1979 did not include any amount the company could not distribute due to any legal restrictions---Central Board of Revenue vide paragraph 4 of the Circular No.26 of 1999, dated 30-9-1999 had clarified that the term "reserves" for the purposes of S.12(9A) of the Income Tax Ordinance, 1979 did not include any income, profit or gain which under any restriction could not be distributed.

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

----S. 12(9A) & Second Sched., Part-IV Cl. (59A)---Income deemed to accrue or arise in Pakistan---Disallowance of "provisions for doubtful debts" in computation of excess reserves under S.12(9A) of the Income Tax Ordinance, 1979---Validity---Provision for doubtful debt was a claim relatable to profit and loss account and it could not be added in the amount of reserve in defiance to Cl. 59A of Part-IV of the Second Schedule of the Income Tax Ordinance, 1979 read with S.12(9A) of the Income Tax Ordinance, 1979---Since the Appellate Tribunal did not have figures and the status of the assessee, claim of set aside was disturbed---Assessing Officer was directed to strictly comply, with the instructions given by the Appellate Tribunal.

2004 PTD (Trib.) 1062 rel.

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

----S. 88---Charge of additional tax for failure to pay tax with the return---Illegal charge of additional tax---Assessee contended that after giving a finding the `nil' return was filed, no additional tax could be imposed under S.88 of the Income Tax Ordinance, 1979 as such additional tax could only be imposed if tax was not paid on the basis of the return---Validity---Where facts were not disputed and the legal position was obvious leaving the issue undecided was not justified---Set aside or remand order was made in doubtful situations or where the determination of facts required scrutiny of record---No tax was payable on the basis of return---Charge of additional tax under S.88 of the Income Tax Ordinance, 1979 was not justified and the same was deleted by the Appellate Tribunal.

1988 PTD (Trib.) 647; I.T.As. Nos.541 and 542/IB of 1998-99 and I.T.A. No.636(IB) of 1998-99 rel.

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

----Third Sched: R.7(b)(i) & Second Sched: Cl. 176---Power generation project-Exemption-Disposal of assets and treatment of resultant gains or losses---Profit on sale of fixed assets and sale of scrap---Department contended that the sale proceeds of an asset exceeding the written down value shall be deemed to be the income chargeable under the head "income from business or profession" while the contention of the assessee was that these profits were of a power project---Exemption was not restricted to sale of electricity but any and all incomes arising from power project---Validity---Sale of scrap was a business income---Scrap was an ancillary item of the main project---In exemption provisions, the scope of exemption is always to the specific business and in most of the cases it was only one source---Unlike interest, scrap was an offshoot of main business---Restrictive scope of exemption and patent law did not give any reason to extent over arms to allow exemption to any other source than the power generation under Cl. 176 of the Second Schedule of the Income Tax Ordinance, 1979---Departmental appeal was allowed in the manner that sale of scrap though held to be as business income, was declared as not exempt from tax and was not covered under R. 7 of the Third Schedule of the Income Tax Ordinance, '1979.

1989 PTD (Trib.) 1199 rel.

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

----S. 27---Capital gain---Foreign exchange gain---Foreign exchange loss mainly comprised of unrealized gains and losses on conversion of foreign currency loans and favourable balances-Gain on re-valuation on foreign currency was not real income as long as the foreign currency was not actually exchanged for Pakistan rupee---Currency exchange gain was, otherwise not liable to tax as being capital in nature.

1998 PTD (Trib.) 288 and 541 and 542/IB/1998-99 rel.

(l) Income tax---

----Turn key contract---Agreements were separate of supply as well as other civil work etc.---All contracts were separate and specific and category of work in each case had separately been defined therein---It was not a case of one complete contract of construction, installation and other ancillary work--Such a contract could not be called a `turn key' contract.

(m) Income tax---

----Turn key project---Definition---Turn key project is the one in which the contractor completes the project at his own in respect of every thing including starting from laying of foundation to set up the undertaking till it is ready for production.

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

---Ss. 52, 86, 80C(2)(b), 50(4), Proviso---C.B.R. Circular No.4 of 1995, dated 9-7-1995---Liability of person failing to deduct or pay tax---Assessee in default---Charge was crated on account of differential of withholding tax---'Validity---Facts as well as the order of the Assessing Officer did not give any convincing reason that it was a case of `turn key' project---Different works had been assigned to different persons---Tax calculated in addition to the tax deducted by no means was justified---Further, assessee claimed that all the parties to the contract were tax payer in Pakistan and tax could always be charged from them which hopefully must have been charged by now---Even otherwise the provisions of S.52(A) of the Income Tax Ordinance, 1979 could still be invoked if there was some deficiency---Held, that charge created by holding the company as assessee in default was highly unjustified; there may be a doubt with regard to the amount of deduction on account of purchase of machinery, since both of them were being charged to tax in Pakistan, the agreement to be treated as a normal construction and supply agreement and not a turnkey one, the difference if any, could always be charged from the companies---Appellate Tribunal reconfirmed deletion of the tax created on account of differential of withholding tax.

2004 PTD (Trib.) 2695; Ghulam Muhammad Landkhor v. Safdar Ali PLD 1967 SC 530; Irfan Gul Magsi v. Haji Abdul Khalid Soomro and others 1999 PTD 1302; 2002 PTD (Trib.) 3118; (2001) 83 Tax 22 (Trib.) 2001 PTD (Trib.) 2605; 2000 PTD (Trib.) 2193; -CIT v. Asbestos Industries Ltd. 1993 PTD 459 and Noon Sugar Mills Ltd. v. CIT Rawalpindi PLD 1990 SC 156 = 1990 PTD 768 = 1990 MLD 1977 ref.

Dr. Ikram-ul-Haq for Appellant.

M. Arif Khan, D.R. for Respondent.

Date of hearing: 27th November, 2004.

2006 P T D (Trib.) 315

[Income-tax Appellate Tribunal Pakistan]

Before Khalida Yasin, Judicial Member and Zafar Iqbal, Member Technical

Customs Appeal No.K-514 of 2005, decided on 7th October, 2005.

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

----Ss.16, 32 & 181---Imports and Exports (Control)( Act (XXXIX of 1950), S.3(1)---S.R.O. 374(1)/02, dated 15-6-2002---Power to prohibit or restrict importation and exportation of goods---Import of old and used Equipment/Accessories for Industrial Alcohol Project---Department after examination had alleged that the consignment consisted of different types of valves which were not importable---Adjudication Collectorate alleged that the appellant did violate the provisions of Ss.16 and 32 of the Customs Act, 1969 read with S.3(1) of the Imports and Exports (Control) Act, 1950---Appellant contended that old and used machinery parts or components imported for their plants, if not importable under Import Policy were releasable under S.181 of the Customs Act, 1969 and its release be allowed against payment of redemption fine---Department passed order for outright confiscation of offending goods---Validity---No misdeclaration was made by importer and as such provisions of S.32 of the Customs Act, 1969 were not attracted---Goods claimed to be restricted were part and parcel of the plant and were required for its operation in manufacturing of industrial alcohol, as such assumption that it was an independent import of certain prohibited goods with the intention to violate law could not be inferred---Appellate Tribunal allowed release of such goods on payment of fine equivalent to 25% of their value in addition to import levies.

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

----S. 32---Untrue statement, error, etc.---Import of old and used goods---Qualified statement---Existing practice was that where old and used goods were imported, declaration with regard to description of goods was not accepted---No qualified statement was made by the appellant to attract provisions of S. 32 of the Customs Act, 1969.

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

----Ss.32(1) & 80---Untrue statement, error, etc.---Motive---Contingency of no fiscal consequence was undeniable as the importer had demonstrated by submitting to the Customs Authorities to assess the goods on the basis of examination and after determining the exact nature of goods so arrived in such a situation no penalty under S.32(1) of the Customs Act, 1969 was leviable for any alleged under-valuation or mis?declaration since there could be no motive to evade tax.

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

----S.32---Offending goods---Past practice---Offending goods in the past had been released on payment of redemption fine in addition to import levies.

?

Muhammad Afzal Awan, Consultant for Appellant.

Abdul Rasheed, Appraising Officer for Respondent.

Date of hearing: 3rd October, 2005.

2006 P T D (Trib.) 356

[Income-tax Appellate Tribunal Pakistan]

Before Khawaja Farooq Saeed, Chairperson and Mahmood Ahmad Malik, Accountant Member

I.T.As. Nos.1066/IB to 1073/IB and I.T.As. Nos.1084/IB to 1091/IB of 2004, decided on 22nd December, 2004.

(a) Income-tax---

----Remand---Power to remand is discretionary in nature but such discretion is to be exercised reasonably and fairly indicating the reasons for remand.

1996 PTD (Trib.) 388; 1996 SCMR 230; and Ch. Muhammad Sadiq v. Income Tax Officer and others 1988 PTD 1014 rel.

(b) Income-tax---

----Remand---Remand order would have meant that the assessee would have been subjected to another round of cumbersome proceedings which is deprecated in law and such order should not be passed in a routine manner to allow a party to improve his case or to fill in the lacuna.

Ayesbee (Pvt.) Ltd. v. Income Tax Appellate Tribunal and others 2002 PTD 407 rel.

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

----S.23(1)(x)---Deductions---Disallowance of written off of the bad debts---Issue was set aside by the First Appellate Authority---Validity---Setting aside was not the answer---Ratio decidendi of the judgment was binding and the First Appellate Authority would have accepted the same in its true spirit---Remand by the First Appellate Authority was highly unjustified---Assessing Officer was directed to accept the aSsessee's claim of writing off of the bad debts.

1996 PTD (Trib.) 388; 1996 SCMR 230; Ch. Muhammad Sadiq v. Income Tax Officer and others 1988 PTD 1014; Ayesbee (Pvt.) Ltd. v. Income Tax Appellate Tribunal and others 2002 PTD 407; 2002 PTD (Trib.) 1898; (2002) 85 Tax 245 (Trib.); 2003 PTD (Trib.) 1189 and R.A. No.349/LB of 2002 ref.

C.I.T. v. National Bank of Pakistan (1967) 34 Tax 158 and 1992 PTD 39 rel.

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

--S.23(1)(x)---Deductions---Bad debts taxed in earlier year---Validity---Bad debts of earlier years could be allowed even if claimed in a subsequent year---First Appellate Authority was under legal obligation to follow the judgment of Appellate Tribunal and to allow the bad debts of earlier years in the years where the assessee-Bank claimed the same.

?

2002 PTD 1872; Karamsey Govindji v. C.I.T. (1957) 31 ITR 953; Hindustan Commercial Bank Ltd., (1980) 122 ITR 645; C.I.T. v. National Bank of Pakistan 1976 PTD 237; C.I.T: v. Grindlays Bank Ltd. 1991 PTD 569; 2002 PTD 1898; 2000 PTD 874 and 2002 PTD 1998 ref.

Central Insurance Co. Ltd. v. C.I.T. 1997 PTD 71 rel.

(e) State Bank of Pakistan Act (XXXIII of 1956)---

----S.54-A---Income Tax Ordinance (XXXI of 1979), Preamble---Provisions to override other law---Non-obstante provision in terms of S.54-A of the State Bank of Pakistan Act, 1956 was applicable on instructions by authorities that deal with administrative working of the banks---Instructions were not in respect of charge of income tax or calculation of the income under the Income Tax Ordinance, 1979 or any tax like sales tax, customs, excise duty etc.---Same was to regulate the financial institution and it deals with the policies, regulations and directives for the purpose of financial control and protection of the rights of the account holders.

(f) State Bank of Pakistan Act (XXXIII of 1956)---

----S.46-B---Income Tax Ordinance (XXXI of 1979), Preamble---Inconsistent directives not to be issued---Section 46-B of the State Bank of Pakistan Act, 1956 overrides those directives or policies that regulate the working administration and policy of the running of the institution and not charge of tax or for that matter in other similar provision.

(g) Income-tax---

----Loss---Diminution in value of investment was not to be allowed as a loss for the purpose of corresponding reduction in income.

Investment Ltd. v. C.I.T. Calcutta (1970) 77 ITR 533 and (2002) 85 Tax 245 (Trib.) rel.

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

--S. 9---Income and profit---Special law---Income tax law in itself is a special law and had its own provisions to regulate the charge of income tax with reference to its calculation etc.---No other law could be invoked to define the term "income" and "profit" for the purpose of charging income tax---Income tax law had its own history and development of various provisions had progressed with the changing circumstances---Income tax is charged on the incomes, profits and gains and the same could only be defined and brought under tax under the provisions thereof.

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

----S.23(1)(x)---Deductions---Provision for diminution in value of investment---Diminution in the value of stocks and shares could not be allowed as a tool for reducing the income for the purpose of calculation of the taxable profits.

C.I.T. Companies III, Karachi v. Krudd Sons Ltd. 1994 PTD 174; UCO Bank v. C.I.T. (1999) 106 Taxman 601 and Investment Ltd. v. C.I.T. Calcutta (1970) 77 ITR 533 relevant.

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

----Ss.23 & 25(a)---Deductions---Amounts subsequently recovered in respect of deductions, etc.---Ascertainable accrued liability---Any ascertainable accrued liability is deductible under the mercantile system of accounting---Even disputed liabilities are allowable under mercantile system of accounting---Legislature clearly provided that any subsequent recovery would be automatically offered for tax as per S.25(a) of the Income Tax Ordinance, 1979---In case of banks, the accounts are maintained on accrual basis---Even if the hybrid system is adopted it had to be taken in its actual spirit---If the amounts are ascertainable and have actually accrued same would have been allowed.

2001 PTD 1427; 2001 PTD 744 and 2001 PTD 3326 rel.

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

---S. 24(i)--Deductions not admissible---Concessionary loans---Addition---Validity---Held, it is always better to earn little than to keep the money dormant without any income---No one can be asked to do business on the dictates of the others---Actual income is taxed not what one could earn and there was no question of application of S.24(i) of the Income Tax Ordinance, 1979 as this was neither perquisite nor profit in lieu of salary or any other such amenity---Application of S.24(i) of the Income Tax Ordinance, 1979 was disapproved and claim was allowed by the Appellate Tribunal.

2001 PTD 946 and C.I.T. v. Wazir Sultan Tobacco Co. Ltd. (1988) 173 ITR 290 (AP) rel.

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

----S.23(1)(xviii)---C.B.R. Circular Letter No. IT.T-3 (40)/85 dated 9-9-1985---Deductions---Staff welfare fund expenses---Disallowance of staff welfare fund expense by placing reliance on Circular Letter No.IT.T-3(40)/85 dated 9-9-1985---Validity---Circular letter endorsed deduction of such expense being wholly and exclusively for the business of banks---Circular letter did not say that it was a special concession in the case of nationalized bank and it had been reaffirmed that establishment of Staff Welfare Fund and contribution in it by the employer bank will be a business expense---Assessing Officer had misinterpreted the circular letter misconstruing as if it bestowed upon nationalized banks some special relief---Fact was that the Central Board of Revenue only clarified that such an expense being wholly and exclusively for business was an allowable deduction---Even otherwise any interpretation of law by Central Board of Revenue was not binding on the taxpayers and the Court if it goes against the statute---Expenditure claimed was of revenue nature for the welfare of employees and was allowable in the light of well-established position of law---Central Board of Revenue did not speak of the nationalized banks but they did not impose any restriction on others; it, in fact, granted exemption to all banks without exception.

Income Tax Manual at page 177 rel.

(m) Income-tax---

----Apportionment of expenses---Apportionment of expenses is not permissible between exempt capital gains and income earned from other operations.

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

----S.23---Deductions---Bad debts written off during the year were an allowable expense in profit and loss account and if claimed by the bank should be allowed without exception---Similar situation applies if the same were in respect of an earlier year but were claimed in a subsequent year.

(o) Income-tax---

----Apportionment of expenses---Income from capital gain being a separate block of income and being similar in its charge to property income having restrictive allowance of expenditure, could not be quantified for prorating the expenses claimed otherwise.

I.T.A. No.106/LB of 2000; I.T.A. No.1658/LB of 2003 and 2005 PTD (Trib.) 344 rel.

2001 PTD 476 distinguished.

(p) Income-tax---

----Apportionment of expenses---Where the assessee had different source of income and allocation of expenses under normal circumstances did not have any doubts in view of the legal position, there was no question of proration of the expenses in respect thereof---Proration could only be made where under different heads the expenses otherwise were relatable but had not been quantified while prorating of accounts by the taxpayer---Since this situation did not exist in the present case the capital gain could be identified as a separate block and its expenditure also could be specified---Proration to said head was an incorrect application of law.

I.T.A. No.106/LB of 2000; I.T.A. No.1658/LB of 2003 and 2005 PTD (Trib.) 344 rel.

2001 PTD 476 distinguished.

Dr. Ikram-ul-Haq for Appellant/Assessee.

Arif Khan, D.R. for Respondent.

Date of hearing: 7th December, 2004.

2006 P T D (Trib.) 421

[Income-tax Appellate Tribunal Pakistan]

Before Khawaja Farooq Saeed, Chairperson and Mrs. Abida Ali, Accountant Member

I.T.As. Nos. 1322 and 1323(IB) of 2004, decided on 15th June, 2005.

Income Tax Ordinance (XXXI of 1979)-

----Ss. 59, 62 & 134---Filing of return under Self-Assessment Scheme---Appeal to Appellate Tribunal---Return filed by the assessee for the relevant two years under Self-Assessment Scheme was not accepted for the reason that declared income was less than last assessed income---Commissioner Income Tax (Appeals) on appeal directed the Assessing Officer to accept declared version of the assessee---Department had filed appeal before Appellate Tribunal---Assessee had stated that status of company of assessee during period under consideration was changed from registered firm to that of association of persons; that previously the firm consisted of three partners, whereas present association of persons had two members, one of them was partner in the previous firm---Contention of the Department regarding succession of business, did not hold weight because proceedings for the two years under appeal in the case of registered firm were filed by the same Assessing Officer on the basis of deed of dissolution and form-H, etc.---Capital in new business in the status of association of persons was less than that of the registered Firm and one of the members of association of persons was partner in the registered firm, whereas other was a new one---Declared version of assessee for the relevant two years was rejected for the reason that declared income was less than last assessed Income, which was unjustified because firm's case had no relevancy with the case of assessee being association of persons---Commissioner Income Tax (Appeals), in circumstances, had rightly directed the Assessing Officer to accept returns under Self-Assessment Scheme for both the years---Departmental appeals stood rejected, in circumstances.

Mirza Khan, D.R. for Appellant.

Mir Asad Khan for Respondent.

Date of hearing: 2nd June, 2005.

2006 P T D (Trib.) 429

[Income-tax Appellate Tribunal Pakistan]

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

I.T.As. Nos.5953/LB and 5954/LB of 2002, decided on 29th January, 2005.

(a) Words and phrases---

----"Permission" is quite distinct and in no way synonymous to "approval".

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

----Ss.65 & 13(1)(aa)---Additional assessment-Approval-Permission--Proceedings under S.65 of the Income Tax Ordinance, 1979 as well as additions under S.13(1)(aa) of the Income Tax Ordinance, 1979 were not maintainable as no approval, as mandatory requirement, exists and not seeking of approval and in return not allowing the approval were the major lacunas which were going to the roots of the case.

1993 PTD (Trib.) 1172; 1998 SCMR 2013 (SC Pak); 2003 PTD (Trib.) 1238; 2004 PTD (Trib.) 463 and 2004 PTD (Trib.) 726 rel.

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

----Ss. 154 & 65---Service of notice---Non-service of statutory notice---Re-assessment proceedings---Assessee's participation in the re-assessment proceedings could not validate the proceedings suffering due to non-service of statutory notice as service of notice was not made on any member or relative of the members of Association of Persons but had been made on somebody else which the department itself had found as not reliable as at one notice such person was written as son and on the other as employee.

Messrs Idress Barry and Company, Lahore v. CIT Punjab and N.-W.F.P. 1959 SCC 47 and CIT North Zone West Pakistan Lahore v. Messrs Idrees Barry and Company, Lahore 1967 PTD 189 rel.

S.H. Mahmood and Co. v. CIT Karachi PLD 1961 (W.P.) Kar. 23;1988 PTD (Trib.) 973; 2003 PTD (Trib.) 242; 2002 PTD 1209; (2004) PTD (Trib.) 106; 2004 PTD (FTO) 758 and 2004 PTD (Trib.) 1391 ref.

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

----S. 65---Additional assessment---Non-prescribed format---Issuance of notice under S.65 of the Income Tax Ordinance, 1979 on non-prescribed format---Validity---Assessing Officer was required to issue notice under S.65 of the Income Tax Ordinance, 1979 on the duly prescribed format and issuance on a non-prescribed format was an incurable mistake which had caused illegality and assessment on this score was not maintainable.

Messrs Home Planners v. C.I.T. Companies Zone, Lahore 2001 PTD 1633 rel.

2004 PTD (Trib.) 1784 ref.

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

----Ss. 13(1)(aa) & 65---Addition---"Approval" and "permission"---Distinction---Addition under S.13(l)(aa) of the Income Tax Ordinance, 1979 was illegal, void ab initio as "permission" had been sought and permission had been granted as against the word "approval"---Assessment order framed under Ss.62/65 of the Income Tax Ordinance, 1979 being illegal was vacated by the Appellate Tribunal.

Syed Mahmood Shah v. CIT and others (2001) 83 Tax 132 (H.C. Lah.) ref.

Sh. Sharif Hussain and Sh. Muhammad Yasin for Appellant.

Sabiha Mujahid, D.R. for Respondent.

Date of hearing: 25th November, 2004.

2006 P T D (Trib.) 447

[Income-tax Appellate Tribunal Pakistan]

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

I.T.As. Nos.1549/KB to 1552/KB of 2003, decided on 20th March, 2004.

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

----S. 65---Additional assessment---Definite information---Capital gain---Adventure in the nature of trade---Assessee declared gain on sale of plot---Assessing Officer accepted the declared capital gain after taking into consideration all the aspects of addition while passing assessment order---Addition was made by invoking S.65 of the Income Tax Ordinance, 1979 on the ground that such gain was taxable income as the assessee as allegedly involved in the business of sale/purchase of properties and this was, in the opinion of Assessing Officer, adventure in the nature of trade---First Appellate Authority confirmed the order---Assessee contended that addition invoking S.65 of the Income Tax Ordinance, 1979, after treating it "exempt receipts" in terms of "capital gain" while passing the assessment order, was an afterthought reflecting difference of opinion---Additional assessment under S.65 of the Income Tax Ordinance, 1979 was suffering in law for want of escaped assessment, under-assessment or assessment at a low rate, definite information and discovery of a new fact which could be treated as "definite information"---Validity---Assessee disclosed all material facts without concealment, and assessment had been consciously completed by the Assessing Officer accepting the declared capital gain after taking into consideration all the aspects of addition---Observation of First Appellate Authority that action of the Assessing Officer was not mere change of opinion and assessee had been rightly taxed taking into consideration the disposal of the plot in the preceding years; had no merit as the re-assessment invoking S. 65 of the Income Tax Ordinance, 1979, subsequently for the reason that "in subsequent years, receipts of the same nature had been earned by the assessee, hence the present receipts had rightly been treated as adventure in the nature of trade" was in fact presumptive appreciation of law---Receipts could be treated as adventure in the nature of trade keeping in view the same nature of trade to be carried in the same period or before this but on the basis of subsequent receipts of similar nature, there remain no possibility to treat the receipts as revenue receipts---Where the receipt had been accepted as capital in nature, consideration of certain material formally declared by the assessee, re-examination of same material thereafter would amount to change of opinion and re-assessment would be without jurisdiction beyond mandate of S.65 of the Income Tax Ordinance, 1979---Re­opening of the assessment was not justified and the proceedings were not warranted by law.

2001 PTD 633 (Trib.) rel.

ITAT, Karachi's case 1984 PTD (Trib.) 127; (1959) 37 ITR 242; (1967) 45 ITR 37; 1984 MLD 262 and (1976) 33 Tax 12 (Lahore) ref.

(b) Income-tax---

----Capital gain---Revenue receipts---Line which separates the two classes of cases is the sum of gain that had been made, mere enhancement of value or a gain made in operation of business in carrying out a scheme for profit making and in the absence of any evidence of trading activity in cases of purchase and resale, profit arising from resale, would be revenue only if a transaction is in the assessee's ordinary line of business.

(c) Income-tax---

----Capital gain---Assessee's line of business---Admittedly transaction was outside the assessee's line of business---For want of evidence in respect of trading activity for last 20 years, there remained no alternate except to accept the profit arising from resale to be an accretion of capital--In absence of any trading activity for last 20 years, in cases of purchase and resale of land and building, it is reasonable to hold the profit from the resale to be an accretion of capital.

Eduljee Dinshaw's case 1990 PTD 155 and (1976) 102 ITR 2002 rel.

(d) Income-tax---

----Capital gain---Sale of property after 20 years---Twenty years period between purchase and sale was itself sufficient to hold that the transaction was without intention of resale at a profit and a resale under changed circumstances, would amount to be a realization of capital and would not stamp the transaction with a business character.

(e) Income-tax---

----Adventure in the nature of trade---Onus---Property business---Sale of properties in the previous years and subsequent years---Assessing Officer, keeping in view the properties sold in the previous years and subsequent years, observed that the assessee was involved in property business---Validity---Such was not the real test; it was not essential to constitute trade that there should be series of transactions, both of purchase and sale---No doubt that even a single transaction of purchase and sale outside the assessee's line of business, may constitute an adventure in the nature of trade, however, onus of proving that an isolated transaction constituted an adventure in the nature of trade, was on the Department.

(f) Income-tax---

----Question whether a transaction of purchase amounted to carrying on business or not---Determination---Principles.

(1976) 102 ITR 2002 rel.

(g) Income-tax---

----Adventure in the nature of trade---Reasons and causes for which the profit earned did not fall in the category of income arising from adventure in the nature of trade.

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

----S. 13---Unexplained investment etc., deemed to be income---While invoking S.13 of the Income Tax Ordinance, 1979, the Assessing Officer had neither moved .for approval of the Inspecting Additional Commissioner nor confronted the assessee whereby conditions mandatory in nature for invoking S.13 of the Income Ordinance, 1979, had not been fulfilled.

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

----S. 65---Additional assessment---Order confirming the treatment meted out invoking S.65 of the Income Tax Ordinance, 1979 warrants interference having no basis whereby annulled.

(j) Income-tax---

----Capital gain---Intention---Transaction within one year---If it is presumed that property had been sold within a year, the gain earned was not enough to conclude that there was any intention to achieve gain.

S. Nayyar Raza Zaidi, A.R. for Appellant.

Agha Hidayatullah, D.R. for Respondent.

Date of hearing: 13th February, 2004.

2006 P T D (Trib.) 471

[Income-tax Appellate Tribunal Pakistan]

Before Khawaja Farooq Saeed, Chairperson and Agha Kafeel Barik, Accountant Member

I.T.A. No.1641/KB of 2003, decided on 8th March, 2005.

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

----Ss. 80-D & 2(16)(b)---Societies Registration Act (XXI of 1860), Preamble---Finance Act (IV of 1999), Preamble---Minimum tax on income of certain persons---Cooperative society---Department contended that First Appellate Authority was not justified to delete the turn over tax charged under S.80-D of the Income Tax Ordinance, 1979 as S. 2(16)(b) of the Income Tax Ordinance, 1979 while defining the term "company" had included a body corporate formed by or under any law for the time being in force---Cooperative society was a body corporate .which was very well covered by the definition of "company"- Assessee contended that a society registered under the Societies Registration Act, 1860 was a body corporate, constituted under an instrument and registered in pursuance of the provisions contained in the Societies Registration Act, 1860 and the same was not chargeable to tax applicable for companies, but at the rates applicable for individual, association of persons, unregistered firm, Hindu undivided family and artificial juridical person---Validity---Amendment made by Finance Act, 1999 in S. 80-D of the Income Tax Ordinance, 1979 created charge against four categories only and status of artificial jurisdiction person had not been added in the said charge---By virtue of amendments, the words added were "an individual, an association of persons, an unregistered firm, or a Hindu undivided family"---Status of an artificial juridical person was not covered within the said language---Even in the amendment the artificial juridical person was not made part of the same, the charge of S.80-D was not applicable for the assessment years 2000-2001 and 2001-2002.

1998 PTD (Trib.) 2017 rel.

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

----S. 2(16)(b)---Societies Registration Act (XXI of 1860), Preamble---Company, a body corporate and cooperative society registered under Societies Registration Act, 1860 was a separate entity---Such society was not covered within the definition of the term `company' for the purpose of charge of tax under the Income Tax Ordinance, 1979.

1998 PTD (Trib.) 2017 rel.

(c) Income-tax---

----Co-operative societies--Status--Artificial juridical person--Societies, being creation of some group of persons through bye-law and rules were legal persons which can be sued or can sue in a Court of law---Societies were legal and juridical persons created artificially through registration with some authority under law and were legal persons against whom a case could be filed in a Court of law---Such legal persons can purchase and sell assets and can also hold the same in its registered name---Except for tax rates in income tax for which law had separated them their status was equal to companies---Such societies and organizations were not association of persons but .artificial juridical persons---Status had been made a part of the definition of the term `person' separately and could not be considered as without purpose.

(d) Income-tax---

----Artificial juridical person---Association of persons---Distinction---Basic difference between an artificial juridical person and association of persons is volition---Artificial juridical person is the one who has been artificially designated the status of a `person' as opposed to a natural person---Formation and status of such person in some cases may be by volition while it can also be without volition---Association of persons cannot be without volition; it was a combination of individuals having common interest in business with the object of earning income carried by one or more than one for the benefit of all of them---Such situation does not apply in the case of artificial juridical person except for the formation of a limited company in which the purpose of doing business together and getting benefit out of it can be similar, however, other juridical person may not have the same object---Object of other juridical persons can be any kind of social welfare or it can be cooperative body formed by or under law by Government for a particular purpose in which the individuals may be associated under legal obligation---Association of person may not always be a registered organization formed through some instrument but on the other hand an artificial juridical person has to be legally constituted body formed by or under some law of the land.

W.T.As. Nos. 1132, 1133/LB of 1995 and W.T.As. Nos. 443 and 444/LB of 2000 rel.

Mushtaq Hussain Qazi, D.R. for Appellant.

Nemo for Respondent.

Date of hearing: 8th March, 2005.

2006 P T D (Trib.) 488

[Income-tax Appellate Tribunal Pakistan]

Before S. Hasan Imam; Judicial Member and Agha Kafeel Barik, Accountant Member

I.T.As. Nos. 2027/KB of 2002 and 926/KB, 622/KB, 623/KB, 129/KB, 941/KB, 1626/KB, 1291/KB, 914/KB, 1549/KB to 1552/KB, 1846/KB, 49/KB of 2003 and 114/KB of 1990-91, decided on' 2nd November, 2004.

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

---Ss. 52, 50(3), Proviso-II, & 12(2)---Finance Act (I of 1995), Preamble---Agreement for avoidance of double taxation---Liability of persons failing to deduct or pay tax---Assessee, a Bank had made payment to company, a non-resident company and payment was remitted directly to Regional Office of the said company at Singapore---Said company did not realize any receipt in Pakistan from the assessee---Assessing Officer observed that newly-added proviso to S.50(3) of the Income Tax Ordinance, 1979 was neither applicable nor attracted in the case of assessee and assessee-Bank was liable to make tax deduction under S. 50(3) of the Income Tax Ordinance, 1979---Assessing Officer charged the tax at the rate of 30% holding the assessee as "assessee-in­default" under S.52 of the Income Tax Ordinance, 1979---Assessee contended that prior to 1995 withholding tax was required to be deducted under S.50(3) of the Income Tax Ordinance, 1979 even if a foreign company established a branch office in Pakistan---Company used to regularly obtain reduced withholding tax service and deducted tax in accordance with rates mentioned in the certificate---After addition of Proviso II to S.50(3) of the Income Tax Ordinance, 1979, through Finance Act, 1995 the assessee stopped deducting said tax---Validity---As a result of amendment in second proviso to subsection (3) of S.50 of the Income Tax Ordinance, 1979 the exemption from withholding tax under the said subsection in respect of branches of non-resident companies would be available in case payment was made to a branch in Pakistan of a non-resident company whereas in the present case the payments had been remitted at Singapore and not to a branch in Pakistan---Assessee failed to deduct tax while making payment to a non-resident outside Pakistan as required under S.50(3) of the Income Tax Ordinance, 1979---Order treating assesses in default, in circumstances, did not warrant interference.

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

---S. 50(3), proviso-II---Deduction of tax at source--Any person responsible for paying to non-resident any sum chargeable under the provisions of Income Tax Ordinance, 1979 shall, unless such person is himself liable to pay tax thereon. as an agent, deduct at the time of payment, tax at the rates specified in the First Schedule to the Ordinance---Any payment made to a non-resident outside Pakistan which was chargeable under the provisions of Income Tax Ordinance, 1979 was liable to withholding tax under S.50 (3) of the Income Tax Ordinance, 1979 at the rate of 30%.

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

----Second Sched., Part-I, Cls. (128) & (62)---Exemption---Export Processing Zone-'-Banking Company---Assessee claimed income from Export Processing Zone Branches as exempt---Such income was added to the income of the assessee on the ground that under Cl. (128) of Part-I of the Second Schedule to the Income Tax Ordinance, 1979, exemption was allowable to an industrial undertaking only whereas the assessee was a banking company and not an industrial undertaking---First Appellate Authority allowed exemption to income from assessee branch located at Export Processing Zone---Validity---First Appellate Authority was not justified to give a different treatment in allowing exemption to assessee bank in respect of assessee's branch located at Export Processing Zone---Departmental appeal was allowed by the Appellate Tribunal.

I.T.A. No.487/KB of 1997-98, dated October 10, 1999 for the assessment year 1996 distinguished.

2004 PTD (Trib.) 1666 rel.

Khaliq-ur-Rehman, FCA for Appellant (in I.T.A. No.2027/KB of 2002).

Ali Hasnain, D.R. and Muhammad Farid, Legal Advisor for Respondent (in I.T.A. No.2027/KB of 2002).

Ali Hasnain, D.R. and Muhammad Farid, Legal Advisor for Appellant (in I.T.A. No.926/KB of 2003).

Khaliq-ur-Rehman, FCA for Respondent (in I.T.A. No.926/KB of 2003).

Date of hearing: 7th September, 2004.

2006 P T D (Trib.) 499

[Income-tax Appellate Tribunal Pakistan]

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

I.T.As. Nos.843/LB to 846/LB of 2003, decided on 14th June, 2005.

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

---S. 30---Income from other sources---"Interest income" arising to assessee was liable to be brought to tax under S.30 of the Income Tax Ordinance, 1979 as income from other sources' and the same did not constitute assessee'sbusiness income'---Such `interest income' fell under the head "income from other sources" under S.30 of the Income Tax Ordinance, 1979.

(2002) 85 Tax 245 (Trib.) distinguished.

1999 PTD (Trib) 708; 1998 PTD (Trib.) 3179; 2002 PTD (Trib.) 250 and 2000 PTD 363 rel.

(b) Income-tax---

----Res judicata---Applicability---Erroneous treatment in earlier years did not constitute a valid precedent in law and has no binding force---Each year is independent and res judicata did not apply in income tax proceedings.

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

---Ss. 30 & 136---Appeal to Appellate Tribunal---Challenge to first round remand order before the Appellate Tribunal in the second round of appeal---Validity---First Appellate Authority set aside the order of Assessing Officer for another opportunity to explain its position with regard to the nature of `interest income'---Assessee did not file any appeal before Appellate Tribunal against the order of First Appellate Authority---Remand order in the first round could not be challenged before the Appellate Tribunal in the second round of Appeal.

(d) Income-tax---

----Assessment---Relevant Income-tax statute must finally prevail---Only in the case of Double Tax Avoidance Treaties negotiated between sovereign States the Treaty Terms will have primacy and will prevail over any other law, including the relevant statute, and that is the only exception---In all other cases involving income tax assessment, the relevant income tax statute would be supreme.

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

----Ss. 156 & 30---Rectification of mistake---Assessee's income from other sources under S.30 of the Income Tax Ordinance, 1979 wrongly set off against brought forward business losses was not permissible under the law and such mistake was rectifiable under S.156 of the Income Tax Ordinance, 1979 as it was a mistake of computation of assessee's total income/loss.

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

----S.30---Income from other sources---Income from sale of scrap',gain on sale of assets' and miscellaneous income' did not constituteincome from other sources' and was not assessable under S.30 of the Income Tax Ordinance, 1979---Income arising against said three heads was the assessee's regular `business income' and was to be so treated for purposes of determination of assessee's total income/loss.

Saeed Ch., F.C.A. for Appellant.

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

Date of hearing: 14th June, 2005.

2006 P T D (Trib.) 508

[Income-tax Appellate Tribunal Pakistan]

Before S. Hasan Imam, Judicial Member and Agha Kafeel Barik, Accountant Member

I.T.A. No.1783/KB of 2002, decided on 5th October, 2004.

Income Tax Ordinance (XXXI of 1979)---

----Ss. 59, 61, 62, 80-D, 134 & 156---Filing of return under Self-Assessment Scheme---Selection of case for total audit---Exclusion of return from purview of Self-Assessment Scheme---Plea of assessee was that his return qualified for Self-Assessment Scheme and its selection for total audit could not alter the factum of acceptance of return under Self-Assessment Scheme---Plea of Department, on the other hand, was that after selection for total audit, the return was excluded from purview of Self-Assessment Scheme' for assessment under S. 62 of Income Tax Ordinance, 1979 and that Assessing Officer was correct in charging tax under S.80-D of Income Tax Ordinance, 1979---Plea of Department was reasonable because relevant Notification was effective for non-application of S.80-D of Income Tax Ordinance, 1979 when return qualified for Self-Assessment Scheme and accepted under S.59(1) of the Ordinance---Scope of Scheme was, however, limited to Self-Assessment Scheme and if Scheme provided that return which qualified under Self-Assessment Scheme, would be selected for total audit, same, after selection would go out of ambit of Self-Assessment Scheme and all the provisions of law in case of normal assessment would be applicable to all such assessments, in circumstances and it was not legally possible to assess under normal law and instead of charging under normal law to charge under Self-Assessment Scheme---Even otherwise to ask assessee to pay further Tax and to amend his return under Self-Assessment Scheme was also not legally possible---Present case having been selected for total audit and assessment in consequence thereof was carried under S.62 of Income Tax Ordinance, 1979, the levy of minimum tax under S.80-D of Income Tax Ordinance, 1979 on turnover was legal---Finding of Commissioner of Income Tax (A) that return in fact qualified for Self-Assessment Scheme, and that there remained no question of application of S.80-D of Income Tax Ordinance, 1979, had no merit---Once return was selected for total audit, it would go out of ambit of S.59(1) of Income Tax Ordinance, 1979---Sufficient reason in circumstances, was available to cancel assessment under S.62 of Income Tax Ordinance, 1979 and to direct to accept return under S.59(1) of Income Tax Ordinance, 1979---Order of C.I.T.(A) stood vacated, accordingly.

2001 PTD 121 ref.

Ghulam Shabbir Memon, D.R. for Appellant.

Akbar Azim Ansari for Respondent.

Date of heating: 22nd September, 2004.

2006 P T D (Trib.) 524

[Customs, Excise and Sales Tax Appellate Tribunal]

Before Saeed Akhtar, Member (Technical)

Appeal S.T.A. No. 1038/LB of 2000, decided on 24th December, 2004.

Sales Tax Act (VII of 1990)---

----Ss.34 & 33---S.R.O. 461(I)/99, dated 9-4-1999---S.R.O. 247(I)/04, dated 5-5-2004---Additional tax---Evasion of sales tax against supply of cotton lint---Case was decided ex parte on the basis of evidence available on record adjudging of amount of sales tax payable along with additional tax and penalty---Appellant contended that principal amount of sales tax had already been paid through crossed pay order as soon as it was received from the buyer and there was a genuine delay because of late receipt of banking instrument from the buyer; that additional tax was not payable because the Federal Government had already granted amnesty in payment of additional tax vide S.R.O. 461(I)/99 dated 9-4-1999; that Government in subsequent amnesty Notification No.S.R.O. 247(I)/04 dated 5-5-2004 granted exemption in the payment of additional tax for the registered persons who made payment of principal amount of sales tax and since principal amount had been paid, available exemption was allowed vide S.R.O. 247(I)/04 dated 5-5-2004 by depositing 25% of the payable additional tax---Validity---Appellant was required to deposit 25% of the additional tax to avail exemption of remaining 75% of additional tax and penalty---Correct amount of additional tax i.e. 25% of the additional tax liability was not deposited within time specified under amnesty notification---Benefit of amnesty scheme was available to the persons who made payment of outstanding ,liability in accordance with the terms and conditions of the amnesty notification S.R.O. 247(I)/04 dated 5-5-2004---Appellant failed to avail the benefit of amnesty scheme as correct amount of additional tax was not deposited---Benefit of amnesty was not available to the appellant---Lower rate of additional tax had been allowed by the Government by making beneficial amendment in S.34 of the Sales Tax Act, 1990---Order was set aside by the Appellate Tribunal and appellant was allowed payment of additional tax at the simple rate in view of beneficial amendment in S.34 of the Sales Tax Act, 1990---Appellant having already deposited principal amount of sales tax, penalty levied in the order was remitted---Department was directed to calculate the additional tax liability at the simple rate and adjust the amounts of additional tax and penalty already deposited against the amount of additional tax calculated at the simple rate.

Jamil Hussain for Appellant.

Ahmad Raza Khan, D.R. assisted by Naseer Iqbal and Waqas Qureshi, Auditors for Respondent.

Date of hearing: 7th December, 2004.

2006 P T D (Trib.) 558

[Customs, Excise and Sales Tax Appellate Tribunal]

Before Raj Muhammad Khan, Member (Judicial) and Muhammad Wali Khan, Member (Technical)

S.T.A. No.714/PB of 2002, decided on 7th January, 2005.

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

---Ss. 32-A & 30---Special Audit by Chartered Accounts or Cost Accountants---Territorial jurisdiction to conduct the audit---Cost Accountant who was posted at Collectorate of Sales Tax, Gujranwala and had supervised the audit team could not produce any notification under S.30 of the Sales Tax Act, 1990 with regard to extension of territorial jurisdiction to him to carry out audit at Peshawar---Letter issued by the Central Board of Revenue authorizing him to conduct the audit, was produced, besides him, the audit team consisted of local officers of sales tax under whose territorial jurisdiction the unit fell---Even if the Cost Accountant was not properly notified for conducting audit at Peshawar, it did not render the entire exercise of audit without jurisdiction---Since there were other local officers who were party to the audit report, same could not be ignored in toto and that no notification under S.32-A of the Sales Tax Act, 1990 was required since it was a routine audit conducted by the local officers.

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

----Ss. 32-A, 22, 11 & 3---Central Excise Act (I of 1944), Preamble---Central Excise Rules, 1944, Preamble---Special Audit by Chartered Accountants or Cost Accountants---Mode of audit---Audit on the basis of consumption of raw material---Validity---Under S.22 of the Sales Tax Act, 1990, a registered person had to maintain certain record which was to be subjected to audit---Auditors, instead of focusing their attention on the prescribed record, had totally relied on presumptive and hypothetical consumption of single raw material for making assessment under S.11 of the Sales Tax Act, 1990---Although, S.11 of the Sales Tax Act, 1990 provided for tax due on supplies made but no such word was explicitly included in the said section to presume the quantity of supply---Unlike the Central Excise Act, 1944 read with Central Excise Rules, 1944, the Sales Tax Act, 1990 did not give power or envisage any procedure for determining the production on the basis of presumptive or hypothetical consumption of raw materials---Novel method adopted for determination of production on the basis of presumption and conjectures, despite being contrary to the provisions of Sales Tax Act, 1990, was discriminatory as well---Section 3 of the Sales Tax Act, 1990, which is charging section, also reflects the scope of charge and levy of sales tax on the value of taxable supply---Provisions of Sales Tax Act, 1990, being fiscal ones were to be interpreted and applied strictly---Charges upon any subject are to be imposed by clear and unambiguous words, there being no room for any intendment nor any equity or presumption as to tax---Department, in circumstances, failed to provide any evidence regarding supplies allegedly made by the taxpayer, to make them liable to tax.

1999 P T D 3907 ref.

Appeal No. 7(2383)ST/IB/2001(PB); Messrs Khyber Match Factory (Pvt.) Ltd. Peshawar v. The Collector of Sales Tax and Central Excise, Peshawar and others rel.

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

----S. 32-A---Special Audit by Chartered Accountants or Cost Accountants---Match factory---Determination of consumption of Potassium Chlorate by auditor---Entire edifice was based on the presumption which had been derived from inconsistent data---Even the consumption of Potassium Chlorate, as determined by the Central Board of Revenue through I.O.C.O. vide its survey carried out, was on much higher side i.e. 552 grams per 50000 splints (inclusive of wastage) against 327 grams worked out by the auditors.

1988 PTD 535 ref.

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

----S. 32-A---Special Audit by Chartered Accountants or Cost Accountants-Match factory---Mechanical application of consumption of one unit to all other units, having different capacities, make models of plant and machinery, production skills and environments, is not justified---No law requires the manufacturers to use or apply the same or any formula for its production particularly the Sales Tax Act, 1990, had not provided for any standard production for match units.

Appeal No. 7(2383)ST/IB/2001(PB); Messrs Khyber Match Factory (Pvt.) Ltd. Peshawar v. The Collector of Sales Tax and Central excise, Peshawar and others rel.

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

---S. 32-A---Special Audit by Chartered Accountants or Cost Accountants---Any enquiry made at the back of any person against whom it is intended to be used, had no legal effect adverse to him---Even otherwise, an unsubstantiated data has no evidential value.

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

----S. 32-A---Special Audit by Chartered Accountants or Cost Accountants---Match factory---Comparison of consumption of potassium chlorate---Information furnished to Department by Swedish Match, Sweden, its consumption of potassium chlorate was reported 415 gm for 50000 match splints which was based on a head size of 3.5 gm and 2 x 2 mm thickness of splints and it was also clarified that their calculations were based on physical account of match splints and did not include wastage that occurs during production process---Admittedly the head size of match splints manufactured in Pakistan was 5 to 6 mm---Information furnished by Swedish Match was not comparable due to different head size between the two countries.

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

---S. 32-A---Special Audit by Chartered Accountants or Cost Accountants---Match factory---Consumption of potassium chlorate---Determination of production---Not only the Potassium Chlorate to exclusively determine the overall production of a unit, this was also besides other factors, which may affect the quantum of production from factory to factory---Auditors had not taken into consideration all such factors and the raw materials in arriving at the purported production in the taxpayer unit.

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

---S. 32-A---Special Audit by Chartered Accountants or Cost Accountants---Match factory---Production---Report of laboratory test---Non-confrontation of---Validity---Results obtained from tests were not considered by the Department while making calculations and the percentages mentioned in the tests were ignored altogether---Laboratory report was silent as to whether the splints sent for the test had heads of the same size or were selected ones or otherwise---Neither the taxpayer was associated with these tests nor the reports of the laboratory were provided to them during the course of audit or thereafter---No reason had been assigned by the Department as to why the assessee was not confronted with the results of the laboratory tests---Laboratory reports, in circumstances, were not to adversely affect the assessee in any way.

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

----S. 32-A---Special Audit by Chartered Accountants or Cost Accountants---Match factory---Auditors during the course of audit had carried out different physical inspections and examination of the process of manufacture of safety matches in the appellant unit and had prepared report to this effect---Perusal of certified copy of report negates the assertion regarding calculations made by the Department inasmuch as consumption of Potassium Chlorate found as per physical verification of the unit, tallied with actual production made during the audit period---Said report was not taken into consideration by the audit team since it would have resulted into falling of the entire case, made out by the auditors, to the ground---Presumptive consumption on the basis of Potassium Chlorate only, was not sustainable under the law.

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

----S. 2(41) & Sixth Sched:---Taxable supply---Match Factory---Sale of wood wastage---Taxation---Validity---Wood being agricultural produce had been specified against Entry No.2 to Sixth Schedule of the Sales Tax Act, 1990---Appellant/taxpayer had not charged any sales tax on such supply nor the Department had ever made demand in this respect from the supplier of raw material wood to the appellant---Disposal of wood wastage did not fall within the purview of the taxable supply since the appellant/taxpayer was the manufacturer of safety matches and not of the sale of the wood wastage.

Appeal No. 7(2383)ST/IB/2001(PB); Messrs Khyber Match Factory (Pvt.) Ltd. Peshawar v. The Collector of Sales Tax and Central Excise, Peshawar and other rel.

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

---Sixth Sched: Item No.2 & S.2(41)---Exemption---Taxable supply---Match Factory---Sale of wood wastage---Taxation---Validity---Disposal of wastage obtained from the goods specified in the Sixth Schedule to the Sales Tax Act, 1990, by a registered person not in the normal course of business, was not "taxable supply" within the meaning of S.2(41) of the Sales Tax Act, 1990 and so no sales tax was chargeable on that account---Wood logs were purchased for its conversion into finished goods in the shape of match splints---Splints so manufactured were taxable within the meaning of sales tax law but wastage obtained therefrom could not be transformed/converted for making it capable of being put to use, which still retained the status of agricultural produce and thus was exempted from sales tax.

Appeal No. K-193/2000 titled: Messrs Novartis, (Pakistan) Ltd. v. Collector (Adjudication, Karachi-III Appeals No.1264/2001 and STA.436/TRF/PB/2001 filed by Messrs Azeem Match (Pvt.) Ltd. and Messrs Khyber Match Factory (Pvt.) Ltd. ref.

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

----Ss. 3(1)(a) & 2(41)---Scope of tax---Business activity---Match Factory---Sale of wastage obtained from paper board---Taxation---Validity---Wastage obtained from paper board was stated to be not capable of being put to use by the appellant/taxpayer and which was not his normal business activity and thus was not taxable under the Sales Tax Act, 1990.

Appeal No. K-193/2000; Novartis, (Pakistan) Ltd. v. Collector (Adjudication, Karachi-III; Appeals No. 1264 of 2001; S.T:A. 436/TRF/PB of 2001 filed by Azeem Match (Pvt.) Ltd. and Khyber Match Factory (Pvt.) Ltd.; Appeal No. 7(2268)ST/IB/2002(PB); Messrs Mohsin Match Factory (Pvt.) Ltd., Peshawar v. The Collector of Sales Tax and Central Excise (Adjudication), Peshawar and others rel.

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

----Ss. 7, 3, 33 & 34---Determination of tax liability---Adjustment of input tax paid on electricity bills---Validity---Supply of electricity was a taxable supply and the electricity bill issued by WAPDA being registered person, shall be deemed as input tax invoice for the recipient of electricity supply and for the purposes of adjustment against output tax under S.7 of the Sales Tax Act, 1990---Tax charged by WAPDA and credited back to its consumers, could not be considered to be a lapse on the part of the recipient (appellant/taxpayer) of such supply---However, supply received by the appellant/taxpayer, being registered person, was liable to pay sales tax thereon-'--Sales tax on this score was recoverable from the appellant/taxpayer except additional tax and penalty since there was no fault or lapse on the part of the appellant/taxpayer in this regard.

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

----S. 11(4), proviso---Assessment of tax---Limitation---Late passing of order---Effect---Proviso to S.11(4), Sales Tax Act, 1990 regarding time fixation for passing the assessment were although mandatory but did not specify consequence of the failure of the officer to pass the order within the given time---Provision remains as directive only and the late passing of the order will not adversely affect the case of the prosecution.

Aamer Amin, F.C.A. for Appellant.

Qurban Ali Khan, D.R., Ishtiaq Ahmad, Law Officer, Syed Phool Badshah, Najeeb Qadir, Cost Accountants, Shuaib Sultan and Inamul Haq, Senior Auditors for Respondents.

Date of hearing: 2nd October, 2004.

2006 P T D (Trib.) 584

[Income-tax Appellate Tribunal Pakistan]

Before S. Hassan Imam, Judicial Member and Agha Kafeel Barik, Accountant Member

I.T.A. No.1363/KB of 2003, decided on 7th January, 2005.

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

----First Sched., Part-IV Cl. (2B)---Companies Act (VII of 1913), Preamble---Super tax--Assessee was a registered firm and derived income from consultancy as Architects---Assessee claimed exemption from super tax under Cl. (2B) of Part-IV to the First Schedule of the Income Tax Ordinance, 1979---Validity---Appellate Tribunal did not agree with the assessee that the condition precedent for allowing exemption viz "partners are prevented to constitute a corporate body" shall not apply in case such profession consists wholly or mainly in the making of contracts on behalf of other person or giving to other persons of advice of a commercial nature in making contracts---Sub-para. (2B) of para. A of Part-IV to the First Schedule of the Income Tax Ordinance, 1979 showed that mere involvement in such profession, would not absolve the assessee from charge of super tax unless there was legal restriction on the assessee debarring it from constituting into a corporate body with a limited liability, which could be registered as a company under the Companies Act, 1913---Such sort of restriction amongst others was independent in nature besides being mandatory' and nothing to do with remaining contents/conditions of sub-para. (2B) of Para. A of Part-IV of the First Schedule of the Income Tax Ordinance, 1979---Mere running such profession would not save the assessee from clutches of super tax as admittedly there was no bar on the assessee's firm to constitute themselves into a corporate body with a limited liability which could be registered as a company under the Companies Act, 1913.

I.T.A. No.632/KB of 1999 rel.

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

---First Sched., Part-IV, Cl. (2B)---Super tax---Exemption---Clause (2B) of First Schedule Part-IV of Income Tax Ordinance, (1979) pertaining to super tax shall give exemption only to such income of registered firm which depends wholly or mainly on the professional qualifications of its partners who were prevented by any law or by convention or rules or regulations of the professional association, society or similar body of which they were members to constitute themselves into a corporate body with a limited liability.

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

---S.134---Appeal to Appellate Tribunal---Where relief has been allowed due to misinterpretation of law, it should not debar, restrict or curtail the powers of the Appellate Tribunal from arriving at a proper legal conclusion at any time deviating from the previous orders of the officers below.

(d) Income Tax---

---History of a case---History, if created by violating clear provisions of law having no ambiguity, was to be discarded.

Chaman Lal Oadh, D.R. for Appellant.

Ali Rahim, A.R. for Respondent No. 4.

Date of hearing: 7th January, 2005.

2006 P T D (Trib.) 594

[Income-tax Appellate Tribunal Pakistan]

Before Rasheed Ahmad Shaikh, Judicial Member and Javed Tahir Butt, Accountant Member

M. As. Nos. 25/LB and 26/LB of 2005 in W.T.As. Nos. 1137/LB and 1138/LB of 2000, decided on 27th April, 2005.

Wealth Tax Act (XV of 1963)---

----Ss. 35 & 17---Rectification of mistake---Appellate Tribunal came to the conclusion that orders passed by the two authorities below were not sustainable in the eye of law---Order passed by the First Appellate Authority and assessment proceedings were held to be without jurisdiction having failed to comply with the provisions of law---While concluding the judgment, it was observed that Appeal Commissioner's order would stand vacated and that of the Assessing Officer restored---Validity---Mistake had been crept therein---Contradictory findings had been recorded qua giving treatment to the assessment order---Whole tenor and the purport of the decision made by the Tribunal suggested annulment of the assessment order being made in contravention of the provisions of S.17 of the Wealth Tax Act, 1963---Appellate Tribunal's order was rectified which shall be read and that of the Appeal Commissioner's order would stand vacated and annulled and that of the Assessing Officer would be made part of the appellate order already passed by the Appellate Tribunal.

Muhammad Shahid Abbas for Applicant.

Dr. Shahid Siddique Bhatti, D.R. for Respondent.

Date of hearing: 27th April, 2005.

2006 P T D (Trib.) 597

[Income-tax Appellate Tribunal Pakistan]

Before Khawaja Farooq Saeed, Chairperson and Javed Tahir Butt, Accountant Member

I.T.A. No.3412/LB of 2003, decided on 23rd February, 2005.

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

----Ss.156, 62 & 80C---C.B.R. Circular No.1(155)DTO-11/94, dated 28-5-1995---C.B.R. Circular No.12 of 1991, dated 30-6-1991---Rectification of mistake---Assessment was framed under S.62 of the Income Tax Ordinance, 1979---Appeal against such order was' filed which was decided by the First Appellate Authority---On direction of Revenue Audit, order under S.156 of the Income Tax Ordinance, 1979 was filed by the Assessing Officer where assessment was completed under S.80C of the Income Tax Ordinance, 1979 and tax was levied on the turnover---First Appellate Authority set aside the order passed under S.156 of the Income Tax Ordinance, 1979---Proceedings were taken over by the Income Tax Panel and after examination of account an order under Ss.132/62 of the Ordinance was passed wherein the assessment was again made according to the provision under S.80C of the Income Tax Ordinance, 1979---Such order was again set aside by the First Appellate Authority---Validity---Held, there were so many doubts in respect of earlier proceedings that the mistake floating on the surface of order was not apparent---Facts of the case gave a very clear and unequivocal picture that present was not a case of, mistake at all-Non-­filing of declaration was not a mistake---Case being that of misapplication of facts as well as of law the proceedings initiated by the Panel were held to be totally illegal and were annulled by the Appellate Tribunal.

2003 PTD 1093; 2000 PTD (Trib.) 329; 2002 PTD 283; C.I.T. v. National Food Laboratories case; T.S. Blaram I.T.O. v. Volkart Brother's case 1998 PTD 1379; 58 Tax 37; Messrs Glaxo Laboratories Ltd. v. Inspection ACIT 1992 PTD 566; (1997) 118 ITR 585; 2003 PTD 279; 2001 PTD 3810; 2004-90 PTD 128 (sic); 155 ITR 568; (1999) 80 Tax 1 (Trib.); 1960 PTD 727 and PLD 1989 SC 222 ref.

(b) Income-tax---

---Change of opinion---Principle of change of opinion can only be applied in circumstances where it can be shown that all facts were consciously considered by the Assessing Officer before coming to a conclusion.

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

---Second Sched., Part-IV, Cl. (9)---Exemption from specific provisions---Declaration---Separate declaration is necessary for opting out of the Presumptive Tax Regime.

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

----Second Sched., Part-IV, Cl. (9)---Exemption from specific provision---Golden principle of interpretation---Law must be applied in its actual spirit---When law provides for specific separate procedure and says that an irrevocable declaration should be filed in addition to filing of return, it cannot be said that the provisions have been added without any purpose and that the same were redundant---Redundancy and superfluousness cannot be attributed to the legislature.

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

----Second Sched., Part-IV, Cl. (9) & S.55---Exemption from specific provisions---Question was whether filing of return amounts to an irrevocable option under Cl. (9) of Part-IV of the Second Schedule of the Income Tax Ordinance, 1979---Validity---Legislature had directed the manufacturers to file an irrevocable declaration for opting out of Presumptive Tax Regime, the same was not to be ignored while making an assessment---Not only that the language speaks of filing an irrevocable option in writing, but it also says that the same shall be along with the return of total income under S.55 of the Income Tax Ordinance, 1979---Before finalizing an assessment, Assessing Officer needs to check as to whether requirements have been fulfilled as prescribed by law.

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

---S.156---Rectification of mistake---Mistake of fact as well as of law---Term `mistake apparent from record' had been discussed many a time in various judgments and there was consensus in judicial forums that the words as used in S.156 of the Income Tax Ordinance, 1979 include mistake of fact as well as of law.

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

---S.156---Rectification of mistake---Section 156 of the Income Tax Ordinance, 1979 applies on those errors only which are glaring, obvious, self-evident and do not require a long drawn process of reasoning or examining arguments of points or where there may conceivably be two opinions and it should be clear and appear like something floating on the surface of the water, meaning thereby that to call it a mistake, no discussion is required.

(h) Interpretation of statutes---

---Notification---Notification was not an Act of Parliament, it was a proclamation and, it could not have become law unless it was to be published in the gazette.

(i) Interpretation of statutes---

----Act of Parliament---In English law the rule is that Act of Parliament becomes law from the first movement of the day on which it receives the Royal Assent, unlike the same the royal proclamation becomes law with its publication in the official gazette.

(j) Interpretation of statutes---

----Notification---Notification issued on the behest of the Government, by the Central Board of Revenue, if is not published in the official gazette, its knowledge to the public at large, remains doubtful.

(k) Income-tax---

----Special laws made to regularize a procedure for a person who had to file return on 31st of July---Assessee per chance for personal reasons filing delayed return up till 31st of August---Notification issued on 24th August could not be said to have created a legal bar against the assessee.

(l) Income-tax---

----Filing of return---Law of natural justice requires announcement of a clear position of relevant law and rules for everyone for filing of return before one is supposed to file it.

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

----Second Sched., Part-IV, Cl. (9)---Exemption from specific provisions---Declaration with return---Instruction came on 24th of August and was published somewhere later, it could not be held valid for the returns filed earlier or even for return filed on the 30th of August, 1991.

155 ITR 568 rel.

(n) Interpretation of statutes---

----In legal framework the instructions that provide remedy are retrospective and can be applied at any stage of the proceedings in a case.

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

----S.156 & Second Sched., Part-IV, Cl. (9)---C.B.R. Circular No.12 of 1991, dated 30-6-1991---Rectification of mistake---Declaration---Assessment finalized under normal law was rectified under S.156 of the Income Tax Ordinance, 1979 by holding that non-declaration by the assessee was a mistake apparent from record---Validity---Held, there was no mistake either on the part of the assessee or on the part of the Assessing Officer --Assessee was neither aware of any such additional requirement nor was ever made wiser by Assessing Officer during the course of proceedings---Since requirement of filing declaration was along with filing of return, this requirement was not be later fulfilled---Since Assessing Officer made the assessment consciously and after dealing with all connecting issues he neither asked for statement under S.143-B of the Income Tax Ordinance, 1979 nor made any calculation of tax as was the then requirement under C.B.R. Circular No.12 of 1991---Acceptance of return under S.55 of the Income Tax Ordinance, 1979 was not a mistake.

155 ITR 568 and 1960 PTD 727 rel.

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

---S.8---All officers to follow the orders of the Central Board of Revenue---Section 8 of the Income Tax Ordinance, 1979 made all instructions of Central Board of Revenue to be binding on all subordinate officers.

PLD 1989 SC 222 rel.

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

----Ss.156, 62, 143-B, 80C & Second Sched., Part IV, Cl. (9)---Rectification of mistake---Declaration---For assessment year 1991-92 in the case of those assessees whose accounts stood closed on or before 31st of December, 1990, filing of a separate declaration was not a requirement---Assessment framed later ignoring such a declaration was not mistake apparent from record.

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

---Ss.61, 56 & 156---Notice for production of books of accounts, etc.---Issuance of notice---Notification under S.61 of the Income Tax Ordinance, 1979 could be issued during the pendency of a return or where a notice under S.56 of the Income Tax Ordinance, 1979 had been issued, but not where assessment had already been finalized or where an order is to be amended by rectifying a mistake on record.

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

---S.156---Rectification of mistake---Plain reading of S.156 of the Income Tax Ordinance, 1979 did not provide any room for making an assessment upon a finalized assessment.

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

----S.156(2)---Rectification of mistake---Opportunity of being heard---Opportunity of being heard to the assessee was to be provided under S.156(2) of the Income Tax Ordinance, 1979, which could be in the shape of a letter describing the nature of the mistake and indicating the rectifications, which,need to be carried out.

(u) Income-tax---

----Assessment---Wrong mentioning of section did not vitiate an assessment.

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

----Ss.61, 55 & 56---Notice for production of books of accounts, etc.---Jurisdiction---Assessing Officer acquires jurisdiction for issuance of notice under S.61 of the Income Tax Ordinance, 1979 where a return of income had been filed by the assessee, or a notice under S.56 of the Income Tax Ordinance, 1979 had been served upon him.

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

----S.156---Rectification of mistake---Cancellation or re-opening an assessment---"Rectification" is a very limited term however, it was carried out without cancelling or reopening an order---Such rectification did change the shape but the original order remained intact for all legal and practical purposes subject to modification by way of rectification of a mistake.

(x) Interpretation of statutes--

----Law should always be applied in its natural meanings and in its, literal sense---Intendments beyond the language of law by way of interpretation and reducing facilities by self-generated meanings cannot be permitted by any Court.

Naeem Akhtar Sheikh, F.C.A. along with Jalal Ahsan, A.C.A. for Appellant.

Shahid Jamil Khan, L.A. and Dr. Shahid Siddique Bhatti, D.R. for Respondent.

Date of hearing: 25th January, 2005.

2006 P T D (Trib.) 626

[Customs, Excise and Sales Tax Appellate Tribunal]

Before Saeed Akhtar, Member (Technical) and Pir Akhtar Hussain Bodla, Member (Judicial)

Appeal No. S.T.A. 1495/LB of 2000, decided on 15th December, 2004.

Sales Tax Act (VII of 1990)---

----Ss.3, 6, 23, 33, 34, 37(a)(b) & 2(9)---Scope of tax---Supply of cotton lint without issuance of sales tax invoices and payment of sales tax---Show-cause notice was issued for evasion of sales tax on account of cotton lint and cotton seed---Appellant failed to submit written reply to show-cause notice and no one appeared at the time of hearing to defend the charges---Demand of sales tax along with additional tax and penalty was enforced by the Adjudicating Officer---Validity---Nothing was available on record to prove that show-cause notice was served upon the appellant---Decision was an ex parte one where huge liability against the appellant had been adjudged on the basis of information available with the department---Case was remanded to the Adjudicating Officer for de novo consideration on merit after affording opportunity of hearing to the parties concerned so that a just and fair decision could be made.

Rana Muhammad Afzal for Appellant.

Ahmad Raza, D.R. assisted by M. Amin, Auditor for Respondent.

Date of hearing: 14th December, 2004.

2006 P T D (Trib.) 632

[Income-tax Appellate Tribunal Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member and Mukhtar Ahmad Gondal, Accountant Member

I.T.A. No.528/LB of 2003, decided on 3rd September, 2005.

Income Tax Ordinance (XXXI of 1979)---

----S.16(2)(c) & Second Sched.---Income Tax Rules, 1982, Rr.4 to 18---C.B.R. Circular No. 5 of 1980 dated 16-2-1980---C.B.R. Circular No.1 of 1965 dated 1-7-1965---Profit in lieu of salary---Payments under Golden Handshake Scheme---Pro rata taxation of the Golden Handshake Scheme's payments---First Appellate Authority set aside the assessment for fresh proceedings with the direction of pro rata taxation of the Golden Handshake Scheme payment for the remaining period of assessee's service in terms of Circular No.5 of 1980 dated 16-2-1980---Validity---Payments received by the employees from their employers in consequence of Golden Handshake Scheme were taxable, as they fell in the definition of salary as provided under' S.16(2)(c) of the Income Tax Ordinance, 1979 being compensation in connection with termination of service---C.B.R. Circular No.1 of 1965 dated 1-7-1965 remains intact and available to the assessee. who wants to avail it---Assessing Officer was directed that while framing fresh assessment, he should also consider the decision of the superior Courts or any subsequent improvement in this regard---Directions of the First Appellate Authority regarding pro rata taxation was vacated and setting aside of the assessment was upheld by the Appellate Tribunal.

2002 PTD 562 rel.

Mahboob Alam, D.R. for Appellant.

Nemo for Respondent.

Date of hearing: 3rd September, 2005.

2006 P T D (Trib.) 637

[Customs, Excise and Sales Tax Appellate Tribunal]

Before Mian Muhammad Jehangir, Member (Judicial)

Customs Appeal No. 2265/LB of 2001, decided on 11th November, 2004.

Sales Tax act (VII of 1990)---

----Ss.33(1) & 26---General penalties---Penalty was imposed for non-filing of return on the ground that every applicant who had applied for registration was supposed to file sales tax return as required by S.26 of the Sales Tax Act, 1990---Appellant was not a registered person in the month for which the penalty was imposed---Validity---Section 26 of the Sales Tax Act, 1990 provided that every registered person had to file the return---If an enterprise was not a registered person, it was not binding on the firm to file the return in the prescribed form---Appellant could not be penalized as he was not a registered person in the month for which the penalty was imposed.

Jamil Hussain for Appellant.

Malik Shabbir, Dy. Superintendent for Respondent.

Date of hearing: 11th November, 2004.

2006 P T D (Trib.) 641

[Income-tax Appellate Tribunal Pakistan]

Before Rasheed Ahmed Sheikh, Judicial Member

I.T.A. No.718/LB of 2004, decided on 14th December, 2005.

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

----S.62---Survey for Documentation of National Economy Ordinance (XV of 2000), Preamble---Assessment on production of accounts, evidence etc.---Assessee was confronted by issuing notice under S.62 of the Income Tax Ordinance, 1979 whereby proposed estimated sales were based on local inquiry report---After lapse of almost two years from the date of issuance of the first notice, the assessee was once again confronted with higher sales viz. the earlier one on the ground that assessee had agreed before the Survey Team to be assessed at such sales---Validity---No implicit reliance could be placed on the contents recorded in the Survey Form, which could merely be considered a piece of information having some evidentiary value and nothing more---Contents recorded in Survey Form had no binding force, reason being usually and generally extent of business in each and every case was adjudged considering the multidimensional factors---Agreement recorded in the Survey Form on the point of estimation of sales was brushed aside by the Appellate Tribunal for purpose of disposal of appeal.

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

----S.129---Appeal to the Appellate Additional Commissioner---Remand of case---Case should have not been remanded where neither the new facts were required to be brought on record nor there was a case of further inquiry or investigation.

(c) Survey For Documentation of National Economy Ordinance (XV of 2000)---

----S.302(2)---Contract Act (IX of 1872), Ss. 10, 14 & 19---Filing of questionnaire---Agreement of sales---Voidable contract---Section 10 of the Contract Act, 1872, provided that only those agreements had binding force which were made by free consent of the parties---Under S.14 of the Contract Act, 1872, the consent could only be said to be free if it was not caused by coercion and undue influence---Agreement of sales made with Survey Team was voidable contract being caused by coercion and undue influence as had been envisaged in S.19 of the Contract Act, 1872---Sales agreed in Survey Form lacked legal sanctity.

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

----S.62---Assessment on production of accounts, evidence etc.---Sales be estimated considering overall facts of the case---Circle Inspector reported stock lying at shop at Rs.600,000 and the declared capital was at Rs.600,000---Appellate Tribunal deemed appropriate and fair to fasten the sales at Rs.48,00,000 in circumstances.

Azhar Ehsan Sheikh for Appellant.

Dr. Shahid Siddiqui Bhatti, D.R. for Respondent.

Date of hearing: 14th December, 2005.

2006 P T D (Trib.) 648

[Customs, Central Excise and Sales Tax Appellate Tribunal]

Before Saeed Akhtar, Member (Technical) and Pir Akhtar Hussain Bodla, Member (Judicial)

Appeal No. S.T.A. No. 1587/LB of 2001, decided on 29th December, 2004.

Sales Tax Act (VII of 1990)---

----Ss. 3, 6, 23, 33, 34, 37(a)(b) & 2(9)---Scope of tax---Audit staff observed that appellant supplied oil cake and oil dirt without issuing sales tax invoices and payment of sales tax---Contravention report was made out for violation of S.2(9), 3, 6, 23, 33, 34 & 37(a)(b) of the Sales Tax Act, 1990---Show-cause notice was issued and adjudged sales tax liability payable along with additional tax---Validity---Registered person was required to deposit sales tax along with additional tax as adjudged by the Adjudicating Officer---Department confirmed that entire principal amount had been deposited and an amount of additional tax liability was still recoverable---Beneficial amendment had been made in S.34 of the Sales Tax Act, 1990 allowing payment of additional tax at the simple rate instead of compound rate---Department was directed to re-calculate the amount of additional tax at the rate which is presently applicable and recover the balance amount of additional tax after allowing adjustment of additional tax already deposited by the appellant---Order was modified accordingly by the Appellate Tribunal.

Munawar Warraich for Appellant.

Khalid Bashir, D.R. with Safdar Bashir, Auditor for Respondent.

Date of hearing: 12th October, 2004.

2006 P T D (Trib.) 656

[Customs, Excise and Sales Tax Appellate Tribunal]

Before Zafar Iqbal, Member Technical and Mrs. Khalida Yasin, Member Judicial

Customs Appeal No. K-982 of 2001, decided on 21st October, 2005.

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

----S. 81---Provisional assessment of duty----Nature and character of provisional assessment---Explanation.

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

----S.81(4)----Provisional assessment of duty---Limitation for finalization of assessment--Payment of additional amount or bank guarantee having been required to secure the tentative maximum in the mind of Revenue---Such could not mature into final assessment merely for the reason of expiry of the period of one year contemplated in S.81(4) of the Customs Act, 1969---No mechanism is available in the Customs Act, 1969 whereby an importer or exporter could force the department to finalize an assessment.

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

----S.81(2)---Provisional assessment of duty---Limitation for finalization of assessment---Customs authorities had failed to finalize the assessment of the assessee within the stipulated period as provided by subsection (2) of S.81 of the Customs Act, 1969---Provisional assessment made by the Customs Authorities in terms of S.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---Order was set aside by the Appellate Tribunal.

Muhammad Afzal Awan for Appellant.

Manzoor Hussain Memon along with Tariq Aziz, D.R. for Respondents.

Date of hearing: 10th October, 2005.

2006 P T D (Trib.) 661

[Income-tax Appellate Tribunal Pakistan]

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

I.T.As. Nos. 144/LB to 149/LB, 562/LB to 567/LB of 2005, decided on 16th June, 2005.

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

----S.65---Additional assessment---Notice---Combined notice in multiple assessment years could not be issued since each year might involve different issues in the respective assessment years.

2005 PTD (Trib.) 234 rel.

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

----Ss.65, 59(1) & 62---Additional assessment---Pending assessment---Issuance of combined notice---Validity--Assessments for the assessment year 1996-97 to 1999-2000 had been finalized under deeming provision of S.59 (1) of the Income Tax Ordinance, 1979 while the assessments for the assessment years 2000-01 and 2001-02 were still pending finalization before the department---Combined notice could not be issued and combined order under Ss.65 and 62 of the Income Tax Ordinance, 1979 could not be passed because S.65 of the Income Tax Ordinance, 1979 could only be invoked where assessment had already been finalized under S.62 of the Income Tax Ordinance, 19i9 while the assessments for the two years i.e. 2000-01 and 2001-02 were pending finalization.

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

----S.65---Additional assessment---Issuance of notice---Ticking of two different clauses---Effect---Assessing Officer ticked two different clauses which meant that Assessing Officer was not sure whether this was a case of under-assessment or escaped assessment.

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

----S.65---Additional assessment---Failure to observe legal formalities while framing assessment---Validity---Assessing Officer failed to observe legal formalities while making additional assessments inasmuch as he issued combined notice for the multiple assessment year; ticked more than one clauses of the notice; notice itself was served upon the assessee and as regards assessment year 2000-01 and 2001-02 the Assessing Officer proceeded to frame assessment under Ss. 62 and 65 of the Income Tax Ordinance, 1979 despite the fact that returns were filed under S. 59(1) of the Income Tax Ordinance, 1979 and there was no finding to the effect that the returns did not qualify for Self-Assessment Scheme---Order passed by the First Appellate Authority was vacated and assessment were annulled for all the years under appeal by the Appellate Tribunal---Assessing Officer was directed to accept the declared version of the assessee in circumstances.

1997 PTD 47; 2005 PTD (Trib.) 234 and 2004 PTD (Trib.) 1391 rel.

Ch. Afzaal Ahmad for the Assessee.

Abdul Rasheed, D.R. for the Department.

Date of hearing: 16th June, 2005.

2006 P T D (Trib.) 673

[Income-tax Appellate Tribunal Pakistan]

Before Ehsan-ur-Rehman, Judicial Member and Naseer Ahmad, Accountant Member

I.T.A. No.2607/LB of 2005, decided on 30th November, 2005.

Income Tax Ordinance (XLIX of 2001)---

----S.122---Amendment of assessment---Issuance of notice without indication of specific provision of S.122 (1), Income Tax Ordinance, 2001---Validity---Notice issued for assumption of jurisdiction was defective and when initial action was defective subsequent action could not be termed as legal---Assessment in the present case, was made before the promulgation of Income Tax Ordinance, 2001 i.e. on 30-3-2002---Department could not go beyond the period of promulgation of the Income Tax Ordinance, 2001---Department was not justified in invoking the provisions of S.122 of the Income Tax Ordinance, 2001 in circumstances which was ab initio void and illegal---Appellate Tribunal cancelled the order of the Assessing Officer and restored the position which stood before the initiation of proceedings by the Department.

Aqeel Ahmad, I.T.P. for Appellant.

Muzammal Hussain, D.R. for Respondent.

Date of hearing: 29th November, 2005.

2006 P T D (Trib.) 689

[Income-tax Appellate Tribunal Pakistan]

Before Muhammad Munir Qureshi, Accountant Member

I.T.A. No. 4203/LB of 2003, decided on 29th November, 2005.

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

----S.13 (1)(aa)---Unexplained investment etc., deemed to be income---Accretion in wealth---Assessee contended that amount had arisen from agricultural lease land---Necessary corroboration from pertinent Revenue Record was not made to substantiate such contention---Assessing Officer rejected such assertion of the assessee and included the amount in assessee's total income as being unexplained as to source---First Appellate Authority accepted assessee's contention that the amount represented agricultural income from land obtained on lease by referring to a statement from the landlord (lessor) that he had given land to assessee (lessee)--Validity---Simple statement by one person that he had given his land on lease to another person would not be sufficient in accretion in wealth---Contract between landlord and assessee appeared to be in the nature of an afterthought and artificially contrived when assessee was questioned on the accretion in his wealth by the Assessing Officer--No documentary evidence was furnished by the assessee to establish that land obtained by him on lease was in fact used for agricultural cultivation by him and that agricultural produce grown on land was actually disposed of in the market that resulted in accretion in his wealth---Document from "Patwari" was wholly suspected as the same threw no light on the exact nature of the land and on the cultivation made thereon---Said document did not clarify whether it was canal irrigated land or otherwise or whether it was "Banjar" land and document appeared to be hastily filed in and no attention appeared to have been paid to the various columns---Appellate Tribunal vacated the order of the First Appellate Authority and restored the order of the Assessing Officer.

1991 PTD 488 not applicable.

(b) Income-tax---

---Contract---Contract between two parties---Third party does not have any right to interfere with regard to the modalities/terms and conditions of the said contract---However, the first condition is that there should be a bona fide, "arms length", transparent contract between two genuine parties.

1991 PTD 488 rel.

S.A. Masood Raza Qizalbash, D.R. for Appellant.

Syed Nisar Gillani for Respondent.

Date of hearing: 29th November, 2005.

2006 P T D (Trib.) 696

[Income-tax Appellate Tribunal Pakistan]

Before Naseer Ahmad, Accountant Member and Ehsanur Rehman, Judicial Member

I.T.A. No.3958/LB of 2004, decided on 12th August, 2005.

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

----S.122---Income Tax Ordinance (XXXI of 1979), S.12 (18)---S.R.O. No. 633(I)/2002 dated 19-9-2002---Amendment of assessment---Addition---Assessment was modified under S.122 of the Income Tax Ordinance, 2001 on 21-1-2004 by invoking S.12 (18) of the Income Tax Ordinance, 1979 treating the share deposit money as a loan---Validity---High Court had observed that S.R.O. No.633(I)/2002 dated 19-9-2002 was not a valid and legal document and was of no consequence and it was so declared---Department could not invoke the provisions of S.122 of the Income Tax Ordinance, 2001---Order passed by the Assessment Officer was cancelled and assessment finalized under S.62 of the Income Tax Ordinance, 1979 was restored by the Appellate Tribunal.

Honda, Shahrah-e-Faisal, Karachi and others' case 2005 PTD 1316; 2005 PTD 1621 and W.P. 7788 of 2003 rel.

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

----S. 12(18)---Income deemed to accrue or arise in Pakistan---Addition---Share deposit money created through transfer entry by general voucher did not attract the provisions of S.12 (18) of the Income Tax Ordinance, 1979.

2001 PTD 1180 rel.

Ziauddin Sheikh for Appellant.

Muzammal Hussain, D.R. for Respondent.

Date of hearing: 11th August, 2005.

2006 P T D (Trib.) 703

[Customs, Excise and Sales Tax Appellate Tribunal]

Before Mian Muhammad Jahangier, Member (Judicial) and Mehmood Alam, Member (Technical)

Appeal No. 1934/LB of 2001, decided on 16th August, 2005.

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

----S.162---Power to issue search warrant---Seized goods were released subject to payment of legal dues and penalty in spite of the fact that raids conducted over the premises were illegal and goods were released but the appellant was directed to make payment of legal dues and penalty---Appellant contended that seizing officer did not follow the procedure as prescribed in S.162 of the Customs Act, 1969 and the raid and procedure thereof was of no legal effect---Validity---Goods in an identical case were released without payment of duties and taxes even without examination in compliance of order of the High Court---In case of violation of mandatory provision of law looking into the things available at the spot was illegal and unjustified---Proper course of action was that the Customs authorities should have come back and after compliance of the provision of law, the raid should have been conducted---Examination of goods at later stage was illegal and that the discrimination made by Adjudicating Officer was without any basis or legal grounds---Order-in-original was set aside and Appellate Tribunal ordered that the goods owned by the appellant should be released immediately.

PTCL 1991 CL 2000 ref.

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

----S.187---Burden of proof---Fake/forged or irrelevant documents---Initial burden of proof was upon the appellant to defend the allegation by sound and convincing evidence in accordance with the provision of S.187 of the Customs Act, 1969---Appellant produced bills of entries either original or in photocopy, in such a situation burden of proof had shifted and it was the duty of the prosecution to prove through evidence that the documents were fake, forged or irrelevant---In order to verify the documents the prosecution sent the same to Customs authorities which re-submitted these documents without attesting the same---Order-in-original did not show that the documents were found bogus, even in this connection the statement of the concerned officer was not recorded---Observations of Adjudicating Officer in connection with the documents being irrelevant were not correct and was without any basis in circumstances.

Mian Abdul Ghaffar for Appellant.

Munawar Iqbal Inspector Legal, F.I.A. for Respondent.

Date of hearing: 28th April, 2005.

2006 P T D (Trib.) 712

[Income-tax Appellate Tribunal Pakistan]

Before Ehsan-ur-Rehman, Judicial Member and Naseer Ahmad, Accountant Member

W.T.A. Nos. 1010/LB of 2004 and 18/LB of 2005, decided on 16th April, 2005.

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

----S. 17(1)(a)(b)---Time limit for completion of assessment and reassessment---Issue of limitation decided by ,the First Appellate Authority by properly relying on the reported order of Appellate Tribunal was upheld by the Appellate Tribunal.

2004 PTD (Trib.) 388 and 2004 PTD (Trib.) 1014 rel.

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

----S.31B---Additional Wealth Tax---Mandatory or discretionary---Assessee contended that charging of additional tax was not mandatory but was discretionary requiring the Assessing Officer to decide its chargeability on the merit of each case---Validity---Enactment had never been made to give it a mechanical or mandatory shape for imposing the additional tax and language of section had allowed the discretion to be exercised by the Assessing Officer on analyzing the merit of each case---Appellate Tribunal declined to uphold the findings of the First Appellate Authority that additional tax was mandatory under the law and not discretionary---Assessee's appeal on the issue of additional tax was accepted and departmental appeal was rejected.

1995 PTD 91; 2001 PTD 807; 2003 PTD 818; 2003 PTD 2653 and GST 2005 CL 54 rel.

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

----S.31B---Additional Wealth Tax---Provisions mandatory or discretionary---Provisions of additional tax in terms of language, "shall be liable to pay" has made it not mandatory and also that discretion has been given to judge each case on its merit.'

1995 PTD 91; 2001 PTD 807; 2003 PTD 818;.2003 PTD 2653 and GST 2005 CL 54 rel.

Ghazanfar Hussain, D.R. for Appellant.

Sirajuddin Khalid for Respondent.

Date of hearing: 16th April, 2005.

2006 P T D (Trib.) 804

[Income-tax Appellate Tribunal Pakistan]

Before Syed Nadeem Saqlain and Rasheed Ahmad Shaikh, Judicial Members and Muhammad Munir Qureshi, Accountant Member

W.T.As. Nos. 1137/LB and 1138/LB of 2000, decided on 24th November, 2001.

Per Syed Nadeem Saqlain, Judicial Member; Rasheed Ahmad Shaikh, Judicial Member, agreeing---

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

----S.17(1)(a) & (b)---Wealth escaping assessment---Issuance of notice under wrong provision of law i.e. under S.17(1)(a) instead of under S.17(1)(b) of the Wealth Tax Act, 1963---First Appellate Authority set aside the case for the reason that on 29-9-1998 the Assessing Officer sent a letter for permission from the Inspecting Additional Commissioner to reopen the case whereas show-cause notice under S.17(1)(a) of the Wealth Tax Act, 1963 was served upon the assessee on 2-10-1998 and the assessee had not been provided sufficient opportunity of being heard---Assessee contended the assumption of jurisdiction was defective for the reason that notice was issued under wrong provision of law and any proceeding conducted in pursuance thereof was illegal and void ab initio and could not be sustainable in the eye of law---Assessing Officer erred in law while issuing notice under S.17(1)(a) of the Wealth Tax Act, 1963 since it was not attracted in the case of assessee because the case of the assessee was covered by S.17(1)(b) of the Wealth Tax Act, 1963---If Assessing Officer had any definite information about the escapement of Wealth Tax then he should have issued a notice under S.17(1)(b) of the Wealth Tax Act, 1963 requiring him to give all the relevant information---Validity---Assessing Officer sought the permission to invoke S.17 of the Wealth Tax Act, 1963 without waiting for the reply from the assessee despite the fact that the First Appellate Authority showed his astonishment and displeasure about the procedure adopted by the Assessing Officer and observed that "this state of affairs was not sustainable in law as the letter for permission to reopen the 'case was sent well before the service of show-cause notice issued under S.17(1)(a) of the Wealth Tax Act, 1963"---After observing such flagrant violation of legal provision and holding it to be against the law, the First Appellate Authority proceeded to set aside the case and did not annul the assessment proceedings conducted by Assessing Officer---Both the orders passed by the lower authorities were not sustainable in the eye of law which were vacated by the Appellate Tribunal being without jurisdiction having not been complied with the provisions of law.

1992 PTD Note 369 at p.398 and 1985 PTD (Trib.) 178 rel. 2002 PTD (Trib.) 168 and 2002 PTD (Trib.) 2276 ref.

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

----S. 17(1)(a) & (b)---Wealth escaping assessment---Application of the provisions---S.17(1)(a) of the Wealth Tax Act, 1963 would be attracted in a case where there was an escapement of assessment for the reason that the assessee had failed to file a return of his net wealth under S.14 of the Wealth Tax Act, 1963---While S.17(1)(b) of the Wealth Tax Act, 1963 would be applicable where the assessment had already been framed and the Assessing Officer gets any information with regard to escapement of income---Assessment already completed by the Department warranted the invocation of S.17(1)(b) and not S.17(1)(a) of the Wealth Tax Act, 1963.

Per Rasheed Ahmad Shaikh, Judicial Member agreeing with Syed Nadeem Saqlain, Judicial Member--

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

----S. 17(1)(a) & (b)---Wealth escaping assessment---Incorrect citation of limb of statutory notice or mere breach of form or mere misquotation of a statutory provision---Effect---Invocation of S. 17 of the Wealth Tax Act, 1963 was a question of assumption of jurisdiction it could not be said that this was "mere breach of form" or failure to cite proper limb of statutory provisions or "misquotation of provisions of law".

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

----S. 17(1)(a) & (b)---Wealth escaping assessment---Application of relevant provisions of law---Provision of S.17(1)(b) of the Wealth Tax Act, 1963 provided that if the Assessing Officer had, in consequence of any information in his possession, reasons to believe, notwithstanding that there had been no such omission or failure as referred to in cl. (a) of S.17(1) of the Act that the net wealth chargeable to tax had escaped assessment for any year, whether by reason of under assessment at too low a rate or otherwise---Section 17(1)(a) provided that where the assessment had already been made and certain information regarding escapement of income came into the possession of the Assessing Officer, only then S.17(1)(a) of the Act shall be invoked.

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

----S. 17(1)(a)(b) & (c)---Wealth escaping assessment---Legislature had purposely categorized three clauses (a), (b) and (c) in subsection (1) of S.17 of the Wealth Tax Act, 1963; otherwise only a single sentence could have been inserted by the legislature to cover up all the eventualities referred to in S.17 of the Wealth Tax Act, 1963---Purport and tenor behind classifying such categories was that the Assessing Officer should' be mindful and decisive about the case, which he was going to re-open---Section 17(1) of the Wealth Tax Act, 1963 had made it clear that Assessing Officer was under legal obligation to examine whether this was a case of understatement or escaped assessment or assessed at too low a rate---Such action would evaluate whether the Assessing Officer, while invoking the provisions of S.17(1) of the Wealth Tax Act, 1963 had applied his mind to the facts of the case in its proper perspective.

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

----S. 17(1)---Wealth escaping assessment---Law did not permit to re-open the case on account of wavering mind.

(g) Interpretation of statutes---

----Where the legislature had intended to do a certain act under the law that should have been done accordingly and violation thereof was not sustainable in law.

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

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

----S. 17(1)(a) & (b)---Wealth escaping assessment-Issuance of notice under wrong provision of law i.e. under S.17(1)(a) instead of under S.17(1)(b) of the Wealth Tax Act, 1963---Validity---Notice under S.17(1)(b) was required to be issued as this was a case of "under-assessment" and not "escapement"---Assessing Officer had indeed "erred" in issuing notice under S.17(1)(a) of the Wealth Tax Act, 1963 but this mistake did not completely oust his jurisdiction under S.17(1) of the Wealth Tax Act, 1963---No prejudice had been caused to assessee by issuance of notice under S.17(1)(a) instead of under S.17(1)(b) of the Wealth Tax Act, 1963 as First Appellate Authority had already set aside the order of Assessing Officer thereby providing the assessee an opportunity to tender explanation with regard to liabilities claimed and the embargo imposed by S.2(16)(ii) of the Wealth Tax Act, 1963---Mere incorrect citation of "limb" of S.17(1) could not invalidate assessment proceedings.

(1970) 21 Tax 71 (Trib.); 1985 PTD (Trib.) 255; (1971) 24 Tax 183 and 1991 PTD 217 rel.

Zafar Shah, F.C.A. for Appellant.

Mehboob Alam, D.R. for Respondent.

Date of hearing: 14th November, 2001.

2006 P T D (Trib.) 827

[Income-tax Appellate Tribunal Pakistan]

Before S. A. Minam Jafri, Accountant Member

I.T.A. No. 1244/KB of 2005, decided on 28th January, 2006.

Income Tax Ordinance (XXXI of 1979)---

----S.13 (1)(d)---Addition---Permission---Approval---Addition made under S.13(1)(d) of the Income Tax Ordinance, 1979 was deleted by the Appellate Tribunal on the ground that mandatory approval had not been obtained.

(2005) 92 Tax 95 (Trib.) rel.

Abdul Tahir, I.T.P. for Appellant.

Ghulam Bashir Memon for Respondent.

Date of hearing: 27th January, 2006.

2006 P T D (Trib.) 828

[Income-tax Appellate Tribunal Pakistan]

Before Agha Kafeel Barik, Accountant Member and S. Hasan Imam, Judicial Member

I.T.As. Nos. 1308/KB to 1310/KB of 2005, M.As. (Stay) Nos.3/KB to 5/KB of 2006, decided on 26th January, 2006.

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

---S.156--Rectification of mistake---Appeal against rectified order--Principles---If an order is modified under 5.156 of the Income Tax Ordinance, 1979 to the extent that the tax liability is increased, or the nature of such order is changed in such a manner that it is required to be read with the amended order then it is merged with the subsequent order---If any order under S.156 of the Income Tax Ordinance, 1979 does not increase or decease the tax liability of the assessee nor changes the fundamentals of such order, to appeal would lie against such order challenging the contents of the original-order.

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

----S. 156---Rectification of mistake---Appeal---Cause of grievance, as enumerated in grounds of appeals by the assessee, arose out of the original assessment orders passed by the Assessing Officer under S.62 of the Income Tax Ordinance, 1979 against which the assessee failed to file any appeal---Appeal filed by the assessee in respect of order of Assessing Officer and subsequent order of First Appellate Authority were misdirected, which had been filed simply to keep the issue alive---Appeals were dismissed by the Appellate Tribunal.

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

---Ss. 156 & 62---Rectification of mistake---Application for stay of demand---Request for stay of demand arising out of original order passed by the Assessing Officer under S.62 of the Income Tax Ordinance, 1979---Since assessee had failed to file appeal against the assessment order passed under S.62 of the Income Tax Ordinance, 1979 by the Taxation Officer and all his applications under S.156 of the Income Tax Ordinance, 1979- had been rejected by the Taxation Officer and subsequently his appeals filed before the First Appellate Authority as well as before the Appellate Tribunal had also failed, stay of demand was not granted by the Appellate Tribunal in circumstances.

Abdul Tahir, I.T.P. for Appellant.

Gohar Ali, D.R. for Respondent.

Date of hearing: 26th January, 2006.

2006 P T D (Trib.) 838

[Income-tax Appellate Tribunal Pakistan]

Before Ehsan-ur-Rehman, Judicial Member and Naseer Ahmad, Accountant Member

I.T.As. Nos. 1337/LB, 815/LB, 1203/LB of 2003 and 1349/LB of 2005, decided on 24th November, 2005.

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

---S.12(18)---Income deemed to accrue or arise in Pakistan---Preliminary expenses---Liability shown in balance-sheet in respect of pre-incorporation expenses was considered as loan and addition was made, which was deleted by the First Appellate Authority---Validity---When transactions took place there was no company on ground and as such provisions of S.12(18) of the Income Tax Ordinance, 1979 were not attracted---No option was available before formation of the company with the promoters but to incur preliminary expenses from their own pocket---Assessee-company did not violate the provisions of income tax law---Addition made under S.12(18) of the Income Tax Ordinance, 1979 by the Department was totally misconceived and not tenable---Departmental appeal being devoid of any merit was rejected by the Appellate Tribunal on this issue.

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

---S.62(1)---Assessment on production of accounts, evidence etc.---Yieldage rate---Declared yieldage rate of 82.07% was rejected and applied the same at 84%---Additions were also made out of P&L account on account of unverifiability under various heads---Assessee contended that no notice under S.62(1) of the Income Tax Ordinance, 1979 was issued to confront the deficiencies, if any, which was a sine qua non---Nothing was brought on record to reject the books of accounts and to make addition in declared yieldage---Summary rejection of books and final accounts was against the settled principles---Validity---Declared trading version could not be rejected on the basis of parallel cases until and unless some concrete material was brought on record to do so---Rejection of, trading version was not sustainable in law and even on the facts and in the circumstances of the case---Corollary of the events was that the declared trading results merited acceptance.

86 Tax 117 (H.C. Kar.) and 90 Tax 117 (Trib.) ref.

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

---S. 62(1)---Assessment on production of accounts, evidence etc.---Rejection of trading account without issuance of notice---Validity---Department failed to point out any material deficiencies in the books of accounts or practically speaking to issue a notice under S.62(1) of the Income Tax Ordinance, 1979 which was a mandatory condition for rejection of accounts---Trading account was directed to be accepted as such, as there was no reason to reject the same or the books of accounts.

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

---S.62---Assessment on production of accounts, evidence etc.---Addition out of profit and loss account---Assessee contended that department failed to pinpoint any expense through a notice under S.62 of the Income Tax Ordinance, 1979 which was exaggerated or unverifiable---Additions had been made on account of stock phrases like un-verifiability and excessiveness---Additions were made with the remarks "as per history of the case" whereas this was the first year of the company' business and there was no history as such-Validity-Additions and 'arbitrarily been made under various heads which were not warranted at ,all and the same were deleted by the Appellate Tribunal.

?

2004 PTD 2231 rel.

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

---S.62---Assessment on production of accounts, evidence etc.--Addition was made on account of sale rate without rejection of books of accounts---Validity---No proper show-cause notice after examination of details was issued---Assessing Officer had also not commented upon purchases which were made from verifiable parties---Considering the fact that purchases were made from verifiable parties, Appellate Tribunal directed to accept the declared trading results.

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

---S. 62---Assessment on production of accounts, evidence etc.--Workers profit participation fund---Addition of---Validity---Addition made on account of workers profit participation fund without any plausible reason was deleted by the Appellate Tribunal.

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

---S. 62---Assessment on production of accounts, evidence etc.---Abnormal loss---Assessee contended that abnormal loss was correctly declared on account of sale of damaged raw material, supported by relevant details and that Assessing Officer was not justified at all to disallow the same without assigning any cogent reason or justification---Validity---Since on account of abnormal loss the matter had been remanded to the Assessing Officer and no prejudice had been caused to the assessee, Assessing Officer was directed to proceed afresh strictly in accordance with the directions issued by the First Appellate Authority.

Ch. Abdul Rasheed, D.R. for Appellant (in I.T.A. No. 1337/LB of 2003).

Muhammad Shahid Baig for Appellant (in I.T.As. Nos. 815/LB, 1203/LB of 2003 and 1349/LB of 2005).

Ch. Abdul Rasheed, D.R. for' Respondent (in I.T.As. Nos.815/LB, 1203/LB of 2003 and 1349/LB of 2005).

Muhammad Shahid Baig for Respondent (in I.T.A. No. 1337/LB of 2003).

Date of hearing: 23rd November, 2005.

2006 P T D (Trib.) 856

[Income-tax Appellate Tribunal Pakistan]

Before S. Hasan Imam, Judicial Member and Agha Kafeel Barik, Accountant Member

W.T.A. No.19/KB of 2005 decided on 30th June, 2005.

Wealth Tax Act (XV of 1963)---

----S. 16(5)---Assessment---Setting aside of---Assessing Officer had not taken pains to verify the evidence from the concerned sources and from the persons whose particulars were duly provided by the assessee for confirming the authenticity of the documents---Assessment had been set aside in view of the defects and deficiencies narrated in the detailed order recorded by the First Appellate Authority---Validity---Order of First Appellate Authority did not warrant interference as no specific finding could be recorded for want of verification of the evidence placed on record before the officers below---While confirming the setting aside order, Appellate Tribunal further directed that specific finding may also be recorded in this context along with the issue of permission instead of approval for being mandatory requirement of law.

Abdul Tahir Ansari, I.T.P. for Appellant.

Gohar Ali, D.R. for Respondent.

Date of hearing: 25th June, 2005.

2006 P T D (Trib.) 862

[Income-tax Appellate Tribunal Pakistan]

Before S. Hasan Imam, Judicial Member and Agha Kafeel Barik, Accountant Member

I.T.As. Nos.573/KB and 574/KB of 2005, decided on 27th June, 2005.

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

----S. 65---Re-assessment proceedings---Proceedings under S.65 of Income Tax Ordinance, 1979 could be initiated only in case where definite information had come into the possession of Deputy Commissioner and that too after obtaining the approval of Inspecting Assistant Commissioner in writing to do so---Letter from Assessing Officer for obtaining the permission and another letter granting permission were on record, but neither mandatory prior_ approval was sought nor approval was granted---Permission was not equivalent to approval and since there was no mandatory approval of Inspecting Assistant Commissioner, addition was not maintainable in law---C.I.T.(A) in circumstances had erred to have not deleted the addition instead of setting aside the same.

1993 PTD (Trib.) 1172; (2005) 91 Tax 462 (Trib.) and 2003 PTD (Trib.) 1238 ref.

(b) Words and pharas---

----"Permission" and "approval"---"Permission" is not equivalent to "approval".

Abdul Tahir Ansari, I.T.P. for Appellant.

Gohar Ali, D.R. for Respondent.

Date of hearing: 25th June, 2005.

2006 P T D (Trib.) 864

[Income-tax Appellate Tribunal Pakistan]

Before Jawaid Masood Tahir Bhatti and Ehsan ur Rehman, Judicial Members and Mazhar Farooq Shirazi, Accountant Member

I.T.As. Nos. 1684/LB, 1685/LB, 2397/LB and 2398/LB of 2001, decided on 26th May, 2005.

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

----Ss. 30(2)(d) & 62---Income from other sources---Lease income---Increase in assets---Taxation Officer discarded lease money which was supported by a lease agreement, only .for the reason that during the years, there had been increase in the operating fixed asset but the lease money as compared to the previous assessment year had not been proportionately increased---Validity---Held, there was no dispute regarding increase in fixed assets but that was not sufficient to discard a legally executed agreement which had been accepted by the Department in two preceding assessment years---Taxation Officer had failed to bring on record any evidence to establish that the actual lease money received by the assessee was in any way more than the declared one---In case of lessee, assessments had been made by accepting the lease expenses at the amount, which had been declared by the assessee as lease money---Taxation Officer had estimated the lease money without any basis which was not only beyond comprehension but devoid of any legal support---Action of the Taxation Officer was self-contradictory as the addition in lease money in the case of a lessor was possible only by making simultaneous addition under S.13(1)(d) of the Income Tax Ordinance, 1979 in the case of lessee---Assessee company was deriving income from lease money and the same was adjusted through one general entry---Entries in ledger existed under the head "building", "associated", "repair" and "depreciation"---Said entries in the ledger had properly depicted all the transactions during the income year---Taxation Officer had failed to point out any specific defects in the books and supportive documents so the rejection of declaration version and estimation of lease money was without any legal basis--Unless and until specific defects in the books of accounts were confronted through a notice under S.62 of the Income Tax Ordinance; 1979, the book version could not be rejected--Declared lease money was directed to be accepted for both the years and appeals filed by the assessee on the issue of lease money was allowed by the Appellate Tribunal.

1998 PTD 769; PLD 1991 SC 368 1991 PTD 488; 2002 PTD 877; 2001 PTD 1180; 2002 PTD 1858; 2002 PTD 2545; 2002 PTD 63; Writ Petition No.13534 of 2001 decided on 8-1-2003; 1968 PTD 734 and 1989 PTD 909 ref.

43 Tax 149 distinguished.

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

----Ss. 30(2)(d) & 19(1)---Income from other sources---Income from house property---Distinction between the provisions of Ss. 30(2)(d) & 19(1) of Income Tax Ordinance, 1979--Provisions of S.30(2)(d) of the Income Tax Ordinance, 1979 pertaining to hire of building along with machinery is different from provisions of S.19 of the Income Tax Ordinance, 1979 which pertained to income from house property--Under S.19(1) of the Income Tax Ordinance, 1979, the Income Tax was charged on annual value of the property and under S.19(2)(b) of the Income Tax Ordinance, 1979, it had been provided that "annual value" shall be deemed to be the sum for which the property might reasonably be expected to let from year to year---No such stipulation existed in S.30(2)(d) of the Income Tax Ordinance, 1979 meaning thereby that under S.30(2)(d) of the Income Tax Ordinance, 1979, Income Tax would be on actual income derived from the hire of machinery/building and not on rental value.

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

----Ss. 32(1)(3), 17, 19, 22, 27 & 30---Method of accounting---Computation of income by the Assessing Officer on the basis and manner as he thought fit---Principles---Section 32(1) of the Income Tax Ordinance, 1979 provided that Income, profit and gains shall be computed for the purpose of Ss.17, 19, 22, 27 and 30 of the Income Tax Ordinance, 1979 in accordance with the method of accounting regularly employed by the assessee, whereas S.32(3) of the Income Tax Ordinance, 1979 was in the context of method of accounting which were universally recognized as Mercantile, Cash and Hybrid---Under S.32(3) of the Income Tax Ordinance, 1979, the tax payer was obliged to follow one of the methods of accounting regularly and if he failed to do so only then the Assessing Officer shall compute income on such basis and in such manner as he thought fit.

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

----S. 62---Assessment on production of accounts, evidence etc.---Assessment of income---Method---Under S.62(1) of the Income Tax Ordinance, 1979, the Assessing Officer is authorized to assess the total income of an assessee by an order in writing after considering the evidence on record including evidence produced by the assessee under S.61 of the Income Tax Ordinance, 1979 and such other evidence as the Assessing Officer may requite on specific points---Where the assessee provides books of accounts as evidence in support of declared version, the Assessing Officer shall, before disagreeing with such accounts, give a notice to the assessee of the defects in the accounts.

(e) Income tax---

----Lease agreement between an assessee company and an Association of Persons having the same persons as Directors and Members respectively---Tax planning or of tax evasion---Legality---Lease agreement between an assessee company and an Association of Persons was not an illegal arrangement---Company and an Association of Persons were two distinct legal entities separately chargeable to tax under provisions of Income Tax Ordinance, 1979 and were not legally debarred to enter into any agreement---In case of two different legal entities not legally debarred to enter into any agreement, any arrangement made by them by executing such an agreement could not be declared as invalid---Leasing out of mills by the assessee company to the Association of Persons made through a legally permissible agreement was a case of tax planning and not of tax evasion---So far as the possibility of any presence of intention of avoidance of proper taxation through collusive arrangement between the parties for the said purpose was concerned, the same could not be ruled out in case of any agreement even though executed between two entirely different parties---Lease agreement between an assessee company and an Association of Persons having the same persons as Directors and Members respectively was not to be considered illegal.

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

----S. 12(18)---Income deemed to accrue or arise in Pakistan---Lease of factory---Indirect loan---Construction of building---Due to associated undertaking, fixed asset was made by the lessee at his own cost which was adjustable towards lease money---Taxation Officer had not disputed the construction of building but had made the addition on the ground that even indirect loans were liable to addition under S. 12(18) of the Income Tax Ordinance, 1979---Validity---Department has failed to establish that the amounts in question were received by the assessee/lessor in cash and were claimed and shown as loan---Assessee/lessor had only shown a liability due to associated undertaking, representing unadjusted amount of cost of construction by the lessee after reducing the lease money receivable---Such liability was an accounting entry and did not constitute as receipt of any "sum" which could attract the provision of S.12(18) of the Income Tax Ordinance, 1979---Addition made in said respect was deleted and orders of both the Officers below were vacated by the Appellate Tribunal---Assessee's appeals were allowed and that of Department's were dismissed.

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

----S.11(1)---Scope of total income---Provisions of S.11(1) of Income Tax Ordinance, 1979 indicate that the deeming was of income and not of any receipts and the said deeming was in the context of geographical taxing the income in Pakistan of a resident person.

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

----S. 12(18)---Income deemed to accrue or arise in Pakistan---Deeming provision of S.12(18) of Income Tax Ordinance, 1979 had been introduced to check the back dated fictitious transactions to justify the resources---Where the source of sum was declared and it was found to be a good money, irrespective of the technical flaws in its change from one head to another, an addition would be unjustified.

?

Writ Petition No.13534 of 2001 decided on 8-1-2003 rel.

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

--S.12(18)---Income deemed to accrue or arise in Pakistan---Provisions of S.12(18) of the Income Tax Ordinance, 1979 were not attracted until unless the amount was claimed and shown as "loan" or "advance".

2002 PTD 877 rel.

Shahid Pervaiz Jami for Appellant (in 1.T.As. Nos.1684/LB and 1685/LB of 2001).

Muhammad Asif, D.R. for Respondent (in I.T.As. Nos.1684/LB and 1685/LB of 2001).

Muhammad Asif, D.R. for Appellant (in I.T.As. Nos.2397/LB and 2398/LB of 2001).

Shahid Pervaiz Jami for Respondent (in I.T.As. Nos.2397/LB and 2398/LB of 2001).

Date of hearing: 19th April, 2005.

2006 P T D (Trib.) 882

[Income-tax Appellate Tribunal Pakistan]

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

I.T.A. No.114/KB of 1990-91, decided on 30th August, 2004.

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

----S. 23---Deductions---Provision for bad and doubtful debts--Disallowance of---Assessing Officer made disallowance for provisions and claim for doubtful debts for the reasons that market value of the securities exceeded the dues outstanding; that the borrower had the intention and capacity to pay the dues and that the lender had not taken any steps to recover the dues---First Appellate Authority set aside the order with the direction to Assessing Officer to accept the assessee's claim, if found consistent with the certificates from the State Bank of Pakistan read with Central Board of Revenue's Circular/instructions---Validity---Since relief had been allowed subject to certificate from the State Bank of Pakistan in terms of C.B.R.'s Circular/instructions, there appeared no reason to set aside the order---Allowing relief in this context would be justified and judicious and the setting aside of order in respect of specific provision for bad/doubtful debts would be of no legal consequence---Assessing Officer was directed by the Appellate Tribunal to allow the claim of the assessee.

1990 PTD (Trib.) 731 and 1991 PTD 569 rel.

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

----S. 23---Deductions---Loss on account of fraud---Claim had been made in terms of business loss and First Appellate Authority had not recorded any finding whether such nature of claim could be made in terms of business loss---Appellate Tribunal confirmed the setting aside order passed by the First Appellate Authority.

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

----S. 24(i)---Deductions not admissible---Leave, fair assistance---Assessing Officer treated the expenditure on leave fair assistance as expense on perquisites resulting in add-back to the taxable perquisites---Fist Appellate Authority maintained the same---Assessee contended that expenses were incurred on the quick leave provided to one set off officers in order to make sure of their working by a successor group to avoid pitfalls and maladministrative practice and such expenses were allowable as normal expenditure in a banking concern---Validity---Such type of practice finds no support from other banks and it was a decided issue at the level of the Appellate Tribunal---Appellate Tribunal found no merit in the arguments and the order of the First Appellate Authority was maintained.

?

I.T.As. Nos.377 and 378/KB of 1977-78, decided on 28-8-1978 rel.

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

----S. 23---Income Tax Rules, 1982, R.20---Agreement for the Avoidance of Double Taxation---Deductions---Proportionate head office charges---Disallowance of proportionate head office charges made by invoking R.20 of the Income Tax Rules, 1982 was confirmed by the First Appellate Authority---Validity---Claim was allowable subject to verification---Order was set aside by the Appellate Tribunal---Reasonable head office expenses were to be allowed by the Assessing Officer in pursuance of provisions of Cl. (4) of Articles III & XVI of the "Agreement for the Avoidance of Double Taxation"---Assessing Officer was directed to re-examine the matter and to allow reasonable claim after proper verification, keeping in view the treaty provisions.

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

----S. 23---Banking Companies Ordinance (LVII of 1962), Ss. 25 & 84---Deductions---Penal interest---Disallowance of---Assessing Officer disallowed penal interest paid on account of exceeding credit ceiling limits and penal interest on shortfall in maintenance of statutory cash reserves and liquid assets---Assessee contended that penalty was not imposed because of criminal offence as provided for in S. 84 of the Banking Companies Ordinance, 1962---Payment in terms of penalty not being for a criminal offence was an allowable expense against the taxable income---Order of First Appellate Authority confirming the treatment observing that, the amounts paid in terms of penal interest was inadmissible being in the nature of penalty for infringement of banking loss, was not in accordance with the provisions of law---Validity---Penal interest paid due to infringement of the policies to control advances by Banking Companies was in the nature of the penalty---Since it was a penal interest payable to the State Bank, it may not be treated as an error incidental to the normal course of business of a Banking Company, as such the payment of penal interest or penalty without taking cognizance under S.84 of the Banking Companies Ordinance, 1962, did not mean that it was not a penal action---Penalty imposed was not an allowable expense.

1999 SCMR 1213 rel.

PLD 2001 SC 201 = (2001) 83 Tax 113 (S.C.) Pak) distinguished.

(f) Banking Companies Ordinance (LVII of 1962)---

----Ss. 83, 84 & 25---Sections 83 & 84 had nothing to do with sub-sections (a), (3), (4) & (6) of S.25 of the Banking Companies Ordinance, 1962, which simply provide penalty and not an imprisonment like S. 83 of the Banking Companies Ordinance, 1962, and deal with the powers of State Bank to control advances, wherein penalty was provided in case of infringement---Taking cognizance under S.84 of the Banking Companies Ordinance, 1962 of the offences falling under S.83 of the Banking Companies Ordinance, 1962, was a different matter.

(g) Income-tax---

----Capital gain---Appellate Tribunal allowed Assessee's appeal against the order of First Appellate Authority confirming the treatment whereby capital gain realized on sale of Government securities was treated as revenue gain.

Dated 1-12-2001 passed in ITA Nos. 141 of 143/KB of 1990-91 and 1985 PTD 329 rel.

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

--------S. 23(vii)---Deductions---Bifurcated interest expenses---Disallowance of---Assessing Officer disallowed the bifurcated interest expenses---First Appellate Authority remanded the case to Assessing Officer for re-examination after affording an opportunity of hearing to the assessee---Validity---Investment was purely an income earning business activity---Profit on this activity was offered for tax and it was a matter of evidence that the investment in prize bonds was made through borrowed capital attracting the provisions of S.23(vii) of the Income Tax Ordinance, 1979, which required re-examination---Order of First Appellate Authority was not interfered with by the Appellate Tribunal.

Iqbal Naeem Pasha and Nadeem Ahmed Dawoodi for Appellant.

Muhammad Farid, Legal Advisor, Ali Hasnain, D.R. and Javed Iqbal Rana, D.R. for Respondent.

Date of hearing: 20th March, 2004.

2006 P T D (Trib.) 896

[Income-tax Appellate Tribunal Pakistan]

Before Javaid Iqbal, Judicial Member and Muhammad Mehboob Alam, Accountant Member

I.T.A. No.1239/KB of 2000-2001, decided on 15th April, 2002.

Income Tax Ordinance (XXXI of 1979)---

----Ss. 65, 13(1)(aa), 56, 61, 50(5A), 80CC & 143-B---C.B.R. Circular No.6 of 1991, dated 30-6-1991---C.B.R. Circular No.6 of 1994, dated 10-7-1994---Additional assessment---Assessee, an exporter---Tax was withheld at export stage---Statement under 5.143-B of the Income Tax Ordinance, 1979 was filed and tax deducted was considered as full and final discharge of tax liability---Notices under Ss. 56 & 61 of the Income Tax Ordinance, 1979 were issued after getting the information from the wealth tax proceedings of assessee regarding the investment made in purchase of plot, which were replied and explained by the assessee---Assessing Officer leaving undecided the matter initiated under S.56 of the Income Tax Ordinance, 1979, issued the notice under S.65 of the Income Tax Ordinance, 1979 and made the assessment---Validity--Action of Assessing Officer was totally against the spirit of law---During pendency of proceedings initiated under S.56 of the Income Tax Ordinance, 1979, issuance of notice and completion of assessment under S.65 of the Income Tax Ordinance, 1979, especially in the case where previously statement under S.143-B had been filed, was patently illegal ' and invalidated the entire proceeding of the case---Order of vacation of First Appellate Authority was confirmed but with different view from the one adopted by the First Appellate Authority because the view of First Appellate Authority that it was mere change of opinion was not tenable as the income and wealth proceedings were of distinctive nature---Queries made by Assessing Officer and their explanation by assessee and finding by Assessing Officer in either of the two assessment proceeding will not debar the additional assessment in the other set of proceedings--Departmental appeal was dismissed by Appellate Tribunal being devoid of any merit.

Muhammad Ali Judhar , D.R. for Appellant.

Javed Zakaria for Respondent.

Date of hearing: 30th January, 2002.

2006 P T D (Trib.) 903

[Income-tax Appellate Tribunal Pakistan]

Before S. Hasan Imam, Judicial Member and Agha Kafeel Barik, Accountant Member

I.T.As. Nos. 1846/KB of 2003 and 49/KB of 2004, decided on 13th October, 2004.

(a) Income Tax Ordinance (XXX1 of 1979)---

----Ss. 143-B, 80-C, 50(4) & First Sched., Part-I, Para. CCC (I)(a)(ii)---Statement regarding certain assessees---Contract receipts---Rate of income-tax---Assessing Officer found that receipts of assessee were of the quantum where they attract provision of para. CCC(1)(a)(ii) of Part-I of the First Schedule of the Income Tax Ordinance, 1979 wherein it was mentioned that receipts totalling more than Rs.30 Million were to be subjected to deduction of tax under S.50(4) of the Income Tax Ordinance,. 1979 at the rate of 6%7--Assessing Officer concluded that tax liabilities of the assessee on the total receipt should be at the rate of 6%, whereas tax had been deducted at the rate of 5% from such receipts---Assessee contended that charging of tax at the rate of 6% of the receipts exceeding Rs.30 Million in the absence of any settled amount of agreement or contract or where value of total contract had not been specified in terms of Cl. E(ii)(a)(i) & (ii) of Part-I of First Schedule was illegal---First Appellate Authority was not justified in holding that in the absence of any contract agreement exceeding Rs.30 Million, tax was to be charged up to Rs.30 Million receipts at the rate of 5% and where it exceeded Rs.30 Million in financial year at the rate of 6% on the amount exceeding Rs.30 Million---Validity---Contention of assessee that present contract was silent about the amount of contract and that value of the contract had not been specified instead labour rate per ton for extraction of coal had been agreed upon and the quantity of coal to be extracted was also not specifically laid down, found no merit because the total receipts during the assessment year had exceeded the value of Rs.30 Million and even if it was presumed that the assessee did not know in advance as to what would be the ultimate quantity of payment under the contract and started deduction of tax at the rate of 5%', even then the total payment of the contract in the assessment year exceeded Rs.30 Million---Assessee was under legal obligation to cover up the amount if not deducted earlier at the rate of 6% before the end of the financial year for the proper application of 6% deduction rate on receipts declared---Order of First Appellate Authority was not justified and there was no question of charging 5% up to Rs.30 Million and 6% where the value of contract exceeded Rs.30 Million---Departmental appeal was allowed by the Appellate Tribunal as the declared receipts of assessee were Rs.76.003 Million---Tax had been rightly charged at the rate of 6% as per para. CCC (I)(a)(ii) of part Part-I of the First Schedule of the Income Tax Ordinance, 1979.

(2002) 86 Tax 262 (Trib.) ref.

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

----First Sched., Part-I, para. CCC (I)(a)(ii), Ss. 80-C & 50(4)---Rate of income tax---Where contractual receipts exceed Rs.30 Million, the rate of deduction under S.50(4) of the Income Tax Ordinance, 1979 and of assessment under S.80-C of the Income Tax Ordinance, 1979 would be 6% of the income, representing payments on account of execution of contracts---Value of contract was material and it had nothing to do with the amount of payments received in respect of that contract and/or receipts from the same payer relating to different contracts---Word "contract" had been used in singular, therefore, higher rate of 6% will be applied if the particular contract exceeds, Rs.30 Million---For the purpose of present case, the contract will be taken as a whole for application of 5% or 6% tax.

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

----Ss.80-C, 143-B, 50(4) & First Schedule, Part-I, para. CCC (I)(a)(ii)--Tax on income of certain contractors and importers---Rate of income?tax---Value of contract, was the determining factor for application of rate of 5% or 6% as the case may be, or the income representing the payments on account of execution of contract.

Amir Ali Khan Talpur, D.R. for Appellant.

Mazharul Hasan, A.R. for Respondent.

Date of hearing: 18th September, 2004.

2006 P T D (Trib.) 952

[Income-tax Appellate Tribunal Pakistan]

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

I.T.As. Nos. 5416/LB of 2003 and 5804/LB of 2002, decided on 31st August, 2005.

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

----S. 62---Assessment on production of books of accounts, etc.---Assessee, a medical doctor---Estimation of income without any material--Validity---Assessing Officer passed assessment orders in a summary manner and estimates of income from operations was made without any material---First Appellate Authority allowed relief after detailed discussion and keeping in view material evidence such as certificate from the concerned hospital, history, of the case and on the basis of parallel cases---Finding of First Appellate Authority on the issues of "income from operations", "income from private practice" and treatment in respect of add backs in Profit & Loss account was confirmed by the Appellate Tribunal.

I.T.A. No. 701/LB of 2000, dated 28-10-2000 and 2001 PCTLR 155 rel.

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

----S. 12(18)---Unexplained investment etc., deemed to be income---"Salami" received on the birth of daughter---Addition---Validity---Assessee showed in reconciliation statement a sum as "Salami" received on the birth of his daughter---Since amount was not received through crossed cheque, Assessing Officer proceeded to make addition under S.12(18) of the Income Tax Ordinance, 1979---Addition was deleted by the First Appellate Authority on the basis of judgment of High Court and observed that as per tradition of our society "Salami" was being given on the occasions of births, marriages and other ceremonies---First Appellate Authority was justified in deleting the addition in view of judgment of High Court---Order of First Appellate Authority was maintained by the Appellate Tribunal.

(2002) 85 Tax 354 ref.

Ahmad Shahab D.R. for Appellant.

Ahmed Nadeem Ahsan, I.T.P. and Muhammad Waseem Bilal for Respondents.

Date of hearing: 16th August, 2005.

2006 P T D (Trib.) 958

[Income-tax Appellate Tribunal Pakistan]

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

I.T.A. No. 4873/LB and M.A. (Add. Ground) No. 691/LB of 2005, decided-on 22nd October, 2005.

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

----Ss. 62 & 166(2)(a)---Income Tax Ordinance (XLIX of 2001), S.239(2)(1)----General Clauses Act (X of 1897)---Assessment on production of accounts, evidence etc.---Assessee contended that since provision parallel to S.166(2)(a) of the Income Tax Ordinance, 1979 had not been made in the Income Tax Ordinance, 2001, assessment under S.62 of the Income Tax Ordinance, 1979 could not be made after the enforcement of Income Tax Ordinance, 2001 in spite of subsection (1) and subsection (2) of S. 239 of the Income Tax Ordinance,. 2001---Validity---Subsections (1) & (2) of S.239 of the Income Tax Ordinance, 2001 clearly laid down that if an assessment was to be made in respect of any income year ending on or before 30th day of June, 2002, the provisions of Income Tax Ordinance, 1979 insofar as they related to computation of total income and tax payable thereon, shall apply as if the Income Tax Ordinance, 2001 had not come into force and that such assessment shall be completed in accordance with the procedure specified in Ss.59, 59A, 61, 62 or 63, as the case may be of the Income Tax Ordinance, 1979---Two subsections of S.239 of the Income Tax Ordinance, 2001 clearly saved the provisions of Income Tax Ordinance, 2001 and applicability thereof in respect of an assessee for a tax year ending on or before the 30th day of June, 2002---Since assessment was liable to assessment/computation of his income and tax thereon for the assessment year 2001-2002 for which Income Tax Ordinance, 2001 was not inforce and the Income Tax Ordinance, 1979 applied, the Income Tax Authorities were fully within their jurisdiction to complete assessment under S.62 of the Income Tax Ordinance, 1979 in view of the provisions of subsections (1) & (2) of S.239 of the Income Tax Ordinance, 2001 read with S. 6 of the General Clauses Act, 1897.

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

----Ss. 239(1) & (2)---Income Tax Ordinance (XXXI of 1979), 5.166---Contention of assessee that provisions of subsection (1) & (2) of S.239 of the Income Tax Ordinance, 2001 did not clearly save the applicability of the provisions of Income Tax Ordinance, 1979 relating to assessment and computation of tax in respect of an income year ending on or before 30th June, 2002 as was done by subsection (2)(a) of section 166 of the Income Tax Ordinance, 1979, was not tenable.

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

--S.62---Survey for Documentation of National Economy Ordinance (XV of 2000), S.3---Assessment of production of accounts, evidence etc.---Estimation of sales---Sales were estimated after enquiry report of the Inspector by rotating stocks at six times---Assessee contended that sales could not be estimated more than the sales determined by the Survey Authorities---Validity---Estimate of sales by the Survey Team was not binding on the Department or the Appellate Authorities provided there was sufficient reason to make departure from such estimate---Appellate Tribunal fixed the estimate of sales for assessment year 1991-1992 at Rs.25,00,000 as it was not believable that sales after ten years for assessment year 2001-2002 were Rs.28,50,000 (as reported to the Survey team) particularly when the assessee had constructed a new show room and factory building---Sufficient reason to make departure from the estimate of sales reported in the Survey therefore existed in the circumstances.

2002 PTD 541 ref.

(d) Survey for Documentation of National Economy Ordinance (XV of 2000)---

----S. 3---Income Tax Ordinance (XXXI of 1979) S.62---Filing of questionnaires---Estimation of sales---Estimate of the Survey Team was not binding upon the Assessing Officer and it was to be accepted only in case it was fair and reasonable.

2002 PTD 541 ref.

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

---Ss. 146 & 62---C.B.R. Circular 10 of 1979, dated 1-10-1979---Power to enter and search business premises----Estimate of sales on the basis of inspector's report---Assessee contended that since permission of the Inspecting Additional Commissioner had not been obtained, nor reliance could be placed on Inspectors report which was not based on any documentary evidence---Validity---Since the Inspector made spot enquiries after entering into the business premises of the assessee without prior permission of the Inspecting Additional Commissioner as required under 5.146 of the Income Tax Ordinance, 1979, his report could not be made the basis of assessment---Assessment was set aside and case was remanded to the Assessing Officer with the direction that he shall get proper Inspector's enquiry conducted after obtaining permission of the Inspecting Additional Commissioner---Proper inventory of work in progress, of finished stock and machinery installed shall be made---Newly-constructed area of the "show room and factory building with actual measurements shall be ascertained---Contents of the enquiry report shall be duly confronted to the assessee for his explanation and due opportunity of being heard shall be provided in respect of inquiry report for purposes of assessment.

?

1997 PTD (Trib.) 103 and 2004 PTD 30 rel.

Ajmal Khan and Shahid Umar Khan for Appellants.

Mrs. Sabiha Mujahid, D.R. for Respondent.

Date of hearing: 22nd October, 2005.

2006 P T D (Trib.) 967

[Income-tax Appellate Tribunal Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member and Mukhtar Ahmad Gondal, Accountant Member

W.T.A. No.72/LB of 2005, decided on 9th May, 2005.

(a) Finance Act (V of 1989)---

----S.7---C.B.R. Circular No. 9 of 1997 dated 24-7-1997---Levy of tax on capital value of certain assets---Hearing and decision by First Appellate Authority in respect of Capital Value Tax assessment---Department contended that Capital Value Tax assessment was not appealable in the light of Central Board of Revenue Circular No.9 of 1997 where it had been provided that only revision petition could be tiled before the Commissioner of Wealth Tax and hearing of appeal and decision thereon by the First Appellate Authority was without jurisdiction and was void in the eyes of law---Validity---Through Circular No.9 of 1997 dated 24-7-1997 regarding explanation of provision relating to Capital Value Tax in Para. V, it had been specifically provided that "as there was no legal recourse to the wrong charge of Capital Value Tax, such Capital Value Tax payers had now been provided the right to file revision petition to the Commissioner of Wealth Tax"---Order of the First Appellate Authority was treated to be the decision made on the revision petition filed by the assessee---Department had no right to file appeal before the Appellate Tribunal, as in the Circular, only the assessee had been provided with the right to file revision petition before the Commissioner which he had decided in favour of the assessee.

(b) Finance Act (V of 1989)---

----S.7---Capital Value Tax Recovery and Refund Rules, 1990, R.8(2)---Wealth Tax Act (XV of 1963), S.30---Transfer of Property Act (IV of 1882), Preamble---C.B.R. Circular No.9 of 1997, dated 24-7-1997---C.B.R. Circular No.16 of 1992, dated 1-7-1992---C.B.R. Circular No.5 of 1996, dated.l-7-1996---Levy of tax on Capital Value of certain assets---Purchase of agricultural land through registered deed dated 5-3-1997---Order regarding amount of Capital Value Tax was passed against legal heirs of the assessee, which had been deleted by the First Appellate Authority without any justification---Assessee contended that land was transferred in the name of late assessee on 15-12-1973 through a registered document---Possession of land was delivered to the late assessee fulfilling all conditions as specified in the Transfer of Property Act, 1882 which were, offer, acceptance, consideration and possession---Conditions of valid transfer through registered document were completed on 15-12-1973---Land was originally allotted to assessee in respect of Islamabad Affectees Scheme and there was a dispute on the land for which the assessee had to file civil suit before Senior Civil Judge regarding specific performance of contract due to the reason that the assessee died in the meanwhile and the consent of all the legal heirs of assessee was required in respect of final deed for the transfer of property---Suit was decreed in 1995 holding that land had already been transferred in the name of late assessee and the execution of sale-deed in that regard was only a formal proceedings---Capital Value Tax was not applicable when the land was originally transferred to the late assessee on 15-12-1973 or subsequently when the dispute in the case was finally decided by Senior Civil Judge on 6-12-1995, as the Capital Value Tax on the agricultural land was made applicable through Circular No.5 of 1996 dated 1-7-1996 when the scope of Capital Value Tax was extended to purchase agricultural land---No valid jurisdiction was available with the Taxation Officer to levy Capital Value Tax on the transaction, as the transaction was effected much before the promulgation of the levy and First Appellate Authority had rightly deleted the levy---Validity---No justification was available with the Assessing Officer to levy Capital Value Tax on the transaction which had been made in 1973 through a registered sale document when there was no such levy of tax on sale of agricultural land---Later proceedings in Civil Court regarding completion of crown deed and mutation of land were the procedural matter---First Appellate Authority had rightly deleted the levy---Order of First Appellate Authority was upheld and the appeal filed by the Department was dismissed.

1992 ALD 582(1) and PLD 1964 SC 842 rel.

Abdul Ghani, D.R. for Appellant.

Rana M. Ishaque for Respondent.

Date of hearing: 30th April. 2005.

2006 P T D (Trib.) 973

[Income-tax Appellate Tribunal Pakistan]

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

I.T.A. No. 77/LB of 1997, decided on 18th May, 2005.

Income Tax Ordinance (XXXI of 1979)---

----S.13(1)(aa)---Addition---Setting aside of assessment---First Appellate Authority after observing that Assessing Officer while finalizing the proceedings had completely lost sight of the fact that under Islamic Law a gift to the Muslim can be made verbally or in writing---Addition under S.13(1)(aa) of the Income Tax Ordinance, 1979, was illegal as appellant had shown Nil value (being gifted property) in the wealth statement and as such the alleged difference in value, if any, could only be made under S.13(1)(d) and not under S.13(1)(aa) of the Income Tax Ordinance, 1979---Assessment was set aside for de novo proceedings---Validity---First Appellate Authority in spite of observing that "Assessing Officer while finalizing the proceedings had completely lost sight of the fact that under Islamic Law a gift to the Muslim can be made verbally or in writing, addition under S.13(l)(aa) of the Income Tax Ordinance, 1979 was illegal as appellant had shown Nil value (being gifted property) in the wealth statement and as such the alleged difference in value, if any, could only be made under S.13(1)(d) and not under S.13(l)(aa) of the Income Tax Ordinance, 1979" proceeded to set aside the case for de novo consideration---In spite of fact that nothing had been brought on record by the Assessing Officer for making addition, setting aside was not justified since it meant to give the Assessing Officer premium to make up his deficiencies---Neither the assessee resided in the property nor any business was being conducted therein---Addition made under S.13(l)(aa) of the Income Tax Ordinance, 1979 was without lawful jurisdiction and was deleted by the Appellate Tribunal.

2004 PTD (Trib.) 769; PTCL 2000 CL 111; (1987) 56 Tax 35; W.T.A. No.976/LB of 1997; 2005 PTD (Trib.) 517; Moulvi Abdullah and others v. Abdul Aziz and others 1987 SCMR 1403; (2003) 87 Tax 19 (Trib.); (2003) 88 Tax 119; (2003) 87 Tax 156; (2004) 89 Tax 3,32 (Trib.); 1992 SCMR 2047; 1983 SCMR 76; (2003) 87 Tax 29 (Trib.); (2003) 87 Tax 129 (Trib.) and (2003) 88 Tax 243 (Trib.) rel.

Tahir Mehmood Butt for Appellant.

Abdul Rasheed, D.R. for Respondent.

Date of hearing: 20th April, 2005.

2006 P T D (Trib.) 984

[Income-tax Appellate Tribunal Pakistan]

Before Ehsan-ur-Rehman, Judicial Member and Naseer Ahmad, Accountant Member

I.T.As. Nos. 4359 and 4360/LB of 2002, decided on 25th May, 2005.

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

----Ss.52, 86 & 50(4)---Finance Act (III of 1998), Preamble---Liability of persons failing to deduct or pay tax---Assessee contended that First Appellate Authority had not considered the amendment made in S.50(4) of the Income Tax Ordinance, 1979 through Finance Act, 1998 in which proviso and explanations were added---Said amendment was effective. from assessment year 1999-2000 while the tax had been charged under Ss.52/86 of the Income Tax Ordinance, 1979 for the assessment years 1996-97 and 1997-98---Validity---Appellate Tribunal deleted the tax levied by the Assessing Officer under Ss.52/86 of the Income Tax Ordinance, 1979---Appeal filed by the assessee was accepted by the Appellate Tribunal.

2004 PTD 921 rel.

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

----S.50(4), Explanation---Deduction of tax at source---Explanation added to S.50(4) of the Income Tax Ordinance, 1979 by virtue of Finance Act of 1998, could not be applied retrospectively.

2004 PTD 921 rel.

Khalid Maqbool ,I.T.P. for Appellant.

Muzammal Hussain, D.R. for Respondent.

Date of hearing: 24th May, 2005.

2006 P T D (Trib.) 987

[Income-tax Appellate Tribunal Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member and Mukhtar Ahmad Gondal, Accountant Member

W.T.As. Nos. 217/LB to 219/LB of 2005, decided on 8th June, 2005.

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

----S.16(3)---Consolidated assessment order by taxation officer---Validity---Such assessment made by the taxation officer was illegal without jurisdiction, void ab initio, as wealth tax assessments could not be taken up or finalized by the taxation officer---Wealth tax assessment and income tax assessment were governed separately under Wealth Tax Act, 1963, the Income Tax Ordinance, 1979 or the Income Tax Ordinance, 2001 respectively---Wealth tax assessment could not be taken up or finalized by the taxation officer.

1997 PTD 821; 1999 PTD (Trib.) 4026; 2005 PTD (Trib.) 1370 and W.T.A. No.184/LB of 2004 ref.

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

----Ss.17A(1)(b) & 16(3)---Time limit for completion of assessment and re-assessment---Filing of revised return in response to notice---Completion of assessments after two years from the date of filing of returns---Validity---Assessing Officer in the consolidated assessment order had neither mentioned about any revised returns nor had mentioned regarding any notice sent to the assessee and a mechanical order had been passed by the Taxation Officer without considering the relevant provision and procedure provided under law---Assessing Officer in the assessment order should have mentioned the date of filing the revised returns and other relevant facts which he had not done---When returns were filed by the assessee, the assessment could only be made within two years from the date of furnishing the return and if the assessment had not been finalized within the time limit, further proceeding would be a nullity in the eyes of law---Assessing Officer failed to make assessment within two years---Returns having been filed within time, there was no justification for making the demand after limitation period provided under the law, even if the assessee in response to notice had filed the revised returns---Taxation Officer has passed the assessment order without jurisdiction and the consolidated order passed for all the three years was barred by limitation provided under the law and was annulled by the Appellate Tribunal---Original returns filed by the assessee were directed to be accepted---Order of First Appellate Authority was vacated and consolidated assessment order passed by the Taxation Officer under S.16(3) of the Wealth Tax Act, 1963 for all the three years was annulled.

2004 PTD (Trib.) 388; 1997 PTD 821; 1999 PTD (Trib.) 4026; 2005 PTD (Trib.) 1370; W.T.A. No.184/LB of 2004 and 2002 CLC 209 rel.

Younis Khalid for Appellant.

Anwar Ali Shah, D.R. for Respondent.

Date of hearing: 8th June, 2005.

2006 P T D (Trib.) 991

[Income-tax Appellate Tribunal Pakistan]

Before Rasheed Ahmed Sheikh, Judicial Member and Javed Tahir Butt, Accountant Member

W.T.As. Nos. 880/LB to 882/LB of 2004, 757/LB to 759/LB of 2004, decided on 28th June, 2005.

Wealth Tax Act (XV of 1963)---

----Ss.17 & 17B---Wealth escaping assessment---Reopening of assessment under S.17B of the Wealth Tax Act, 1963 by the Assessing Officer---Validity---Assessee was issued a show-cause notice under S.17B of the Wealth Tax Act, 1963 and the Inspecting Additional Commissioner also granted permission to reopen the assessments under S.17B of the Wealth Tax Act, 1963---Section 17B of the Wealth Tax Act, 1963 dealt with the powers of Inspecting Additional Commissioner to revise the wealth tax officer's order---Assessments could be reopened under S.17 of the Wealth Tax Act, 1963 and not under S.17B thereof---Super-structure built on wrong foundation had to fall down---Assessments were reopened under a wrong section which spoke incompetence and lack of knowledge of the wealth tax authorities handling the case---Though a definite information was available with the Assessing Officer to initiate the proceedings under S.17(1) of the Wealth Tax Act, 1963 but record revealed that the show-cause notice issued to the assessee clearly indicated the intention of the Assessing Officer to reopen assessment under S.17B of the Wealth Tax Act, 1963 and permission had been granted by the Inspecting Additional Commissioner under S.17B of the Wealth Tax Act, 1963---Contention of Department that wrong ticking of the section will not vitiate the assessment proceedings was not convincing---Assessments based on the notices issued under wrong section of law were illegal and could not be endorsed---Orders of Assessing Officer and First Appellate Authority were vacated by the Appellate Tribunal with the observation that department, was at liberty to initiate action as provided under law to tax the untaxed value of six Kanals of land.

Dr. Shahid Siddique Bhatti, D.R. for Appellant.

Sh. Zafar ul Islam for Respondent.

Date of hearing: 28th June, 2005.

2006 P T D (Trib.) 995

[Income-tax Appellate Tribunal Pakistan]

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

W.T.As. Nos. 365/LB to 367/LB of 2004, decided on 31st December, 2004.

Wealth Tax Act (XV of 1963)---

----S.14C---Income Tax Ordinance (XXXI of 1979), S.53---Tax on ownership of certain immovable assets---Minimum wealth tax---Advance tax---Assessee was an individual and filed property survey during the survey campaign declaring a property---Assessing Officer being of the view that assessee was liable to pay minimum wealth tax under S.14C of the Wealth Tax Act, 1963, proceeded to impose wealth tax along with additional tax after issuance of a show-cause notice---Validity---Assessing Officer as well as First Appellate Authority erred in law while levying tax under S.14C of the Wealth Tax Act, 1963---Provisions of S.14C of the Wealth Tax Act, 1963 as well as S.53 of the Income Tax Ordinance, 1979 were part materia and postulated similar situation i.e. - payment of advance tax---Orders passed under S.14C of Wealth Tax Act, 1963 were cancelled and appeals filed by the assessee were allowed by the Appellate Tribunal.

(1992) 66 Tax 140; 2000 PTD 2433 (Trib.); 2003 PTD 319 (Trib.) and (2001) 83 Tax 1919 rel.

Monim sultan for Appellant.

Abdul Rasheed, D.R. for Respondent.

Date of hearing: 30th November, 2004.

2006 P T D (Trib.) 1019

[Income-tax Appellate Tribunal Pakistan]

Before Rasheed Ahmed Sheikh, Judicial Member and Javed Tahir Butt, Accountant Member

I.T.As. Nos. 1721/LB, 562/LB, 260/LB, 699/LB of 2003, decided on 16th April, 2005.

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

----S. 136(7)---Constitution of Pakistan, (1973), Arts. 199(4A) & 254---Appeal to High Court---Stay---Assessment after expiry of six months from the date of passing interim order by the High Court---Validity---Assessing Officer had acted within his jurisdiction to formulate the assessment after expiry of six months from the date of passing the interim order.

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

----S. 62(1), proviso---Assessment on production of accounts, evidence, etc.---Assessing Officer had to form independent opinion about defects noted in the books of accounts but not by any other authority or agency or forum etc. until and unless so authorized in accordance with law.

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

----Ss. 62(1) & 4A---Constitution of Pakistan (1973), Art. 199(4A)---Assessment on production of account, evidence, etc.---Confrontation of defects under S.62 of the Income Tax Ordinance, 1979 on the basis of audit report which was sub judice before High Court---Such defects were not pointed out by the Assessing Officer himself---Validity---Assessee had been confronted with the defects pointed out by the auditor in its verbatim---Audit report had been made the basis for assessment which was sub judice before the High Court---Books of accounts were examined by the auditor and not by the Assessing Officer which was statutory requirement of law---Assessing Officer was directed by the Appellate Tribunal to accept the return version of the assessee.

(1999) 79 Tax 263 (Trib.) rel.

(d) Income-tax-

----Ad hoc addition---Receipts---Round addition in workshop labour income (mechanical, denting and painting) and miscellaneous. income ' when such income/receipts were fully documented---Validity---Receipt/ income was added towards the declared receipts/income after having observed that those were not open to verification---Making of round ad hoc additions in account cases was deprecated---Round addition made in said heads was deleted by the Appellate Tribunal.

(1976) 33 Tax 1 and (1982) 45 Tax 140 rel.

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

----S. 24(1) & (ff)---Deductions not admissible--Salary expenses---Expenses claimed were added back by the Assessing Officer merely stating "under Ss.24(I) and 24(ff)" or the Income Tax Ordinance, 1979--No discussion whatsoever had been made as to why and to what extent said provisions were attracted to the payments of salary---In absence of any reason given or making any discussion, the addition could not be made or maintained under S.24(I) & (ff) of the Income Tax Ordinance, 1979 which showed careless attitude of the Assessing Officer while curtailing such expenses--Addition made was deleted by the Appellate Tribunal in circumstances.

(f) Income-tax---

----Disallowance on stock phrases---Legal and professional charges---Disallowance was made by mentioning "due to non-verifiability of the claim and history of the case"---Such practice of curtailing the claim could not be appreciated--Hundred per cent disallowance certainly had been made on stock phrases 'which addition was deleted by Appellate Tribunal.

Muhammad Ali Asghar Qazi, I.T.P. for Appellant (in I.T.As. Nos.1721/LB, 562/LB and 260/LB of 2003).

Ahmed Rauf, L.A. for Respondent (in I.T.As. Nos.I721/LB, 562/LB and 260/LB of 2003).

Ahmed Rauf, L.A. for Appellant (in I.T.A. No.699/LB of 2003).

Muhammad Ali Asghar Qazi, I.T.P. for Respondent (in I.T.A. No.699/LB of 2003).

Date of hearing: 16th April, 2005.

2006 P T D (Trib.) 1050

[Income-tax Appellate Tribunal Pakistan]

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

M.As. Nos. 579/LB to 581/LB of 2005, decided on 12th November, 2005.

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

----Ss. 221 & 132(2)---Rectification of mistake---Recall of order by the Appellate Tribunal---Contention raised by the assessee before the Appellate Tribunal was justified due to the fact that no notice of hearing was served either on Authorized Representative or assessee/applicant company as the assessee has also filed an affidavit whereby it had stated that no notice of hearing in appeal was ever served upon any official of the applicant-company---Non-appearance on the date of hearing therefore, was not wilful---Order passed under S.132(2) of the Income Tax Ordinance, 2001 for no fault of the assessee was unjustified as the issue raised in main appeals remained unsubstantiated for non ­prosecution---Order passed was recalled in the interest of justice and office was directed to list the main appeal filed by the assessee for regular hearing---Miscellaneous applications filed by the assessee were allowed by the Appellate Tribunal in circumstances.

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

Anwar Ali Shah, D. R. for Respondent.

Date of hearing: 11th November, 2005.

2006 P T D (Trib.) 1052

[Income-tax Appellate Tribunal Pakistan]

Before Muhammad Munir Qureshi, Accountant Member

I.T.As. Nos. 5373/LB and 5374/LB of 2003, decided on 18th November, 2005.

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

----S. 129---Appeal to the Appellate Additional Commissioner---Vacation of order---First Appellant Authority "vacated" the order of Assessing Officer but it had not specified,' precisely, what consequential action it had in its mind after the vacation---Order of First Appellate Authority to that extent was declared "inchoate" by the Appellate Tribunal.

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

----Ss. 56 & 61---Notice for furnishing return of total income---Issuance of single notice under S.56 of the Income Tax Ordinance, 1979 for two assessment years, though not a preferred mode to call for returns of income for two assessment years, was not illegal---Issuance of "multiple statutory notices" under different provisions of the statute (such as notice under S.56 and notice under S.61) simultaneously, was however illegal, as it caused prejudice to the assessee.

2005 PTD (Trib.) 234 rel.

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

----S. 63---Best judgment assessment---Assessment after date of compliance-Legality-Ex parte assessment made after the date of compliance cited in the notice was not illegal provided default was properly established and the Assessing Officer took cognizance of assessee's default on the due date i.e. the date specified in the notice.

1996 PTD 1125; PLD 1975 Lah. 893; (2004) 90 Tax 325 (Trib.) and 2005 PTD (Trib.) 211 rel.

S.A. Masood Raza Qizalbash, D.R. for Appellant.

Nemo. for Respondent.

Date of hearing: 18th November, 2005.

2006 P T D (Trib.) 1072

[Income-tax Appellate Tribunal Pakistan]

Before Khawaja Farooq Saeed, Chairperson and S. Abdul Minam Jafari, Accountant Member

I.T.As. Nos. 1698/KB to 1702/KB of 2003, decided on 13th September, 2005.

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

----Second Sched., Part-1, cl. (94)---Companies Ordinance (XLVII of 1984), S. 26---Exemption---Assessee Company was a body corporate promoted by various insurance companies to help, support, and protect the status and general welfare of the Insurance Companies' working in Pakistan---Assessee company filed its return claiming exemption---Assessing Officer in re-assessment proceedings repeated his order by holding that assessee was not involved in any charitable or general welfare purpose and made various, add backs from Profit and Loss account---First Appellate. Authority confirmed the treatment in its entirety---Validity---Object of the assessee company was to promote support and protect status, common interest and welfare of the companies and bodies carrying on the business of insurance in Pakistan---Company could at best be considered as an association doing research to find ways and means for increasing business of its members for such and similar other common interests---Company was an association of business rivals who had united on common interest---Such could not be in the form of general public interest---If the welfare of the member companies was the only purpose, it was neither a `charitable purpose' nor a general public welfare motive---On one hand these companies were getting the benefits of deduction of the membership fee and other contributions to this association from their accounts and on the other hand were claiming exemption in the case of this association which was not meant for a public welfare at all---Had these companies united for a charitable hospital or for an educational institution with non-profit motive, the matter could be decided in their favour---If the main purpose was to maintain, run etc. educational institution, research or other institutions for development of technology in the. country for the welfare and uplift of the general Pakistani public or to assist in establishment of hospitals and clinics and dispensaries, or to construct houses and buildings for housing poor class, and to help poor by providing food and clothing to down-trodden public, etc.; such an exemption could be granted---Assessee company was not entitled to exemption under the Second Schedule of the Income Tax Ordinance, 1979 in circumstances.

(1965) 55 ITR 722 (SC) and (1967) 60 Tax 195 ref.

1985 PTD 287 distinguished.

Hyderabad Race Club v. C.I.T. (1985) 153 ITR 521; Fisher's Blend Station v. Tax Commissioner (Wash.) 45 Pac. (2) 942; Union Pass. R.Co. v. Philla. 101 U.S. 528, 25 L.Ed. 912; Harper v. England, 124 Fla. 296, 168 So. 1403; Common v. Hazel 155 Ky. 30, 159 S.W. 673; State v. Soards Directory Co., 148 La 1013, 88 So. 251; Springfield v. Smith 138 Mo. 645. 40, S.W. 757, 37 L.R.A. 446; People v. Morgan, 69 N.Y.S. 263. 59 Ap. Div. 302; Common v. Cover 215 Pa. 556. Atl. 686 St. Louis v. Boatmen's Ins. Co. 17 Mo. 150; Camas Stage Co v. Kozer, 104 Ore. 600, 209 Pac. 95 ALR 27; New Orleans v. Robira, 42 La. Ann. 1098, 8 So. 402. 11 L.R.A. 141 and Portland v. Kozer, 108 Ore. 375, 217 Pac. 833; The Interpretation of Statutes at p.166 of its Chapter 23; PLD 1966 SC (sic); PLD 1966 Dacca 523 and 1973 PTD 361 rel.

(b) Interpretation of Statutes---

----Importing meanings from other laws is not safe---Meaning should be adopted as explained in the concerned enactment---If the main law does not give a guideline then the ordinary dictionary meanings are to be adopted.

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

----Second Sched., Part-I, cl. (94)---Exemption---Charitable purpose---`Charitable purpose' had been defined to include relief of poor, education, medical relief and advancement of any other object of public utility in the Income Tax Ordinance, 1979---Claiming that provision of Income Tax Ordinance, 1979 having been applied while granting permission under the Company Law makes it a charitable society shall not be of help.

(d) Interpretation of statutes---

---Explanation clause is to be given restrictive meanings.

(e) Income-tax---

----Exemption---Facts of each case separately decide the question of exemption of its income.

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

---Second Sched., Part-I, cl. (94)---Exemption---Benefit to the public at large---Term "benefit to the public at large" cannot be stretched to include legal persons doing profitable business.

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

----Second Sched., Part-I, cl. (94)---Exemption---Public---Term public' stands forthe public' and the general body of mankind.

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

----Second Sched., Part-I, cl. (94)---Exemption---Charitable purpose--Charitable purpose may not be restricted to charity only.

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

---Second Sched., Part-I, cl. (94)---Exemption---Public at large---Term `public at large' cannot .be stretched beyond the living persons.

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

----Second Sched., Part-I, cl. (94)---Exemption---Public at large---Public at large as used in the exemption clause, only includes human beings and not those persons who cannot breathe or enjoy the nature.

(k) Income-tax---

---Exemption---Doubt in case of exemption is to be resolved in favour of revenue and not the assessee.

(l) Income-tax---

----Exemption---Exemption is a special facility and additional benefit which could only be advanced to the people for whom the same had been provided---Nobody could, by way of extending the meaning of law or creating a doubt therein, claim that he was exempt from tax.

(m) Income-tax---

----Exemption---Doubts---Exemption enactments were clearly in derogation of the normal rights and were a kind of special privileges---Such statutes were always subject to strict construction against claimant be that a legal person or juridical person---Before an exemption could be allowed the right for the same should be clearly given rather establish from the statute itself---Doubt in such cases must always be resolved against the existence of such an exemption---If the right of a person of an exemption stands established, efforts should not be made to defeat the purpose, at the same time such 'a right could not be established by debates or arguments and the doubt shall remain a doubt against the tax payer.

Fisher's Blend Station v. Tax Commissioner (Wash.) 45 Pac. (2) 942; Union Pass. R.Co. v. Philla. 101 U.S. 528, 25 L.Ed. 912; Harper v. England, 124 Fla. 296, 168 So. 1403; Common v. Hazel 155 Ky. 30, 159 S.W. 673; State v. Soards Directory Co., 148 La. 1013, 88 So. 251; Springfield v. Smith 138 Mo. 645, 40, S.W. 757, 37 L.R.A. 446; People v. Morgan, 69 N.Y.S. 263. 5,9 Ap. Div. 302; Common v. Cover 215 Pa. 556. All. 686 St. Louis v. Boatmen's Ins. Co. 17 Mo. 150; Camas Stage Co v. Kozer, 104 Ore. 600, 209 Pac. 95 ALR 27; New Orleans v. Robira, 42 La. Ann. 1098, 8 So. 402. 11 L.R.A. 141 and Portland v. Kozer, 108 Ore. 375, 217 Pac., 833 rel.

(n) Income-tax---

----Add back out of Profit and Loss account---Stock phrases---Appellate Tribunal deleted the additions made under the head telephone, motor vehicle expenses and entertainment, being made on the basis of "stock phrases".

(2003) 87 Tax 122 rel.

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

----Ss. 23 & 24---Deductions---Bad debts---Full particulars had hot been provided-Appellate Tribunal set aside the case on said issue---Assessing Officer was directed to re-determine the status of the same in the light of Ss.23 and 24 of the Income Tax Ordinance, 1979 and then either allow or disallow the same.

E.U. Khawaja and S. Hassan Naeem for Appellant.

Mushtaq Husain Qazi, D.R. for Respondent.

Date of hearing: 11th March, 2005.

2006 P T D (Trib.) 1165

[Income-tax Appellate Tribunal Pakistan]

Before Rasheed Ahmed Sheikh, Judicial Member

I.T.A. No. 6002/LB of 2003, decided on 4th January, 2006.

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

----Ss. 132(2) & 62---Decision in appeal---Enhancement of assessment on the basis of estimation by the. First Appellate Authority---Validity---First Appellate Authority exercised its powers under S.132(2) of the Income Tax Ordinance, 1979 on whims---Not an iota of additional evidence had been adduced by the First Appellate Authority to justify its action of enhancement in the assessment made under S.62 of the Income Tax Ordinance, 1979---Facts on the strength of which the already completed assessment had been enhanced were the same which were thoroughly appraised at the assessment stage---Facts recorded by First Appellate Authority evidently envisaged that adoption of daily sales was not supportive of any material evidence---First Appellate Authority pushed his own estimate in the assessment made under S.62 of the Income Tax Ordinance, 1979 without bringing any additional cogent or concrete material on record---Inviting provisions of S. 132(2) of the Income Tax Ordinance, 1979 was not tenable in law in circumstances.

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

----S. 132(2)---Decision in appeal---Enhancement of assessment---In order to enhance the assessment or the penalty or to reduce the refund there must exist some overpowering material evidence, which could not be refuted.

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

----S. 132(2)---Decision in appeal---Enhancement of assessment---Law disapproves enhancement in assessment or penalty Or reduction in refund where two opinions can be formed on a certain set of facts.

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

---S. 132(2)---Decision in appeal---Enhancement of assessment---First Appellate Authority is debarred to exercise the powers vested in it under S.132(2) of the Income Tax Ordinance, 1979 on conjectures and surmises.

(e) Income-tax---

---Evidence---No information/evidence can be used at the back of the parties.

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

----S. 132(2)---Decision in appeal---Enhancement of assessment---Non­ confrontation---Effect---Non-observance of mandatory provision of law i.e. confrontation by the First Appellate Authority prior to drawing adverse inference with the material gathered by him renders the order passed under S.132(2) of the Income Tax Ordinance, 1979 to be nullity in law.

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

---S. 132(2)---Decision in appeal---Enhancement of assessment---Sale of bakery items had been adopted by the First Appellate Authority on pure guess work---Such segment of income had been introduced by the First Appellate Authority for the first time without corroborating any material evidence---Said part of income was deleted by the Appellate Tribunal in the circumstances.

Sheikh Muhammad Yousaf, ITP for Appellant.

Dr. Shahid Siddique Bhatti, D.R. for Respondent.

Date of hearing: 4th January, 2006.

2006 P T D (Trib.) 1189

[Income-tax Appellate Tribunal Pakistan]

Before Ehsan-ur-Rehman, Judicial Member and Naseer Ahmad, Accountant Member

I.T.As. Nos. 4453/LB, 4454/LB of 2005, 4605/LB, 4606/LB, 5049/LB and 5050/LB of 2003, decided on 24th February, 2006.

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

----First Sched., Part-III, Para-C, Ss. 80-DD & 50(5)---Rate of surcharge---Levy of---Before an assessee is taxed under minimum tax regime as contemplated in S.80DD of the Income Tax Ordinance, 1979 his final tax liability is first calculated under the normal tax regime on the basis of total income---When the liability under the normal law regime worked out on said basis is less than the tax deducted under S.50(5) of the Income Tax Ordinance 1979 only then he is taxed under S.80DD of the Income Tax Ordinance, 1979 and the tax deducted under S.50(5) of the Income Tax Ordinance, 1979 is taken as the minimum tax payable by the assessee, though actually it is more than the tax calculated under the normal tax regime including the surcharge under para. C of Part-III of the First Schedule of the Income Tax Ordinance, 1979 and it is against the very scheme of the Income Tax Ordinance, 1979 to charge surcharge from an assessee who is already paying tax at an amount higher than the tax calculated under the normal law regime which S.80DD of the Income Tax Ordinance, 1979 called the final tax liability and which includes both income tax and surcharge---When the final tax liability including both income tax and surcharge was less than the tax deducted under S.50(5) of the Income Tax Ordinance, 1979 only less than the tax deducted under S.50(5) of the Income Tax Ordinance, 1979 was taken as the minimum tax payable by the assessee under S.80DD of the Income Tax Ordinance, 1979.

FAR Bennion MA on Statutory Interpretation (Third Edition, Butterworth, 1997; Messrs Aphali Pharmaceuticals Ltd. v. State of Maharashtra and others (1989) 4 Supreme Court Cases 378 and S. Sankappa and others v. Income-tax Officer, Central Circle II, Bangalore (1968) 68 ITR 760 (SC) ref.

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

----First Sched., Part-III, Para-C, Ss.9 & 10---Rate of surcharge---Levy of surcharge---Principles---Surcharge will be levied only when income-tax will be levied under S.9 of the Income Tax Ordnance, 1979---Where income tax is not levied under S.9 of the Income Tax Ordinance, 1979 no surcharge could be levied under S.10 of the Income Tax Ordinance, 1979---If Ss. 9 & 10 of the Income Tax Ordinance, 1979 were read in conjunction, S.10 of the Income Tax Ordinance, 1979 clearly stated that an additional duty in the form of surcharge will be levied on the income tax payable under S. 9 of the Income Tax Ordinance, 1979 at the rate as given in the First Schedule of the Income Tax Ordinance, 1979.

(c) Interpretation of statutes---

----Schedule to a statute---Schedule had nexus with certain sections in the main enactment, which were called the inducing sections, which control and regulate the Schedule.

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

----Ss. 9., 10 & First Sched.---Charge of income-tax---Surcharge--Inducing sections of the First Schedule were the sections 9 and 10 of the Income Tax Ordinance, 1979 and where no tax was charged under S.9 of the Income Tax Ordinance, 1979 no surcharge could be levied under S.10 of the Income Tax Ordinance, 1979.

Dawood Corporation (Pvt.) Ltd. v. Commissioner of Income Tax Appeal-II, Karachi 2006 PTD 148 rel.

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

----Ss.10, 8ODD & First Sched.---Charge of super tax and surcharge, Under S.10 of the Income Tax Ordinance, 1979 surcharge was levied on the basis of assessed total income meaning thereby that where tax was not levied on the basis of assessed total income no surcharge could be levied---Tax under S.80DD of the Income Tax Ordinance, 1979 in the present case, was not levied on the basis of the assessed total income and if tax was not levied on the basis of assessed total income no surcharge could be levied.

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

----S. 8ODD & First Sched., Part-III, para-C---Minimum tax on income of importers of edible oils, etc.---Levy of surcharge---When the .very scheme of the Income Tax Ordinance, 1979 did not support the levy of surcharge on tax recovered under S.80DD of the Income Tax Ordinance, 1979 there was no need to specifically refer S.80DD of the Income Tax Ordinance, 1979 in Para. C of Part-III of the First Schedule of the Income Tax Ordinance, 1979.

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

----First Sched: Part-III, Para-C---Levy of surcharge---Certain sections of the presumptive tax regime had been mentioned in Para-C of Part-III of the First Schedule of the Income Tax Ordinance, 1979 only to clarify that where a person was assessed to tax under normal law regime and his income also included a portion of income covered under the Presumptive Tax Regime the later will be excluded.

(h) Income-tax---

----Disallowance---First Appellate Authority could not direct dis?allowance of 20% of expense from vehicle account as being unverifiable as it was never in dispute that the assessee had actually incurred the expense and the only dispute was whether it was a capital or revenue expense.

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

---S. 132(4)-Decision in appeal---For enhancement of assessment a notice under S.132(4) of the Income Tax Ordinance, 1979 was mandatory.

(j) Income-tax---

----Trading account---Where the declared trading account of an assessee were finally accepted the addition on account of other income on insufficient grounds was not sustainable.

(k) Income-tax---

----Addition---Unless an Assessing Officer pointed out specific instances of unverifiable transactions he could not make the additions---Generalized observation are not sufficient to sustain additions in profit and loss accounts.

2004 PTD (Trib.) 2231; Coca Cola Export Corporation v. IAC 2002 PTD 1496 = 1991 PTD (Trib.) 643; 1989 PTD (Trib.) 39; (2002) 88 Tax 48 (Trib.) and Ayenbee (Private) Limited v. ITAT 2002 PTD 407 rel.

Sajid Ijaz Hotiana for Appellant (in I.T.As, Nos. 4453/LB, 4454/LB of 2005, 4605/LB and 4606/LB of 2003).

Muzammal Hussain, D.R. for Respondent (in I.T.As. Nos.4453/LB, 4454/LB of 2005, 4605/LB and 4606/LB of 2003).

Muzammal Hussain, D.R. for Appellant (in I.T.As. Nos.5049/LB and 5050/LB of 2003).

Sajid Ijaz Hotiana for Respondent (in I.T.As. Nos.5049/LB and 5050/LB of 2003).

Date of hearing: 14th February, 2005.

2006 P T D (Trib.) 1204

[Income-tax Appellate Tribunal Pakistan]

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

I.T.A. No.5169/LB of 2004, decided on 22nd September, 2005.

Income Tax Ordinance (XXXI of 1979)---

----Ss. 13(1)(aa)(d), 62 & 132---Unexplained investment etc., deemed income---Addition---Assessee contended that Assessing Officer having failed to issue any notice under Ss.13(1)(aa) and 13(1)(d) of the Income Tax Ordinance, 1979 at the time of re-assessment made under Ss.62/132 of the Income Tax Ordinance, 1979, could not be allowed to make any reappraisal with regard to additions---Department pleaded that assessee/appellant had already been properly confronted with regard to the additions made under Ss.13(1)(aa) and 13(1)(d) of the Income Tax Ordinance, 1979 at the time when original assessment was finalized under S.62 of the Income Tax Ordinance, 1979 and assessee was well aware of the facts and circumstances leading to such additions---Validity---Assessing Officer failed to formally confront the assessee with the proposed addition---Earlier confrontation on the matter at the time of original order did not exempt the Assessing Officer from carrying out statutory requirement of formal confrontation before making the proposed additions---Proceedings under Ss.62/132 of the Income Tax Ordinance, 1979 were fresh proceedings and there could be no "carry forward" of earlier proceedings under S.62 of the Income Tax Ordinance, 1979 with regard to proposed addition---Assessing Officer was bound to make fresh confrontation under Ss.13(1)(aa) and 13(1)(d) of the Income Tax Ordinance, 1979 before resorting to additions to the total income---Fact that approval had been duly obtained from Inspecting Additional Commissioner was of no consequence and failure to formally confront the assessee with the proposed addition was a lapse on the part of Assessing Officer which was fatal.

2004 PTD (Trib.) 2352; 1985 PTD (Trib.) 178; 1989 PTD (Trib.) 150; 1997 PTD (Trib.) 1102 and 1991 PTD (Trib.) 758 ref.

2003 PTD (Trib.) 2547 rel.

Ajmal Khan for Appellant.

Dr. Ahmad Shahab, D.R. for Respondent.

Date of hearing: 22nd September, 2005.

2006 P T D (Trib.) 1211

[Income-tax Appellate Tribunal Pakistan]

Before S. Hasan Imam, Judicial Member and Agha Kafeel Barik, Accountant Member

W.T.As. Nos. 92/KB to 97/KB, 87/KB to 91/KB of 2005, decided on 16th February, 2006.

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

----Ss. 16(3) & 16(5)/23/17---Assessment---Cancellation of assessment order by the First Appellate Authority for the alleged unauthorized representation of an Advocate before the Assessing Officer during assessment proceedings in response to statutory notices---Validity---Apparently, the said gentleman was duly authorized by the assessees to attend Wealth Tax Assessment proceedings, otherwise he had had no business to waste his time and energy---Even otherwise his mala fide intention or any personal gain in attending assessment proceedings of the two assessees had not been proved---First Appellate Authority was not justified to ignore the circumstantial evidence and was swayed away at the instance of the assessees which appeared to be mala fide---Order of Fist Appellate Authority canceling orders were vacated by the Appellate Tribunal.

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

----Ss. 16(5) & 17---Assessment---Ex parte assessment orders had been passed---Service of notices appeared to be doubtful---Such orders were set, aside by the Appellate Tribunal for de novo assessments after issue and service of statutory notices:

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

----S.31B(1)---Additional wealth tax---Late payment of admitted tax liability on the basis. of wealth tax returns was proved from the record---Assessing Officer was' empowered to charge additional tax in such cases First Appellate Authority, however, observed that the Assessing Officer did not accord the assessee fair opportunity of being heard---Appellate Tribunal set aside all the orders with the direction to the Assessing Officer to issue show-cause notices and accord reasonable opportunity to the assessee of being heard.

Agha Hidayatullah, D.R. for Appellant.

Abdul Tahir for Respondent.

Date of hearing: 16th February, 2006.

2006 P T D (Trib.) 1225

[Income-tax Appellate Tribunal Pakistan]

Before Khawaja Farooq Saeed, Chairperson and Ehsan-ul-Haq, Accountant Member

I.T.As. Nos. 176/IB to 178/IB of 2001-2002, decided on 17th February, 2005.

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

---S. 66-K---Powers --Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order---Non-filing of audit statements was neither erroneous nor prejudicial to the interest of Revenue.

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

----S.66-A---Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order---Prejudicial to the interest of revenue---Where paid up capital was less than the threshold prescribed for the purpose which was 3 million rupees, filing of audited statement was not requirement of law---If it was not on record of the department, it did create a very strong doubt with regard to the genuineness of the declared income, however it was not causing any prejudice to the interest of revenue.

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

----S. 66-A---Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order---Erroneous assessment---Doubt be that of any strength does not make an assessment erroneous---Word "erroneous" could not be extended to the estimates, gossip or poor quality of assessment etc.

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

----S. 66-A & Third Schedule---Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order---Depreciation allowance on building constructed for purpose of sale---Validity---Assessee dealt in the business of construction and sale of property---Building was his stock in trade---Third Schedule to the Income Tax Ordinance, 1979 related to allowance of depreciation on building owned by an assessee and used for the purpose of business---Building had not been used for business all, rather was never intended either---Allowance of depreciation was erroneous on the face of it and the same had caused prejudice to the interest of revenue.

2000 PTD (Trib.) 277 and 2000 PTD 1201 distinguished.

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

----S. 66-A---Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order---Poor quality of assessment or inexperience of Assessing Officer at the time of making assessment do not fall within the definition of error.

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

----S. 66-A --Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order---Poor quality of assessment was never a good base for considering an order to be as erroneous and prejudicial to the interest of revenue.

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

----S. 62---Assessment on production of books of accounts, etc.---Non­ production of books of accounts---Finalization of assessment under S.62 of the Income Tax Ordinance, 1979---Effect---Doubt was very strong that no books were produced to the Assessing Officer which made the order under S.62 of the Income Tax Ordinance, 1979 to be without jurisdiction---In absence of books of accounts assessment under S.62 of the Income Tax Ordinance, 1979 was legally not valid---Assessing Officer's action of finalizing the assessment in disregard to the legal provision made the order without proper jurisdiction.

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

----S. 66-A Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order---Assessment erroneous and prejudicial to the interest of revenue---Cancellation of assessment on the ground that books of accounts; list of creditors and bank, statement was not furnished before the Assessing Officer while passing order under S.62 of the Income Tax Ordinance, 1979---Validity---While giving reply to Inspecting Additional Commissioner regarding non-furnishing of list of creditors and bank statement, assessee stated that the same had intentionally been removed from the record---Case was not that of street grocer where such a list could not have been produced---Action of assessee in not coming out straight with the books and copy of the list of creditors accelerated the doubts which had turned into belief that the things had been intentionally manipulated---Assessing Officer was a quasi-judicial officer equipped with the duty to assess the actual income of an assessee as well as to protect the revenue as its representative---Assessing Officer's ignorance or intentional overlooking the details statedly provided at the time of assessment without satisfying himself to the correctness of the advances, was undoubtedly an action that had made the order erroneous---List of creditors who had advanced in multi millions had neither been probed nor was put to scrutiny---Whether the entire amount was in relation to intending purchasers or there were other creditors also, had not been looked into---Facts coupled with the urgency and the short order assessing only the sale of property ignoring all other factors smacked of mala fide---Such an order automatically became erroneous as well as prejudicial to the interest of revenue---Assessee had not produced books of accounts before the Assessing Officer at the time of original assessment---Assessment under S.62 of the Income Tax Ordinance, 1979 was not legally correct assessment---Order should have been passed under S.63 of the Income Tax Ordinance, 1979---Assessee at no stage of the proceedings, divulged information about, his actual state of business---Assessment had been framed in total disregard to the legal norms and procedural practices for making a normal legal assessment---Order was erroneous and prejudicial to the interest of revenue in circumstances.

Geevee Enterprises v. Additional Commissioner of Income Tax Delhi and others 1975 ITR 375; Rampyari Devi Saragoi v. Commissioner of Income Tax; 1990 PTD 526 rel.

2002 PTD (Trib.) 1583; 2000 PTD (Trib.) 277; 2000 PTD 1821; 2000 PTD 1201; 1999 PTD 700 and 1999 PTD 3229 distinguished.

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

----S. 66-A---Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order---Order erroneous and prejudicial to the interest of revenue---Presumption of truth and sanctity attached to the order was not to be disturbed by presumptions or reasons to suspect-If however, there were reasons to believe that the procedure and practices had intentionally been ignored, one could definitely invoke the .provisions of S.66-A of the Income Tax Ordinance, 1979.

1990 PTD 935 distinguished.

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

----S. 66-A---Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order---Order erroneous and prejudicial to the interest of revenue---Role of Assessing Officer---Assessing Officer had never satisfied himself with tangible effort that the list of creditors provided or books examination in a potential case was unnecessary---Role of Assessing Officer as representative of department was completely missing---Department could, claim infringement of its right of natural justice in circumstances---General concept of justice ,was applicable on both the parties---If Assessing Officer had not played the role assigned to him as representative of the department in addition to his judicial functions same casts doubt---Action to totally ignore the rights of the department and non-playing the role of its representative could also make an order erroneous and prejudicial to the interest of revenue.

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

----S.66-A---Powers of Inspecting Additional Commissioner to revise Deputy Commissioner's order---Order erroneous and prejudicial to the interest of revenue---Assessing Officer's ignorance not to challenge or comment or scrutinize without being satisfied that it was unnecessary under the particular circumstances of a case, made an order erroneous and prejudicial to the interest of revenue.

Shahid Pervez Jami and C.A. Habib, F.C.A. for Appellant.

Rafaqat Ali Syed, D.R. for Respondent.

Date of hearing: 17th February, 2005.

2006 P T D (Trib.) 1248

[Income-tax Appellate Tribunal Pakistan]

Before Ehsan ur Rehman, Judicial Member and Naseer Ahmad, Accountant Member

I.T.As. Nos.762/LB, 763/LB of 2002, 2457/LB and 2458/LB of 2004, decided on 15th June, 2005.

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

----Ss. 34, 30, Second Sched., cls. (118D) & (99)---Set off of losses---Income from other sources---Exemption---Assessee was enjoying exemption under cl. 118-D of the Second Schedule of the Income Tax Ordinance, 1979---Nil income was assessed but Assessing Officer treated the other income as taxable under S.30 of the Income Tax Ordinance, 1979 and assessed accordingly and did not set off against exempt income---Validity---Total income was to be computed which may include exempt income---If exempt income was positive or negative the same was to be computed---While computing the exempt income/loss the Assessing Officer could not probe the trading result and if he was satisfied that the exempt income or loss declared was from the exempt source then he had to accept the declared version of exempt income/loss subject to statutory additions including that of tax depreciation---If there was no other .income then the declared exempt income/loss would be computed as total income---In case there was other income which was taxable then the same was to be included in the positive exempt income and total income from exempt and non-exempt sources was to be computed, however, tax was to be charged on taxable income only---In case there was taxable income from other sources and there was business loss of exempt income then as per provisions of 34 of the Income Tax Ordinance, 1979 taxable income was to be set off against exempt (loss) separately from the taxable income from other sources---First Appellate Authority was not justified to remand the case to the Assessing Officer---Appeals were accepted and orders of the authorities below were vacated---Assessing Officer was directed to accept the declared exempt income/loss and to set off the taxable income from other sources against loss of exempt income as had been envisaged under S.34 of the Income Tax Ordinance, 1979.

2000 PTD 359 and 1999 PTD (Trib.) 1528 rel.

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

----Ss. 2(24)(44), 11(1) & 14(1), proviso---Income---Income includes loss of income profits or gains and "total income" means total amount of income from all the sources---Total income was to be computed in the manner laid down under the Income Tax Ordinance, 1979 irrespective of the fact that the same was taxable or exempt and the total income may include income which was exempt from tax and if the entire income was exempt even then total income was to be computed whether it was positive income or negative (loss).

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

----Second Sched., cls. (18D), (99) & S. 2(24)(b)---Second Sched., cl. (99) of the Income Tax Ordinance, 1979 provided that' the expression "income" had been used as against expression "profit and gains" used in cl. (118D) of the Second Schedule of Income Tax Ordinance, 1979---Definition of "income" contained in S.2(24)(b) of the Income Tax Ordinance, 1979 provided that "income" included "income, profits and gains" and even loss of income, profits and gains.

?

Shahid Pervez Jami for Appellant.

Muzammil Hussain, D.R. for Respondent.

Date of hearing: 14th June, 2005.

2006 P T D (Trib.) 1254

[Income-tax Appellate Tribunal Pakistan]

Before S. Hasan Imam, Judicial Member and Agha Kafeel Barik, Accountant Member

I.T.As. Nos. 1727/KB of 2003 and 407/KB of 2004, decided on 23rd November, 2004.

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

----S. 62---Assessment on production of accounts, evidence etc.---Decrease in sales---Gross loss---Estimation of sales---Validity---No doubt sales to government agencies in the present case, had reduced from 20% to 15.40% contrary to sales to limited company, which had increased from 21% to 28.19% whereas there was little decline in wholesale (from 59% to 56.33%) but this may not be taken as a sufficient reason to accept considerable decrease in sales and gross los, increase of gross profit rate---No admissible evidence had been furnished to show increase in the prices of raw material---Record was also silent in respect of any evidence showing decline in prices of raw material---Case was a no account case, assessee was duly confronted and accounts were rejected after a detailed reply was. taken into consideration by the Assessing Officer---Estimation of sales and application of gross profit rate at 7.5% was as per history of the assessee and did not warrant interference for any reason.

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

----Ss. 182(2)(3), 151, 153 & 169---Penalty for failure to furnish a return or statement---Additional penalty---Separate provision had been laid down for imposing additional penalty of Rs. 200 for each day of default---Additional penalty will be taken as a separate course for which a separate notice would be necessary after action under S.182(2) of the Income Tax Ordinance, 2001 and each day of default shall start after the date of imposition of penalty under S.182(2) of the Income Tax Ordinance, 2001 which means that for imposing additional penalty it would be necessary to pass an order under S.182(2) of the Income Tax Ordinance, 2001 and thereafter on failure of the assessee to pay penalty of Rs.2000 additional penalty shall be levied at the rate of Rs.200 for each day of default---Both the penalties were independent in -nature, based on different actions, having separate starting dates and separate notice would be mandatory for each action---Action under S.182(3) of the Income Tax Ordinance, 2001 was not discretionary as such showing reasonable cause would not be necessary for the levy of additional tax---Penalty under S.182(2) and (3) of the Income Tax Ordinance, 2001 would be separate for each statement because the words "failure to furnish the statement" had been used for a situation where an assessee failed to furnish more than one statement, separate action should be proposed for each statement under S.182(2)(3) of the Income Tax Ordinance, 2001.

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

----S.182(3)---Penalty for failure to furnish a return or statement---Default in respect of which penalty had been imposed under S.182(3) of the Income Tax Ordinance, 2001 should start from the date of penalty imposed under S.182(2) of the Income Tax .Ordinance, 2001, as such time had already lapsed till passing of an order under S.182(2) of the Income Tax Ordinance, 2001 which should be excluded while imposing penalty under S.182(3) of the Income Tax Ordinance, 2001.

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

----S. 182(2)---Penalty for failure to furnish a return or statement---Order imposing penalty under S.182(2) of the Income Tax Ordinance, 2001 had been passed after affording opportunity of hearing to the assessee who, due to its wilful absence after due service of notice, failed to show a reasonable excuse for filing required statement within the prescribed period, as such order in this context, did not warrant interference.

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

----S. 182(3)---Penalty for failure to furnish a return or statement---Statements due on 15th October 2002, were filed on 14-12-2002 (late by 58 days)---Before service of show-cause notice, dated 23-5-2003 showing compliance by 30-5-2003, there was no default attracting S.182(3) of the Income Tax Ordinance, 2001 which provided imposition of additional penalty when a person liable to a penalty under S.182(2) of the Income Tax Ordinance, 2001 continued in failing to furnish the statement, besides- a separate notice would also be mandatory---Order imposing penalty under S.182(3) of the Income Tax Ordinance, 2001 confirmed by the First Appellate Authority was unjustified and liable to be cancelled:

A.H. Faridi, I.T.P. for Appellant.

Ghulam Shabbir Memon, D.R. for Respondent.

Date of hearing: 5th October, 2004.

2006 P T D (Trib.) 1270

[Income-tax Appellate Tribunal Pakistan]

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

I.T.As. Nos. 5857/LB to 4859/LB and 2086/LB to 2088/LB of 2004, decided on 30th May, 2005.

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

----Second Sched., Part-II, cl. (110)---Exemption---Assessing Officer refused to. grant exemption from tax on share income received by the assessee-company as member of association of persons on the ground that the same was not available to the company as a member of association of persons---Validity---Words "on which tax has already been paid by the association" occurring in cl. (110) clearly indicate that the sole purpose of said clause was to save the member of the association from double taxation, one in the hands of association of persons and again in the hands of member---Clause showed that the words in parenthesis refer to the term "association of persons" and not to the term "member", maximum that could be said about the view of the Revenue was that their interpretation of the provision was also possible, but then it was an accepted rule of construction that where there were two interpretations of the provision, one that favours the subject shall prevail for that reason also view of the Department was not supported by the Appellate Tribunal---Assessee/company's claim for exemption was justified and same was allowed by the Appellate Tribunal.

2000 PTD (Trib.) 2664; 2001 PTD (Trib.) 2605 and 2003 PTD (Trib.) 1167 ref.

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

----S.52---Liability of persons failing to deduct or pay tax---Limitation---Assessing Officer could not go beyond the period of four years for the call for books of accounts----First Appellate Authority decided that order passed under S.52 of the Income Tax Ordinance, 1979 were hit by limitation and these were accordingly annulled---Order of First Appellate Authority was in accordance with a settled law.

2003 PTD (Trib.) 1167 rel.

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

----S.52---Liability of persons failing to deduct or pay tax---Tax was charged on 10% of payments made towards purchases---First Appellate Authority described such levy as being improper and illegal---Observation of the First Appellate Authority was strengthened by judgment of Appellate Tribunal in which it was held that the information for holding assessee as "assessee in default" required even stronger evidence than for reopening of the case under S.65 of the Income Tax Ordinance, 1979 in terms of definite information---Action on the part of Assessing Officer on charging tax on 10% payments made by the assessee-company for purchases was illegal and accordingly deleted---Order of First Appellate Authority was justified by law and the same was maintained by the Appellate Tribunal.

2003 PTD (Trib.) 1167 rel.

Ibrar Hussain Naqvi for Appellant/Assessee.

Ahmad Kamal, D.R. for Respondent/Department.

Date of hearing: 21st May, 2005.

2006 P T D (Trib.) 1282

[Income-tax Appellate Tribunal Pakistan]

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

M.A. No. 721/LB of 2005, I.T.As. Nos. 3247/LB and 3299/LB of 2003, decided on 8th November, 2005.

Income Tax Ordinance (XXXI of 1979)---

----S. 59(1)---C.B.R. Circular No.4 of 2001, dated 18-6-2001, para.9(a)(ii)---Self-assessment---Assessment year 2001-2002---Selection of case for total audit---Selection of case by the Regional Commissioner of Income Tax for total audit was declared illegal by the Appellate Tribunal and Assessing Officer was directed to accept the return under S.59(1) of the Income Tax Ordinance, 1979---Appeal filed by the department was rejected being devoid of merit.

Messrs Sahib Textiles (Pvt.) Ltd., through Managing Director, Faisalabad v. Federation of Pakistan through Secretary Finance, Secretariat, Islamabad and 4 others 2004 PTD 1; Ellahi Cotton Mills Ltd. v. Federation of Pakistan PLD 1997 SC 582 = 1997 PTD 1555; Canon Products Ltd. v. I.T. Officer, Companies Circle, Karachi 1985 PTD 549; Muhammad Asghar and others v. Income Tax Officer and others 1986 PTD 357; Ikhlaq Cloth House, Faisalabad v. ACIT, Faisalabad 2001 PTD 3121; 2005 PTD (Trib.) 342 and 2003 PTD (Trib.) 2157 rel.

Muhammad Shahid Abbas for Appellant (in M.A. No.721/LB of 2005 and I.T.A. No. 3247/LB of 2003).

Anwar Ali Shah, D.R. for Respondent (in M.A. No.721/LB of 2005 and I.T.A. No. 3247/LB of 2003).

Anwar Ali Shah, D.R. for Appellant (in I.T.A. No.3299/LB of 2003).

Muhammad Shahid Abbas for Respondent (in I.T.A. No.3299/LB of 2003).

Date of hearing: 2nd November, 2005.

2006 P T D (Trib.) 1292

[Income-tax Appellate Tribunal Pakistan]

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

I.T.As. Nos. 6053/LB of 2004, 6030/LB, 6031/LB of 2003, 6641/LB, 43/LB and 44/LB of 2004, decided on 24th September, 2005.

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

----S. 23(1)(x)---Deductions---Banking Company---Provision for bad debts---Assessing Officer disallowed provision for' bad debts on the ground that assessee had not fulfilled all the conditions for admissibility laid down in S.23(1)(x) of the Income Tax Ordinance, 1979---First Appellate Authority deleted such addition by relying on Appellate Tribunal's judgments which disapproved such disallowances in case of banks working under the regulatory control of State Bank of Pakistan---Validity---Contention of department that various judgments of Appellate Tribunal on the issue were conflicting and contradictory in nature carried force but at the same time pre-empting the jurisdiction of High Court by judgment of a larger Bench of the Tribunal would not be appropriate---Appellate Tribunal upheld the decision of First Appellate Authority :deleting the additions made on account of provision- for bad debts.

2002 PTD (Trib.) 1898; (2002) 85 Tax 245 (Trib.); 2003 PTD (Trib.) 1189; R.A. No.349/LB of 2002, I.T.As. Nos.2715 and 2716/LB of 1999; 1997 PTD 71; 2006 PTD (Trib.) 356 and Muhammad Inayatullah Cheema v. Sardar Masood Qazilbash 2002 PTD 1195 rel.

I.T.A. Nos. 5531/LB of 1996; Nos. 45, 46, 6362, 88, 89, 6054 to 6057/LB of 2004 and 1985 PTD 413 ref.

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

-----S. 23(1)-Deductions---Banking company---Interest credited to suspense account---Assessee credited mark-up to suspense account instead of profit and loss account---Assessing Officer rejected assessee's contention that it could be taxed on actual receipt basis but was taxable on accrual basis---First Appellate Authority relying on various judgments deleted the addition---Department contended that since assessee was maintaining its account in mercantile system the interest was chargeable to tax on accrual basis---Validity---Since deletion of interest credited to suspense account was made on the basis of cases decided by the Appellate Tribunal, order of First Appellate Authority was upheld by the Tribunal.

Muslim Commercial Bank v. IAC I.T.A. No.123 of 1999; Habib Bank Ltd. v. DCIT I.T.A. No.270 of 1999; (2002) 85 Tax 245 (Trib.); I.T.A. No. 2715 and 2716/LB of 1999; I.T.A. No. 5013/LB of 2000, I.T.A. No. 1082/LB of 2000; I.T.A. No. 1658/LB of 2003 (Trib.); I.T.A. No.1658/LB of 2003; I.T.As. Nos. 966 to 968/LB of 2002, 705/LB, 5961 and 5963/LB of 2004 rel.

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

----First Sched. & S. 30(2)(a)---Rate of income tax---Banking Company--Dividend---Contention of revenue was that First Appellate Authority was not justified to direct that dividend income of a banking company which could also be a public company should be subjected to concessionary rate of tax at 5% instead of the normal banking company rate---Assessee contended that banking company could also be a public company the dividend income of which was assessable at the rate of 5% under First Schedule of the Income Tax Ordinance, 1979---Validity---Banking company being a public company also Appellate Tribunal upheld the application of tax rate of 5% to its dividend income.

2000 PTD (Trib.) 507 rel.

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

----S. 62, proviso---Assessment on production of accounts, evidence etc.---Banking company---Profit and loss additions---Additions were deleted by the First Appellate Authority on the grounds that additions were made merely on assumptions and conjectures; that Assessing Officer did not point out any specific instance of non-business nature or un-verifiability of any expense and also did not issue any specific notice in terms of proviso to S.62 of the Income Tax Ordinance, 1979; that accounts of scheduled banks were subject to audit control and strict scrutiny of the State Bank and were regularly audited by internal, external and State Bank's auditors and that confrontation of some specific instance especially in the presence of proviso to S.62(1)' of the Income Tax Ordinance, 1979 were required---Validity---First Appellate Authority was justified in deleting the add backs from the profit and loss account as no specific instance of non-business or unverifiable expense was pointed out---Banks were under the control of State Bank of Pakistan and external as well as internal auditors---Such additions without any sufficient justification could not be sustained and were liable to be deleted---Order of First Appellate Authority was upheld by the Appellate Tribunal.

I.T.A. No. 1913/KB of 1998 rel.

(e) Income-tax---

----Add back of expenses---Banking company---Allocation of expenses relatable to exempt capital gain---Addition deleted by the First Appellate Authority on the basis of decided cases of Appellate Tribunal was impugned by the Department on the ground that allocation of expenses to exempt capital gain on sale of shares was rightly made by the Assessing Officer as income to which these expenses were allocated was not taxable being exempt---Validity---Since First Appellate Authority followed the judgments of Appellate Tribunal on this issue, order on this point was upheld by the Appellate Tribunal.

I.T.A. No.106/LB of 2000; I.T.A. 1658/LB of 2003; (2004) 90 Tax 128 (Trib.); I.T.As. Nos. 1066 to 1073/IB of 2004; I.T.A. No.966 to 968/LB of 2002, 205/LB of 2004, 5961 and 5962/LB of 2004 ref.

(f) Income-tax---

----Add back of expenses---Banking company---Fee and subscription---Fee paid to the Securities and Exchange Commission of Pakistan was disallowed holding same to be of capital nature made in respect of share capital---Assessee contended that such expenditure had no connection with enhancement of share capital of the bank but it was paid in connection with business of the bank and was not capital in nature---Addition was deleted by the First Appellate Authority---Validity---Order of First Appellate Authority was maintained by the Appellate Tribunal as the arguments of the assessee could not be controverted by the department.

(g) Income-tax---

----Add back of expenses---Banking company---Expenses on opening of new branches---Expenses were disallowed by holding them to be capital in nature---Assessee contended that expenses were incurred on publicity of new branches opened for promotion of its business---First Appellate Authority allowed such expenses incurred for business purposes---Order of First Appellate Authority was confirmed by the Appellate Tribunal being not controverted by the department.

137 ITR 652 and 168 ITR 731 rel.

(h) Income-tax---

----Bad debts actually written off---Add back of---Banking company---Bad debts claimed as actually written off were disallowed on the ground that the same were not irrecoverable as the ray of hope was still there---Addition was confirmed by the First Appellate Authority---Assessee contended that debts were actually written off because of its irrecoverability which meant not that the amount of debt was gone for ever but that the chances of its recovery were extremely remote---If bad debt which was written off was recovered in subsequent period it was taxable as income under S.25(aa) of the Income Tax Ordinance, 1979---Not in the interest of bank to claim debt as bad which was subsequently liable to be added to its income on recovery, it was only in cases where chances of recovery were extremely remote that the debt had been claimed to be bad and written off as irrecoverable---Disallowance was ordered to be deleted by the Appellate Tribunal.

2002 PTD (Trib.) 1898; 85 Tax 245 (Trib.) and I.T.As. Nos.1066 to 1073/IB of 2004 rel.

(i) Income-tax---

----Banking company---Provisions for non-banking assets---Dis?allowance---Such provision was disallowed on the ground that it was a mere provision and none of the assets had been disposed of as such provision had no relevance to the actual loss---Addition was confirmed by the First Appellate Authority on the ground that no actual loss was incurred on disposal of any asset, as only the actual loss on disposal of the asset was allowable deduction---Assessee contended that non-banking assets in question related to recoveries made against loans from debtors that constituted stocks in trade of the banks and any loss incurred was allowable under the established accounting principles---Validity---Assessee did not give sufficient evidence to establish before Assessing Officer that provision for non-banking assets was not merely an unascertained provision but was actual liability incurred which was liable to be allowed as deduction---Order of First Appellate Authority disallowing the claim of such provision was upheld by the Appellate Tribunal.

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

----Second Sched., Part-IV, cl. (3) & S.24(i)---Banking company---Allowance of perquisites paid by certain corporations---Deductions not admissible---Excess perquisites---Word `or' used in cl.(3) of Part-IV of the Second Schedule of the Income Tax Ordinance, 1979 had a conjunctive import---Said clause was applicable only to such banks which were owned and controlled by the Federal Government---Since bank was not controlled by the Federal Government, the benefit of the clause could not be extended to it---Addition made by the Assessing Officer on account of excess perquisites under S.24(i) of the Income Tax Ordinance, 1979 and confirmed by the First Appellate Authority was upheld by the Appellate Tribunal.

1999 PTD 2901 and 1991 SCMR 2164 ref.

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

----S. 24(i)---Banking-company---Deductions not admissible---Provisions for concessional loans---Addition of---Validity---Provisions of S.24(i) of the Income Tax Ordinance, 1979 were attracted where the expenditure was "incurred" in providing a perquisite---Since no expenditure was incurred by the bank on provision of concessional loans, this would not be a perquisite falling under the provision of S.24(i) of the Income Tax Ordinance, 1979---Since bank/assessee did not incur any expenditure in provision of concessional loan, additions made by the Assessing Officer on concessional loans were ordered to be deleted by the Appellate Tribunal.

?

I.T.A. No.652/KB of 1999-2000 Per incurium

(1988) 173 ITR 290 rel.

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

----S. 24(i)-Income Tax Rules, 1982, Rr. 3-18---Deductions not admissible---Application and explanations of the provisions---Perquisite for purposes of taxation had two aspects---One aspect was its taxability in the hands of the employer which was covered under S.24(i) of the Income Tax Ordinance, 1979 and the other aspect was the taxability of perquisites in the hands of the employee which were computed in accordance with Rr. 4-18 of the Income Tax Rules, 1982---If an employee had been provided a benefit perquisite on concessional rate, it will be a perquisite in the hands of the employee under R.18 of the Income Tax Rules, 1982 and the amount which would have been expended by the employee in obtaining such benefit or perquisite from an independent source as reduced by the amount if any actually paid by him in cash would be added to his income.

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

---S. 24(i)-Deductions not admissible---Income Tax Rules, 1982, Rr.3 & 18---Concessional loan---Benefit of concessional loan was liable to be added to the salary income of the employee under R.18 read with R.3 of the Income Tax Rules, 1982.

(n) State Bank of Pakistan Act (XXXIII of 1956)-

---Ss. 54-A & 46-B---Banking Companies Ordinance (LVII of 1962), Ss.91-A & 35---Income Tax Ordinance (XXXI of 1979), Preamble---Provisions to override other laws---Inconsistent directives not to be issued---Application of other laws barred---State Bank of Pakistan Act, 1956 and Banking Companies Ordinance, 1962 were enactments prior to the Income Tax Ordinance, 1979---Provisions of said enactments would not override a law made subsequently---Contention that provisions of Income Tax Ordinance, 1979 were excluded to the extent of provisions made in the State Bank Regulations made under the State Bank Act, 1956, was not tenable.

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

---S.5---State Bank of Pakistan Act (XXXIII of 1956), Ss.54-A & 46-B--Banking Companies Ordinance (LVII of 1962), Ss.91-A & 35---Income Tax Ordinance (XLIX of 2001), S.3---Jurisdiction of Income-tax authorities---Overriding effect of other laws---Authorities under the Income Tax Ordinance, 1979 as laid down in S..5, exercise their jurisdiction subject to the provisions of the Income Tax Ordinance, 1979---If effect of any other law was to be given notwithstanding the provision of Income Tax Ordinance, 1979 then a specific provision was made in the Income Tax Ordinance, 1979 giving effect to such provision of that other law---Prudential Regulations of the State Bank of Pakistan or the Companies Ordinance, 1962 would not override the provision of Income Tax Ordinance, 1979 as no specific effect had been given to these provisions in the Income Tax Ordinance, 1979.

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

----S. 24---Deductions not admissible---Renovation, written off---Assessee had written off renovation as it shifted its head office to another place---Assessing Officer disallowed some portion out of such amount on the ground that assessee did not provide details of assets written off--Assessee contended that amount related to times which were fixed in nature and could not be removed from their position and the bank had to surrender them---First Appellate Authority upheld the same being reasonable and no solid evidence was produced---Validity---Assessee had not submitted any further argument except what was said earlier before First Appellate Authority---Appellate Tribunal declined to interfere with such order and addition on this point was upheld.

?

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

• S. 24(i)---Deductions not admissible---Commercialization fee paid to Development Authority---Fee paid to Development Authority was disallowed being inadmissible under S.24(i) of the Income Tax Ordinance, 1979 as it was penalty---Assessee submitted before First Appellate Authority that same was not a penalty but commercialization fee which was admissible---No evidence in support of the contention having been produced order of Assessing Officer was upheld---Appellate Tribunal found no reason to differ with the order of First Appellate Authority which was maintained.

Dr. Ikram-ul-Haq for Appellant (in I.T.As. Nos.6053/LB of 2004, 6030/LB and 6031/LB of 2003).

Javaid Iqbal Rana IAC, LTU and Dr. Ishtiaq Ahmad, DCIT for Respondent (in I.T.As. Nos.6053/LB of 2004, 6030/LB and 6031/LB of 2003).

Javaid Iqbal Rana IAC, LTU and Dr. Ishtiaq Ahmad, DCIT for Appellant (in I.T.As. Nos. 6641/LB, 43/LB and 44/LB of 2004).

Dr. Ikram-ul-Haq for Respondent (in I.T.As. Nos. 6641/LB, 43/LB and 44/LB of 2004).

Date of hearing: 24th September, 2005.

2006 P T D (Trib.) 1323

[Income-tax Appellate Tribunal Pakistan]

Before Khawaja Farooq Saeed, Chairperson and Mazhar Farooq Sheerazi, Accountant Member

I.T.As. Nos.1933/LB to 1935/LB, 2103/LB, 2096/LB and 2104/LB of 1996, decided on 9th February, 2005.

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

----S. 154---Service of notice---Postal certificate---Presumption---Rebuttal---Appellate Tribunal directed for re-calling the order and the case was fixed for regular hearing on the ground that assessee had not received the notices and the service being under postal certificate was held to be a presumption rebutable.

2003 PTD 1516; 1994 SCMR 2233 and 1999 PTD 1358 rel.

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

----Ss. 59(1)(4), 55-A, 64 & 65---Finance Act (1 of 1995), Preamble---Self-assessment---Assessment years 1990-91 to 1992-93---No order in writing was passed under S.59(1) of the Income Tax Ordinance, 1979---Re-opening of assessment under S.65 of the Income Tax Ordinance, 1979---Department contended that order had been deemed to be an order even prior to assessment year 1995-96---Validity---Provision that had held the acknowledgement issued under S.55-A of the Income Tax Ordinance, 1979 as a deemed order was inserted by Finance Act, 1995---Prior to such amendment the requirement of determination of the income through an order was a part of law---Assessment years 1990-91 to 1992-93 in which no assessment should had been made after the expiry of the next financial year; meaning thereby that on 30th of June, 1993, the same had become barred by time---Pending return could not be assessed subsequent to the said date---Such amendment had made such lapse to be as order but the same could not be made applicable on these returns---No question, of an assessment order would arise as the return pending on the next 30th of June had become time-barred---Provision of S.59(4) was similar to S.64 of the Income Tax Ordinance, 1979; in the said section no return could be finalized after two years from the end of the assessment year in which the return had been filed---Return had become barred by time under S.59(4) of the Income Tax Ordinance, 1979 and unless the legislature had so mentioned in unequivocal terms that all such time-barred returns shall also be considered as an assessment, the assessment in hand could not be given any life--Proceedings initiated were illegal and the same were cancelled by the Appellate Tribunal.

1993 SCMR 1108 = 1993 PTD 1108 ref.

2003 PTD 1530 rel.

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

----S. 65(1)(c)---Additional assessment---Assessment years 1990-91 to 1992-93---Acknowledgement slip was not to be treated as an assessment order---Assessing Officer was required to assess and accept the declared income through a formal order---In absence of such an order, the provision of S.65(1)(c) of the Income Tax Ordinance, 1979 did not come to effect---Requirement therein was to assess by an order in writing the total income of the assessee on the basis of return filed by him.

?

2003 PTD 1530 rel.

Akram Tahir, D.R. for Appellant.

Ajmal Khan for Respondent.

Date of hearing: 14th December, 2004.

2006 P T D (Trib.) 1338

[Income-tax Appellate Tribunal Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member and Shaheen Iqbal, Accountant Member

I.T.A. No.1611/KB of 2003, decided on 12th March, 2005.

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

----S. 22 & Third Sched., R.7(b)---Income from business or profession---Profit on sale of car---Taxation---Assessee contended in respect of addition made on account of sale of car that car was declared in the wealth statement and was disposed of and its profit was declared as exempt receipt---Profit earned on such sale of car did not fall within the ambit of S.22 of the Income Tax Ordinance, 1979 as profit earned from adventure in the nature of trade nor R.7(b) of the Third Schedule of the Income Tax Ordinance, 1979 for the reason that it was a solitary sale of car and there was no finding that the assessee was dealing in trading of vehicles or any frequent purchase and sale of cars---Addition had rightly been deleted by the First Appellate Authority---Validity---Appellate Tribunal held that addition made in respect of sale of car had rightly been deleted as the Assessing Officer had made the addition without any basis.

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

----S. 19(1)(b)---Income from house property---Estimation of Annual Letting Value---Addition---Assessee contended that property was inherited and fully occupied by the tenants---Case for enhancement of rent was pending in the Courts and all tenants were disputing their rent in the Courts---No justification existed for estimating Annual Letting Value---First Appellate Authority had rightly directed to accept the Annual Letting Value on the basis of actual rent---Validity---Directions of First Appellate Authority regarding Annual Letting Value of inherited property were reasonable, as the assessee had explained that property was an inherited property and fully occupied by the tenants, but the Assessing Officer had failed to make any inquiry in this regard and to confirm from the tenants of the property regarding rent---First Appellate Authority had given full justification for the treatment meted out by him---Appellate Tribunal upheld the order of First Appellate Authority.

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

----S. 62---Assessment of production of accounts, evidence etc.---Gross profit rate---Income from dairy farm and sale of milk---First Appellate Authority reduced the applied cross profit rate from 33% to 15%, as the Assessing Officer had applied gross profit rate at 33% on the basis of parallel case which in fact was not parallel and had not been confronted to the assessee and the First Appellate Authority had reduced the applied gross profit rate in view of the fact that the history of assessee's own case was of 15% gross profit rate.

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

---S. 62---Assessment on production of accounts, evidence etc.---

Income from dairy farm and sale of milk---Quantity of milk---Quantity of milking yield had been reduced as per history of the case by the First Appellate Authority keeping in view the certificate issued by the Dairy Farms Association confirming the milking yield at 8-kg.

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

----S. 13(1)(aa)---Unexplained investment etc., deemed to be income---Value of cattle---Addition was made on the basis of conjectures and surmises as the value of cattle had been determined by the Assessing Officer without any basis and the Assessing Officer rejected the explanation of the assessee regarding the value and the number of animals---First Appellate Authority had rightly deleted the addition keeping in view all these factors.

Ms. Farzana Jabeen, D.R. for Appellant.

Salman Pasha for Respondent.

Date of hearing: 12th February, 2005.

2006 P T D (Trib.) 1351

[Income-tax Appellate Tribunal Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member and Shaheen Iqbal, Accountant Member

I.T.A. No.1489/KB of 2003, decided on 9th March, 2005.

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

----S. 62-Assessment of production of accounts, evidence etc.---Gross profit rate---Income from dyeing and bleaching business---First Appellate Authority directed Assessing Officer to accept the trading results of the assessee and the gross profit rate 12.54% as shown by the assessee---Department contended that no credence could be attached to the, declared version of the assessee---Assessing Officer had rightly rejected the declared gross profit rate of 10.54% and applied gross profit rate at 18% but the First Appellate Authority without any justification, had directed to accept the declared version---Validity---First Appellate Authority directed to accept the declared gross profit rate after giving due consideration to the facts of the case and specifically for the reason that the Assessing Officer had not pinpointed any specific defect of un­verifiability in the accounts and further sales had been accepted as declared---Increase in turnover had not been taken into account while application of history of the case which was very important factor in respect of gross profit rate which had been ignored by the Taxation Officer---First Appellate Authority had rightly directed to accept the declared gross profit rate and order of First Appellate Authority was upheld by the Appellate Tribunal.

Ms. Farzana Jabeen, D.R. Appellant.

Abdul Raheem Lakhani for Respondent.

Date of hearing: 17th February, 2005.

2006 P T D (Trib.) 1356

[Income-tax Appellate Tribunal Pakistan]

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

I.T.A. No.1296/KB of 2003, decided on 2nd November, 2004.

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

----S.107-AA---Tax credit for investment---Assessee claimed tax credit for investment on plant and machinery---Assessing Officer noted that cost of plant and machinery purchased prior to July, 2000 was also included in the claim for tax credit for investment---Assessing Officer, after deducting amount of purchases prior to July, 2000, allowed tax credit for investment at 10% of the balance amount---Assessee contended that time limit provided in S.107AA of the Income Tax Ordinance, 1979 related to installation period viz. between 1st July, 2000 to 30th June, 2002 and not to period of investment---Such fact had nothing to do with the purchase of machinery---Machinery, if purchased before June, 2000 to July, 2002 (time limit) even then the assessee shall be entitled to tax credit under S.107AA of the Income Tax Ordinance, 1979, if it was installed within the prescribed period viz. between 1st July, 2000 to 30th June, 2002---Validity---Period of installation of machinery was immaterial and left to the assessee to install at any time---Contrary to this for earlier period the tax credit investment in purchase of machinery had been made mandatory within the period prescribed under S.107AA of the Income Tax Ordinance, 1979---Words "where no tax payable in respect of assessment year relevant to the income year in which such plant or machinery was installed" were very much clear to hold that installation period was not restricted but it was investment, for which a specific period had been provided under S. 107AA of the Income Tax Ordinance, 1979---First Appellate Authority was not justified to allow tax credit as the plant and machinery had been purchased prior to stipulated period viz. between 1st July, 2000 to 30th June, 2002.

I.T.A. No. 242/KB of 1981-82 and 1986 PTD 105 ref

1986 PTD (Trib.) 105 and 1993 PTD (Trib.) 695 irrelevant.

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

----Ss. 107-AA & 107---Tax credit for investment---Key terms in Ss.107 & 107AA of the Income Tax Ordinance, 1979 are "an amount invested in purchase of plant and machinery" and the time period for installation, are left open to facilitate the assessee to claim credit in the year the machinery is installed and also to carry it forward, if the whole claim is not adjusted against the tax demand in that particular year.

PLD 1977 SC 164 and PLD 1988 SC 534 rel.

Gohar Ali, D.R. for Appellant.

Salman Pasha for Respondent.

Date of hearing: 20th July, 2004.

2006 P T D (Trib.) 1368

[Income-tax Appellate Tribunal Pakistan]

Before S. Hasan Imam, Judicial Member and Agha Kafeel Barik, Accountant Member

I.T.A. No.699/KB of 2003, decided on 29th March, 2005.

Income Tax Ordinance (XXXI of 1979)---

----Second Sched., Part-I, Cl. (86)---C.B.R. Circular No.2 of 1996, dated 18-2-1996---Exemption---Transfer of an amount .by ,College Division to the assessee Foundation---Exemption---Validity---Clause (86) of Part-I of the Second Sched. of the Income Tax Ordinance, 1979 was restricted to any income of any University established solely for educational purposes and did not permit transfer of amount to any other institution whoever it may be---Transfer of amount by College Division of the assessee's Foundation to Foundation out of accumulated funds for the benefit of welfare activities undertaken by the Foundation, could not be allowed exemption, besides, no details had been provided regarding the activities of the Foundation---Assessing Officer was justified to conclude that welfare activities undertaken by the Foundation, if any, did not fall within the ambit of Cl. (86) of Part-I of the Second Schedule of the Income Tax Ordinance, 1979 for the reason that the Foundation was not enjoying exemption under Cl. (86) of Part-I of the Second Schedule of the Income Tax Ordinance, 1979---Assessee foundation had failed to furnish requisite details reflecting the way of transfer so as to determine whether it was a gift/donation/contribution/award or loan---Clause (86) of Part-I of the Second Schedule of the Income Tax Ordinance, 1979 restricted the use of profits and accumulated funds for the education and for the development of education generating profit and not for use of other institution involved in business having profit motive, as such the facts would be that advance had been made to a sister organization---No independent confirmation was available from the other party with whom transaction had been taken place---Was not ascertainable that such advance had been made in the course of actual carrying out a primary purpose of the Foundation---First Appellate Authority was not justified to hold that rejection of claim of exemption was not in line with the provision of law reading with Circular No.2 of 1996, dated 18-2-1996---Order of First Appellate Authority was vacated by the Appellate Tribunal, whereby the treatment meted out by the Assessing Officer was restored.

Riaz Ahmed, D.R. for Appellant.

Muhammad Arshad, A.C.A. for Respondent.

Date of hearing: 22nd March, 2005:

2006 P T D (Trib.) 1373

[Income-tax Appellate Tribunal Pakistan]

Before Khawaja Farooq Saeed, Chairperson

I.T.A. No.1471/LB of 2005, decided on 9th June, 2005.

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

----Ss. 59-D & 13(1)(aa)---C.B.R. Circular No. 7 of 1997, dated 21-7-1997---Income Tax Rules, 1982, Part-IIA---Tax on undisclosed income---Assessing Officer did not accept the declaration for the reason that the tax fell short---Addition made was confirmed by the First Appellate Authority---Validity---Assessing Officer at best could make the addition up to the amount which was not covered within the tax paid by the assessee rather Assessing Officer should have created a demand of the balance amount and should have charged additional tax for delay---Appellate Tribunal directed for acceptance of the declaration under S.59-D of the Income Tax Ordinance, 1979 subject to payment of the balance tax from the, principal amount and/or additional tax for delay in payment as per law.

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

----S.59-D---Tax on undisclosed income---Declaration of asset on its depreciated value---Validity---Declaration shall be of the total investment and not of the depreciated value.

Naeem Munawar, A.R. for Appellant.

M. Aslam Bhatti, D.R. for Respondent.

Date of hearing: 9th June, 2005.

2006 P T D (Trib.) 1377

[Income-tax Appellate Tribunal Pakistan]

Before S. Hasan Imam, Judicial Member and Agha Kafeel Barik, Accountant Member

I.T.As. Nos. 1857/KB of 2001, 2024/KB to 2026/KB and 2091/KB of 2002, decided on 15th April, 2005.

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

----Ss. 14(2), 62 & Second Sched., Part-I, Cls. (79A) & (79B)---Finance Act (II of 1994), Preamble---Income Tax (Amendment) Ordinance (VII of 1995), Preamble---Income Tax (Fourth Amendment) Ordinance (XLVIII of 1995), Preamble---S.R.O. 796(I)/87, dated 4-10-1987---S.R.O. 603(I)/89, dated 6-6-1989---S.R.O. 745(I)/89, dated 11-7-1989---C.B.R. Letter C. No.1 (33) E&IC/97, dated 15-5-1999---Exemption---Income from WAPDA Bonds---Assessee, a banking company---First Appellate Authority upheld the treatment of Assessing Officer on the issues of not exempting the income earned from WAPDA Bonds--- Validity---In absence of any amendment in S. 14 of the Income Tax Ordinance, 1979 in terms of S.R.O. 745(I)/89, dated 11-7-1989 and because of intact provision of clauses (79A) and (79B) of Part-I of the Second Schedule of the Income Tax Ordinance, 1979, S.R.O. 745(I)/89, dated 11-7-1989 lost its legal veracity, as such the clarification from the Central Board of Revenue "that the income from WAPDA Bonds were exempt under clauses (79A) and (79B) of Part-I of the Second Schedule of the Income Tax Ordinance, 1979 only if such bonds were held by individuals and companies other than banks and insurance companies" held the field besides being absolute and legal---Assessing authority rightly assessed the income of the assessee being a Banking Company following clarification and provisions of S.14(2) of the Income Tax Ordinance, 1979 and clauses (79A) and (79B) of Part-I of the Second Schedule of the Income Tax Ordinance, 1979.

I.T.A. No. 193/KB of 1998-99 dated 19-7-1999 rel.

AIR 1979 SC 621 distinguished.

AIR 1986 SC 806; AIR 1978 SC 621; NLR 2000 Tax 126 and PLD 1991 SC 546 ref.

1997 PTD (Trib.) 13 irrelevant.

(b) Income-tax---

----Promissory estoppel---No promissory estoppel against the legislature in the exercise of its legislative functions nor can be Government or public authority debarred by promissory estoppel from enforcing statutory prohibition.

AIR 1978 SC 621 rel.

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

----S.14(2)---S. R.0.745(I)/89, dated 11-7-1989---Exemption--Promissory estoppel--Promise brought up through S.R.O.745(1)/89, dated 11-7-1989, is contrary to existing law and outside the authority and power of the Government and as such promissory estoppel by the Government or public authority would not override and defeat the statutory provisions.

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

----S. 14(2) & Second Sched., Part-I, Cls. (79A)(79B)---S.R.O. 745(I)/89, dated 11-7-1989---Exemption---S.R.O. 745(I)/89, dated 11-7-1989 is not only contrary to law, but the amendments have also not been brought up in clauses (79A) & (79B) of Part-I of the Second Schedule of the Income Tax Ordinance, 1979 referring exception to Banking Companies in terms of the said S.R.O. as such the exemption already granted to individual and corporate bodies excluding Banking Companies remained intact, having overall binding effect.

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

----S. 14(2) & Second Sched., Part-I, Cls. (79A) & (79B)---S.R.O. 745(I)/89, dated 11-7-1989---Exemption---S.R.O. 745(I)/89, dated 11-7-1989 is contrary to statutory law and as such promissory estoppel against provisions of any legislation, even if under the authority of the Government, to impose new obligations or to withdraw existing concession, will lose its veracity.

(f) Income-tax---

----Promissory estoppel---Doctrine of promissory estoppel cannot be invoked in favour of the assessee being contrary to legislative obligation and if allowed, it would nullify the effect of legislative provision.

PLD 1991 SC 546 rel.

Khaliqur Rehman, FCA and Fateh Ali Vellani for Appellant.

Dr. Farrukh Ansari, D.R. (LTU), Dr. M. Ali Khan, D.R. (LTU) and Muhammad Farid for Respondent.

Date of hearing :5th March, 2005.

2006 P T D (Trib.) 1481

[Income-tax Appellate Tribunal Pakistan]

Before Khawaja Farooq Saeed, Chairperson

I.T.As. Nos.5660/LB of 2003 and 2130/LB of 2005, decided on 5th January, 2006.

(a) Income-tax---

----Add back---Capital expenditure---Purchase of a telephone set was an expenditure of capital nature; assessee at best could be entitled to its depreciation and not the total amount. 1993 PTD (Trib.) 1222 ref.

(b) Income-tax---

----Add back---Telephone expenditure---Appellate Tribunal' allowed 75% of the claimed expenditure as the same was being used by the assessee as well as his family.

(c) Income-tax---

----Add back---Depreciation of car---If assessee during visits from residence to courts dropped or picked up his children from school/colleges or some time in the evening the same comes in personal use---Entitlement of depreciation should not have been reduced to 50%---Appellate Tribunal directed that claim should be allowed to 75% while rest shall be added by the Assessing Officer for calculating income.

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

----S. 12(18)---Income deemed to accrue or arise in Pakistan---Family cash pool---Purchase of car out of cash received from the sons under the head family cash pool---Addition---Validity---Assessee neither claimed the same as gift nor it was one time transfer; it was a contribution in the family expenses by members of the same family against facilities they were enjoying under the supervisions and blessings of the head of the family---Arrangement in hand i.e. family pool and contribution therein in joint family system was neither a gift nor donation, advance or loan---Provision of S.12(18) of the Income Tax Ordinance, 1979 was inserted to curb the misuse of the back dated cash loans or gifts; it was not a tool for charging tax in substitution of the main charging provisions but was in the form of check and not `charge' which should only be used where the tax collector was satisfied that the provision was applicable on all fours---Addition made by the Assessing Officer was deleted by the Appellate Tribunal. 1995 PTD (Trib.) 1176 ref.

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

----S. 12(18)---Income deemed to accrue or arise in Pakistan---Unless the assessee itself claims some amount to be either a loan, a gift or an advance the Assessing Officer could not further proceed to invoke the provisions of S.12(18) of the Income Tax Ordinance, 1979. 1995 PTD (Trib.) 1176 rel.

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

---S.? 12(18)---Income deemed to accrue or arise in Pakistan---Application---Section 12(18) Income Tax Ordinance, 1979 is a deemed income provision which can only be applied in the situations which are beyond any doubt.

(g) Word and phrases---

----Gift---`Gift' in tax laws is a payment made without conditions, for detached and disinterested generosity, out of affection, respect, charity or like impulses and not from the restraining force or a legal duty or from the incentive of anticipated benefits of an economic nature.

?Sh. Zia Ullah for Appellant (in I.T.A. No.5660/LB of 2003).

Mehboob Alam, D.R. for Respondent (in I.T.A. No.5660/LB of 2003).

Mehboob Alam, D.R. for Appellant (in I.T.A. No.2130 of 2005).

?Sh. Zia Ullah for Respondent (in I.T.A. No.2130 of 2005).

Date of hearing: 16th December, 2005.

2006 P T D (Trib.) 1515

[Income-tax Appellate Tribunal Pakistan]

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

I.T.As. Nos. 506/LB and 1233/LB of 2005, decided on 7th September, 2005.

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

----S.129---Appeal to Appellate Additional Commissioner---Setting aside of assessment instead of annulment---Assessee contended that First Appellate Authority was not justified to remand the case for de novo assessment after having observed that the assessee had some force in its arguments and assessment should have been annulled rather than providing the department another opportunity to fill in the lacuna---Validity---First Appellate Authority decided one ground in favour of the Revenue whereby he upheld the re-opening of the case by the Assessing Authority, however, rest of the grounds were decided in favour of the assessee but still proceeded to set aside the case for de novo consideration---While deciding one ground First Appellate Authority did not elaborate on the issue and decided the same with the observation that on the basis of information received from Sales Tax Department regarding higher quantum of purchases than those declared by the assessee, the proceedings were justified---Finding given while discussing other grounds with the observation that "the grounds had some force" were contradictory to the findings given at the time of disposing of said one ground---First Appellate Authority travelled beyond confines of law while setting aside the case for the reason that while giving findings on other grounds in favour of the assessee---First Appellate Authority almost accepted the contentions put forward by the assessee in toto and there was no justification for remand of the case.

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

----Ss. 122(1), 120, 2(13), 2(65)---Amendment of assessments---Re­opening of assessment by Deputy Commissioner of Income Tax---Assessee contended that since the assessment had been amended by the Deputy Commissioner of Income Tax and neither the Commissioner nor the Taxation Officer as envisaged under the law, the same had been passed without jurisdiction and liable to be annulled---Validity---Amended order under 5.122 of the Income Tax Ordinance, 2001 had been passed by the Deputy Commissioner of Income Tax, which was an authority who did not figure anywhere under the Income Tax Ordinance, 2001---Amended order should have been annulled rather than sending back to the Assessing Officer for de novo proceedings---Appellate Tribunal vacated the order passed by the First Appellate Authority and annulled the amended assessment made by the Deputy Commissioner of Income Tax being without jurisdiction.

199 PTD (Trio.) 4026 ref.

Tariq Ahsan, I.T.P. for Appellant.

Rana Muhammad Luqman, D.R. for Respondent.

Date of hearing: 7th September, 2005.

2006 P T D (Trib.) 1534

[Income-tax Appellate Tribunal Pakistan]

Before Khawaja Farooq Saeed, Chairperson and Shaheen Iqbal, Accountant Member

I.T.As. Nos. 427(IB) of 2005, 721(IB), 722(IB), 723(IB), 724(IB) and 725(IB) of 2004, decided on 9th April, 2005.

Income Tax Ordinance (XXXI of 1979)---

----Ss. 5(1)(c), (2)(3),(4) & 66A---Jurisdiction of Income Tax Authorities---Transfer of file from Sheikhupura to Mianwali without getting NOC from Central Board of Revenue and cancellation of assessment by the Inspecting Additional Commissioner of Sargodha---Validity---Department could not prove as to whether the assessee resided in that area of jurisdiction or had any business therein and as to how the file was transferred without getting NOC from Central Board of Revenue, the competent authority for transfer of file from Sheikhupura to Mianwali---Later confirmation of transfer of jurisdiction by the Central Board of Revenue did not remove the legal flaw in jurisdiction---Legal procedure for assigning jurisdiction in every case had been prescribed and the same could be shifted by the Central Board of Revenue for the reasons assigned therein---Two Assessing Officers of two different Regions could not interchange jurisdiction of the cases by themselves---Central Board of Revenue had approved transfer of the case on 26-4-2003 and any action taken by Assessing Officer of Mianwali or .Inspecting Additional Commissioner of Sargodha prior to the same was violative of the legal provisions---Not only that the exercise of territorial jurisdiction by the Inspecting Additional Commissioner Sargodha was not legally correct but his holding the earlier order as `erroneous' was also not based upon the settled definition of the said word---Said term had never been allowed to be applied on the basis of poor quality of order or the reasons of possibilities of better order after cancellation---Since order had been found to be as without jurisdiction, no further discussion or dilation was required---Both the orders of Assessing Officer and Inspecting Additional Commissioner were cancelled by the Appellate Tribunal being without jurisdiction---Orders having been passed prior to the assignment of jurisdiction by the Central Board of Revenue were also held to be illegal and were annulled.

1996 SCMR 856; 2003 PTD (Trib.) 2176; 2004 PTD 330; 2005 PTD (Trib.) 344; 2001 PTD 3810; 1996 PTD (Trib.) 750; PLD 1988 Kar. 587 = 1988 PTD 723; 2002 PTD (Trib.) 99; (1977) 109 ITR 229; 1000 PCTLR 1191 and 1987 PTD (Trib.) 424 ref.

Javed Iqbal and Sirajuddin Khalid for Appellant.

Muhammad Ali Shah, D.R. for Respondent.

Date of hearing: 9th April, 2005.

2006 P T D (Trib.) 1571

[Income-tax Appellate Tribunal Pakistan]

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

M.As. (Cond.) Nos. 393/LB to 397/LB, M.As. Nos. 398/LB to 402/LB of 2005, decided on 24th September, 2005.

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

----Ss. 134(4) & 156--Appeal to Appellate Tribunal---Condonation of delay---Filing of miscellaneous applications for condonation of delay after the main appeals/issues had been disposed of---Validity---No application seeking condonation of delay was submitted nor any affidavit in support thereof was filed at the time of hearing of original appeals---Miscellaneous applications seeking condonation of delay were filed after the receipt of Appellate Tribunal's order whereby appeals were dismissed because of late filing of appeals---After having rejectee the appeals, the Appellate Tribunal as an appellate authority had become functus officio, and could not re-examine the issue--Filing of miscellaneous applications for condonation of delay after the main appeals/issues had been disposed of was deprecated.

1981 SCMR 536 and 1991 PTD,1056 rel.

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

----Ss. 134(4) & 156---Appeal to Appellate Tribunal---Condonation of delay---Filing of appeal through registered post---Effect---Date on which appeal papers were received by the Registrar/Assistant Registrar either through post or otherwise, would be considered the actual date of filing of appeal---Miscellaneous applications seeking condonation of delay could not be entertained after the main appeals had already been finalized---Even otherwise as per law the appellant was bound to explain delay of each day at the time of hearing of original appeals---Posting of appeals within time was of no consequence, because the law did not permit the Registrar/Assistant Registrar to consider the appeals received after the expiry of stipulated time that the same had been instituted on the day when it was posted.

Rana Muhammad Luqman, D.R. for Appellant.

Abdul Rehman Mir, F.C.A. for Respondent:

Date of hearing: 24th September, 2005.

2006 P T D (Trib.) 1586

[Income-tax Appellate Tribunal Pakistan]

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

I.T.As. Nos.456/KB and 689/KB of 2003, decided on 30th January, 2004.

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

----Ss. 107AA, 107 & 156---Finance Ordinance (XXI of 2000), Preamble---Tax credit for investment---Assessing Officer disallowed the tax credit claimed under S.107AA of the Income Tax Ordinance, 1979 on the ground that unlike 5.107 of the Income Tax Ordinance, 1979 there was no explanation available under S.107AA of the Income Tax Ordinance, 1979 whereby tax credit could not be extended to lease assets---First Appellate Authority allowed such tax credit---Department moved application under S.156 of the Income Tax Ordinance, 1979 before First Appellate Authority that unlike 5.107 of the Income Tax Ordinance, 1979 no explanation was available for S.107AA of the Income Tax Ordinance, 1979 whereby the benefit could be given for lease assets---First Appellate Authority revised his order under S.156 of the Income Tax Ordinance, 1979, vacated its earlier order, and consequently restored the order of the Assessing Officer---Validity---In substance the entire arrangement was an investment, which the lease finance was only a methodology to acquire the assets---No distinction could be drawn between an asset, which was acquired through direct purchase or acquired through lease finance---For the purposes of S.107AA of the Income Tax Ordinance, 1979 no such distinction could be drawn---Order of First Appellate Authority allowing the credit under S.107AA of the Income Tax Ordinance, 1979 in respect of leased assets was absolute, as such same did not warrant interference---Departmental appeal and subsequent order of First Appellate Authority invoking S.156 of the Income Tax Ordinance, 1979 observing that benefit of tax credit under S.107AA was available only to those industrial undertaking which "invested and owned that plant and machinery" was annulled by the Appellate Tribunal---Appeal of assessee was allowed on the issue and departmental appeal lost its effect whereby same was dismissed being infructuous.

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

----Ss. 107, Explan. & 107AA---Tax credit for replacement, balancing and modernization of machinery or plant---Tax credit for investment---Provisions of S.107 of the Income Tax Ordinance, 1979 are analogous to S.107AA of the Income Tax Ordinance, 1979; both sections deal with the availability' of tax credit pertaining to investment in plant and machinery---In explanation to S.107 of the Income Tax Ordinance, 1979 the terms "amount" and "purchases of plant and machinery" have been defined in the. explanation thereto so as to extend the benefit to . investments made in machinery purchased through lease finance---Section 107AA of the Income Tax Ordinance, 1979 also uses the expressions "amount" and purchase of plant and machinery---Definition given in the Explanation to S.107 of the Income Tax Ordinance, 1979 is to be extended to the same terms used in S.107AA of the Income Tax Ordinance, 1979; in other words, Explanation to S.107 of the Income Tax Ordinance, 1979 will also fully apply to S.107AA of the Income Tax Ordinance, 1979---Terms "amount" and "purchase of plant and machinery" used in S.107AA of the Income Tax Ordinance, 1979 will also include plant and machinery acquired through lease finance.

1990 PTD (Trib.) 463 rel.

(c) Interpretation of statutes---

----Para materia---Under the principles of para materia, words in two similar statutes or provisions have to be given similar/analogous connotation.

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

----Ss. 107-AA & 107---Tax credit for investment---Key words in S.107-AA of the Income Tax ordinance, 1979 are "amount" and "purchase of plant and machinery", which are the same as in S.107 of the Income Tax Ordinance, 1979----Meanings in the two sections are to be interpreted para materia with each other; in other words, 5.107-AA of the Income Tax Ordinance, 1979 having same context as analogous to S.107 of the Income Tax Ordinance, 1979 is to be interpreted in para materia with 5.107 of the Income Tax Ordinance, 1979.

PLD 1966 Kar. 518; PLD 1966 Dacca 54; PLD 1979 SC (AJ&K) 74; PLD 1984 Kar. 472 and PLD 1989 Kar. 299 rel.

(e) Interpretation of statutes---

----Words defined in the Act are to be given same definition.

PLD 1974 Kar. 417 rel.

(f) Interpretation of statutes---

----Principles embodied in one section may reasonably be resorted to in construing any other similar provision of the same statutes. [p. 1594] F

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

---Ss. 107-AA & 107---Tax credit for investment---Provisions embodied in S.107 of the Income Tax Ordinance, 1979, whereby tax credit has been made available to purchase of assets through lease finance,, are also to be extended to S.107-AA of the Income Tax Ordinance, 1979, considering that both provisions are analogous and use same expression/terminology.

PLD 1980 SC 295; 1971 SCMR 657; PLD 1996 SC 324 and Mohammad Yahaya v. Messrs Valika Properties CP No.490 of 2002 rel.

(h) Interpretation of statutes---

----Explanation to section is only a clarification, calculated to remove doubts and not a substantive provision.

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

----Ss. 107-AA & 107---Tax credit for investment---Terms "amount" and "purchase of plant and machinery" had been defined through an explanation to 5.107 of the Income Tax Ordinance, 1979 which was a clarification whereby the legislature, in its wisdom, had chosen to give such words the connotation/construction in the explanation and remove doubts---Explanation was in relation to the specific words---Same words having been repeated in S.107-AA of the Income Tax Ordinance, 1979 in context with being very similar and analogous to 5.107 of the Income Tax Ordinance, 1979 were to be given the same meaning---Explanation was only classificatory and not a substantive provision and only removed doubts.

1981 PLC 566; PLD 1981 SC 1 and AIR 1991 Born. 196 and 199 rel.

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

----S. 107-AA---Tax credit for investment---Assets acquired through lease and buy back arrangements were, in substance, arrangements to acquire the property and the arrangement of lease rentals was just sham transaction---Real substance and not the form of the transaction had to be appreciated.

PLD 1966 Lahore 244; (1951) 20 ITR 9 (Pat.) and Tax Forum, Feb. 2002 ITAT rel.

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

----S. 107-AA---Tax credit for investment---Section 107-AA of the Income Tax Ordinance, 1979 did not exclude leased assets from its ambit.

(1) Interpretation of statutes---

----Whatever is not specifically prohibited/excluded shall be deemed to be permitted/included.

2000 YLR 2527 rel.

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

----Ss. 107-AA & 107---Tax credit for investment---Objective behind the enactment of S.107AA of the Income Tax Ordinance, 1979---Intention behind the introduction of new section was to encourage the new investments and modernization by additional plant and equipments so as to encourage "Rapid Industrial Development"---Same was another favourable step forward with a view to introduce a provision to further facilitate tax credit, where investment in plant and machinery was made in furtherance to BMR either by balancing or modernization and replacement of machinery and plant---Both the objectives and contexts of S.107 of the Income Tax Ordinance, 1979 and S.107AA of the Income Tax Ordinance, 1979 conform and match with each other.

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

----Ss. 107-AA & 107---Tax credit for investment---Departmental point of view that S.107 & S.107AA of the Income Tax Ordinance, 1979 are not "one and the same" either if they were not para materia was discarded by the Appellate Tribunal. [p. 1596] 0

I.T.A. No. 2053/KB of 2002 rel.

(o) Interpretation of statues---

----Word defined in one statute used in similar connection in later statute should be presumed to carry the same meaning.

PLD 1966 SC 451 rel.

(p) Income Tax Ordinance (XXXI of 1979)

25(c)-Amounts subsequently recovered in respect of deductions, etc.---Excise duty payable---Deferred liabilities on account of excise duty was shown being trading liabilities of more than 3 years---Assessee explained that this issue had been pending before Supreme Court and requested to keep pending till final decision---Assessing Officer refused the same on the ground that this was a trading liability, the expense of which had been claimed in earlier years and the department had allowed this expenses, since then expense had not been paid till date and the time limit of three years had expired and whole amount was added under S.25(c) of the Income Tax Ordinance, 1979---Validity---First Appellate Authority deleted such addition by observing that there was no justification making addition because the Government had filed an appeal on the issue before the Supreme Court and the decision was awaited---Deletion was upheld by the Appellate Tribunal.

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

?----S. 24(ft)---Deductions not admissible---Cash payments---Addition was made on the ground that total amount of expenses incurred in cash pertaining to entertainment, vehicle running, printing and stationery attracts the provisions of S.24(ft) of the Income Tax Ordinance, 1979---Validity---First Appellate Authority deleted such addition by observing that most of the expenses incurred were below statutory exemption limit, therefore, did not come within the ambit of S.24(ft) of the Income Tax Ordinance, 1979---Deletion was confirmed by the Appellate Tribunal.

Aijaz Asad Rasool, D.R. for Appellant (in I.T.A. No.456/KB of 2003).

Dr. Muhammad Farough Naseem and Mushtaq Ahmed Vohra, FCA for Respondent (in I.T.A. No.456/KB of 2003).

Dr. Muhammad Farough Naseem and Mushtaq Ahmed Vohra, FCA for Appellant (in I.T.A. No.689/KB of 2003).

Aijaz Asad Rasool, D.R. for Respondent (in I.T.A. No.689/KB of 2003).

Date of hearing: 20th January, 2004.

2006 P T D (Trib.) 1636

[Income-tax Appellate Tribunal Pakistan]

Before Ehsan-ur-Rehman, Judicial Member and Naseer Ahmad, Accountant

Member

M.As. Nos.795/LB and 796/LB of 2005, decided on 27th January, 2006. Income Tax

Ordinance (XLIX of 2001)---

----S. 131---Appeal---Restoration---Assessee submitted that non-appearance was due to inadvertent mistake in recording the date fixed in the diary of Authorized Representative, so he may not be allowed to be adversely affected and condemned unheard---Validity---Appellate Tribunal restored the appeal to its original position.

Sirajuddin Khalid for Appellant.

Muzammal Hussain, D.R. for Respondents.

Date of haring: 27th January, 2006.

2006 P T D (Trib.) 1665

[Income-tax Appellate Tribunal Pakistan]

Before Rasheed Ahmed Sheikh, Judicial Member and Javed Tahir Butt, Accountant Member

I.T.As. Nos. 260/LB, 562/LB, 1721/LB and 699/LB of 2003, decided on 16th April, 2005.

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

----S.62---Constitution of Pakistan (1973), Arts. 199(4A) & 254---Assessment on production of accounts, evidence etc.---Passing of assessment after expiry of six months from the date of passing the interim order by the High Court---Validity---Assessing Officer acted within his jurisdiction to formulate the assessment after expiry of six months from the date of passing the interim order---Article 199(4A) of the Constitution provided that period of six months would run in a case where proceedings taken or act done by any authority or person or purported to have been done was connected 'with assessment or collection of public revenue shall cease to have effect on the expiration of a period of six months following the day on which it was made unless the case was finally. decided or the interim order was withdrawn by the Court earlier---Objection, that Assessing Officer was debarred to pass the order after the expiry of six months from the date of passing the interim order by the High Court was overruled by the Appellate Tribunal reason being that the Assessing Officer was within the jurisdiction to proceed after six months to finalize the assessment.

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

----Ss.62 & 4(A)---Constitution of Pakistan (1973), Art.199---Assessment on production of accounts, evidence etc.---Assessment on the basis of Audit Report sub judice before High Court---Validity---Assessing Officer was not competent to rely upon the contents of the audit report for the purposes of formulating the assessment as the said report was sub judice before the High Court---Assessing Officer had either to wait for the decision of the High Court till the writ was disposed of---If the assessment was not hit by limitation, notice should have been given after examination of books of accounts by the Assessing Officer---Assessing Officer had acquired extra constitutional powers to make the assessment basing upon the audit report which was sub judice before the High Court---Entire superstructure of the assessment order revolved around the shortcomings pointed out by the auditor in the books of accounts examined by him---Such act of the Assessing Officer was not sustainable in law.

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

----Ss. 62 & 4(A)---Assessment on production of accounts, evidence etc.---Assessment---Assessing Officer had to form his independent opinion about the defects noted in the books of accounts but not by any other authority or agency or forum etc. until and unless so authorized in accordance with law.

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

----Ss.62(1) & 4(A)---Assessment on production of accounts, evidence etc.---Assessee had been confronted under S.62 of the Income Tax Ordinance, 1979 with the defects pointed out by the auditor in its verbatim and audit report had been made the basis for assessment which was sub judice before the High Court---Books of accounts were examined by the auditor and not by the Assessing Officer which was statutory requirement of law---Assessing Officer was directed by the Appellate Tribunal to accept the returned version on account of being non-adherence to statutory requirement of law.?

1999 PTD (Trib.) 382 rel.???????

(e) Income tax---

----Addition in workshop labour income (mechanical), workshop labour income (denting & painting) and miscellaneous income---Validity---Additions were not maintainable on account of two reasons: firstly, complete procedure as to how the car which was taken for repair in the premises was explained, first of all job card was prepared which gives complete identifying particulars of the party such as car number, model and the items which were to be repaired, cash memo/credit invoice was issued mentioning therein job card number, date, party's name and the amount to be received from the client was recorded, entire income was properly documented and supportive of material evidence and secondly higher appellate Courts had always deprecated making of round/ad hoc addition in account cases.

1976 PTD 119 and 1984 PTD 239 rel.

(f) Income tax---

----Profit and Loss expenses---Tele none expenses---Assessce, a company---Addition on account of personal use---Validity---Disallowance made against the expenses claimed was unwarranted---Company was an artificial juridical person and the directors were employees of the company which were being separately assessed---No addition could be made on account of involvement of personal element of the assessee ?company---Addition was deleted by the Appellate Tribunal.

(g) Income tax---

----Bonus---Disallowance of---Deletion of addition---First Appellate Authority observed that disallowance was made without discussing merits of the claim---Nothing had been brought on record wherefrom it could be deduced that element of un-verifiability of the claim was available---Assessing Officer had not bothered to mention that payment of bonus was not in accordance with treatment and condition of employment---Deletion of addition by the First Appellate Authority was maintained by the Appellate Tribunal in circumstances.

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

----S.62(1)---Assessment on production of accounts, evidence etc.---Assessing Officer could not unearth any substantial discrepancy whatsoever in the declared receipts as were required to be confronted in terms of proviso to S.62(I) of the Income Tax Ordinance, 1979.

(i) Income tax---

----Receipts---Addition on the basis of history---Validity---Assessee had discharged his onus probandi by adducing the material and evidence---Blame could not be fastened at its door by merely stating that the receipts were not fully verifiable or the assessee had a history of making addition---Appellate Tribunal directed the Assessing Officer to accept the declared receipt.

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

---Ss. 24(i) & 24(ff)---Deductions not admissible---Expenses claimed was added back by merely stating "under S.24(i) and 24(ff)"---No discussion had been made as to why and to what extent these provisions were attracted to the payments of salary---In the absence of giving any reason or making any discussion in that regard, the addition could not be made or maintained under cis. (i) and (ff) of the S.24 of the Income Tax Ordinance, 1979---Addition made was deleted by the Appellate Tribunal in circumstances.

Muhammad Ali Asghar Qazi, I.T.P. for Appellant.

Ahmad Rauf, Legal Advisor for Respondent.

2006 P T D (Trib.) 1691

[Income-tax Appellate Tribunal Pakistan]

Before Rasheed Ahmed Sheikh, Judicial Member

I.T.As. Nos. 3116/LB to 3118/LB of 2004, decided on 28th January, 2006.

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

----S.62(1)---Assessment on production of accounts, evidence etc.---Rejection of trading account---Assessee contended that not only the expenses debited to trading account but also the sales declared were subjected to verification---Besides higher gross profit rate had been conceded viz. generally applied in this line of business---No valid reason existed with the department to discard the declared trading version---Validity---Assessing Officer had kept in darkness while disbelieving the assessee's declared version---Nothing substantial whatsoever had been adduced to justify rejection of declared trading version---Although assessee had a history of rejection of its declared trading version nevertheless the fact remained that each year was a separate assessable entity that was why the "doctrine of res judicata" did not attract to the assessment proceedings---Assessment made for one assessment year had no binding effect on the assessment to be made in respect of subsequent assessment year unless it was proved that no substantial variance in the facts and circumstances existed in both the assessment years.

1994 PTD 174; 1991 PTD 678 and 1991 PTD 730 rel.

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

----S.62(1)---Assessment on production of accounts, evidence etc.---Rejection of trading account---Assessee contended that since the debit side as well as the credit side of the trading account were open to verification besides the entire sales were subjected to sales tax and there was no valid reason with the department to disbelieve the declared trading results---Such contention had been brushed aside by the Assessing Officer without referring to any infirmity despite the fact that books of accounts were examined by him---Validity---Complete list of parties to whom the sales were effected had been placed on record and entire sales were made to limited companies whose complete identifying particulars had also been mentioned in front of their names---Parties were also registered with the Sales Tax Department and their sales tax numbers had been recorded therein---Even Assessing Officer had not quantified proportion of unverifiable purchases and sales---Par excellence substantial improvement in sales as well as in gross profit rate could be exhibited in the years under appeal viz. the preceding assessment years, in such circumstance Courts always come at the assessee's rescue---Assessee's declared trading results were accepted by the Appellate Tribunal and was ordered accordingly.

1967 PTD 291; 1974 PTD 45; (1974) 29 Tax 161; 1978 PTD (Trib.) 16; 1985 PTD 896 and 1987 PTD (Trib.) 402 rel.

Saleem Abid, I.T.P. for Appellant.

Dr. Shahid Siddique Bhatti, D.R. for Respondent.

2006 P T D (Trib.) 1699

[Income-tax Appellate Tribunal Pakistan]

Before Rasheed Ahmed Sheikh, Judicial Member and Mukhtar Ahmad Gondal, Accountant Member

I..T.As. Nos. 4901/LB of 2004 and 2581/LB of 2005, decided on 26th November, 2005.

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

----S.62(1)---Assessment on production of accounts, evidence etc.---Setting aside of assessment for de novo consideration---Assessee contended that returned version merited acceptance, reason being provision of S.62(1) of the Income Tax Ordinance, 1979 were not adhered to---Question arose as to whether assessment should be set aside where in a case legal infirmity of non-issuance of statutory notice existed---Validity---Assessment was set aside with the direction to pinpoint the defects after careful examination of book of accounts in terms of S.62(1) of the Income Tax Ordinance, 1979---In fact appropriate course available with First Appellate Authority in such circumstances was to direct acceptance of returned version in its totality instead of resorting to set aside the assessment for de novo proceedings---Assessee's returned version merited acceptance and it was ordered accordingly by the Appellate Tribunal---Order of First Appellate Authority was vacated.

2005 PTD (Trib.) 1437 rel.

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

----S.80-D---Minimum tax on income of certain persons---Commission income---Assessee was aggrieved on account of charging turnover tax on gross turnover/distribution of products on behalf of principal company---Validity---Turnover tax under S.80D of the Income Tax Ordinance, 1979 was to be charged on the commission earned by the agent/distributor from the principal company as a part of its turnover---Assessing Officer was directed to charge the tax under S.80D of the Ordinance on the commission income earned by the assessee.

I.T.A. Nos.4469 and 4470/LB of 2002 rel.

Tipu Sultan, I.T.P. for Appellant.

Ghazanfar Hussain, D.R. for Respondent.

2006 P T D (Trib.) 1728

[Income-tax Appellate Tribunal Pakistan]

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

I.T.A. No.337/PB of 2005, decided on 30th July, 2005.

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

--S.39---Income Tax Ordinance (XXXI of 1979), S.30---Income fromother sources---Section 39 of the Income Tax Ordinance, 2001 was parallel to S.30 of the Income Tax Ordinance, 1979 and was a residual head of income but it was more elaborate to discuss certain new items which were to be charged under this head but subject to the limitation that it could be charged only when all the other heads of income as described in Income Tax Ordinance, 2001 were exhausted---Sub­sections (1) to (3) of S.39 of the Income Tax Ordinance, 2001 enumerated the heads which were to be subjected to action under S.39, while subsections (4) and (5) of S.39 of the Income Tax Ordinance, 2001 described that the amount received as loan advances, deposits or gift by a person in a tax year from another person (not being a banking company or financial institution) otherwise than by a cross-cheque drawn on a bank, or through a banking channel from a person holding national tax card shall be treated as income chargeable to tax under the head income from other source for the tax year in which it was received---Section 39(4) of the Income Tax Ordinance, 2001 excluded the advance payment for the sale of goods or supply of services, while S.39(5) of the Income Tax Ordinance, 2001 restricted the entire section not to be applied to any income received by a person in a tax year i.e. chargeable to tax under any other head of income or subject to tax under Ss. 5, 6 & 7 of the Income Tax Ordinance, 2001---Words "chargeable to tax under any other head of income" were of great significance---If the income was taxable under any head of income of the Income Tax Ordinance, 2001, then it should not be added under the deeming provision of law as contained in S.39 of the Income Tax Ordinance, 2001.

1992 PTD 1141; 1992 PTD (Trib.) 1599 and 1992 PTD 798 ref.

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

----Ss.177 & 124A---Audit---Tax year 2003---Selection of case for total audit---Assessee contended that selection of case for total audit was illegal which had been declared as such by the Federal Tax Ombudsman and the High Court---First Appellate Authority rejected assessee's plea on the ground that department had gone in appeal to Supreme Court and S.124A of the Income Tax Ordinance, 2001 had authorized the tax authority to modify the order---Validity---Order of rejection of assessee's plea by the First Appellate Authority for the reason that department had gone in appeal to Supreme Court was unjustified and not sustainable---Selection of the case for total audit had already been declared against the law by the High Court---Appellate Tribunal followed the same.

2005 PTD 11152 rel.

Shafi Jan for Appellant.

Yousaf Ghaffar, D.R. for Respondent.

2006 P T D (Trib.) 1738

[Income-tax Appellate Tribunal Pakistan]

Before S. Hasan Imam, Judicial Member and Agha Kafeel Barik, Accountant Member

I.T.As. Nos.31/KB, 32/KB, 3382/KB of 2004, 803/KB and 804/KB of 2003, decided on 14th October, 2004.

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

----First Sched., Part-IV, para. A, sub-para. (2B)---Super Tax---Exemption---Assessee being a professional firm, engaged exclusively in making of contract on behalf of other persons and giving them advice of commercial nature in connection with making of contracts, claimed exemption from charge of super tax---Department contended that contention of the assessee was not correct, as exemption from super tax was available, where registered firm was prohibited by any law or convention to form a company with limited liability---Validity---Super tax shall be payable by the assessee in respect of income, profits and gains derived by it from the exercise of a profession---Income of the assessee admittedly depended wholly on the professional qualification of its partners, who were not prevented by any law, convention, rules or regulations by the professional association to constitute themselves into a corporate body same should be registered as a company---Assessing Officer was justified to disallow the claim of exemption from payment of super tax---Conditions laid down to claim exemption from payment of super tax was not fulfilled by the assessee---Order of First Appellate Authority was vacated/annulled and that of Assessing Officer was maintained by the Appellate Tribunal.

(b) Income-tax---

----Prior history, bar of---Where relief has been allowed due to misinterpretation of law, it shall not debar the Appellate Tribunal from arriving at a proper legal conclusion at any time, deviating from the previous orders of the officers below---History created violating clear provisions of law, having no ambiguity was to be discarded.

(c) Income-tax---

----Disallowance of expenses---Assessee challenged setting aside order in respect of common disallowances made at the assessment stage---First Appellate Authority concluded that in spite of the fact that complete details had been furnished, the Assessing Officer made the additions without pointing out discrepancies or defects---Assessment orders revealed that general phrases had been used to disallow the claim, which was not proper besides being unjustified as admittedly complete details had been furnished by the assessee---Instead of scrutinizing the details, Appellate Tribunal directed the Assessing Officer to look into the matter afresh and to conclude the finding after confronting the assessee on each and every expense and also after going through the record maintained by the assessee.

Qazi Anwar Kamal, A.R. for Appellant (in I.T.As. Nos.31/KB, 32/KB and 3382/KB of 2004).

Ms. Shaista Kamal, D.R. for Respondent (in I.T.As. Nos.31/KB, 32/KB and 3382/KB of 2004).

Ms. Shaista Kamal, D.R. for Appellant (in I.T.As. Nos.803/KB and 804/KB of 2003).

Qazi Anwar Kamal, A.R. for Respondent (in I. T. As. Nos.803/KB and 804/KB of 2003).

2006 P T D (Trib.) 1768

[Income-tax Appellate Tribunal Pakistan]

Before Rasheed Ahmed Sheikh, Judicial Member and Javed Tahir Butt, Accountant Member

I.T.A. No.5727/LB of 2003, decided on 25th March, 2005.

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

----S. 221(1)---Income Tax Ordinance (XXXI of 1979), 5.156---Rectification of mistake---Subsection (1) of S.221 of the Income Tax Ordinance, 2001 squarely applies to the orders passed under the Income Tax Ordinance, 2001 and not under the repealed Income Tax Ordinance, 1919.

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

----S. 221(1)---Income Tax Ordinance (XXXI of 1979), 5.156---Rectification of mistake---Jurisdiction---Commissioner was not vested with the powers to amend/rectify any mistake apparent from the record where an order under the repealed Income Tax Ordinance, ,1979 was passed by the Deputy Commissioner of Income Tax or the Income Tax Panels.

(c) Income Tax Ordinance (XLIX of 2001)

---S. 221(1A)-Income A)---Income Tax Ordinance (XXXI of 1979), 5.156---Finance Act (I of 2003)„ Preamble---Rectification of mistake---By insertion of subsection (IA) of S.221 of the Income Tax Ordinance, 2001 on June, 17, 2003 it had been made abundantly clear that power to amend/rectify the order passed by the Deputy Commissioner of Income Tax or the Income Tax Panels was not available in the Income Tax Ordinance, 2001---Such power flows to the Commissioner after insertion of subsection (IA) in S.221 of the Income Tax Ordinance, 2001 on June 17, 2003 by Finance Act, 2003.

(d) Income Tax Ordinance (XLIX of 2001)

---S. 221(1A)---Income Tax Ordinance (XXXI of 1979), S.156---Finance Act (I of 2003), Preamble---Rectification of mistake---Since amendment in S.221 of the Income Tax Ordinance, 2001 had been brought on June 17, 2003 by virtue of Finance Act, 2003, therefore, subsection (IA) of S.221 of the Income Tax Ordinance, 2001 would start its voyage from the date June, 17, 2003---If any order passed by the Deputy Commissioner of Income Tax or the Income Tax Panels was rectified by the Commissioner prior to the date of insertion of sub-section (lA) to S.221 of the Income Tax Ordinance, 2001, that would be made in absence of having any legal sanctity behind it.

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

----S. 221(1A)---Income Tax Ordinance (XXXI of 1979), 5.156---Finance Act (I of 2003), Preamble---Rectification of mistake---Order passed by the Assistant Commissioner, whereby rectification of the order was made, on 24-9-2002, prior to introduction of the amendment in S.221 of the Income Tax Ordinance, 2001, was not sustainable in law having been passed without lawful authority---Order passed under S.221 of the Income Tax Ordinance, 2001 being contrary to law was cancelled/annulled by the Appellate Tribunal.

PLD 1979 Lah. 703; 1984 PTD (Trib.) 95; 1988 PTD 227; 1991 PTD 843; 1993 PTD 110; 1993 PTD 83; 1993 PTD 110; 1994 PTD (Trib.) 839; 1994 PTD (Trib.) 1416, 1998 PTD (Trib.) 279 and 2003 PTD 1343 ref.

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

----S. 221---Rectification of mistake---Application of appropriate clause, provision or subsection---Merely mentioning S.221 of the Income Tax Ordinance, 2001 in the order did not absolve the Assessing Officer from his responsibility to apply appropriate clause, provision or subsection of the relevant section of law.

(2003) 87 Tax 19 (Trib.) and 2004 PTD Trib.) 1052 rel.

Muhammad Bashir Malik for Appellant.

Dr. Shahid Siddique Bhatti, D.R. for Respondent.

2006 P T D (Trib.) 1778

[Income-tax Appellate Tribunal Pakistan]

Before Ehsan-ur-Rehman, Judicial Member and Naseer Ahmad, Accountant Member

I.T.As. Nos. 998/LB and 999/LB of 2004, decided on 10th August, 2005.

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

----S. 122---Income Tax Ordinance (XXXI of 1979), Ss. 62, 30 & 31---General Clauses Act (X of ,1897), S.6---Amendment of assessments---Interest income---Assessments were framed in respect of bank interest/mark-up under the head "business income"---Expenses were allowed and net income was assessed---Order under S.122 of the Income Tax Ordinance, 2001 resulted into modification of assessment by assessing the interest income under Ss.30 and 31 of the Income Tax Ordinance, 1979---Such order was upheld as justified and in accordance with law by the First Appellate Authority---Validity---Assessment for year 1998-99 was the result of order, dated 21-4-1999 and for assessment year 1999-2000 it was by an order, dated 14-2-2000 as such both the assessment orders were hit by limitation because provisions of S.122 of the Income Tax Ordinance, 2001 could not be attracted to orders passed prior to July, 2000---Assessee could be proceeded against only under the Income Tax Ordinance, 1979 in the light of S.6 of the General Clauses Act, 1897 with the result that the proceedings under S. 122 of the Income Tax Ordinance, 2001 could not be clothed with legality---Order passed under 5.122 of the Income Tax Ordinance, 2001 was annulled/cancelled by the Appellate Tribunal.

2005 PTR 70 rel.

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

---Ss. 122 & 210(IA)---Amendment of assessments---Jurisdiction---Exercise of authority under 5.122 of the Income Tax Ordinance, 2001 by the Inspecting Additional Commissioner of Income Tax by bringing on record that proceedings were being undertaken by virtue of delegation of authority by the Zonal Commissioner of Income Tax---Validity---When subsection (IA) in S.210 of the Income Tax Ordinance, 2001 was inserted, subsection (IA) had put a restriction on the Commissioner of Income Tax that powers of amendment of assessment contained in subsection (5A) of S.122 of the Income Tax Ordinance, 2001 shall not be delegated to a Taxation Officer below the rank of Additional Commissioner---Revising authority had specifically mentioned that powers had been delegated by the Commissioner of Income Tax---Authority described in S.210(1A) of the Income Tax Ordinance, 2001 was Additional Commissioner of Income Tax and not the Inspecting Additional Commissioner of Income Tax.

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

---S.122(5) & (5A)---Income Tax Ordinance (XXXI of 1979), Preamble--Amendment of assessments---Any action under S.122(5) or (5A) of the Income Tax Ordinance, 2001 for assessments completed under the Income Tax Ordinance, 1979 prior to July, 2000 was unlawful.

2005 PTR 70 rel.

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

---S. 122---Amendment of assessments---Retrospective effect---S.R.O. No.633(I)/2002 of 14-9-2002 had introduced subsections in S.122 of the Income Tax Ordinance, 2001, so no retrospective effect could be given.

2005 PTR 70 rel.

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

---S. 122(5A)---Amendment of assessments---Re-opening/revision the assessment for assessment years 2000-2001, 2001-2002 and 2002-2003 could not be permitted in exercise of jurisdiction under the provisions of S.122(5A) of the Income Tax Ordinance, 2001 as it had been inserted with effect from 1-7-2003 which could not be retrospective in operation.

2005 PTR 63 rel.

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

----S.201(lA)---Finance Act (II of 2004), Preamble---Delegation---Subsection (IA) in S.210 of the Income Tax Ordinance, 2001 was inserted by Finance Act, 2004, so the delegation of authority to any officer of the rank of Additional Commissioner could become legally possible after said date when there was such provision in the statute book.

(g) Income Tax Ordinance (XLIX of 2001)

---S. 122(5A)-Amendment of assessments---No such authority was available in the Income Tax Ordinance, 2001 which had been designated as Inspecting Additional Commissioner---Assumption of jurisdiction by any authority designated as Inspecting Additional Commissioner was ab initio void and of no legal consequence.

(h) Income Tax Ordinance (XLIX of 2001)

---S. 122(5A)-Amendment of assessments---Basically subsection (5A) of S.122 of the Income Tax Ordinance, 2001 was as a result of S.R.O. though was rescinded subsequently by Finance Act but it had basically been brought into existence in an illegal manner and secondly legislative work could not be undertaken under S.240 of the Income Tax Ordinance, 2001 in the name of removal of difficulties.

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

---Ss. 122(5A), 210 & 240---Amendment of assessments---Series of amendments in S.122(5A) of the Income Tax Ordinance, 2001 and in S.210 of the Income Tax Ordinance, 2001 and then one further amendment in S.240 of the Income Tax Ordinance, 2001 were indicative of scenario where the law makers were well aware that ambiguities/ inconsistencies existed in the statute book and with this background the penal proceedings were not to be initiated against the assessee as only precise and clear law could create a liability for the assessee, otherwise the benefit of ambiguities and doubts always goes in favour of the assessee and not in favour of the assessors---Requirement was that in a precise and unambiguous manner the liabilities of the assessee should be spelt out till such time that the actions of the revising authorities could get legal approval.

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

----S. 122---Income Tax Ordinance (XXXI of 1979), Ss.22, 30 & 31---Initiation of proceedings simultaneously under two enactments---Validity---Assessee could not be proceeded simultaneously under two different enactments---"Income assessed" in S.22 of the Income Tax Ordinance, 1979 had been modified in terms of Ss.30 & 31 of the Income Tax Ordinance, 1979 but order had been passed under S.122 of the Income Tax Ordinance, 2001.

(k) Income-tax---

----Cancellation and annulment---No mention was found as to subsection or the clause under which the proceedings had been initiated as it was only after mentioning the exact provision of law that the proceedings were to be initiated and concluded---Such a defect was incurable and goes to the root of the case resulting into outright cancellation and annulment of order.

Ziaullah Kayani for Appellant.

Muzammal Hussain, D.R. for Respondent.

2006 P T D (Trib.) 1790

[Income-tax Appellate Tribunal Pakistan]

Before S. Hasan Imam, Judicial Member and Agha Kafeel Barik, Accountant Member

I.T.As. Nos. 407/KB of 2004 and 1727/KB of 2003, decided on 23rd November, 2004.

(a) Income-tax---

----Gross profit rate---Decrease in gross profit rate---Sale to Government agencies had reduced from 20% to 15.40% contrary to sales to limited company, which had increased from 21% to 28.19% whereas there was little decline wholesale (from 59% to 56.33%) but this may not be taken as a sufficient reason to accept c-)nsiderable decrease in sales and gross loss, instead of gross profit rate---Besides no admissible evidence had been furnished to show increase in the prices of raw material---Record was silent in respect of any evidence showing decline in prices of raw material---Present was a no account case, assessee was duly confronted and accounts were rejected after a detailed reply was taken into consideration by the Assessing Officer---Estimate of sales and application of G.P. rate at 7.5% was as per history of the assessee and thus was not interfered with by the Appellate Tribunal.

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

----S. 12(18)---Income deemed to accrue or arise in Pakistan---Loan iron Director of the company---Details of loan were furnished by the assessee---Assessing Officer observed that loan was obtained on long term without banking channel and the amount had been received in cash---Addition---Validity---Case-law holding that "any amount received through crossed cash or any other banking channel was not liable to tax under S.12(18) of the Income Tax Ordinance, 1979" had not been taken into consideration by the Assessing Officer---Appellate Tribunal directed that issue be concluded afresh by the Assessing Officer after recording complete facts.

2002 PTD 1963 ref.

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

----Third Sched., R.8(5)(a)---Rules for the computation of depreciation allowance---Sales proceeds---First Appellate Authority failed to record his order in respect of addition in scrap sales and in respect of an addition made in respect of profit from sales of assets under R.8(5)(a) of Third Schedule of the Income Tax Ordinance, 1979 and no finding was given o:, additional ground of appeal relating to allowance of depreciation---Case was remanded to First Appellate Authority by the Appellate Tribunal for fresh adjudication on merit.

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

----Ss. 182(2)(3), 169, 151 & 153---Penalty for failure to furnish a return or statement---Levy of penalty under S.182(3) of the Income Tax Ordinance, 2001 at the rate of Rs.200 per day for alleged defaults of 58 days in furnishing statements, prescribed under Ss.151 & 153 of the Income Tax Ordinance, 2001 read with 5.169 of the Ordinance along with penalty under S.182(2) of the Income Tax Ordinance, 2001---Validity---Order imposing penalty under S.182(2) of the Income Tax Ordinance, 2001 had been passed after affording opportunity of hearing to assessee, who due to its wilful absence after due service of notice, failed to show a reasonable excuse for not filing required statement within the prescribed period, as such the impugned order was not interfered by the Appellate Tribunal--Appellate Tribunal in respect of additional penalty under S.182(3) of the Income Tax Ordinance, 2001 found that required statements due on 15th October, 2002, were filed on 14-12-2002 (late by 58 days), but before service of show-cause notice, as such there was no default attracting subsection (3) of S.182 of the Income Tax Ordinance, 2001 which provided imposition of additional penalty when a person liable to a penalty under subsection (2) of S.182 of the Income Tax Ordinance, 2001 continued to fail to furnish the statement, besides a separate notice would also be mandatory---Imposing penalty under S.182(3) of the Income Tax Ordinance, 2001 confirmed by the First Appellate Authority was unjustified and was cancelled by the Appellate Tribunal.

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

----S. 182(3)---Penalty for failure to furnish a return or statement---Procedure and propositions for levy of penalty.

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

----S. 182(2)(3)---Penalty for failure to furnish a return or statement---Notice for imposition of additional penalty---Controversy was whether notice under subsection (2) of S.181 of the Income Tax Ordinance, 2001 would be sufficient for imposing additional penalty provided under subsection (3) of S.182 of the Income Tax Ordinance, 2001 or separate notice was mandatorily required---Validity---Separate provision had been laid down for imposing additional penalty of Rs.200 for each day of default---Additional penalty will be taken as a separate course for which a separate notice would be necessary after action under S.182(2) of the Income Tax Ordinance, 2001 and each day of default shall start after the date of imposition of penalty under S.182(2) of the Income Tax Ordinance, 2001 which meant that for imposing additional penalty it would be necessary to pass an order under S.182(2) of the Income Tax Ordinance, 2001 and thereafter on failure of the assessee to pay penalty of Rs.2000, additional penalty shall be levied at the rate of Rs.200 for each day of default---Both the penalties were independent in nature, based on different actions, having separate starting dates, thus separate notice would be mandatory for each action.

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

---S. 182(2)(3)---Penalty for failure to furnish a return or statement---Action under S. 182(3) of the Income Tax Ordinance, 2001 was not discretionary, as such showing reasonable cause would not be necessary for levy of additional tax.

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

---S. 182(2)(3)---Penalty for failure to furnish a return or statement---Separate penalty for each statement---Penalty under Ss. 182(2) and 182(3) of the Income Tax Ordinance, 2001 would be separate for each statement because the words, "failure to furnish the statement" had been used, as such where an assessee failed to furnish more than one statement, separate action would be proposed for each statement under subsections (2) and (3) of S.182 of the Income Tax Ordinance, 2001.

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

---S. 182(2)(3)---Penalty for failure to furnish a return or statement---Time for start of default---Default in respect of which penalty had been imposed under S.182(3) of the Income Tax Ordinance, 2001 shall start from the date of penalty imposed under S.182(2) of the Income Tax Ordinance, 2001 as such time already lapsed till passing of an order under S.182(2) of the Income Tax Ordinance, 2001 shall be excluded while imposing penalty under S.182(3) of the Income Tax Ordinance, 2001.

A.H. Fridi, ITP for Appellant.

Ghulam Shabbir Memon, D.R. for Respondent.

2006 P T D (Trib.) 1800

[Income-tax Appellate Tribunal Pakistan]

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

I.T.As. Nos.5531/LB of 1996, 45/LB, 46/LB, 6362/LB, 88/LB, 89/LB, 6054/LB to 6057/LB of 2004, decided on 28th June, 2005.

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

----S.23(1)(x)---Deductions---Disallowance of provisions for bad debts on the ground that provision' made in final accounts for an expense did not qualify as valid business expendiure and it was required to be added back to income when finalizing income tax assessment and in case of debt gone bad, only that part of the debt may be written off and charged to the profit and loss account that could be shown by the assessee to have actually gone bad---Assessee-Bank contended that Banking Company fell in a distinct class governed byprudential regulations' and subject to stringent rules prescribed by State Bank of Pakistan reporting format for documentation required to be periodically filed by a Bank before the State Bank, made it incumbent on the assessee-Bank to cite only a provision for bad and doubtful debts in the case of debt that was held by the Bank to havegone bad'---Assessee had no option but to cite the bad debt as a provision in the final accounts---Validity---Assessing Officer had not "determined" whether or not the claimed bad debt had indeed become bad as was required to do under S.23(1)(x) of the Income Tax Ordinance, 1979---Matter was remanded to Assessing Officer to do the same strictly in accordance with law---Assessing Officer will not disallow the bad debt claim simply because it had been cited as a provision for bad debt'---Add-back could only be made if, after calling for necessary explanation/clarification as the Assessing Officer might require, the assessee was duly confronted and the Assessing Officer thendetermines' that a certain amount was not a `bad debt'---If Assessing Officer were to allow the provision for bad debts as a profit and loss account expense without question, as a matter of course, then the statutory requirement for its "determining" whether the debt had indeed become bad would be rendered redundant which of course could not be the case as no provision in a statute could be seen as having become redundant---Matter pertaining to bad debt as a charge to the profit and loss account was remanded to the Assessing Officer for its re-appraisal strictly in accordance with express statutory stipulation/judgment of High Court.

1976 PTD 237 and M.A. 22-23/LB/2005 (A.Y. 1997-98 & 1998-99), dated 24-5-2004 ref.

(b) Interpretation of statutes---

----Fiscal law will be taken to mean what a plan reading of the text of the statute ordinarily suggests---Nothing can be read into or out of a statute and no special interpretation at variance with what it's text plainly suggests is permissible.

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

----S. 23(1)(x)---Deductions---After scrutiny, the Assessing Officer may endorse the assessee's bad debt claim, reduce the claim or reject the claim altogether and it is his prerogative under the law to do so as borne out by the statute i.e. S.23(1)(x) of the Income Tax Ordinance, 1979.

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

----S.23(1)(x)---Deductions---Burden of proof---Onus to establish that a claimed bad debt had indeed gone bad was squarely on the assessee.

1976 PTD 237 rel.

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

----S.23(1)(x)---Deductions---"Provisions for bad debts" and "provisions for gratuity"---No similarities---No real similarities between a provision for gratuity and a provision for a had debt---Provision for gratuity is a definite and ascertained liability even when it is cited as an accrued expense and it is possible to precisely calculate/extrapolate the gratuity amount due to an employee at the time of his superannuation/retirement given by the terms of his employment agreed to between employer and employee when he first took up employment---No precise methodology to determine with similar certainly what exact amount out of the total debt constitutes a `bad debt' at the time when the final accounts are drawn up---Provision for bad debt is not the same as a provision of gratuity.

1985 PTD 413 rel.

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

---S. 23(1)(x)--Deductions--Bad debts taxed in earlier years---Department contended that First Appellate Authority was not justified to delete the addition made on account of bad debts taxed in earlier years in contravention of provisions of S. 23(1)(x) of the Income Tax Ordinance, 1979---Assessee contended that in cases of banks, the Assessing Officer could not insist for concrete evidence that the debt had indeed become irrecoverable and mere debit to the Profit and Loss Account of debts by banks was, prima facie, evidence that the same were allowable expenditure---Validity---Bad debt claim once rejected by the Assessing Officer could be considered again in a subsequent year and there was no bar in law regarding the same---Assessing Officer will be required to "determine" whether the bad debt claim was justified or not whenever the debt claim came up before him---Such was not a question of requiring the assessee-bank to submit "unassailable proof"' in this regard but rather the assessee-bank will have to answer any query raised by the Assessing Officer in case he had any doubt that a debt qualified to be treated as having become bad---Matter pertaining to had debt taxed in earlier years also required the Assessing Officer's scrutiny and finding as to admissibility---Matter pertaining to such bad debts was remanded back to Assessing Officer for his appraisal strictly in accordance with law.

1976 PTD 237 and M.A. 22-23/LB of 2005 (A.Y. 1997=98 & 1998-99), dated 24-5-2004 ref.

I.T.A. No. 1066 to 1073/IB of 2004; 2002 PTD (Trib.) 1898; (2002) 85 Tax 245 (Trib.); 2003 PTD (Trib.) 1189 and R.A. No.349/LB of 2002 per incurium.

1999 PTD 1972; (1997) 226 ITR 605 (Guj); (1983) 16 TTJ (all.) 65; (1985) 21 TTJ (All.) 233; (1998) 100 Taxman 109 (Cal.); (1960) 39 ITR 104; (1983) 143 ITR 166 (Guj.); (1989) 30 ITD 245(Delhi); (1990) 32 ITD 315 (Born); (1999) 65 TTJ (Jp). 480; (1987) 27 TTJ (Delhi) 50; (1985) 21 TTJ (Indore) 251 and (1988) 24 ITD 97 (Ahd) not considered.

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

----S. 23---Deductions---Taxation of profit on NIT units as dividends---Relief accorded by the First Appellate Authority that "profit on NIT units should be treated as dividend chargeable to tax at concessionary rate of 5% instead of normal rate as dividend chargeable to tax at concessionary rate of 5% instead of normal rate applied on it being a composite income of banking business" was maintained by the Appellate Tribunal as it was consistent with statutory stipulation and applicable law.

2002 PTD (Tub.) 507 rel.

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

----S. 23(1)(xviii)---Deductions---Appellate Tribunal upheld the finding of First Appellate Authority allowing Corporate Assets Tax payment as a legitimate charge to the assessee-company's Profit and Loss Account.

1980 PTD (Trib.) 61 and 1981 PTD 84 rel.

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

----Third Sched., R.8(4)---Depreciation allowance---Initial depreciation--Office equipment---Appellate Tribunal maintained the normal depreciation allowed on "office equipment" by the First Appellate Authority on the ground that office equipment did constitute machinery.

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

---S. 23---Zakat and Ushr Ordinance (XVI11 of 1980), S. 25---C.B.R. Circular No.28 of 1980, dated 29-10-1980---Deductions---Zakat on Nl7' units---Addition made on the ground that assessee never actually paid any amount by way of Zakat to the Central Zakat Fund was deleted by the First Appellate Authority, which was maintained by the Appellate Tribunal as Zakat was deducted by the company on dividend income.

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

----S. 23---Deductions---Taxation of dividend at concessionary rate---First Appellate Authority's direction to tax dividend income at the rate of 5% instead of normal tax rates applicable to banking companies was maintained by the Appellate Tribunal.

2002 PTD (Trib.) 507 and I.T.As. Nos. 93-94/LB of 2001 rel.

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

----S. 23---Deductions---Interest credited to suspense account---First Appellate Authority deleted the addition made on account of interest credited to suspense account and the same was upheld by the Appellate Tribunal.

(2002) 85 Tax 245 (Trib.); I.T.A. No. 3458_2920 to 2922/LB of 2001; I.T.As. Nos.2715-2716/LB of 1999; I.T.A. No.1658/LB of 2003 and I.T.As. Nos. 3623-3624/LB of 2002 rel.

(m) Income-tax---

----Expenses---Apportionment of expenses between exempt capital gain and income earned from other operations was not permissible: in law.

I.T.A. No. 1066 to 1073/1B of 2004 and 2004 PTD (Trib.) 344 rel.

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

----S. 23---Deductions---Share enlistment fee---Addition on account of "share enlistment fee" was made on the ground that such expense was capital in nature---Assessee contended that fee paid to Stock Exchange under the Securities and Exchange Commission Regulation was an expense wholly and exclusively for the business of the bank and not a capital in nature---Addition was deleted by the First Appellate Authority---Relief accorded by the First Appellate Authority was maintained by the Appellate Tribunal.

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

----S. 23(1)(xxi)---Deductions---Expenditure---Assessee contended that First Appellate Authority unjustifiably maintained addition made by the Assessing Officer as there was no express statutory stipulation that expenditure claimed under S.23 (1)(xxi) of the Income Tax Ordinance, 1979 be admitted only if such expenditure was first incorporated in income---Mark-up/interest credit to the suspense account related to non-performing loans and had been specifically declared as allowable deduction by the legislature---Validity---Departmental rationale for disallowance of such expenditure under S.23(1)(xxi) of the Income Tax Ordinance, 1979 appeared to be misconceived---Appellate Tribunal directed that the expenditure be admitted in full.

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

----S. 23---Deductions---Amortization of deferred cost---Assessee contended that First Appellate Authority had unjustifiably confirmed the addition made by the Assessing Officer on the ground that the expenditure in, question incurred on new branches of assessee-Bank renovated etc. was capital in nature when in actual fact the expenditure was in essence revenue expenditure and had been deferred by the assessee over a three years period in order to spread out of the expenditure over a reasonable timeframe and no asset of enduring nature had been credited---Validity---Held, expenditure was indeed not in the nature of capital expenditure and could legitimately be seen as revenue expenditure and the same was allowable in full as claimed.

I.T.A. No. 93-94/LB of 2001; 137 ITR 652; 168 ITR 731 and 1998 PTD (Trib.) 1935 rel.

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

---S. 23---Deductions---Disallowance of depreciation on vehicles and building---Assessing Officer tinkered with the depreciation claim which was not proper---Disallowance made by the Assessing Officer and approved by the First Appellate Authority was deleted by the Appellate Tribunal.

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

---S. 23---Deductions---Taxation of compensation on delayed refund---Assessee received compensation on account of delayed disbursement of refund---Such compensation was not declared as "income" as it was in the nature of damages from wrongful possession of assessee's property---Assessee contended that any damages/compensation/interest etc. received for sterilizing of profit for loss to property or injury to capital asset were capital receipts not chargeable to tax---First Appellate Authority upheld the addition of compensation amount to income with the observation that the assessee could not sufficiently rebut the findings of the Assessing Officer---Validity---When compensation admittedly pertained to refund due to assessee and not disbursed in time, such compensation was without doubt capital in nature and not taxable under the Income Tax Ordinance, 1979---Finding First Appellate Authority was vacated and it, was directed that the addition as made by the Assessing Officer be deleted.

(1993) 199 ITR 303 (Ker); (1970) 76 1TR 467 (SC); (1979) 3 SC 150 and (1989) 179 ITR 157 rel.

Dr. Amjad, Addl. CIT. and Shahid Jamil, L.A. for Appellant (in I.T.As. Nos, 5531/LB of 1996, 45/LB, 46/LB and 6362/LB of 2004).

Dr. Ikram-ul-Haq for Respondent (in ITT.As. Nos. 5531/LB of 1996, 45/LB, 46/LB, 6362/LB of 2004).

Dr. Ikram-ul-Haq for Appellant (in LT.As. Nos.88/LB, 89/LB, 6054/LB to 6057/LB of 2004).

Dr. Amjad, Addl. C.I.T. and Shahid Jamil, L.A. for Respondent (in I.T.As. Nos.88/LB, 89/LB, 6054/LB to 6057/LB of 2004).

Date of hearing: 12th March, 2005.

2006 P T D (Trib.) 1827

[Income-tax Appellate Tribunal Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member and Shaheen Iqbal, Accountant Member

R.As. Nos. 426/KB to 429/KB of 2004, decided on 15th February, 2005. (a) Income

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

----Ss. 136 & 66-A---Reference to High Court---Question referred was "whether Appellate Tribunal was justified in vacating the order of the Inspecting Additional Commissioner on the ground, that S.66-A of the Income Tax Ordinance, 1979 could not be invoked on the basis of audit observation ignoring the provisions of S.7 of the Income Tax Ordinance, 1979 and the fact that the Inspecting Additional Commissioner invoked S.66-A etc. only after applying his mind and coming to conclusion that case for such action did exist on the basis of evidence/material on record"---Validity---Questions of law as framed by the Department did not arise out of order of Appellate Tribunal---Inspecting Additional Commissioner modified the assessments under S.66-A of the Income Tax Ordinance, 1979 on two issues: Capital loss set-off against operating revenue and payment of technical fee disallowed by the Inspecting Additional Commissioner, but on these two issues no question had been framed and this fact had also been mentioned in the statement of facts filed by the Department---Appellate Tribunal allowed the appeal after apprising the facts and had given its verdict on the factual grounds and recorded its finding of facts and no law point arose in this respect---Issues viz; allocation prorating of expenses between exempted capital gain and taxable income and payment of technical fee disallowed by the Inspecting Additional Commissioner had been allowed after apprising of facts and the verdict in this regard had been given on factual basis as well as by following earlier binding decisions of Appellate Tribunal, High Court and Supreme Court---Questions framed by the Department did not arise out of order of Appellate Tribunal.

2005 PTD (Trib.) 344; 2002 PTD 498; 2002 PTD 327; (1961) 42 ITR 589 (SC); (1987) 164 ITR 789 (P&H) and PLD 1984 Lah. 401 ref.

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

----Ss. 136, 66-A & 62---Reference to High Court---Question referred was "whether Appellate Tribunal was justified in vacating the order of the Inspecting Additional Commissioner on the ground that S.66-A of the Income Tax Ordinance, 1979 could not be invoked because of involvement of predecessor Inspecting Additional Commissioner in the assessment proceedings under S.62 of the Income Tax Ordinance, 1979 who had just approved the assessment order and had not himself framed the same"---Validity---Question had been framed on the findings of fact that the issue of approval was given only for the assessment year 1995-96 and not arising out of the order of Appellate Tribunal and this issue had been decided, keeping in view the earlier orders of Appellate Tribunal and High Court.

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

----S. 136---Reference to High Court---Question for reference was "whether Appellate Tribunal was justified to hold that the expenses could not be prorated for being off set against income from capital gains which was exempt from tax and had thus to be allowed against only taxable income though some of these did pertain to earning of capital gains"---Validity---Allocation of expenses was not made by the Department---Question was misconceived as neither any ground was taken by the assessee nor any finding was given by the Appellate Tribunal---As question did not arise out of the order of Appellate Tribunal, the same could not be referred to High Court---Question framed also did not affect the right of parties---Question was purely academic and need to be referred.

RA No.800/KB of 2003, dated 31-7-2003; RA No.39/KB of 1984-85, dated 28-11-1994; R.As. Nos.691 and 692/KB of 2002, dated 12-11-2002 and R.As. Nos.421, 422/KB of 2004, dated 27-1-2005 rel.

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

----Ss. 136 & 66-A---Income Tax Ordinance (XLIX of 2001), S.209(9)---Reference to High Court---Question for reference was that "whether Appellate Tribunal was justified to hold that successor Inspecting Additional Commissioner could not legally proceed to frame reassessment under S.66-A of the Income Tax Ordinance, 1979 on the basis of show cause issued earlier by his predecessor ignoring the provision of S.209(9) of the Income Tax Ordinance, 2001---Validity---Question did not arise out of order of Appellate Tribunal as no finding on S.209(9) of the Income Tax Ordinance, 2001 had been given in the order and for referring the question of law it was necessary that the question must arise out of order of Appellate Tribunal.

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

----S. 136---Reference to High Court---Jurisdiction of High Court---Scheme of Income Tax Ordinance provided that the High Court does not exercise appellate jurisdiction---High Court exercises advisory jurisdiction only, when invoking its advisory jurisdiction its opinion is sought on a point of law for guidance---Opinion is to be sought where a difficulty arises---General and abstract questions which are purely academic in nature do not require to be referred.

Lungia Tea Company v. Commissioner of Income Tax 1970 SCMR 872 rel.

Ms. Farzana Jabeen D.R. and Shafqat Hussain Kehar, DCT for Applicant.

Javaid Zakaria for Respondent.

2006 P T D (Trib.) 1844

[Income-tax Appellate Tribunal Pakistan]

Before Rasheed Ahmed Sheikh, Judicial Member and Javed Tahir Butt, Accountant Member

I.T.As. Nos.1185/LB and 1405/LB of 2000, decided on 20th May, 2005.

(a) Interpretation of statutes---

----What has been stated in the statute that has to be adhered to in the letter and spirit and no other meanings can be imported from the language of the statute.

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

----S.12(18)---Income deemed to accrue or arise in Pakistan---No addition whatsoever in the garb of the words incorporated in S.12(18) of the Income Tax Ordinance, 1979; such as "loan" or "advance" or "gift", could be made unless those were so shown or claimed and had been so received.

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

----Ss.65 & 13---Additional assessment---Approval and permission---Explanation---Legislature had used the word "approval" and not the "permission" in order to reopen the already completed assessment or the addition to be made under S.13 of the Income Tax Ordinance, 1979---Subsection (2) of S.65 of the Income Tax Ordinance, 1979, in unequivocal words proclaims that no proceedings under Subsection (1) of S.65 of the Income Tax Ordinance, 1979 shall be initiated unless definite information has come into the possession of the Deputy Commissioner and he has obtained the previous approval of the Inspecting Additional Commissioner in writing to do so---For reopening the case under S.65 of the Income Tax Ordinance, 1979 two conditions precedent were i.e. existence of "definite information" and obtaining of "previous approval" and not the 'permission'-For reopening already completed assessment, one of the mandatory condition was to obtain "previous approval" from the Inspecting Additional Commissioner in order to reopen the assessment---If this mandatory requirement of law was missing the proceedings initiated under S.65 of the Income Tax Ordinance, 1979 or the re-assessment made thereunder was bound to be annulled/cancelled.

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

---Ss.13 & 65---Addition made under clauses (aa) to (e) of S.13 of the Income Tax Ordinance, 1979 was liable to be deleted because obtaining of approval from Inspecting Additional Commissioner was the statutory requirement of law which was to be adhered to in its letter and spirit.

(e) Income-tax---

---Assessment---Non-observation of statutory requirement(s) of law, by which jurisdiction to assess was assumed per se (by itself) renders the assessment, additional assessment, addition etc. to be nullity in law and as such was liable to be cancelled, annulled or deleted as the case may be.

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

---Ss.13(1)(d) & 65---Unexplained investment etc., deemed to be income---Addition on the basis of "permission" and not by "approval"---Validity---No "approval" whatsoever from the Inspecting Additional Commissioner was obtained by the Assessing Officer prior to reopening of the already completed assessment and also for making additional under S.13(1)(d) of the Income Tax Ordinance, 1979---"Permission" was sought not only prior to issuance of notice under S.65 of the Income Tax Ordinance, 1979 and also while making addition under S.13(1)(d) of the Income Tax Ordinance, 1979---Reopening of assessment under S.65 of the Income Tax Ordinance, 1979 had been accorded and subsequently addition under S.13(1)(d) of the Income Tax Ordinance, 1979 had been made by seeking permission from the Inspecting Additional Commissioner which was a clear violation of the provision of law---Additional assessment had been made in absence of any lawful authority and as such annulled/cancelled by the Appellate Tribunal and assessment made under S.59(1) of the Income Tax Ordinance, 1979 stood restored.

2004 PTD (Trib.) 1052; 2004 PTD (Trib.) 618 and I.T.A. No.2695/LB of 2000 ref.

2000 PTD 3788 and 2003 PTD (Trib.) 1238 rel.

Dr. Shahid Siddique Bhatti, D.R. for Appellant.

Muhammad Shahid Abbas for Respondent.

2006 P T D (Trib.) 1852

[Income-tax Appellate Tribunal Pakistan]

Before Khawaja Farooq Saeed, Chairperson, Jawaid Masood Tahir Bhatti, Judicial Member and Mehmood Ahmad Malik, Accountant Member

W.T.As. Nos. 129/LB to 131/LB of 2004, decided on 20th April, 2005.

Per Mehmood Ahmed Malik, Accountant Member [Minority view]---Wealth Tax Act (XV of 1963)---

----Ss.2(1)(5)(ii) [2(e)(ii)] & 3---Assets---Flour Mill---Lease out---Taxation---Assessee contended that Mills were leased out for, a limited number of years and it could not be said that the assets were held for the purpose of letting out or business of letting out of property---Validity---Assessments had been made ex parte because the assessee had failed to file Wealth Tax Returns---Claim of assessee that some liabilities had also to be allowed required consideration by the Taxation Officer---Assessee held immovable property for letting out and that it was an "asset" within the meaning of Wealth Tax Act, 1963 and liable to wealth tax---Assessments were set aside with the directions that proper opportunity of hearing be allowed to the assessee and the claim regarding liabilities may be examined.

2000 PTD (Trib.) 1826; W.T.As. Nos. 694 and 695/LB of 2003 and W.T.As. Nos. 1919 to 1921/LB of 2002 ref.

Afzal Flour Mills (Pvt.) Limited v. C.I.T. and others 2004 PTD 188 and Messrs B.P. Biscuit Factory Ltd., Karachi v. W.T.O. 1981 PTD 217 rel.

Per Khawaja Farooq Saeed, Chairperson---

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

----Ss.2(1)(5)(ii) [2(e)(ii)] & 3---Assets---Flour Mill---Lease out---Taxation---Validity---Flour Mill neither normally nor specifically in the present case had been established to earn rent---Purpose of the Flour Mill evidently was to run the industry and commercially exploit the same for earning income and not to earn the rental income therefrom ---Assessee claimed that it was only for two years previous to present year that this industry had been given on lease goes to favour his point of view---After the years under discussion the lease had again been revoked---Wealth tax was not chargeable to the Flour Mill in circumstances.

W.T.As. Nos. 694 and 695/LB of 2003; W.T.As. Nos.1919 to 1921/LB of 2002; 1977 PTD. 13 = PLD 1977 Lah. 170 and 224 ITR 310 rel.

Afzal Flour Mills (Pvt.) Limited v. C.I.T. and others 2004 PTD 188 distinguished.

Per Jawaid Masood Tahir, Bhatti Judicial Member; Khawaja Farooq Saeed, Chairperson---[Agreeing with Majority view]---

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

----S.2(1)(5)(ii) [2(e)(ii)]---Assets---Flour Mill---Lease out---Taxation---Section 2 (1)(5)(ii) of the Wealth Tax Act, 1963 applies to those properties purpose of which right from their construction remains letting out or sale and it was the purpose of holding a property which was subject to charge---Flour mill being neither normally nor specifically established to earn rent, could not be taken under the ambit of definition of an "asset"---Language of law itself had referred the word "immovable property held for the purpose of construction and letting out of property, immovable property held for the purpose of business of construction and letting out"---None of the propositions applied in the present case as the purpose of the assessee had never been letting out---Wealth tax was not chargeable to assessee's flour mill---Order of First Appellate Authority and that of Assessing Officer were vacated by the Appellate Tribunal and appeals of the assessee were allowed.

Afzal Flour Mills (Pvt.) Limited v. C.I.T. and others 2004 PTD 188 and Messrs B.P. Biscuit Factory Ltd., Karachi v. W.T.O. 1981 PTD 217 distinguished.

1977 PTD 13 = PLD 1977 Lah. 170 rel.

Riaz Bashir Sh., I.T.P./A.R. for Appellant.

Abdul Salam, D.R. for Respondent.

Anwar Ali Shah, D.R. for Respondent.

2006 P T D (Trib.) 1862

[Income-tax Appellate Tribunal Pakistan]

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

W.T.As. Nos. 687/LB to 691/LB of 2004, decided on 1st October, 2005.

Wealth Tax Act (XV of 1963)---

----S.17---Wealth escaping assessment---Setting aside of assessment---First Appellate Authority set aside the case for de novo assessment after having held that the combined notice issued under S.17 of the Wealth Tax Act, 1963 was illegal---Validity---Notice under S.17 of the Wealth Tax Act, 1963 issued was a combined notice for all the assessment years---First Appellate Authority admitted such fact and the same did appear in the order---First Appellate Authority, instead of annulling the assessments framed on the basis of combined notice, remanded the case for de novo assessments---First Appellate Authority erred in law while remanding the case---Appellate Tribunal vacated the order of First Appellate, Authority and annulled the assessments framed by the Assessing Officer---Assessments were supposed to be completed within two years from the date of issuance of notice which was not done, rather, the assessments were framed after almost four years of the issuance of the notice and such assessments had become tine-barred---Assumption of jurisdiction by Assessing Officer thereafter was nullity in the eye of law.

2000 PCTLR 815 and 1987 PTD (Trib) 314 rel.

Siraj-ud-Din Khalid, for Appellant.

Imran Raza Kazmi, D.R. for Respondent.

2006 P T D (Trib.) 1878

[Income-tax Appellate Tribunal Pakistan]

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

M.A. (Revised Ground) No.282/KB and I.T.A. No.184/KB of 2005, decided on 28th June, 2005.

Income Tax Ordinance (XXXI of 1979)---

----Ss. 134, 13(1)(aa), 66(1)(c) & 25(c)---Appeal to Appellate Tribunal--Amendment in the ground of appeal---Application to add, amend, alter or disregard any of the grounds of appeal by the assessee/respondent, when the appeal was preferred by the Department---Validity---Appeal had been preferred by the department, as such it being the only custodian of the appeal, had exclusive, vested right to confine itself to any of the issue, whereas the assessee, through application, in order to cover up its fault, had tried to adjudicate the issues decided against it without filing an appeal---Assessee being a respondent had no right to ask for addition in grounds of appeal, whatever may be fate of the issues, if not adjudicated or wrongly adjudicated, will not in any case entitle the assessee to indulge in the grounds of appeal preferred by the department---Miscellaneous application moved by the assessee in the department appeal to include the proposed grounds directly affecting the assessee, was not maintainable, as same would amount to allow the assessee to argue the grounds of appeal affecting relief in favour of the assessee on aggrieved issues not relevant to departmental appeal, without filing a separate appeal---Allowing additional grounds, in circumstances, would tantamount to asking the department to look after the assessee's interest in departmental appeal, besides the right of appellant to withdraw the appeal will also be frustrated in such circumstances---Law did not provide any provision enabling the assessee/respondent to invoke attention of the Appellate Tribunal for deciding issues not the subject-matter of appeal and for which no appeal had been preferred by the assessee---No question arose to allow the assessee/respondent to amend the grounds of appeal raised in the department appeal---Miscellaneous application was rejected by the Appellate Tribunal.

B.A. Mujahid Baluch, ITP for Applicant.

Ghulam Shabbir Memon, D.R. for Respondent.

2006 P T D (Trib.) 1881

[Income-tax Appellate Tribunal Pakistan]

Before Ehsan-ur-Rehman, Judicial Member and Naseer Ahmad, Accountant Member

I.T.A. No.4293/LB of 2003, decided on 8th June, 2005.

Income Tax Ordinance (XXXI of 1979)---

----Ss. 23(1)(x) & 25(a)---Deductions---Loss due to destruction of stock by fire---Disallowance of loss caused by fire of the insured stocks due to partial receiving of compensation from the Insurance Company Assessee contended that stocks had actually been destroyed by fire while the hope for recovery of the same from Insurance Company was not in sight and in case any compensation was received or recovery was subsequently made then the same could be offered to tax as per provisions of S.25(a) of the Income Tax Ordinance, 1979---Validity---Loss due to destruction of stock by fire was an allowable expense---Recovery of claim from Insurance Company after partial payment had apparently become not possible---In case of recovery of claim in future it could be taxed in the year of receipt under the provisions of S.25(a) of the Income Tax Ordinance, 1979---Amount of claim which had not been accepted by the Insurance Company shall be written off and in future if at all the same was recovered, wholly or partly, it shall be added in the year in which it was recovered.

1 Tax 4 ref.

1983 PTD 30 rel.

Zia Haider Rizvi along with Haroon Mirza for Appellant.

Imran Raza Kazmi, D.R. for Respondent.

2006 P T D (Trib.) 1888

[Income-tax Appellate Tribunal Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member and Mukhtar Ahmad Gondal, Accountant Member

I.T.As. Nos. 2024/LB of 2004, 1549/LB, 1550/LB of 2003, 4043/LB and 4044/LB of 2001, decided on 6th June, 2005.

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

----S. 62---Assessment on production of accounts, evidence etc.---Gross profit rate---First year of business---First Appellate Authority directed the Department to accept the declared trading version in respect of Ghee Unit---Department contended that gross profit rate of 3% was applied as against declared gross profit rate of 2.92% keeping in view the other parallel cases of this line of business but the First Appellate Authority had directed to accept the declared version without any justification---Validity---First Appellate Authority had rightly directed to accept the declared gross profit rate keeping in view the facts and circumstances of the case specifically on the fact that . the year under review was the first year of business and Assessing Officer himself had admitted that in parallel' cases, gross profit rate of 3% was to be applied in such like matters despite the fact that he had neither mentioned any parallel case nor had confronted the assessee regarding parallel case.

(b) Income Tax Appellate Tribunal Rules, 1981---

----R.10---Contents of memorandum of appeal---Appeal filed by, the Department was dismissed on the ground that the grounds of appeal were vague, unspecific and against the Income Tax Appellate Tribunal's - Rules, 1981 and also against the decision in this regard made by the Appellate Tribunal that the ground should be specific and each head of account should be specifically mentioned in the grounds of appeal.

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

----Ss. 52 & 50(4)---Liability of persons failing to deduct or pay tax---Purchase of plant and machinery---Non-deduction of tax---Assessee contended that Assessing Officer had wrongly declared the assessee as an "assessee in default" because the assessee company did not deduct tax from the party from whom the assessee company purchased plant and machinery and such things transpired from the schedule- of fixed assets filed with the return---Such type of purchases were not covered under S.50(4) of the Income Tax Ordinance, 1979---Validity---Order annulled by the First Appellate Authority, keeping in view the decision of High Court, was upheld by the Appellate Tribunal and appeal filed by the Department in respect of order under S.52 of the Income Tax Ordinance, 1979 was dismissed.

1999 PTD 4028 rel.

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

----Ss. 221 & 240---Income Tax Ordinance (XXXI of 1979), Ss.156 & 59(1)---S.R.O. No.633(I) of 2002, dated 14-9-2002---Rectification of mistake---Assessment years 1999-2000 to 2001-2002---Taxation Officer assumed powers for rectification of previous assessment order completed under the Income Tax Ordinance, 1979 vide cl. (7) S.R.O. No.633(I)/ 2002, dated 14-9-2002 issued under S. 240 of the Income Tax Ordinance, 2001 and Taxation Officer had passed the order under S.221 of the Income Tax Ordinance, 2001 for the assessment year 1999-2000 on 11-2-2004 while for the assessment year 2000-2001 and 2001-2002, the order had been made on 20-11-2002---Validity---Order passed by the Assessing Officer was invalid and against the jurisdiction---Taxation Officer had passed the order under S.221 of the Income Tax Ordinance, 2001 without any justification and the First Appellate Authority upheld the same without considering the legal as well as factual position---Orders for all the three years were vacated and the orders passed by the Taxation Officer under S.221 of the Income Tax Ordinance, 2001 for all the three years under review were annulled---Appeals filed by the assessee were allowed.

Writ Petition No.7788 of 2003 and 1992 PTD 570 rel.

1985 PTD 767; 1990 PTD (Trib.) 931; 2001 PTD (Trib.) 1988 and 2003 PTD (Trib.) 698 ref.

(e) income Tax Ordinance (XLIX or 2001)---

----S. 221---Rectification of mistake---Once the matter had been agitated and considered by the superior authority on the same issues, the rectification in the matter could not be made.

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

----S. 221---Income Tax Ordinance (XXXI of 1979), Ss, 156 & 66-A---Rectification of mistake---Proceedings were initiated under S.66-A of the Income Tax Ordinance, 1979 on 1-11-2001 which were later on dropped with the observation that the assessment order was neither erroneous nor prejudicial to the interest of Revenue, but the Taxation Officer on the same issue on which the matter was reopened under S.66-A of the Income Tax Ordinance, 1979 had made the rectification in the same order which could not be upheld in any norms of justice.

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

----S. 221---Income Tax Ordinance (XXXI of 1979), 5.156---Rectification of mistake---Rectification was without any norms of justice as the Regional Commissioner of Income Tax, after considering the reply on the issue, decided that the return will be processed under Self-Assessment Scheme but on the other hand, the Assessing Officer had rectified the order for the same year without considering the fact that the Regional Commissioner of Income Tax in this regard had already decided to process the assessment under Self-Assessment Scheme.

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

----S. 221---Income Tax Ordinance (XXXI of 1979), S. 156---Rectification of mistake---For rectification of mistake, the Taxation Officer could not go beyond his limitation, as had been provided under the law or the interpretation of law as made by the superior Courts.

1992 PTD 570 rel.

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

----S. 221---Income Tax Ordinance (XXXI of 1979), S. 156---S.R.O. No. 633(I)/2002, dated 14-9-2002---Rectification of mistake---S.R.O. No.633(I)/2002, dated 14-9-2002 was invalid and illegal documents as declared by the High Court.

Writ Petition No. 7788 of 2003 rel.

Shahid Abbas and Muhammad Hamid for Appellant (in I.T.As. Nos. 2024/LB of 2004, 1549/LB, 1550/LB of 2003).

Anwar Ali Shah, D.R. for Respondent (in I.T.As. Nos. 2024/LB of 2004, 1549/LB, 1550/LB of 2003)..

Anwar Ali Shah, D.R. for Appellant (in I.T.As. Nos. 4043/LB and 4044/LB of 2001).

Shahid Abbas and Muhammad Hamid for Respondent (in I.T.As. Nos. 4043/LB and 4044/LB of 2001).

2006 P T D (Trib.) 1899

[Income-tax Appellate Tribunal Pakistan]

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

I.T.As. Nos. 735/LB and 851/LB of 2003, decided on 19th September, 2005.

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

----S. 62(1)---Assessment on production of accounts, evidence etc.---Add backs of profit and loss expenses on the basis of reasonableness/past history---Assessee contended that treatment accorded by the First Appellate Authority with regard to profit and loss add-backs was not at all justified and these should have been allowed in their entirety as the Assessing Officer had failed to comply with the mandatory requirement stipulated in S.62(1) of the Income Tax Ordinance, 1979 regarding formal confrontation to assessee before drawing any adverse inference---Validity---In case of profit and loss add-backs, it was a fact that formal confrontation under S.62 of the Income Tax Ordinance, 1979 had not been made---No add back would be tenable in law simply on the basis of alleged unreasonableness past history- Appellate Tribunal directed that the claimed expenditure be accepted.

2005 PTD (Trib.) 1208; 2004 PTD (Trib.) 2231; 2002 PTD (Trib.) 1583; 1999 PCTLR 1098; (1984) 50 AX 44; (1970) 76 ITR 365; 2002 PTD 407 HC Kar 417; 1999 PTCLR 1098 (Trib.) 1100; 2004 PTD 1640 FTO/1646-C; 2003 PTD (Trib.) 625; 1999 PTD (Trib.) 3892; 1996 PTD 263; 1998 PTD (Trib.) 860; 2003 PTD (Trib.) 2668 and (1999) 79 Tax 264 (Trib.) 266 rel.

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

----S. 62(1)---Assessment on production of accounts, evidence etc.---Formula assessments---Trading account-First Appellate Authority directed to accept the trading account---Appeal by the Department---Assessee contended that Assessing Officer had failed to cite specific defects in the books maintained and to formally confront the assessee under S.62 of the Income Tax Ordinance, 1979---Relief accorded by the

First Appellate Authority was fully justified---Validity---No exception could be taken to the finding recorded by the First Appellate Authority with regard to acceptance of manufacturing/trading account of the assessee company---Department's reference to electricity consumption was not convincing---"Formula assessments" were not acceptable---Assessing Officer had not formally confronted the assessee with comprehensive particulars of the case held by him to be parallel to assessee company's case---Adverse inference drawn by the Assessing Officer was indeed not justified---First Appellate Authority rightly directed that trading account were to be accepted.

2005 PTD (Trib.) 1208 ;2004 PTD (Trib.) 2231 2002 PTD (Trib.) 1583; (1984) 50 AX 44; (1970) 76 ITR 365; 2002 PTD 407 HC Kar 417; 1999 PTCLR 1098 Trib. 1100; 2004 PTD 1640 FTO/1646-C; 2003 PTD (Trib.) 625; 1999 PTD (Trib.) 3892; 1996 PTD 263; 1998 PTD (Trib.) 860; 2003 PTD (Trib.) 2668 and (1999) 79 Tax 264 (Trib.) 266 rel.

Siraj Khalid and Sohail Ibne Siraj for Appellant (in I.T.A. No. 735/LB of 2003).

Dr. Ahmad Shahab, D.R. for Respondent (in I.T.A. No. 735/LB of 2003)..

Dr. Ahmad Shahab, D.R. for Appellant (in I.T.A. No. 851/LB of 2003).

Siraj Khalid and Sohail Ibne Siraj for Respondent (in I.T.A. No.851/LB of 2003).

2006 P T D (Trib.) 1918

[Income-tax Appellate Tribunal Pakistan]

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

M.As. Nos.14(PB) and 49(PB) of 2004, decided on 18th September, 2004.

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

---S. 156(3) & Second Sched., Part-1, Cl. (118C)---Rectification of mistake---Limitation---Assessee contended that due to non-passing of order on miscellaneous application, dated 8-3-2001, automatic rectification under the deeming provision of S.156(3) of the Income. Tax Ordinance, 1979 had taken place as on 30-6-2002 and passing of order, dated 28-12-2002 on application, dated 8-3-2001 was barred by limitation of one year---Validity---Photocopies of alleged rectification application produced during the hearing showed the date of receipts by the department as 8-3-2001 whereas no such original application showing this date of receipt was available in the departmental record---Attested photocopies of the same application showed the date of receipt as 8-6-2002---Entries relevant to receipt of rectification application were made at proper place of the register, these entries were in sequence of time-frame---No entry of any application by the assessee dated 8-3-2001 was found in the register which was apportioned for receipt of income tax rectification application---Photocopies of alleged application produced on behalf of assessee showed the date of acknowledgement and registration of application as 8-3-2000, while photocopies of the same application duly attested by the Assessing Officer was showing the date of receipt by department as 8-6-2002 required further investigation and same alone was sufficient to reject the miscellaneous applications---Departmental record had been tampered with by subsequent placing of miscellaneous rectification application and efforts were made to convince the Appellate Tribunal on the issue which was an afterthought and intended to mislead---Application was rejected by the Appellate Tribunal in circumstances.

2001 PTD (Trib.) 2922 ref.

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

----S. 156(3) & Second Sched., Part-1, Cl. (118C)---Rectification of mistake---Exemption---Assessee contended that assessment year 1993-94 was the first year of production which was accepted as such while commercial production was started from 'assessment year 1994-95 but the Assessing Officer, due to mistaken fact, had considered it as 2nd year of exemption---Validity---Assessment order of assessment year 1993-94 was silent by not giving any comments on the nature of production as to whether commercial or trial---By drawing the distinction between trial and commercial production, the production of the assessment year 1993-94 was found commercial production---There remained no room for further discussion and was sufficient to negate and disprove the contention of assessee---Applications being devoid of merits were rejected by the Appellate Tribunal in circumstances.

2001 PTD (Trib.) 2922 and (2000) 82 Tax 481 ref.

1998 PTD 2722 rel.

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

Date of hearing: 19th August, 2004.

2006 P T D (Trib.) 1936

[Income-tax Appellate Tribunal Pakistan]

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

I.T.As. Nos.141/LB and 142/LB of 2006, decided on 25th February, 2006.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 153(1)(c), 153(6) & 115(4)---C.B.R. Circular No.1 of 2005, dated 5-7-2005---C.B.R. Circular No.11 of 1991, dated 30-6-1991---Payments for goods and services---Persons not required to furnish a return of income---Carriage contractors---Assessee instead of filing statement filed returns claiming refund---Assessing Officer observed that deduction of tax on payments in case of carriage contractors was the full and final discharge of tax liability and claim of refund could not be entertained---First Appellate Authority directed the Assessing Officer to give effect to the tax deduction as in accordance with C.B.R. Circular No.1 of 2005, dated 5-7-2005 withholding tax on all types of services was adjustable and directed to issue refund as claimed---Validity---While accepting appeal of the assessee, First Appellate Authority had fully justified his action---Appellate Tribunal endorsed his view that Assessing Officer was quite unjustified while rejecting the claim of refund by treating the tax deducted as full and final discharge of tax liability---First Appellate Authority had rightly given a judicious direction, which did not warrant any interference---Departmental appeals were dismissed by the Appellate Tribunal being devoid of legal substance.

(2005) 91 Tax 263 (Trib.) ref.

2004 PTD 2749 rel.

Anwar Ali Shah, D.R. for Appellant.

Sh. Zafar-ul-Islam for Respondent.

2006 P T D (Trib.) 1939

[Income-tax Appellate Tribunal Pakistan]

Before Rasheed Ahmed Sheikh, Judicial Member

I.T.A. No.2594/LB of 2004, decided on 6th January, 2006.

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

----S.13(1)(e)---Unexplained investment etc., deemed to be income---Addition---Assessee paid nine days visit to United Arab Emirates and thirty eight days to United States and a sum of Rs.510,000 was shown to have been incurred on such tours---Assessing Officer considered such expenses to be on the lower side and proceeded to estimate such expenses at Rs.10,00,000---Addition of Rs.4,90,000 was made in terms of S.13(1)(e) of the Income Tax Ordinance, 1979 on account of declaring less expenses on foreign tour---First Appellate Authority deleted such addition as the same was made without bringing any material whatsoever on record-Validity-Since, estimate of Assessing Officer holding that expenses of Rs.10,00,000 were incurred on foreign tours, without any shadow of doubt, was based on hypothetical and fanciful assumption same was bound to be deleted--Addition made by the Assessing Officer was nothing but an exhibition of arbitrary powers---Even approval granted by supervisory officer also showed lack of application of mind as he did not bother to check the basis for the estimation of expenditure---Finding of First Appellate Authority was endorsed by the Income Tax Appellate Tribunal in its totality and department appeal was dismissed.

(b) Income-tax---

----Estimation of expenses---Principle---Estimate without details could not be upheld in all circumstances and the department should give at least some definite basis for arriving at the conclusion that higher expenses were incurred viz claimed.

Dr. Shahid Siddique Bhatti, D.R. for Appellant.

Arshad Nauman, I.T.P. for Respondent.

2006 P T D (Trib.) 1941

[Income-tax Appellate Tribunal Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member and Shaheen Iqbal, Accountant Member

I.T.As. Nos. 1616/KB, 1617/KB of 2003, 1622/KB, 1623/KB of 2003, decided on 17th March, 2005.

Income Tax Ordinance (XLIX of 2001)---

----S.122(5A)---Income Tax Ordinance (XXXI of 1979), S.59(1)---Finance Act (I of 2003), Preamble---C.B.R. Circular No.11 of 1991, dated 30-6-1991---Amendment of assessments---Issuance of show-cause notice under S.122 of the Income Tax Ordinance, 2001 for the assessment year 1998-99 on 29-4-2003 and for assessment year 1999-2000 on 19-4-2003 for amendment of already completed assess­ments---Assessee contended that at the time on which the said show-cause notice had been issued proposing amendment in the earlier completed assessment for the reasons that the orders were erroneous and prejudicial to the interest of revenue, the law prevailing at that point of time did not give the requisite jurisdiction to the Assessing Officer as subsection (5A) of S.122 of the Income Tax Ordinance, 2001 containing the requisite provisions for jurisdiction purposes was inserted in law on 16-6-2003 through Finance Act, 2003---Validity---On the dates on which the show-cause notices were issued proposing action under S.122 of the Income Tax Ordinance, 2001, the Assessing Officer had no power to amend the assessment on the ground that it was erroneous and prejudicial to the interest of revenue due to the reason that the related provisions of law were not available to the Assessing Officer---Jurisdiction assumed by the Assessing Officer was without jurisdiction, as at the time when he started the proceedings, he had no jurisdiction to proceed with the case and his subsequent actions were ab initio void and illegal---Order of First Appellate Authority was vacated and orders passed by the Assessing Officer under 5.122 of the Income Tax Ordinance, 2001 were cancelled by the Appellate Tribunal.

Messrs Sui Northern Gas Company Ltd.'s case I.T.A. No.837, 838/KB of 2003 and Messrs Jahangir Siddiqui & Company Limited, Karachi v. IAC in M.As. (A.G.) Nos. 349 to 353/KB of 2004, I.T.As. Nos. 825 to 829/KB of 2003 and I.T.As. Nos. 896 to 900/KB of 2003 rel.

2003 PTD 52; 2002 PTD 248; 2001 PTD 1525 and 1984 PTD 137 ref.

Abid Shaban for Appellant (in I.T.As. Nos. 1616/KB and 1617/KB of 2003).

Ms. Farzana Jabeen, D.R. for Respondent (in I.T.As. Nos.1616/KB and 1617/KB of 2003).

Ms. Farzana Jabeen, D.R. for Appellant (in I.T.As. Nos. 1622/KB and 1623/KB of 2003).

Abid Shaban for Respondent (in I.T.As. Nos.1622/KB and 1623/KB of 2003).

2006 P T D (Trib.) 1947

[Income-tax Appellate Tribunal Pakistan]

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

I.T.As. Nos.2022/LB to 2025/LB of 2000, decided on 6th September, 2003.

Income Tax Ordinance (XXXI of 1979)---

----Ss. 156(3) & 13(1)(aa)---C.B.R. Circular No. 4 of 1979, dated 23-8-1979---Rectification of mistake---Addition---Setting aside of assessment by the First Appellate Authority---Appeal against by the Department that assessments were rightly made and additions made being in consonance with law were justified---Assessee submitted' that departmental appeals had become infructuous, since the order passed by the First Appellate Authority stood rectified under S.156(3) of the Income Tax Ordinance, 1979 as application seeking rectification was filed before the First Appellate Authority---Validity---Assessee preferred an application seeking rectification as on 1-1-2001 which should have been decided by 30-6-2002 failing which mistake sought to be rectified would be deemed to have been so rectified---Assessee did its level best by sending reminders requesting for disposal of rectification application on different dates---Assessee sent an application requesting for adjudication of said rectification application followed by their further reminders---Assessee was informed by the department that no such application was available on record almost 2-1/2 years after filing the application and exactly one year after the first reminder---Stamps of the department along with signatures on copy of rectification application, reminders and production of original peon book went a long way to belie the departmental stand that they received no such application---Assessee submitted application on 1-1-2002 which should have been finalized till 30-6-2002, failing which the mistake sought to be rectified stood rectified by operation of law---Order appealed against was not holding the field after having been rectified---Appeals having become infructuous were, dismissed by the Appellate Tribunal.

1998 PTD (Trib.) 3478 rel.

Waheed Shahzad Butt for the Assessee.

Bashir Ahmad Shad, D.R. for the Department.

Date of hearing: 4th September 2003.

2006 P T D (Trib.) 1958

[Income-tax Appellate Tribunal Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member and Mukhtar Ahmad Gondal, Accountant Member

I.T.As. Nos.5570/LB of 2002, 4793/LB of 2003, decided on 12th August, 2005.

Income Tax Ordinance (XXXI of 1979)---

----S.62---Survey for Documentation of National Economy Ordinance (XV of 2000), Preamble---Assessment on production of books of accounts, etc.---Estimation of sales on the basis of survey---Department contended that First Appellate Authority without any cogent reason discarded the estimation of Assessing Officer in adopting admitted sales duly agreed to by the sole proprietor and daughter of the assessee in survey forms duly filled by the daughters of assessee---Survey team comprising of experienced Income Tax, Sales Tax and Military Officers made an agreement with the assessee for power loom and trading business at two places in different cities---Only to hoodwink the Department, the assessee at belated stage had taken plea before First Appellate Authority that they had not made any agreement with the Survey Authorities---Assessee had a proper forum to agitate admitted turnover if found "forced agreement" within reasonable time but assessee accepted said agreement, as such relief given by First Appellate Authority was not based on facts---Validity---First Appellate Authority observed that Assessing Officer blindly followed the disputed survey forms---Appellants had successfully proved that the survey forms were not received by them and that the date had been interpolated on survey forms in respect of the persons who had already discontinued the business---Was obligatory upon the Assessing Officer to investigate the matter and apply his mind in this queer situation when the basis of the order was being challenged forcefully and successfully---First Appellate Authority allowed the appeal except assessment of rental amount and business telephone charges---Appellate Tribunal, after considering findings of First Appellate Authority did not interfere in the order and upheld the same---Appeal filed by the department was dismissed.

S.A. Masood Raza Qazalbash, D.R. for Appellant.

Ahmad Nadeem Ahsan for Respondent.

2006 P T D (Trib.) 1962

[Income-tax Appellate Tribunal Pakistan]

Before Khawaja Farooq Saeed, Chairperson

I.T.A. No.713/IB of 2004, decided on 21st May, 2005.

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

----Ss.24(i) & 163(2)---Agreement for Avoidance of Double Taxation between Pakistan and Poland---Department pleaded that provisions of Income Tax Ordinance, 1979 were applicable even on non-resident companies and there was no exception provided in the Avoidance of Double Taxation Treaty of Pakistan with Poland with regard to non- application of S.24(i) of the Income Tax Ordinance, 1979---Validity---Languages used was very wide and reading the same through S.163(2) of the Income Tax Ordinance, 1979 clearly gave the impression that only such expenses which were incurred for the purposes of permanent establishment were allowable---There was an exception to the rule however, that such exception was not with regard to S.24(i) of the Income Tax Ordinance, 1979.

I.T.A. No.463/LB of 2003 and R.A. No.140/IB of 2004 rel.

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

----S.163---Avoidance of Double Taxation and Prevention of Fiscal Evasion---Agreement for Avoidance of Double Taxation between Pakistan and Poland--Since the Convention was notwithstanding the provisions of Income Tax Ordinance, 1979. hence was governed under its own Articles.

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

--Ss.24(i) & 163---Agreement for Avoidance of Double Taxation between Pakistan and Poland, Art.3(7)---Under Article 3(7) of the Convention deduction of expenses, which were incurred for the purpose of permanent establishment, were to be allowed as a whole.

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

----Ss.163 & 24(i)---Avoidance of Double Taxation and Prevention of Fiscal Evasion---Agreement for Avoidance of Double Taxation between Pakistan and Poland---Interpretation and explanation---Provisions of the Income Tax Ordinance, 1979 shall not apply with regard to the determination of expenses under the said Convention---Such conventions were drawn under the delegated power through S.163 of the Income Tax Ordinance, 1979 and it was as good a law as Income Tax Ordinance, 1979 itself---Rules of interpretation applicable on interpretation of statutes were fully applicable for interpreting the Articles of the Convention and in this regard the principle of not to exceed beyond intendments applies on all fours---Section 163 of the Income Tax Ordinance, 1979 was a non-obstante clause and supersedes every thing contained in Income Tax Ordinance, 1979---Once all the provisions were substituted by a separate Convention it could not be said that provisions of Income Tax Ordinance, 1979 were still applicable.

Manzoor Ahmed, D.R. for Appellant.

Ms. Rubica Jafri, I.T.P. for Respondent.

2006 P T D (Trib.) 1965

[Income-tax Appellate Tribunal Pakistan]

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

I.T.A. No. 5144/LB of 2005, decided on 25th February, 2006.

Income Tax Ordinance (XXXI of 1979)---

----Ss.50(4A), 59(A) & 156---Deduction of tax at source---Commission--Assessment was finalized under Self-Assessment Scheme but credit of tax deducted on commission was disallowed on the ground that commission/incentive received by the assessee was subjected to tax @ 10% under S.50(4A) of the Income Tax Ordinance, 1979 and these were covered under Presumptive Tax Regime and tax so deducted was final discharge of tax liability---First Appellate Authority directed to accept the contention of assessee to process rectification application on the ground that assessment framed under S.59(A) of the Income Tax Ordinance, 1979 was in existence and was valid to all purposes of the provisions of Income Tax Ordinance, 1979---Validity---Assessment was finalized under S.59(A) of the Income Tax Ordinance, 1979 and it was intact till the assessee filed rectification application as such it was valid to all purposes of provisions of law under Income Tax Ordinance, 1979---Rejection of rectification was not well-founded---Finding of First Appellate Authority was fair and judicious---Department sought vacation of order of First Appellate Authority merely on the basis of presumptions and conjectures, which could not be allowed at all---First Appellate Authority had passed a speaking order, which sufficiently met the ends of justice and could not be interfered in the absence of plausible reasons put forth from revenue side---Order of First Appellate Authority was upheld and departmental appeal was dismissed by the Appellate Tribunal being devoid of legal substance.

2005 PTD (Trib.) 668 and (2005) 91 Tax 157 (FTO) ref.

Anwar Ali Shah, D.R. for Appellant.

Zafar-ul-Islam for Respondent.

2006 P T D (Trib.) 1968

[Lncome-tax Appellate Tribunal Pakistan]

Before Ehsan-ur-Rehman, Judicial Member and Naseer Ahmed, Accountant Member

I.T.As. Nos. 2449/LB, 2450/LB, 2452/LB, 5522/LB of 2002 and 2189/LB of 2000, decided on 5th December, 2005.

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

----S. 80-D & Second Sched., Part-I, Cl. 102B---S.R.O. No.337(I)/93, dated 25-4-1993---S.R.O. 921(I)/94, dated 22-9-1994---S.R.O. 1189(I)/94, dated 11-12-1994---Protection of Economic Reforms Act (XII of 1992), Preamble---Minimum tax on income of certain persons---Exemption---Levy of minimum tax on the turnover whereas exemption had been admittedly allowed in respect of profit and gains---Validity---As per plain opening language of Part-I of the Second Schedule of the Income Tax Ordinance, 1979 the assessee company undisputedly was qualified for exemption under Cl. 102B of Part-I of the Second Schedule of the Income Tax Ordinance, 1979, and could not be burdened with S.80D of the Income Tax Ordinance, 1979, a liability which was in existence prior to Cl. 120B of Part-I of the Second Schedule of the Income Tax Ordinance, 1979---Controversy could also be resolved in favour of assessee even as per Cl. 102B of Part-I of the Second Schedule of the Income Tax Ordinance, 1979, language of S. 80D of the Income Tax Ordinance, 1979 and the opening para of Part-I of the Second Schedule of the Income Tax Ordinance, 1979.

Ellahi Cotton Mills's case 1997 PTD 1555 and Fecto Belarus Tractors Limited v. Federation of Pakistan 2001 PTD 1829 rel.

2001 PTD (Trib.) 865; 2000 SCMR 1012; 1999 SCMR 1072; 1999 SCMR 412 and 1989 CLC 776 ref.

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

----Second Sched., Part-I, Cl. 122-C---Protection of Economic Reforms Act (XII of 1992), Preamble---Exemption---Clause 122-C, Part-I, Second Schedule of the Income Tax Ordinance, 1979 having been introduced in 1987 so it was to be resolved as to whether it was covered under Protection of Economic Reforms Act, 1992.

Zaman Cotton Mill's case 2001 PTD 1203 distinguished.

(c) Income-tax---

----Exemption---Application of case-law---Case cited in respect of customs duty and sales tax had its applicability (on Income Tax) because both such laws were part of fiscal laws like income tax, so the principles as laid down while granting exemption would be available in the Income Tax proceedings.

(d) Protection of Economic Reforms Act (XII of 1992)---

----S. 6 & Sched.---Notification entitling concessions from duty, sales tax had specifically been made part of Protection of Economic Reforms Act, 1992.

Asim Zulfiqar ACA and Zulfiqar Ali Sheikh, ITP for the Assessee.

Ali Ashtar Naqvi and Shahid Jamil Khan. L.A for the Respondent.

Date of hearing: 3rd December, 2005.

2006 P T D (Trib.) 1979

[Income-tax Appellate Tribunal Pakistan]

Before Khawaja Farooq Saeed, Chairperson, Rasheed Ahmad Sheikh, Judicial Member and Amjad Ali Ranjha, Accountant Member

I.T.As. Nos.4181/LB to 4183/LB, 4493/LB of 2000, 31/LB, 32/LB of 2001; 1979/LB and 1980/LB of 2003, decided on 30th August, 2003.

Per Rashid Ahmad Sheikh Judicial Member; Khawaja Farooq Saeed Chairman Agreeing---

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

----Ss. 80-D, 80-C, 80-CC & 62---Minimum tax on income of certain persons---Levy of minimum tax in second round of litigation---Assessee contended that no tax in terms of S.80D of the Income Tax Ordinance, 1979 was levied by the department at the time of finalization of original assessment under Ss.62, 80C and 80CC of the Income Tax Ordinance, 1979; said levy was raised in pursuance of Appellate Tribunal's direction given at the time of first round of litigation; since original order had merged with the appellate order on account of following "doctrine of merger" as a result of which the original order loses its independent entity and that levy of new charge under S.80D of the Income Tax Ordinance, 1979 on re-assessment thus was illegal and uncalled for---Validity---Tax under S.80CC of the Income Tax Ordinance, 1979 was originally levied merely that levy had been modified while adhering to the directions and findings given by the Appellate Tribunal, assessee could not dislodge this factum at the time of arguing the case---Plea of assessee that it was a new levy was not established from the record--- Assessing Officer, while assessing the assessee's income, came to a conclusion that no tax was payable or the tax paid was less than one half percent of the amount representing its turnover from all sources the provisions of S.80D of the Income Tax Ordinance, 1979 shall suo motu came into operation---Assessee had not claimed that he had paid more tax than the one worked out on its total turnover from all sources---Assessing Officer therefore, had rightly worked out the tax in terms of S.80D of the Income Tax Ordinance, 1979.

(2000) 82 Tax 149 (Trib.) rel.

1992 PTD 566; (19'92) 65 Tax 366; PLD 1969 SC 322; W.P. No.235 of 2002, I.T.As. Nos.2134 and 2135/LB of 2002; and Messrs Be Be Jan Pakistan, Faisalabad's case (2002) 86 Tax 259 distinguished.

(b) Income-tax---

----New levy---Show-cause notice---Without confronting the assessee with a show-cause notice, no new levy can be charged on re-assessment to be made in pursuance of the directions given in appellate order. [p. 1983] B

1992 PTD 566; 1992 PTD 709; 2001 PTD (Trib.) 1059; PLD 1969 SC 322; W.P. No.235 of 2002, I.T.As. Nos.2134 and 2135/LB of 2002; and Messrs Be Be Jan Pakistan, Faisalabad's case 2002 PTD 208 ref.

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

----Third Sched., Rr. 7(b)(1) & 8(5)---Disposal of assets and treatment of resultant gains or losses---Sale proceeds---Exemption was claimed on sale of business assets---Department contended that since land and building represented business assets, which were entitled for depreciation, the gain earned on such asset constituted business income within the meaning of R.7 (b)(1) of the Third Schedule of the Income Tax Ordinance, 1979---Validity---Gain earned on sale of building could not be taxed particularly when R. 7(b)(1) was read with sub-rule (5) of R.8 of the Third Schedule to the Income Tax Ordinance, 1979---Rule 7 of the Third Schedule to the Income Tax Ordinance, 1979 merely enunciate that where any asset was disposed of by an assessee and if the sale proceeds thereof exceeded the written down value, the excess shall be deemed to be the income of the assessee of that year chargeable under the head "income from business or profession" and if the sale proceeds were less than the written down value, the deficit shall be deemed to be an expenditure deductible from the profits and gains of the business or profession of that year---Rule 8 of the Third Schedule to the Income Tax Ordinance, 1979 defines the words and terminology used in R.7 of the Third Schedule to the Income Tax Ordinance, 1979 such as "fair market value", "furniture", "plant", "Sale proceeds" etc; proviso had been added through Finance Ordinance, 1980 under the definition of "sale proceeds" whereby it had been provided that in case of "building" the term "sale proceed" shall mean an amount equal to the lower of the original cost and sale price or fair market value whichever was higher---Since original cost was lower, therefore, the gain earned on sale of building fell outside the domain of the Assessing Officer to tax the same under R.7(b) of the Third Schedule to the Income Tax Ordinance, 1979--Gain earned on sale of commercial building was not taxable in the hand of assessee in circumstances and Assessing Officer had fallen in serious error in taking the gain without appreciating the Rules in their proper perspective---Transaction was not an adventure in the nature of trade of property as a commodity---Intention to earn profit was undoubtedly there, but an accretion in capital could not make it an income chargeable to tax even if the intention of its purchase was to earn profit---Order of First Appellate Authority was vacated and addition made on account of gain on sale of building was deleted by the Appellate Tribunal.

2002 PTD 2169; (1990) 61 Tax 105; Commissioners of Inland Revenue v. Birmingham Theatre Royal Estate Co. Limited; Commissioner of Income Tax, Delhi v. M.K.S. Pratap Kumari of Alwar 1982 PTD 59; Premier Cloth Mills Ltd. v. Sales Tax Officer 1972 SCMR 257; K.M.O. Chettiyar Firm v. Commissioner of Income Tax 1934 ITR 155; AIR 1959 SC 1252; (1965) 57 ITR 21; (1978) 37 Taxation 233; (1976) 102 ITR 202; (1994) 69 Tax 299; (1995) 72 Tax 197: (1976) 102 ITR 2002 and AIR 1959 SC 1252 rel.

(d) Income-tax---

----Exemption---If the assessee did not claim that the amount was not taxable, a non-taxable figure could still not be brought to tax under the law.

(e) Administration of justice---

----Issue was not to be raised again in the second round of litigation if the same had come to an end in the first round for all practical purposes.

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

----Third Sched., Rr.7(b)(i)(ii) & 8---Disposal of assets and treatment of resultant gains or losses---Explanations---Rule 8 of the Third Schedule of the Income Tax Ordinance, 1979 was in continuation of all earlier rules of the Third Schedule of the Income Tax Ordinance, 1979 and started with the language "for the purpose of this Schedule"---Rule 8 only defined various terms used in the Third Schedule, for example, it defined the terms "sale proceeds" which had been used in Rr.7(b)(i) and 7(b)(ii) of the Third Schedule of the Income Tax Ordinance, 1979---To say that this definition did not have any application and could not be read with R.7(b)(i) of the Third Schedule of the Income Tax Ordinance, 1979, was a misconception---Rule 8 of the Third Schedule of the Income Tax Ordinance, 1979 was not only to be read along with R.7 of the Third Schedule of the Income Tax Ordinance, 1979 but with all other rules of the Third Schedule in entirety.

Per Amjad Ali Ranjha Accountant Member [Minority view]---

1999 PTD (Trib.) 14; 2000 PTD 14; 1987 PTD (Trib.) 671 ref.

Muhammad Iqbal Khawaja and Faisal Iqbal Khawaja for Appellant/Assessee.

Javed-ur-Rehman, D.R. for the Respondent/Department.

2006 P T D (Trib.) 2004

[Income-tax Appellate Tribunal Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member and Mukhtar Ahmad Gondal, Accountant Member

W.T.As. Nos.775/LB to 778/KB of 2004, decided on 16th August, 2005.

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

----S.17B---Powers of Inspecting Additional Commissioner to revise Wealth Tax Officer's order---Jurisdiction---While exercising jurisdiction under S.17B of the Wealth Tax Act, 1963, Inspecting Additional Commissioner had been given two powers to pass order enhancing or modifying the assessment or cancelling the assessments and directing a fresh assessment to be made---Inspecting Additional Commissioner had cancelled assessments, but simultaneously had enhanced the assessments for which he was under legal obligation to make direction for fresh assessment to be made.

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

----S.17B-,--Powers of Inspecting Additional Commissioner to revise Wealth Tax Officer's order---Jurisdiction---Directions by the Inspecting Additional Commissioner---Inspecting Additional Commissioner, instead of passing formal order in accordance with law directed concerned officer to make fresh assessment, and had also directed the Special Officer "to go through the order carefully" as "the case under reference involves potential revenue, therefore, action on your part must be completed on priority basis under intimation to this office"---Such order passed under directions by the superior officer could never be fair and justified being' passed under the pressure of the superior officers and could not be appreciated.

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

----S.17B---Powers of Inspecting Additional Commissioner to revise Wealth Tax Officer's order---Change of opinion---Addition of stock/bills receivable in net wealth---During first round, Inspecting Additional Commissioner in his order under S.17B of the Wealth Tax Act, 1963 did mention/discuss stock/bills receivable, but not added the same towards net wealth---Liabilities were disallowed in order to convert the losses declared into net wealth at certain figures, while in second round, Inspecting Additional Commissioner had made the addition of the same which would tantamount to change of opinion which was not permissible under the law.

(d) Interpretation of statutes---

----When a statute confers a certain duty, on an officer, it is that officer who has to make up his mind and pass the order in accordance with law and exercise his discretion uninfluenced by any opinion of any other authority.

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

----Ss.16, 17B, 23 & 31B---Assessment---Cancellation of assessments and directions by the Inspecting Additional Commissioner for completion of assessment---Validity---Inspecting Additional Commissioner while remanding the case of Assessing Officer had specifically directed that the case under reference involved potential revenue, therefore, action on his part must be completed on priority basis under intimation to his office which clearly showed that the Assessing Officer had acted as a tool of the Inspecting Additional Commissioner and had not applied his own mind to the facts of the case available on record which was in violation of law and not sustainable---Additions made by the Assessing Officer was without justification---Order of First Appellate Authority was vacated and order passed under S.16/17B/23 of the Wealth Tax Act, 1963 was cancelled---Original assessment was restored---Addition made under S.31B of the Wealth Tax Act, 1963 was deleted by the Appellate Tribunal.

2001 PTD 804 ref.

Shahid Abbas for Appellant.

Anwar Ali Shah, D.R. for Respondent.

2006 P T D (Trib.) 2012

[Income-tax Appellate Tribunal Pakistan]

Before Rasheed Ahmed Sheikh, Judicial Member and Javed Tahir Butt, Accountant Member

I.T.As. Nos. 697/LB to 700/LB, 1591/LB and 1592/LB of 2001, decided on 24th February, 2005.

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

----Ss.65(3A) & 62---Additional assessment---Limitation---Notice under S.62 of the Income Tax Ordinance, 1979 dated 23-6-2000 was issued which consisted of nine pages---Reply of said notice was delivered at 12-10 p.m. on 30th June, 2000 which was the last date of completion of additional assessments---On July 1st, 2000, a request was made by the assessee for delivery of copy of assessment order personally---On 3rd July, 2000 besides requesting inspection of file, copy of the order sheet was requisitioned which was refused---Assessee contended that it was positive to apprehend and believe that no order was passed within the limit of time specified in S.65(3A) of the Income Tax Ordinance, 1979; that vested right had been accrued in respect of assessment which was made after expiry of period of limitation and that order passed after refusal to supply copy of such assessment order as on 9-7-2000 was mala fide and was designed to pass antedated to show the same to have authored on 30-6-2000 by Assessing Officer---Validity---Under Civil Procedure Code, 1908 short order was to be announced, the day, the proceedings of a case were concluded---While in fiscal statutes the legislature in its wisdom had not adopted such practice; it was so because fiscal statutes generally create liability on a citizen for which a serious deliberation was required---Had the Assessing Officer passed the order under S.65 of the Income Tax Ordinance, 1979 after the cut date, then it would have been very comfortable for the appellate Court to declare such order to have-been passed without lawful jurisdiction---Such was not the case of assessee---Assessee tried by enumerating series of events to contend that assessment order had been passed beyond the cut date---Record did not support the assessee's contention---Appellate Tribunal held that assessment order had been passed within the limit of time specified under the law and objection of assessee was overruled.

(b) Income-tax---

---Limitation---If on the date of hearing of the case factum of concluding proceedings had been recorded in the order sheet, the Assessing Officer could proceed to dictate the order subsequently but of course, within a reasonable period of time.

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

---S.65---Additional assessment---Assessment on the basis of projected figures submitted to Bank for obtaining loan---Validity---Appellate Tribunal had recognized the customary practice of projected figures for obtaining loans and had held unequivocally that such projected figures were not good ground for frustrating the assessment.

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

---S. 65---Additional assessment---"Definite information"---Statement filed with bank merely for purposes of obtaining financial assistance-Once admitted that the statements filed with the bank were merely for the purposes of obtaining financial assistance, those could not assume the character of "definite information" for the purposes of invoking the provisions of S.65 of the Income Tax Ordinance, 1979.

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

----S.65----Additional assessment---"Definite information"---Variance in figures recorded in the books of accounts and those appearing in the accounts filed with the Bank---Assessment---Validity---No doubt that the assessee had given inflated figures in the statements filed with the bank, but fact remained that the figures appearing in the statements of accounts filed with the Tax Department did match with the figures recorded in the books of accounts maintained by the assessee---Such was not the case of department that the figures recorded in the books of accounts and those appearing in the account statements filed with the Department were at variance---Department had not objected to such factum that purpose of showing inflated figures in the statement which were filed with the Bank was other than obtaining financial assistance/loan---Statements filed with the Bank could not be read in isolation---In no way the statements filed with the Bank constituted "definite information" which could compel initiation of proceedings under S.65 of the Income Tax Ordinance, 1979.

1992 PTD 739; 1990 PTD (Trib.) 106 and 1993 SCMR 1108 = 1993 PTD 1108 rel.

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

----S. 65---Additional assessment---"Definite information"---Projected figures submitted to Bank for obtaining financial assistance---Filing of projected figures for obtaining loan may be a piece of information, the truth of which had yet to be established---Such information could not be held to be "definite" in its character.

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

----S.65---Additional assessment---Inquiry---Assessment on the basis of inquiry conducted after issuance of notice under S.65 of the Income Tax Ordinance, 1979---Validity---Inquiry was made by Assessing Officer subsequent to issuance of notice under S.65 of the Income Tax Ordinance, 1979---Such practice had always been deprecated by higher appellate forums---Record had established that mandatory jurisdictional requirement to be in possession of the "definite information" regarding concealment or escapement of income prior to initiation of proceedings under S.65 of the Income Tax Ordinance, 1979 was not fulfilled---No sanctity could be attached to such information in order to invoke the provisions of S.65 of the Income Tax Ordinance, 1979.

(h) Words and phrases---

----"Cancel" and "Annual"---Distinction---When the word "cancel" is used, it generally means interruption of continuance, cessation or termination and does not mean putting an end to something which but for the action in question would have gone on---Word "annul" means to deprive a judicial proceeding of its operation, either retrospectively or only as to future transactions---"Annulment" means to nullify, to set at naught, to make void, to reduce to nothingness.

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

----Ss.65 & 129---Additional assessment---Number of legal infirmities---Cancellation of assessment but not annulment---First Appellate Authority, after giving serious deliberations on legal as well as factual aspects of the case, found the assessment made under Ss.62/65 of the Income Tax Ordinance, 1979 to be not sustainable in law and cancellation thereof was made---Validity---Assessment made under Ss.62/65 of the Income Tax Ordinance, 1979 merited annulment and not the cancellation because where there exists number of legal infirmities in the proceedings initiated for completion of additional assessments, which were not curable, those proceedings should be set at naught rather giving leverage to re-start---First Appellate Authority after thorough appraisal and appreciation of law and facts came to the conclusion that the assessment made under Ss.62/65 of the Income Tax Ordinance, 1979 was not sustainable in law, that certainly merited annulment---Reasonings and findings recorded by the First Appellate Authority to arrive at the decision was endorsed by the Appellate Tribunal but conclusion arrived at was modified to the extent that the assessment being not maintainable, both on legal as well as factual planes, stands annulled.

(j) Income-tax---

----Cash transactions---Cash transactions inter parties could not be doubted unless proved otherwise.

(k) Income-tax---

----Nature of business---Determination of---Commission income by selling the products of manufacturers of sweetmeat or business of manufacturing of sweetmeat---Assessing Officer had built up his opinion on extraneous consideration attributing business of manufacturing of sweetmeat to the assessee---No direct evidence was in possession of the Department to disbelieve the assessee's arrangement of earning commission income by selling the products of manufacturers of sweetmeat---In absence of pointing out definite material, full support was lent to the conclusion that the assessee was not the manufacturer of sweetmeat.

1991 PTD 488 rel.

(l) Income-tax---

----Contracts---When two parties contract to do something by a mutual valid contract or intend doing so, then the third party, like_ the Income Tax Department or for that matter the Court had no power to modify either the contract or what they have intended to do with it.

Dr. Ilyas Zafar and Hafiz Muhammad Ishaq, I.T.P. for Appellant (in I.T.As. Nos.697/LB to 700/LB of 2001).

Dr. Shahid Siddique Bhatti, D.R. for, Respondent (in I.T.As. Nos.697/LB to 700/LB of 2001)..

Dr. Shahid Siddique Bhatti, D.R. for Appellant (in I.T.A. 1591/LB and 1592/LB of 2001).

Dr. Ilyas Zafar and Hafiz Muhammad Ishaq, I.T.P. for Respondent (in I.T.A. 1591/LB and 1592/LB of 2001).

2006 P T D (Trib.) 2036

[Income-tax Appellate Tribunal Pakistan]

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

I.T.As. Nos. 194, 195 and 196/KB of 2004, decided on 23rd June, 2005.

Income Tax Ordnance (XLIX of 2001)---

----S. 122---Income Tax Ordinance (XXXI of 1979), Second Sched., Part-I, Cl. (86)---Amendment of assessments---Exemption---Interest income-Income was returned as Nil being an exempt income including profit on investment of Profit and Loss Account---Assessing Officer taxed such profit---First Appellate Authority set aside the assessment for de novo examination on merits on the plea that the whole of the income of an educational institution was exempt being an education institution---Assessing Officer finalized the assessment at Nil---Inspecting Additional Commissioner re-opened the assessments under notice under S.122 of the Income Tax Ordinance, 2001 being erroneous and prejudicial to the interest of Revenue and taxed the profit of such bank account---Validity---Income of the trust for charitable or religious purposes was exempt from income tax under Cl. (93) of the Second Schedule to the . Income Tax Ordinance, 1979 and income from voluntary contributions to charitable or religious institutions was exempt under Cl. 94 of the Second Schedule of the Income Tax Ordinance, 1979---Income from other sources including an interest income, however, would not be exempt, such was an income from other sources wherein exemption clauses were not attracted---If it was presumed that the investment had been made in the scheduled bank, even then exemption on interest income derived from a scheduled bank would be allowed with effect from 1-7-2003 as amended provision had no retrospective effect---Order of First Appellate Authority was annulled and that of Inspecting Additional Commissioner was maintained by the Appellate Tribunal.

77 Tax 73 of 1997 ref.

1994 PTD (Trib.) 1924 and I.T.A. No.1322/KB of 2004 rel.

Ghulam Shabbir Memon, D.R. for Appellant.

Amjad Javed Hashmi for Respondent.

2006 P T D (Trib.) 2040

[Income-tax Appellate Tribunal Pakistan]

Before Javid Iqbal, Judicial Member and Syed Aqeel Zafarul Hassan, Accountant Member

I.T.As. Nos. 157(PB) and 172(PB) of 2002, decided on 16th December, 2003.

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

----Second Sched., Part-1, Cl. (118C) & S.156---S.R.O. 857(I)/88, dated 26-9-1988---Exemption---Rectification of mistake---First year of exemption---Determination---Assessee contended that production during assessment year 1993-94 was trial production and assessment year 1994-95 was first year of exemption as in assessment year 1993-94 no commercial production was made and the production of 113 days was trial production and Assessing Officer made a mistake in the assessment year 1999-2000 by allocating it as 7th year of exemption .from tax holiday; that commercial production started from 5-11-1992 which was relevant to the assessment year 1994-95 as Assessing Officer while framing assessment for assessment Year 1994-95 had mentioned that commercial production had started from 5-11-1992; that allocation of 2nd year of exemption in the assessment order for assessment year 1994-95 was a mistake on the basis of which period of 8 years exemption could not be curtailed by the mistaken remarks in the assessment year 1994-95, "that it was 2nd year of exemption" and that such mistake in the assessment order for assessment year 1999-2000 be rectified-- Validity---When product was marketed the production should be considered commercial production---Production was carried out for full crushing season of 113 days and the product was sold in market---Plea that production of assessment year 1993.-94 was trial production had been found incorrect---Rectification application had been filed on 16-8-2001, whereas the filing of alleged rectification application for assessment year 1994-95 and onward had been claimed to be filed as on 8-3-2001 but this fact had neither been established from .the subsequent rectification application, dated 16-8-2001 nor in the order of rejection by Assessing Officer or in the order, otherwise this fact should have been definitely mentioned in subsequent application for assessment year 1999-2000---If the rectification application for assessment year 1994-95 and onward was already filed by the assessee and the word "onward" covered all subsequent assessment years then why the application for the subject year under appeal had been filed---Orders of assessment years 1993-94 to 1997-98 had got finality---Assessment order of assessment year 1998-99, order of which was passed in combine with assessment year under appeal had also attained finality to which the exemption of 6th year had been allocated by Assessing Officer, with the allocation of 7th year to assessment year 1999-2000-First Appellate Authority committed a mistake by setting aside the order of assessment year, as there existed no mistake apparent from the order and the Assessing Officer was absolutely right in rejecting the rectification application---Orders of earlier years had got finality which could not be disturbed by rectifying only subsequent order of assessment year 1999-2000---Order of First Appellate Authority was vacated and that of Assessing Officer was restored by the Appellate Tribunal.

(1954) 26 ITR (sic); (1982) 133 ITR 879; 1999 PTD 4126; (1998) 79 Tax 279 (Trib.); 2001 PTD (Trib.) 2922 and (2000) 82 Taxation 481 ref.

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

----5.156 & Second Sched., Part-1, C1.118C---Rectification of mistake---Exemption---Combined order of two assessment years---Rectification application of only one year---Validity---For assessment years 1998-99 and 1999-2000 combined assessment had been framed, the assessee had only asked for the rectification of alleged mistake in assessment year 1999-2000 while assessment year 1998-99 he had not contested the allocation of 6th years at all---Not possible that for both of the assessment years exemption holiday of 6th years, could be allocated.

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

----S. 156---Rectification of mistake---Section 156 of the Income Tax Ordinance, 1979 covers only the mistake which is obvious, glaring and apparent from the order and is curable without any further extraneous evidence and further arguments---Lengthy agitation through the grounds, additional grounds of appeal and long drawn arguments on the issue of rectification are sufficient reasons to disapprove the rectification application.

Shaukat Amin Shah, F.C.A. and Mehmood Mirza for Appellant/Assessee.

Mirza Khan, D.R. for Respondent/Department.

2006 P T D (Trib.) 2058

[Income-tax Appellate Tribunal Pakistan]

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

I.T.A. No. 1662/LB of 2004, decided on 24th March, 2006.

Income Tax Ordinance (XXXI of 1979)---

----Ss. 63 & 59---Survey for Documentation of National Economy Ordinance (XV of 2000), Preamble---C.B.R. Circular No.18 of 1999, dated 11-9-1999---Best judgment assessment---Self-assessment---Assessee was booked as new assessee as a result of survey---Ex parte assessment was framed by ignoring the aspect that assessee was already an existing taxpayer and return for the charge year had already been accepted under Self-Assessment Scheme---Validity---Assessee had categorically stated before First Appellate Authority that for the same assessment year the assessment stood finalized under Universal Self-Assessment Scheme in the light of C.B.R. Circular No.18 of 1999, dated 11-9-1999 relevant to the provisions of S.59 of the Income Tax Ordinance, 1979 whereas he was existing assessee---Assessing Officer proceeded ex parte under S.63 of the Income Tax Ordinance, 1979 on the basis of single notice, which could not be considered proper service from judicial point of view---Appellate Tribunal confirmed the setting aside with modification in the order of First Appellate Authority to the extent that the assessee will provide proof of his original assessment order Universal Self-Assessment Scheme and if the same was intact, the second assessment should be cancelled.

Siraj-ud-Din Khalid and Muhammad Younis Khalid for Appellant.

Anwar Ali Shah, D.R. for Respondent.

2006 P T D (Trib.) 2060

[Income-tax Appellate Tribunal Pakistan]

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

I.T.As. Nos. 1650/KB and 1651/KB of 2002, decided on 27th October, 2005.

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

----S. 62---Assessment on production of accounts, evidence etc.---Confrontation of facts through order sheet entry---Fact regarding fall in sales with nominal increase in gross profit rate; sales were verifiable being made to known parties; purchases were not open to complete verification and day to day production record was not being maintained and also with unverifiability of debit side of the trading account were confronted through order sheet entry---Validity---Addition in order sheet entry had disturbed the sequence to the sentence and differing in written patterns---Order sheet entry was neither a substitute nor equal to statutory notice under S.62 of the Income Tax Ordinance, 1979 and also did not refer to specific defects in the books of accounts produced through order sheet entry---No evidence was available to the effect that assessee accepted the rejection of book version by acknowledging the order sheet entry---Even presence of assessee on the particular date was also shaky---No justification was available to reject the trading version for the application of gross profit---Orders of the two authorities below were annulled by the Appellate Tribunal.

(b) Income-tax---

----Additions out of profit and loss expenses---Neither the assessee was confronted on the addition of entertainment expenses, printing and stationery, repairs and maintenance and general expenses nor any discussion had been made to disallow the claim---Assessing Officer had used general phrases for making disallowances, whereas complete books of account were furnished and no defects had been pointed out---Additions were deleted in circumstances.

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

----S. 62---Assessment on production of accounts, evidence etc.---Reasons for decline in gross profit rate were accepted but addition was made for the reason that there was unverifiability of expenses charged to cost sales which were nor fully vouched---Validity---Rejection of trading version was not permissible when the sales were verifiable---Decline in gross profit rate had been duly explained---Case also suffered from mandatory requirement of service of notice under S.62 of the Income Tax Ordinance, 1979---Contents of order sheet had been duly replied to make out a case for decline in gross profit rate and explanation thereof had been accepted---Even otherwise entry in order sheet carried general observation, not relevant for, the rejection of account or the proposed treatment---Signature on the order sheet entry by the attending assessee could not be taken as acceptance for the purpose of rejection of trading version---When reasons for decline in gross profit rate had been accepted and additions in expenses had been made separately, there remained no reason to apply gross profit rate for making addition in trading account observing that expenses were not verifiable---Addition in gross profit rate was annulled by the Appellate Tribunal in circumstances.

Shahid Pervez Jami for the Assessee.

Zaki Ahmed, D.R. for Respondent.

Date of hearing: 27th July, 2005.

2006 PTD (Trib.) 2078

[Income-tax Appellate Tribunal Pakistan]

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

I.T.As. Nos.3556/LB of 2003, 5575/LB, 5576/LB, 5947/LB to 5949/LB of 2004, decided on 31st October, 2005.

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

----S.62, Explanation---Additions on the basis of general reasons and stock phrases in stereotyped manner---Validity---Assessee was maintaining proper accounts which were produced before the Assessing Officer at the time of assessment---Assessing Officer without pointing out defects in the accounts had made the additions on the basis of general reasons and stock phrases in stereotyped manner which was disapproved.

2003 PTD (Trib.) 2668; 1997 PTD (Trib) 2190; 1989 PTD (Trib.) 39 and I.T.As. Nos. 4081, 4085 and 4086/LB of 2001 rel.

(b) Income-tax---

----Rejection of accounts---Improper for the Assessing Officer to base his order only on mere guess, there should be something more than suspicion to justify the rejection of the book version of the assessee's business---Account books could not be rejected merely because some of the sales and. expenses were not vouched and were not verifiable.

Civil Reference No.28 of 1960 rel.

(c) Income-tax---

----Method of accounting---Assessing Officer should have material to lead him to the conclusion that the method employed was defective or that the case required consideration and a new computation must be made.

(1954) 26 ITR p.159 rel.

(d) Income-tax---

----Certificate of Chartered Accountant---Rejection of, in a summary manner---Validity---Certificate issued by the Chartered Accountant should not simply be rejected in a summary manner.

1998 PTD (Trib.) 86Q rel.

(e) Income-tax--

----Rejection of accounts---Method of accounting---"Accounts" must be distinguished from "method of accounting", there may be a regular method of accounting and yet for defects the accounts may be rejected but it does not lead to automatic rejection of system and method of accounting employed by assessee---Occasion may also arise where although the profit shown in the accounts is not true or correct---Assessing Officer can deduce correct figures from the accounts---If the accounts books are found to be false and manipulated with a view to suppress the income and profit and the same cannot be deduced correctly, then the declared version can be rejected.

C.I.T, Companies-II Karachi v. Krudd. Sons Limited 1994 SCMR 229 rel.

(f) Income-tax---

----Rejection of method of accounting---If rejecting the method of accounting employed by the assessee, the Income Tax Officer was simply to add a particular amount of income returned or to disallow a part of business expenses properly received by the assessee, he must disclose the basis and the manner of computation.

Seth Mathuram Mannala v. C.I.T. C.P and Behari (1954) 25 ITR 216 rel.

(g) Income-tax---

----Res judicata---Rejection of accounts in account cases, on the basis of history of the case was not justified, and there was no res judicata in income tax proceedings.

PLD 1992 SC 562 rel.

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

----S.62---Assessment on production of accounts, evidence etc.---Rejection of audited account version of the assessee without pinpointing specific . instances of unverifiability---Validity---While rejecting the account version of the assessee, both authorities below had not appreciated the facts of the case but action of rejection of books version had been based merely on surmises and conjectures, which had no legal sanctity---Parallel case relied upon by the Assessing Officer were also not parallel to assessee's case and the same were neither disclosed nor properly confronted to the assessee---Since the assessee was maintaining accounts according to prevalent standard of accounting, therefore, rejection of audited account version of the assessee without pinpointing specific instances of unverifiability could not be approved.

1998 PTD (Trib.) 860; 1994 SCMR 229; (1954) 15 ITR 216; S.M. Yousaf and Brother v. C,I.T. 1974 PTD 45; Webster's New International Dictionary Second Edition; Corpus Joris Secundum; Civil Reference No.28 of 1960; (1954) 26 ITR 159; 1998 PTD (Trib.) 860; C.I.T, Companies-II Karachi v. Krudd. Sons Limited 1994 SCMR 229; Seth Mathuram Mannala v. C.I.T. C.P and Behari (1954) 25 ITR 216 and PLD 1992 SC 562 rel.

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

----Ss.111 & 116---Penalty for concealment of income etc.---Suppression of stock---No adverse inference---First Appellate Authority found that Assessing Officer although brought on record the issue of suppression of stocks but did not draw any adverse inference by giving directions for the issuance of notice under S.116 of the Income Tax Ordinance, 1979; since no such finding had been given, therefore subsequent initiation of penalty proceedings and levy of penalty were illegal ; Assessing Officer had neither determined any extent of concealed sales nor made any addition under S.13 of the Income Tax Ordinance, 1979 on account of suppressed stocks and that levy of penalty was deleted being without merit in circumstances---Validity---Appellate Tribunal agreed with the finding given by the First Appellate Authority which being justified---Discrepancies pointed out by the First Appellate Authority were confronted to the Representative of Department, who could not displace the same with plausible reasons or by any dictum of law, which might persuade the Appellate Tribunal to have a view contrary to that of the established discrepancies pinpointed by the First Appellate Authority---Penalty order was not sustainable, which had rightly been vacated by First Appellate Authority deleting the penalty imposed under S.111 of the Income Tax Ordinance, 1979---Order of First Appellate Authority was upheld by the Appellate Tribunal in circumstances.

Aslam Khan, F.C.A. for Appellant (in I.T.As. Nos.3556/LB of 2003, 5575/LB and 5576/LB of 2004).

Anwar Ali Shah, D.R. for Respondent (in I.T.As. Nos.3556/LB of 2003, 5575/LB and 5576/LB of 2004).

Anwar Ali Shah, D.R. for Appellant (in I.T.As. Nos. 5947/LB to 5949/LB of 2004).

Aslam Khan, F.C.A. for Respondent (in I.T.As. Nos. 5947/LB to 5949/LB of 2004).

Date of hearing: 13th, October, 2005.

2006 P T D (Trib.) 2095

[Income-tax Appellate Tribunal Pakistan]

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

I.T.A. No. 683/PB of 2004, decided on 12th September, 2005.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 153, 165 & 80---C.B.R. Circular C. No.1(17)WTH-91-Pt. dated 2-11-2002---Payments for goods and services---Assessee was an Association of Persons, deriving income from construction and sale of shops/flats---Levy of tax and additional tax on the ground that assessee being an Association of Persons came under the definition of "prescribed person" under S.80 of the Income Tax Ordinance, 2001 due to which it was required to have deducted tax under S.153(9) of the Income Tax Ordinance, 2001 but had failed to deduct such tax---Assessee contended that it was an Association of Persons but not constituted by or under the law. as it was not resultant of any legal enactment or statute, hence was not liable to deduct advance tax at the time of payment to the contractors---Validity---Prescribed persons who had liability to deduct tax were Federal government companies, including modarabas, trust, cooperative or finance and other societies which were assigned as status of Association of Persons through the judicial fora foreign contracts or consultancy and consortium or joint ventures registered as well as unregistered firms and such other Association of Persons as were constituted by or under the law---Association of Persons as were not constituted under any specific enactment would not be obliged to deduct advance tax under S.153(9) of the Income Tax Ordinance, 2001---Only those Associations of Persons which were directly created by or under law came under the ambit of S.153 of the Income Tax Ordinance, 2001---In the case of present asessee formation of Association of Persons was not result of any legal elictment---Assessee did not fall under the definition of body constituted by or under the law, thus was not liable to deduction of advance tax.

1993 SCMR 1232 =1993 PTD 766; 2000- PTD 3388; 2003 PTD 1264; 1992 SCMR 250 = 1992 PTD 1; 2002 PTD 63; Oxford English

Dictionary Second Edition at page 308 and New Lexicon Webster Dictionary, p.369 rel.

Zahidur Rehman, I.T.P. for Appellant.

Yousaf Ghaffar, D.R. for Respondent.

2006 P T D (Trib.) 2106

[Income-tax Appellate Tribunal Pakistan]

Before Jawaid Masood Tahir Bhatti., Judicial Member

I.T.A. No. 3713/LB of 2003, decided on 10th March, 2006.

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

----Ss. 111 & 13(1)(d)---Penalty for concealment of income---Deletion of addition penalty---Validity---No justification was for the penalty order, which had been made by the Taxation Officer much after the deduction of additions.

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

----Ss.111 & 116--Penalty for concealment of income---Imposition of penalty after four years from the date of issuance of notice under 5.116 of the Income Tax Ordinance, 1979---Validity---No order of penalty shall be passed after the expiration of two years from the end of financial year in which such notice was served---Admittedly, notice under S.116 of the Income Tax Ordinance, 1979 had been sent by the Taxation Officer as on 30-6-1998 but the penalty order under S.111 of the Income Tax Ordinance, 1979 had been passed on 29-6-2002 after obtaining approval of the Inspecting Additional Commissioner which was exactly four years after the issuance of notice---Taxation Officer was duty bound to pass the order before the expiration of two years from the end of the financial year in which such notice was served and after the expiry of two years, he had no jurisdiction to pass order in this regard--Order passed under S.111 of the Income Tax Ordinance, 1979 was cancelled by the Appellate Tribunal.

Sabiha Mujahid, D.R. for Appellant.

Imran Rasool and Naeem Munawar for Respondents.

2006 P T D (Trib.) 2130

[Income-tax Appellate Tribunal Pakistan]

Before Rasheed Ahmad Sheikh, Judicial Member and Mukhtar Ahmad Gondal, Accountant Member

I.T.A. No. 4100/LB of 2002, decided on 16th September, 2005.

Finance Act (XII of 1991)---

----S. 12(8)---Corporate Assets Tax---Additional tax/penalty could not be charged in the context of Corporate Assets Tax due to confusion created in the minds of taxpayers as a result of multiple circulars issued by the Central Board of Revenue---Order of First Appellate Authority was legally justified in deleting the additional tax and no exception to the order was taken---Departmental appeal was dismissed by the Appellate Tribunal being devoid of merits.

2001 PTD (Trib.) -1790; 2001 PTD (Trib.) 2964; 2002 PTD (Trib.) 1982; 87 Tax 211 (Trib.); W.T.A. No.1872/LB of 1997, dated 26-5-1998 and W.T.A. No.6872/LB of 1996, dated 4-7-2001 rel.

Ghazanfer Hussain, D.R. for Appellant.

Shahid Pervez Jami for Respondent.

Date of hearing: 16th September, 2005.

2006 P T D (Trib.) 2146

[Income-tax Appellate Tribunal Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member and Mukhtar Ahmad Gondal, Accountant Member

I.T.As. Nos. 5323/LB of 2003, 2132/LB of 2002, 5192/LB to 5194/LB, 4329/LB to 4331/LB of 2004, decided on 13th August, 2005.

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

----S. 12(18)---Addition---First Appellate Authority disallowed addition by placing reliance on the decision of High Court---Appellate Tribunal did not interfere in the order of First Appellate Authority and appeal of the department was dismissed.

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

----S. 24(ff)---C.B.R. Circular No.11 of 1998, dated 25-7-1998---Deductions not admissible---Payment in respect of lease of building plant and machinery---Disallowance---Validity---First Appellate Authority keeping in view the Circular No.11 of 1998, dated 25-7-1998 wherein it had been clarified that clause (ft) of S.24 of the Income Tax Ordinance, 1979 applies to expenditure normally chargeable to Profit and Loss Account---Like wages and freight on purchases debitable to said account fell outside the ambit of said clause---In view of the manufacturing expenses, addition had rightly been deleted---No interference was made by the Appellate Tribunal in the order and appeal of the department was dismissed.

Principles of Accountancy" p.183 by M.A. Ghani rel.

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

----S.62---Assessment on production of accounts, evidence etc.---Assessment without confrontation under S.62 of the Income Tax Ordinance, 1979---Validity---Assessing Officer rejected book version without confronting the assessee despite the fact the assessee had furnished books of accounts comprising of cash book, ledger, salary register and vouchers etc. which had been examined---Declared version could not be rejected without confronting the assessee through notice under S.62 of the Income Tax Ordinance, 1979 as this was the mandatory requirement of law for rejection of accounts---Orders of the two authorities below were vacated and declared version of the assessee was directed to be accepted.

2001 PTD (Trib.) 2983; 2002 PTD (Trib.) 1583 and 1999 PTD (Trib.) 3892 rel.

Shahid Pervez Jami for Appellant.

Nemo for Respondent.

Date of hearing: 13th August, 2005.

2006 P T D (Trib.) 2154

[Income-tax Appellate Tribunal Pakistan]

Before S. A. Minam Jafri, Accountant Member

I.T.As. Nos. 1222/KB to 1224/KB of 2004, decided on 7th January, 2006.

(a) Income-tax---

----Appeal---Use of old form of appeal instead of new form---Effect---In appeal substantial legal requirements and procedural formalities had duly been complied with, only form of a appeal inadvertently used by the appellant for the reason of non-availability of the new forms, would not vitiate the legal appellate proceedings, otherwise competent in law, to the extent of denying appellant his right of appeal.

(b) Income-tax---

---Appeal---Procedural compliance---Extreme view towards procedural compliance to the extent of denying the right of appeal cannot be endorsed.

2002 PTD 541 and PLD 175 SC 678 rel.

(c) Income-tax---

----Rules of procedure are meant to advance the cause of administration of justice rather than to thwart it---Technicalities should never undermine the advancement of purpose for which law establishes quasi-judicial forums.

PLD 175 SC .678 rel.

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

---Ss. 52A & 50(4)---Liability of person failing to deduct or pay tax---Re-imbursement of amount---Taxation of---Validity---Payment made by the payer had been qualified to the extent of covering the payments on account of supply of goods or for services rendered to or the execution of a contract only---Re-imbursement of the amount by the payer to the recipient could not be parturitioned as payment envisioned in S.50(4) of the Income Tax Ordinance, 1979---Once it was established that the amount received by the assessee was not on account of supply of goods, or for services rendered or the execution of contract, the provisions of S.52A read with S.50(4) of the Income Tax Ordinance, 1979 could not be trotted out---Orders passed under S.52A of the Income Tax Ordinance, 1979 were erroneous in facts and law, the same were vacated/cancelled by the Appellate Tribunal.

(e) Income-tax--

---Income tax proceedings---Principles of natural justice---Appli?cability---proceedings are quasi-judicial in nature and principles of natural justice are attracted, particularly relating to opportunity of being heard etc.

(f) Interpretation of statutes---

---Fraus Legis---Departmental action---Analogy derived from latest legal principle `Fraus Legis' developed by Court of justice of European Communities, prevents the endorsement of department action which could mean an abuse of a statuary provision by circumventing assessee's factual position or running contrary to spirit envisaged in law.

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

----Ss.86 & 52A---Charge of additional tax for failure to deduct and pay tax---Application of provision on the payer and not on recipient---Provisions of S.86 of the Income Tax Ordinance, 1979 were not attracted in case of default by the recipient and could be invoked in case of default by the payer only.

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

----S.86---Charge of additional tax for failure to deduct and pay tax---Order passed without issuing show-cause notice---Validity---Orders under S.86 of the Income Tax Ordinance, 1979 were not sustainable in law as those orders were passed in a mechanical manner, without issuing any show cause or confronting the assessee in this behalf.

1970 SCMR 226; 2001 PTD 2906; 2004 PTD 1499 and 2004 PTD 1179 rel.

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

---S.52A---Liability of person failing to deduct or pay tax---Liability of payer and recipient---Prior to insertion of S.52A of the Income Tax Ordinance, 1979 in the statute book, only payer was treated as assessee in default on failing to deduct advance tax in terms of S.52 of the Income Tax Ordinance, 1979, and no default of the recipient was visualized on the part of the recipient---By introducing S.52A of the Income Tax Ordinance, 1979 in the statute book the recipient was made liable to pay tax in view of failure on part of the payer to withhold tax at the time of making payments to the recipient.

(j) Interpretation of statutes---

----Statutes dealing with substantive rights are prima facie/generally prospective unless it is expressly or by necessary implications made to have retrospective operation---Rule in general is applicable where the object of the statute is to affect the vested rights or impose new burdens or to impair existing obligations.

Maxwell on the Interpretation of Statutes, 12th Edn. and Francis Bennion's Statutory Interpretation 2nd Edn. rel.

(k) Interpretation of statutes---

----Prospective and retrospective effect of law---New Act/Rule affecting, existing rights or creating new obligations, is presumed to be prospective only---Person could not be saddled with additional liability or burden in retrospection for no default on his part.

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

----S.52A---Liability of person failing to deduct or pay tax---Prospective application---Provisions of S.52A of the Income Tax Ordinance, 1979 will apply to the cases involving default during the financial year 1999-2000 and could be invoked for the assessment year 2000-2001 onwards.

1985 PTD 529; 2004 PTD 921; (1988) 75 Tax 71 and 1988 SCMR 715 rel.

Kafil Ahmed Abbasi for Appellant.

Ghulam Shabbir Memon, D.R. for Respondent.

2006 P T D (Trib.) 2179

[Income-tax Appellate Tribunal Pakistan]

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

I.T.A. No. 317/KB of 2001, decided on 27th May, 2005.

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

----S.62---Assessment on production of accounts etc.---Addition was made without issuing notice under S.62 of the Income Tax Ordinance, 1979 which was a mandatory condition---First Appellate Authority set aside and remanded back the matter after holding that mandatory provision of law had been violated and add backs were not sustainable in law---Validity---Since Assessing Officer had not issued notice under S.62 of the Income Tax Ordinance, 1979 which was mandatory and condition precedent for making additions in the total income of an assessee, the correct legal course for the First Appellate Authority was to delete the additions instead of setting it aside---Addition was deleted by the Appellate Tribunal.

2005 PTD (Trib) 534 rel.

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

----S.23(1)(vii)---Deduction---Financial charges---Disallowance of financial charges on the ground that since there was introduction of fresh capital there appears to be no justification for the claim---Validity---Action of disallowance of financial charges for the reasons assigned by the Assessing Officer was not sustainable in law and the same was deleted.

1992 PLD 954 and 1987 PTD 149 rel.

Arhad Siraj for Appellant.

Farrukh Ansari, D.R. for Respondent.

2006 P T D (Trib.) 2291

[Income-tax Appellate Tribunal Pakistan]

Before Khawaja Farooq Saeed, Chairperson and Shaheen Iqbal, Accountant Member

I.T.A. No.1640/KB of 2004, decided on 24th March, 2006.

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

----S. 27---Capital gain---Goodwill---Assessee was engaged in manufacturing and distribution of' non-pharmaceutical skin and beauty-care product under the exclusive agency and licence agreement---Assessee, therefore, had exclusive right to use the trademark of' principal company---Principal company terminated such agency and withdrew such licence agreement by stating only that service of assessee were no more required---Assessee was debarred from purchase, manufacture, sell or distribute the said products as registered users of trademark owned by the principal company---Assessee approached High Court with object to protect its main earning apparatus---Both companies arrived at an agreement and as a result of such agreement, assessee was compensated for succession of the licence and business as well as the agency agreement---Such amount was assessed by the Assessing Officer as capital gain by treating the amount as a goodwill'---Assessee claimed the said amount as capital receipt exempt from charge under the Income Tax law while the department treated the same as yearly earnedgoodwill' and consequently the capital gain---Validity---Bringing such amount to charge under the garb of provision of S.27 of the Income Tax Ordinance, 1979 by calling it a goodwill could not be supported---Goodwill was a tree sprouted from seed which in this case was agency and licence from principal company which was withdrawn from the assessee---Assessee had nothing in his hands, even the temporary injunction of the Court could not rebuild the same, it was not a goodwill but capital receipt on termination of contract--Capital assets presupposed existence of the same in a visible established and accumulated form---Some entry obtaining in balance sheet or such or similar or auxiliary and ancillary documents could be the only evidence---Strong doubt existed about holding the goodwill a capital asset in a case like the present one where it had never been established to be accumulated---If the department insisted that there was a goodwill and thus a capital asset then what had to be transferred should also have been identified which would all the more necessary as to bring the profit and gains within the mischief of S.27 of the Income Tax Ordinance, 1979--Such profit and gain should have necessarily been arisen from the sale exchange or transfer of capital asset---Orders of the two officers below were disapproved and the addition made by the Assessing Officer and confirmed by the First Appellate Authority was deleted by the Appellate Tribunal.

1984 CLC 2804; PLD 1963 SC 663; "Words and Phrases" Permanent Edition (Volume 6) published by St. Paul, Minn. West Publishing Co.; Corpus Juris Secundumm" Volume-12 published by St. Paul, Minn. West Published Co.; (1962) 48 ITR 1935; (1965) 57 ITR 2999 (S.C. of India); ITAT in 1993 PTD (Trib.) 1175; 1979 PTD Trib. 4; 1985 PTD 3; Commissioner of Income Tax Bangaglore v. B.C. Srinivisa Setty and others (1981) 128 ITR P. 294; 2002 85 Tax 225 (Trib.); 85 Tax 332 H.C.; 1984 PTD 368; CIR v. Shiparo C.C.A. 125F, 2d 532, 535 & 536; 1927 Privy Council 76; 1993 PTD (Trib.) 1175; 1998 (77) Tax Para H on its page 40 and ITAT decided on 31-8-1999 in ITAT No.598 of 1998-99 ref.

1979 (39) Tax 21 (H.C.) and 1992 PTD 232 rel.

2002 PTD 983; 2001 PTD 1047; 2003 PTD 2331 and 1999 PTD Trib. 2356 distinguished.

(b) Income-tax---

----Income'---Connotation---Agreement of agency between assessee and its principal company---Termination of agreement---Compensation---Nature of receipt---Determination---Principles---Connotation of termincome' was very wide and in fact covered anything, which came in, however, one could not ignore that it had to come within the charge created by various provisions of the prevailing law for considering the income as taxable income---Nature of transaction had always been considered, the base of such determination---Contract between assessee and its principal company was to be considered as the basic evidence for determination thereof--Nature of contract intended by the parties should not be ignored unless proved contrary---Nature of contract intended by the parties could not be changed by presumptions or self-created understandings; it could only be disregarded with a valid counter-agreement.

(c) income-tax---

----Capital receipt---Capital receipts on cessation of licence and termination of agency was like compensation on termination of employment and that need not be given any other nomenclature like `goodwill'.

Farogh Naseem for Appellant.

Sheikh Muhammad Hanif D.R. for Respondent.

2006 P T D (Trib.) 2325

[Income-tax Appellate Tribunal Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member and Mukhtar Ahmad Gondal, Accountant Member

I.T.As. Nos. 3949/LB to 3951/LB and 4450 to 4453/LB of 2003, decided on 8th December, 2005.

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

----S. 62---Assessment on production of accounts, evidence etc.---Disallowances---First Appellate Authority deleted the disallowances on the ground that despite maintaining books of account, no specific notice under S.62 of the Income Tax Ordinance, 1979 was issued indicating the quantum of intended Profit and Loss account expenses---Such findings were upheld by the Appellate Tribunal.

2002 PTD 1195; 2001 PTD (Trib.) 2938; 1999 PTD (Trib.) 3892 and 2003 PTD (Trib.) 625 rel.

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

----Third Sated., R.5(1)-Depreciation allowance---Initial depreciation--Machinery regarding which depreciation had been claimed was in use with the assessee on lease rental basis---Company became owner of the said machinery on termination of lease---Contention was that machinery transferred in the name of assessee-Company was entitled to initial depreciation because it was the first year of ownership of the assessee-Company-Validity-Neither there was any installation of machinery or plant nor first time use of the machinery for the purposes of business of the assessee---Machinery was in use prior to the year when the initial depreciation had been claimed---Assessing Officer had rightly disallowed the claim of initial depreciation---Appeal filed on the issue of initial depreciation was dismissed by the Appellate Tribunal.

Zaeem-ul-Farooq for Appellant.

Javed Iqbal Rana, LTU and Sabiha Mujahid, D.R. for Respondents.

Javed Iqbal Rana, LTU and Sabiha Mujahid, D.R. for Appellants (in I.T.A. Nos. 4450/LB to 4453/LB of 2003).

Zaeem-ul-Farooq for Respondents.

2006 P T D (Trib.) 2344

[Income-tax Appellate Tribunal Pakistan]

Before Khawaja Farooq Saeed, Chairman

I.T.As. Nos.1398/LB and 730/LB of 2004, decided on 20th August, 2004.

Income Tax Ordinance (XXXI of 1979)---

----S. 62---Survey for Documentation of National Economy Ordinance (XV of 2000), Preamble---Assessment on production of accounts, evidence etc.---Estimate of sales---Assessee contended that in presence of report by the Survey Team, the Inspector could only deviate on some solid evidence---Neither the Inspector had prepared any stock tally nor his estimates were based upon some objective reasoning and calculation---Such estimates just bald estimates without any support---Held, that the Survey Team report should have been adopted without any exception in circumstances; since there was no reason for taking any exception, Appellate Tribunal directed that the sales declared in the survey form should be accepted as sales for the year.

Rashid Majeed Ch. ITP for Appellant (I.T.A. No. 1398/LB of 2004).

Abdul Sttar Abbasi, D.R. for Respondent (I.T.A. No. 1398/LB of 2004).

Abdul Sttar Abbasi, D.R. for Appellant (I.T.A. No. 730/LB of 2004).

Rashid Majeed Ch. I.T.P. for Respondent (in I.T.A. No.730/LB of 2004).

2006 P T D (Trib.) 2348

[Income-tax Appellate Tribunal Pakistan]

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

I.T.As. Nos. 124/KB to 126/KB of 2005, decided on 4th March, 2006.

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

----Ss. 52, 86, 50 & 2 (16)(bb)---Income Tax Ordinance (XLIX of 2001), S.153(9)---C.B.R. Circular Letter C. No.1 (17) WHT/91-PT, dated 29-8-2002---Liability of persons failing to deduct or pay tax---Company--Trust---Proceedings under Ss. 52/86 of the Income Tax Ordinance, 1979 were initiated treating the assessee as a company in terms of provisions of S.2(16)(bb) of the Income Tax Ordinance, 1979---Assessee contended that both the authorities below had erred in holding the appellant as public company since it was not formed by or under any law for the time being in force as in the case of trust to be a company, the qualifying condition was that the same should have been formed by order under law---Validity---Assessee having neither been formed by a special Act of legislature nor under any law, fell outside the purview of definition and could not be termed as company---Orders of both the officers below, holding the assessee as an "assessee in default" were vacated by the Appellate Tribunal as the assessee was not required to deduct tax as provided under S.50 of the Income Tax Ordinance, 1979 being a trust and not a company.

2000 PTD 3388; 2003 PTD 1264; 1998 PTD (Trib.) 2017; 2003 PTD (Trib.) 436 and I.T.A. Nos. 456 and 689/KB of 2003 rel.

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

----Ss. 2(16)(b) & 2(16)(bb)---Company---Trust---Principle that cooperative societies registered under the provisions of Cooperative Societies Act, 1925 were not companies within the meaning of S.2(16)(b) of the Income Tax Ordinance, 1979 will also apply to trust as provided in clause (bb) of subsection (16) of S.2 of the Income Tax Ordinance, 1979.

(c) Document, registration of---

----Object---Object of registration of a document is firstly to give notice to' the world that such a document has been executed, secondly, to prevent fraud and forgery and thirdly to secure that every person dealing with the property, where such dealings require registration, may rely with confidence upon the statements contained in the register as a full and complete account of all transactions by which the title to the property may be affected.

(d) Income-tax---

----Trust---Kinds of---Trusts are of different kinds such as formed by or under special Act of legislature; formed under Trusts Act, 1882 and formed by an indenture of trust.

Tayyab Gee Adeeb, F.C.A. for Appellant.

Basharat Qureshi, D.R. for Respondent.

2006 P T D (Trib.) 2361

[Income-tax Appellate Tribunal Pakistan]

Before Khawaja Farooq Saeed, Chairperson, S. Hasan Imam, Judicial Member and

Agha Kafeel Barik, Accountant Member

I.T.A. No. 1547/KB of 2003, decided on 26th September, 2005.

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

----Ss. 131 & 210---Income Tax Ordinance (XXXI of 1979), S.134---Appeal to the Appellate Tribunal---Filing of appeal by Deputy Commissioner/Commissioner---Income Tax Ordinance, 1979 provides that the Deputy Commissioner shall file an appeal before the Appellate Tribunal, if the Commissioner objects to any order passed by the Appellate Additional Commissioner and directs the Deputy Commissioner to institute the appeal; contrary to this, S.131 of the Income Tax Ordinance, 2001 empowers the Commissioner only, to file the appeal before the Income Tax Appellate Tribunal if he objects to the order passed by the Commissioner of Income Tax (Appeals)---Term "direction" envisaged in the Income Tax Ordinance, 1979 finds no place in the Income Tax Ordinance, 2001, as such, even under the directions of the Commissioner, no appeal could be lodged challenging the order passed by the Commissioner of Appeals, as absolute authority vests in the Commissioner himself to file the appeal---Section 210 of the Income Tax Ordinance, 2001 empowers the Commissioner to delegate powers vested in him in writing to any Taxation Officer, the Commissioner under the said provision may delegate all of his powers/authority under the Income Tax Ordinance, 2001 other than the power of further delegation---Exercising authority under S.210 of the Income Tax Ordinance, 2001, the Commissioner may delegate the powers of filing of appeal to the Deputy Commissioner, if he so desires, in that case, S.134(2) of the Income Tax Ordinance, 1979 and S.131 of the Income Tax Ordinance, 2001 will have concurrent effect.

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

----S. 210---Income Tax Appellate Tribunal Rules, 1981, R.11(2)(ii)---Delegation---Signature on appeal by the Taxation Officer---Procedure---Procedure of the Income Tax Appellate Tribunal Rules, 1981, provides that in an appeal at the instance of the Commissioner there shall be appended a certificate to the memorandum of appeal stating that the appeal had been preferred in exercise of the powers delegated by the Commissioner under S.210 of the Income Tax Ordinance, 2001, in case the appeal was signed by the Taxation Officer.

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

----Ss. 210 & 131---Delegation---Appeal---Grounds of appeal were signed by the Taxation Officer instead of Commissioner of Income Tax---Validity---Taxation Officer in the absence of delegated powers under S.210 of the Income Tax Ordinance, 2001 had no authority to institute the appeal, where the Income Tax Ordinance, 2001, had prescribed any procedure for the doing of a thing such procedure was to be followed---Since the provisions are exhaustive and clear insofar as they prescribe a particular procedure and as there was a specific prohibition of a particular act, the Court could not circumvent the procedure in the exercise of its inherent power---Any such act was wrongful exercise of powers not vested in Taxation Officer.

I.T.A. No. 1446/KB of 2003 in case of Messrs Javed Arif Fattani Estate Agency; 1996 PTD (Trib.) 334 and 1972 SCMR 73 rel.

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

----Ss. 210 & 131---Delegation---Appeal---Grounds of appeal were signed by the Taxation Officer instead of Commissioner of Income Tax---Curability Lacuna---Appellate Tribunal declined to agree with the findings that the act of tiling of appeal by an authority other than the Commissioner was fatal and incurable and that there was no alternate course except to strike off appeals---Law is always framed for advancement of justice, therefore, it should not be allowed to operate so as to defeat the ends of justice; since it was in the interest of justice to avoid miscarriage of justice, the present act was curable being a technical error---Appellate Tribunal permitted to rectify and cure the omission so as to enable the parties to contest on merit in order to meet the ends of justice.

1997 PTD (Trib.) 879 and 2004 PTD (Trib.) 1812 ref.

I.T.A. No. 1446/KB of 2003 in case of Messrs Javed Arif Fattani Estate Agency and 1996 PTD (Trib.) 334 dissented from.

2003 PTD (Trib.) 711 not relevant.

Chaman Lal Oadh, D.R. for Appellant.

Muhammad Mehtab Khan for Respondent.

2006 P T D (Trib.) 2373

[Income-tax Appellate Tribunal Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member

I.T.A. No. 2231/LB of 2004, decided on 21st February, 2006.

Income Tax Ordinance (XXXI of 1979)---

----S. 12(18)---Income Tax Ordinance (XLIX of 2001), S. 39(3)---C.B.R. Circular No.6 of 1987, dated 5-7-1987---Income deemed to accrue or arise in Pakistan---Advance received from purchaser out of total sale consideration of shop---Taxation---Validity---Intention of the legislature while enacting S.12(18) of the Income Tax Ordinance, 1979 was to discourage fictitious loans, advances and gifts---Assessing Officer as well as First Appellate Authority failed to establish the element of fictitious transaction---Amount in question had been paid through government functionary i.e. Sub-Registrar, who had verified the payment of amount which had been mentioned in the Revenue Record also---Evidence in that regard had also been placed before the Taxation Officer as well as before First Appellate Authority---Treatment meted out by the Taxation Officer to the case was ill-founded, misconceived and on wrong assumption of facts and application of S.12(18)of the Income Tax Ordinance, 1979---No fictitious element in the transaction having been involved, there was no justification for application of S.12(18) of the Income Tax Ordinance, 1979---Assessment order as well as the order of First Appellate Authority were vacated and addition made was deleted by the Appellate Tribunal.

1995 PTD 1176; 1997 PTD 453; 2002 PTD 63 and 2002 PTD 2594 rel.

2002 PTD (Trib.) 827 and 2003 PTD (Trib.) 835 ref. Abdul Hameed, ITP for Appellant.

Sabiha Mujahid, D.R, for Respondent.

2006 P T D (Trib.) 2384

[Income-tax Appellate Tribunal Pakistan]

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

I.T.A. No. 551/IB of 2005, decided on 15th December, 2005.

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

----S. 80D---Finance Act (IV of 1999)---Finance Ordinance (XXV of 2001)---C.B.R. Circular No. 8 of 1999, dated 27-7-1999---Minimum tax---Assessment year 2000-2001---Assessee was an Association of Persons and was charged to minimum tax for the assessment year 2000-2001 under S.80D of the Income Tax Ordinance, 1979---Assessment order was passed as on 29-5-2002---Assessee contended that law was amended by the Finance Ordinance, 2001 w.e.f. 1-7-2001 whereby Association of Persons were excluded from the ambit of S.80D of the Income Tax Ordinance, 1979 and assessment spending completion as on 1-7-2001 would be regulated by the amended law as the amendment in S.80D of the Income Tax Ordinance, 1979 enacted through the Finance Act, 2001 was curative and remedial in nature which should be applied retrospectively---Validity---Inclusion of certain categories of taxpayers within the ambit of 80D of the Income Tax Ordinance, 1979 and the subsequent exclusion of some newly-added taxpayers, were manifestations of policy formulation rather than an exercise in rectifying any wrongs, defects, inequities, contraventions, omissions or irregularities---Subsequent deletion of Association of Persons in S.80D of the Income Tax Ordinance, 1979 was not a measure to remove any hardship or to otherwise soften the law---Such deletion reflected a policy change and coincided with a revamping of income tax law by the Income Tax Ordinance, 1979 and its replacement by the Income Tax Ordinance, 2001---Such amendment was neither curative nor remedial nor a softening of law; it was a simple case of curtailing the extent of tax chargeability---Appeal of the assessee was rejected and orders of Assessing Officer and First Appellate Authority were upheld by the Appellate Tribunal.

1993 SCMR 73; 2002 PTD 285; PLD 1997 Lah. 292; 2002 PTD (Trib.) 221 and 1996 SCMR 273 distinguished.

Black's Law Dictionary Fifth Edition, 1979 and "Statutory Construction" of Crawfard ref.

(b) Interpretation of statutes---

----Retrospective effect of amendment---Where a wrong had been corrected and the amending provision did not affect any vested right nor created any new obligations, it had to be given retrospective operation for extending benefit to the affected parties in pending proceedings.

1993 SCMR 73 rel.

(c) Interpretation of statutes----

---In absence of any indication in the statute that the legislature intended same to &berate retroactively, it must not be given retrospective effect---If per chance any reasonable doubt exists, it should be resolved in favour of prospective operation---Before a law will be construed as retrospective, its language must imperatively and clearly require such a construction.

(d) Interpretation of statutes----

----Retrospective operation of law would only apply if vested rights were not disturbed.

(e) Interpretation of statutes---

----Primary condition for retrospectivity rests upon the existence of an inherent defect in law---Only when such defect existed and was later amended, could be said that an amendment was remedial in nature and would apply to all pending assessments.

Hafiz Muhammad Idrees, A.R. for Appellant.

Muhammad Tahir Khan, D.R. for Respondent.

2006 P T D (Trib.) 2396

[Income-tax Appellate Tribunal Pakistan]

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

I.T.As. Nos. 1246/LB of 2003 and 3768/LB of 2005, decided on 8th December, 2005.

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

----S. 156(1)---Rectification of mistake---Opportunity of being heard--No order under S.156(1) of the Income Tax Ordinance, 1979 could be passed by the Assessing Officer whereby effect of liability for the assessee was increased unless, the assessee had been given an opportunity of being heard.

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

----S. 156(1)---Rectification of mistake---Notice for rectification---Though the Assessing Officer was empowered to rectify any mistake apparent on the face of the record in the original order even on his own, however, it was incumbent upon the Assessing Officer to issue notice under S.156 of the Income Tax Ordinance, 1979 with regard to the subject-matter which the Assessing Officer wanted to rectify---Admittedly, no such notice was given by the Assessing Officer, rectification made regarding such issue was not sustainable in the eye of law.

(c) Income-tax---

----Remand of order---Judicial authority could not use the power of remand just to allow the lower authorities to fill in the lacunae.

1992 PTD 570 rel.

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

----S. 38(6)---Limitation as to set-off and carry forward of losses in the case of firms, partners, etc.---Unabsorbed depreciation---Other income---First Appellate Authority fell in error while allowing set off of unabsorbed depreciation allowance against other income of the following year---Section 38(6) of he Income Tax Ordinance, 1979 dealt with cases of firms and partners, while the assessee was a limited company---Allowance for unabsorbed depreciation could not be set-off/adjusted against other income of the following year.

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

----S. 38(6)---Limitation as to set-off and carry forward of losses in the case of firms, partners, etc.---Set-off unabsorbed depreciation against other income---Validity---If there was any link between the expense and income from other sources meaning thereby this expense was particularly incurred in earning income from other sources, it could be set-off against profits or gains made out of other income and if not then it must be disallowed---Depreciation was an outcome of use of machinery engaged in business which keeps on depleting with passage of time, thus law envisages set-off of unabsorbed depreciation against the income of the very business or profession for which the said machinery had been used---Unabsorbed depreciation could not be set-off against income from other sources for the simple reason that it had no nexus whatsoever with the other income; even otherwise, it did not come within the ambit of sections 30 and 31 of the Income Tax Ordinance, 1979---Since assessee being a limited company, did not come within the purview of S.38 of the Income Tax Ordinance, 1979 the same had been erroneously invoked---Order of First Appellate Authority was vacated by the Appellate Tribunal being unsustainable in the eye of law and that of assessment framed by the Assessing Officer was restored whereby he refused to allow set-off of unabsorbed depreciation of the preceding assessment year against income earned from other sources in the following year.

Muhammad Aslam Lillah (LTU), D.R. for Appellant.

Nemo for Respondent.

2006 P T D (Trib.) 2413

[Income-tax Appellate Tribunal Pakistan]

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

I.T.As. Nos. 2953/LB and 2954/LB of 2004, decided on 30th November, 2005.

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

----S. 156---Rectification of mistake---Mistake apparent on the lace of record could only be considered to be a mistake, if same was floating on the surface of record and did not require further probe---Since First Appellate Authority himself set aside the case so that the Assessing Authority should come to definite conclusion with regard to issue in hand after making inquiries same was not a mistake apparent on the face of the record.

1992 PTD 570; I.T.A. No.2024/LB of 2004 and 1999 PTD (Trib.) 4026 ref.

2004 PTD (Trib.) 320 and 1988 PTD 147 rel.

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

----S. 221---Income Tax Ordnance (XXXI of 1979), S.156---Rectification of mistake---Assessing Officer in first two rectification orders invoked S.156 of the Income Tax Ordinance, 1979 while the last one was passed under S.221 of the Income Tax Ordinance, 2001---Rectification of order and order passed by the First Appellate Authority were liable to be annulled because the same was rectified under S.221 of the Income Tax Ordinance, 2001 despite that the initial two rectification orders have already been made under S.156 of the Income Tax Ordinance, 1979.

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

----S. 221---Rectification of mistake---Rectification of assessment order by Assistant Commissioner of Income Tax---Validity---Assessment order was rectified under S.221 of the Income Tax Ordinance, 2001 by an officer designated as an Assistant Commissioner of Income Tax, but no such assessing authority had been mentioned in the Income Tax Ordinance, 2001---Order passed under S.221 of the Income Tax Ordinance, 2001 was not sustainable in the eye of law being without jurisdiction.

1999 PTD (Trib.) 4026 rel.

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

----S. 221-Income Tax Ordinance (XXXI of 1979), S.156---Rectification of mistake---Three times rectification of an assessment order and setting aside of the same by the First Appellate Authority---Validity---Power under S.156 of the Income Tax Ordinance, 1979 as well as under S.221 of the Income Tax Ordinance, 2001 was exercised three times by the same officers but coming to different conclusions each time which amounted to firstly, change of opinion and secondly, reviewing the order passed by the predecessor earlier---If the departmental officials were allowed to proceed in such a manner whereby the succeeding officers substituted their own opinions with the one already held by their predecessors without any rhyme or reason it would create chaos and the concept of finality in the judicial proceedings would become a mockery---Order setting aside the case for de novo consideration was vacated and resultantly, rectified order passed under S.221 of the Income Tax Ordinance, 2001 was annulled by the Appellate Tribunal.

Monim Sultan for Appellant.

Rana Muhammad Luqman, D.R. for Respondent.

2006 P T D (Trib.) 2465

[Income-tax Appellate Tribunal Pakistan]

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

I.T.As. Nos.69/PB and 70/PB of 2001-02, decided on 6th August, 2004.

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

----S. 23(1)(xxi)---Deductions not admissible---Mark-up reserved---Assessee was a banking company---Unrealized portion of mark-up from the clients for the assessment year 1998-99 and 1999-2000 was not allowed by the First Appellate Authority---Assessee contended that effect of amendment of Cl. (xxi) of subsection (1) of S.23 to the Income Tax Ordinance, 1979 was retrospective in nature and mark-up reserve account as claimed during the said assessment years should have been allowed---Validity---Insertion of Cl. (xxi) of subsection (1) of S.23 to the Income Tax Ordinance, 1979 not being curative or clarificatory but of substantive in nature with specific date of effectiveness i.e. on or after 1st day of July, 2000 with unambiguous intendment, whereas the fiscal statute should be construed in its strict sense if a new enactment had been made or a new definition was added or a deeming provision was inserted or the scope of a provision particularly a substantive/charging provision was enlarged or extended it shall not have the retrospective effects until and unless specifically specified so by the legislature---Insertion of the clause being of substantive nature having specific date of operation i.e. on or after 1st day of July, 2000 leaves no room for ambiguity about its date of operation and thus, it would operate prospectively---Finding of First Appellate Authority was upheld by the Appellate Tribunal.

Elahi Cotton Mills and others v. Federation of Pakistan PLD 1997 SC 582 = 1997 PTD 1555; 1993 SCMR 73; Order of ITAT (LB) in W.T.A. No. 1253/1257/(LB) of 2001 and Iftikhar Hussain Alvi v. CIT Reference No.44/97/2002; 2003 PTD 812 distinguished.

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

----S. 23---Deductions not admissible---Bad debts---Assessee, a Banking Company, contended that doubtful debts had been made in accordance with prudential regulations and State Bank of Pakistan directions---State Bank of Pakistan had issued their reports regarding the provision of bad debts---Since assessee had completed the formality regarding claim of bad debts as required under the Income Tax Laws, the same should have been allowed---Validity---Certificate verifying the irrecoverable debts was not available at the time of assessment, subsequently, it had been provided by the State Bank of Pakistan, therefore, it should be allowed---Appellate Tribunal set aside the order of lower authorities on the issue with the direction that in the light of certificate from State Bank of Pakistan verifying the irrecoverable debts it should be decided accordingly.

Abdul Ghafoor, F.C.A. for Appellant.

Faheem Muhammad, D.R. for Respondent.

2006 P T D (Trib.) 2485

[Income-tax Appellate Tribunal Pakistan]

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

I.T.As. Nos. 680/LB to 682/PB of 2004, decided on 29th March, 2005.

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

----Second Sched., Part-IV, Cl. (6F) & S.13---Exemption---Assessee purchased property in March, 1998 i.e. before the insertion of clause (6F) of the Part-IV of the Second Schedule of the Income Tax Ordinance, 1979 in open auction by Privatization Commission on behalf of the Government but except the call deposit money amount was invested in the period from 1-7-1998 to 16-12-1999, which date had been specified in the said clause---Assessee pleaded that source of investment was immune from probe under the said clause as the same had retrospective effect being beneficiary to the assessee---First Appellate Authority rejected the plea of the assessee by observing that the said clause was inserted by Finance Act, 1998, which was given effect from 1-7-1998, while the appellant had purchased the property in open auction prior to the date of insertion of said clause and the assessee was not qualified to avail the benefit of the clause---Validity---Clause (6F) of the Part-IV of the Second Schedule of the Income Tax Ordinance, 1979 was of beneficial nature and such-like beneficial insertions and amendments where no specific date of operation had been incorporated, will operate retrospectively---As per proviso of clause (6F) of the Part-IV of the Second Schedule of the Income Tax Ordinance, 1979 the amount invested in purchase of any assets through public auction up to 16-12-1999 was immune from probe and no addition could be made under S.13 of the Income Tax Ordinance, 1979---Entire investment was made prior to target date of 16-12-1999---Addition made was deleted by the Appellate Tribunal.

2003 PTD 812 rel.

1981 PTD 210; 1997 PTD 1555; 1993 SCMR 73; 1992 SCMR 1652 and 1995 PTD 812 (Trib.) 1113 ref.

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

---Second Sched., Part-IV, Cl. (6F)---Exemption---Investment---Word "invested" as used in clause (6F) of the Part-IV of the Second Schedule of the Income Tax Ordinance, 1979 by the Legislature was of key importance as it had been used in "past participle form" and covered all those `investments' which had been made in the past.

2003 PTD 812 1997 rel.

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

---Second Sched., Part-IV, Cls. (6F) & Cl. (8)--Cls. (6F) & Cl. (8) of the Part-IV of the Second Schedule of the Income Tax Ordinance, 1979 are identical in their form'.

Zahidur Rehman, Anthorised Representative for Appellant.

Yousaf Ghaffar, D.R., for Respondent.

2006 P T D (Trib.) 2554

[Income-tax Appellate Tribunal Pakistan]

Before Ehsan-ur-Rehman, Judicial Member and Naseer Ahmad, Accountant Member

I.T.As. Nos. 578/LB and 579/LB of 2004, decided on 21st April, 2006.

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

----S. 122(4-A)---Income Tax Ordinance (XXXI of 1979), Ss. 62 & 30-Amendment of assessments---Limitation---Two assessments were framed separately under S.62 of the Income Tax Ordinance, 1979 as on 23-6-1997 and 20-6-1998 respectively---Show-cause notice, dated 7-4-2003 was issued under S.122 of the Income Tax Ordinance, 2001 and assessee was confronted with the position that entire expenses were to be prorated to dividend income and non-dividend income---Further, dividend/mark-up income had wrongly been assessed under S.22 of the Income Tax Ordinance, 1979 as business income as a result of which the provisions of S.30 of the Income Tax Ordinance, 1979 remained inapplicable---Finally order under 5.122 of the Income Tax Ordinance, 2001 was passed on 31-5-2003 with the conclusion that the entire income of the assessee fell under S.30 of the Income Tax Ordinance, 1979---Validity---Assessments framed under S.62 of the Income Tax Ordinance, 1979 for an action under S.65 of the Income Tax Ordinance, 1979 were already hit by limitation on 30-6-2001 and 30-6-2002 respectively for each year---Department initiated proceedings under S.122 of the Income Tax Ordinance, 2001 on 7-4-2003 and culminated the same on 31-5-2003 after the expiry of said prescribed limitation---Even by taking the impugned re-computing of income by an action under S.66A of the Income Tax Ordinance, 1979, the proceedings by 22-6-2001 and 19-6-2002 were hit by limitation, whereas the impugned order under S.122 of the Income Tax Ordinance, 2001 was, dated 31-5-2003---After promulgation of Income Tax Ordinance, 2001, the department had illegally extended the limitation period to 8 years instead of expiry much earlier---Such extending the period of limitation was prima facie illegal void ab initio which merited outright cancellation.

Ellahi Cotton Mills Ltd. v. Federation of Pakistan PLD 1997 SC 582 = 1997 PTD 1555 rel.

1993 SCMR 73 and 1997 PTD 1555 (SC Pak.) irrelevant.

2002 PTD (Trib.) 159 distinguished.

I.T.A. No. 578/LB/2004 ref.

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

----S. 122(4A)---Amendment of assessments---Retrospective effect--Section 122 (4-A) of the Income ,Tax Ordinance, 2001 and the background of its insertion made it abundantly clear that it was retrospectively applicable---As the law is not to encourage the absurdity which is against precision and exactness meaning by it that period when no such limitation was there that revenue/department was free in its action on the point of limitation---Absence of the limitation clause is an ambiguity which is to be interpreted in favour of the assessee---Insertion of said section 122(4A) had proved, that earlier the law was not complete, thus the lacuna was removed which had a curing effect.

Amjad Zubair Tawana, DCIT for Appellant.

Asim Zulfiqar, ACA for Respondent.

2006 PTD (Trib.) 2565

[Income-tax Appellate Tribunal Pakistan]

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

I.T.A. No.387/IB of 2005, decided on 1st March, 2006.

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

----Ss. 80D & 62--Minimum tax on income of certain persons---Normal assessment---Assessee contended that there being non-obstante clause, once an assessee had paid tax @ 0.5% of his declared turnover the Department was precluded from making a regular assessment and. no estimation of turnover or charge of tax over and above what the assessee had voluntarily paid along with the return could be made--Validity---Possibility of regular assessment remained applicable in cases where the earning was more than what could be subjected to 0.5% tax on annual turnover---Assessees who were earning more than an amount that attracted 0.5 % tax remained liable to file income tax return or to get their assessment orders framed in terms of the other provisions of the Income Tax Ordinance, 1979---Assessee itself had filed a return of income falling in line with the said rule---Nothing existed in law requiring acceptance of turnover as declared by an assessee---Assessees remained liable to be assessed in terms of the law contained in the Income Tax Ordinance, 1979.

1998 PTD 1804 and Messrs Ellahi Cotton Mills and others v. Federation of Pakistan etc. PLD 1997 SC 582 = 1997 PTD 1555 Not applicable.

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

----S. 13(1)(aa)---Addition was made under S.13(1)(aa) of the Income Tax Ordinance, 1979, keeping in view the admitted fact that assessee was unable to produce evidence in support of the claimed version---Order of First Appellate Authority noted that the amount in question was received in cash and was shown as a loan and that the amount remained unexplained as no document was filed nor explanation offered during the assessment proceedings--No interference was called for by the Appellate Tribunal in circumstances.

Muhammad Aslam Sheikh for Appellant.

Muhammad Tahir Khan, D.R. for Respondent.

2006 P T D (Trib.) 2575

[Income-tax Appellate Tribunal Pakistan]

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

I.T.A. No. 905/IB of 2002, decided on 19th September, 2005.

Income Tax Ordinance (XXXI of 1979)-

---S. 134---Appeal to Appellate Tribunal---Order was passed by the First Appellate Authority after the Appellate officer had relinquished charge of his post on 19-7-2002---While the order itself bore no date of hearing or the date of passing the order, the date of receipt recorded by the assessee himself on the order was 25-10-2002--Such order was never served on the Department, however, a copy thereof was delivered by the assessee to the Department on 17-1-2003---No indication of the date on which the order was legally served on the parties was found---Department, at the very outset, objected to the maintainability of the assessees appeal on the grounds, inter alia, that the order of First Appellate Authority was fake, illegal and void ab initio because the order surfaced up in a surreptitious manner long after the signatory officer, had been transferred and had relinquished charge as First Appellate Authority on 19-7-2002---Validity---Officer who had became functus officio after he was relieved of his office, should not have been allowed to have anything to do with the judicial work of the office over which he previously presided---Conduct of the out-going officer in not serving his order on the party adversely affected by his order, was an incurable error, because of the fact that, the Revenue had not been served any order (none was said to exist on record) preventing the Department from going to in appeal---Such acts having been done deliberately, same tantamount to commitment of a fraud against the Revenue---Order of First Appellate Authority was declared as illegal, void ab initio and of no significance whatsoever having been passed coram non judice in the circumstance by the Appellate Tribunal and appeal of the assessee was held still to be pending and was to be heard and decided in accordance with law while assessee was directed to pursue the same.

1995 MLD 1596; 1995 CLC 1951 and 1990 ALD 510(2) ref.

PLJ 2003 Lah. 319; (2003) 88 Tax 319 (Trib.); PLD 1978 Lah. 1139; PLD 1978 Lah. 458; PLD 1982 Kar. 250; PLD 1974 Lah: 294; 1979 CLC 114 and PLD 1985 Kar. 95 distinguished.

Ali Akbar v. State 1969 PCr.LJ 1307 and Mehar Din v. Murad Begum PLD 1964 SC 446 rel.

1994 PTD 1974; (2002) 86 Tax 117 (H.C. Kar.) = 2002 PTD 407; 1984 50 Tax 115 (H.C. Kar.) = 1984 PTD 355; 1996 PTD 263 (Lah,) B.C.); 1998 PTD (Trib.) 686; (1994) 50 Tax 44 (Trib.) and 1998 PTD (Trib.) 2106 not considered.

Hafiz Muhammad Idrees for Appellant.

Raja Muhammad Irshad, DAG/Legal Advisor, Dr. Muhammad Iqbal, I.A.C. and Muhammad Tahir Khan, D.R. for Respondents.

2006 P T D (Trib.) 2607

[Income-tax Appellate Tribunal Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member

I.T.A. No.1491/LB of 2005, decided on 5th May, 2006.

Income Tax Ordinance (XLIX of 2001)---

----S. 122(1)---Income Tax Ordinance (XXXI of 1979), S.65---Amendment of assessments---Re-opening of assessment by Taxation Officer---Validity---Original assessment was completed as on 30-6-2001 and the Taxation Officer had reopened the case under S.122 of the Income Tax Ordinance, 2001 and in his order, there was nowhere mentioned that he was delegated powers to reopen the case---Section 65 of the Income Tax Ordinance, 1979 being not saved in S.239 of the Income Tax Ordinance, 2001 no order in this regard could be passed---Case had also been reopened on the basis of record which was already available on file and there was no justification for reopening the case--Taxation officer had assumed jurisdiction under S.122 of the Income Tax Ordinance, 2001 without any justification as he had not been delegated powers by the Commissioner of Income Tax---Order of First Appellate Authority and the order passed by the Taxation Officer were vacated by the Appellate Tribunal.

(2003) 88 Tax 245 (Trib.); (2003) PTD (Trib.) 714; 2003 PTD (Trib.) 742; 2000 PTD (Trib.) 2904; 2006 PTD 673 and 2005 PTD 1316 rel.

Muhammad Shahid, Abbas for Appellant.

Sabiha Mujahid D.R. for Respondent.

2006 PTD (Trib.) 2614

[Income-tax Appellate Tribunal Pakistan]

Before Khawaja Farooq Saeed, Chairperson/Judicial Member, Khalid Waheed Ahmad, Judicial Member and Syed Aqeel Zafar ul Hasan, Accountant Member

I.T.A. No.59/IB of 2004, decided on 17th February, 2006.

Income Tax Ordinance (XXXI of 1979)---

---Ss. 65 & 62---Additional assessment---Approval---Permission---Department contended that First Appellate Authority was not justified in vacating the order passed under Ss. 65/62 of the Income Tax Ordinance, 1979 on the ground that Inspecting Additional Commissioner had only granted permission' which could not be a substitute ofapproval' required under S.65 of the Income Tax Ordinance, 1979---Subject/title of the Inspecting Additional Commissioner's letter in question mentioned the words "approval" while the body of the letter used the word "permission"---Inspecting Additional Commissioner had granted both an approval as well as permission---While using the word permission' Inspecting Additional Commissioner had actually granted approval for initiating proceedings to reopen the assessment of the assessee in accordance with S.65 of the Income Tax Ordinance, 1979---Wordpermission' was in fact synonymous with approval' and irrespective of which word was used, the intention of law had been duly fulfilled---Permission granted by the Inspecting Additional Commissioner was his consent to exercise of jurisdiction---No bar existed to treat a permission granted for purposes of S.65 of the Income Tax Ordinance, 1979 to be any different from an approval and was sufficient to assume jurisdiction to reopen a case---Use of discretion by the Inspecting Additional Commissioner was eminently clear and it expressly constituted a final direct affirmative action---Use of the wordpermission' instead of `approval' in the body of letter issued by the Inspecting Additional Commissioner was of no material significance---Admittedly the title of the letter in question clearly used the word approval---Said two words in the circumstances of the case carry identical meanings and were interchangeable to satisfy the requirement of assumption of jurisdiction to reopen the case under S.65 of the Income Tax Ordinance, 1979---Order of First Appellate Authority was vacated by the Appellate Tribunal and the case was remanded to the First Appellate Authority for decision on merits.

2003 PTD (Trib.) 1238; 1994 PTD (Trib.) 1288; 1998 PTD (Trib.) 1935; 2001 PTD 3788; ITA No.93(IB)/2004, dated 29-5-2004; 2004 PTD (Trib.) 463; 1998 SCMR 2013; 2004 PTD (Trib.) 726 and (1990) 63 Tax 79 (Trib.) distinguished.

I.T.A. No. 767/(IB) of 2002-03 decided on 27-2-2004 rel.

Shakir Hussain v. Chundoo AIR 1913 All. 567 and Treatise Words and Phrases Permanent Edition, Volume 3-4 at page 502 ref.

1994 PTD (Trib.) 856; 1994 PTD (Trib.) 1268; 1992 SCC 946; 1993 SCC 7149; I.T.A. No. 791(IB)/2003, dated 7-4-2003 Not relevant.

Saeed Ullah Khan, A.C. (Legal) MTU and Muhammad Ali Shah, D. R, for the Appellant.

Mansoor Ali Malik for the respondent.

2006 P T D (Trib.) 2623

[Income-tax Appellate Tribunal Pakistan]

Before Rasheed Ahmed Sheikh, Judicial Member and Naseer Ahmad, Accountant Member

I.T.A. No.1307/LB of 2001, decided on 17th March, 2006.

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

-----Ss. 62, 80C & Second Sched., Part-I, Cl. (118E)---Assessment on production of accounts evidence etc.---Exemption claimed was rejected on the ground that assessee was not engaged in manufacturing activities as the assessee could not provide E.O.B.I. and social, security record as .well as purchase vouchers and sale invoice---Proceedings were initiated under S.62 of the Income Tax Ordinance, 1979 and declared receipts were assessed to tax under S.80C of the Income Tax Ordinance, 1979---Validity---Assessing Officer had no lawful jurisdiction to suo motu convert the proceedings initiated under S.62 of the Income Tax Ordinance, 1979 to that of under S.80C of the Income Tax Ordinance, 1979 unless the proceedings under S.62 of the Income Tax Ordinance, 1979 were dropped at the first place---Assessment made was annulled by the Appellate Tribunal having not been lawfully made---Since exemption to income for the first time, was granted by the department, no justifiable reasons could be put forth while refusing the claim of exemption in the subsequent assessment years---Assessing Officer was directed to allow exemption.

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

----Ss. 62 & 80C---Proceedings under S.62 of the Income Tax Ordinance, 1979 and those of under S.80C of the Income Tax Ordinance, 1979 were two distinct and independent proceedings---None of them could overlap or override each other until and unless the proceedings initiated under one section were to be closed.

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

----Ss. 80C & 80CC---Presumptive Tax Regime---Explanation---Presumptive tax is, in fact, akin to capacity tax i.e. capacity to earn---Imposition of presumptive tax under Ss.80C and 80CC of the Income Tax Ordinance, 1979 was substituted of the normal method of levy and recovery of the income tax---Effect of a deeming provision in a taxing statute is that, it brings within the tax net an amount which ordinarily would not have been treated as an income, in other words, it brings within the ambit of chargeability some thing which might not actually accrue but which through a legal fiction shall be deemed to have accrued notionally.

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

----Ss. 80C & 59---Provisions of S.80C of the Income Tax Ordinance, 1979 were deeming in their character whereby no order whatsoever was to be passed rather the order shall be deemed to have been passed under S.59 of the Income Tax Ordinance, 1979.

Saleem Abid, ITP for Appellant.

Dr. Shahid Siddique Bhatti, D.R. for Respondent.

2006 P T D (Trib.) 2639

[Income-tax Appellate Tribunal Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member and Shaheen Iqbal, Accountant Member

I.T.A. No. 2840/LB of 2004, decided on 1st May, 2006.

Income Tax Ordnance (XXXI of 1979)---

----S. 80-D & Second Sched: Part-I, Cls. 115-A, 115-C, Part-IV, Cl. 123---Income Tax Ordinance (XLIX of 2001), S. 221, Second Sched: Part-I, Cl. 106-A & Part-IV, Cl. 11(xvi)---Companies Ordinance (XLVII of 1984), Ss. 15, 32, 33, 183, 178 & 205---Finance Act (VII of 2005), Preamble---S.R.O. 169(I)/1998---S.R.O. 567(I)/99---Minimum tax on income of certain persons---Assessee was registered as limited company and was sponsored by WAPDA with the expectation of the completion of the process of corporationization (privatization) in three years---Before privatization, the income and assets of the assesssee vested in WAPDA and WAPDA's income enjoyed exemption--During the transit period, exemption of income tax and minimum tax was allowed for three years---Privatization of the company/assessee was not completed within the anticipated period---On expiry of three years department undertook assessment proceedings and minimum tax under S. 80D of the Income Tax Ordinance, 1979 was levied---Assessee contended that business was carried on for and on behalf of WAPDA; that Directors/shareholders were nominated in terms of S.183 of the Companies Ordinance, 1984 and had no interest in the profit and no responsibility in the loss of the company; that Directors had no discretion to proceed independently but were bound to comply with all orders from WAPDA and that as the assessee was doing everything for and on behalf of WAPDA, levy of minimum tax on the turnover of the company was taxation of WAPDA's turnover which was not the intention of law---Validity---Held, WAPDA was the de facto owner of the assessee company as all the Directors including Chairman of the company were the employees of the WAPDA; company was incorporated with the view to privatize business of purchase of electric power; assessee company was only instrumental in the functioning of WAPDA and only indicated a nomenclature; all the Directors, Chief Executive and the Chairman of the assessee company were nominated members from employees of WAPDA and were to hold office during he pleasure of WAPDA; directors had no discretion to proceed independently but were bound to comply with all orders from WAPDA; the directors enjoyed no independent discretion, the company was being run on the commercial considerations determined by WAPDA; therefore levy of minimum tax on the turnover of the assessee company was the taxation of WAPDA's turnover which was exempted under the law and that exemption of income tax and minimum tax had been granted to the corporationized entities of WAPDA on account of sale of electricity from the date of the creation of such corporation up to the date of completion of process if corporationized till the tariff was notified---Tariff having neither been notified in the year under reference nor up to the date of effectiveness of the amendments i.e. 1-7-2005, exemption clause 106-A of Part-I of the Second Schedule of the Income Tax Ordinance, 2001 and clause 11(xvi) of Part-IV of the said Schedule were applicable to the assessee company---Demand of minimum tax pertaining to the year under review stood nullified and the orders in this respect stood abated---Order of the First Appellate Authority was vacated and the assessment order was annulled by the Appellate Tribunal.

1993 SCMR 833; PIDC v. CIT (1980) 41 Tax 44; 1993 SCMR 287; (1972) 83 ITR 211; 1991 SCMR 1447; Commissioner of Income Tax v. Ghazi Brotha Construction 2004 PTD 1994 and PLD 1999 SC 880 ref.

Mian Ashiq Hussain for Appellant.

Mrs. Sabiha Mujahid, D.R. for Respondent.

2006 P T D (Trib.) 2662

[Income-tax Appellate Tribunal Pakistan]

Before Ehsan ur Rehman, Judicial Member and Ch. Nazir Ahmad, Accountant Member

I.T.A. No.122/LB of 2005, decided on 20th July, 2006.

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

----Ss. 111(2) & 122(5)---Unexplained income or assets--:-Addition in the tax year immediately preceding the financial year in which the discovery was made---Assessee contended that show-cause' notice was, dated 16-6-2004, thus the amount was discovered in the year, 2004 and immediately preceding financial year was 2003 so the addition was compulsorily to be made in the year, 2003 and not in the assessment year 1998-99---Validity---Addition was to be made in the immediately preceding year where the amount was discovered for action under S.11 of the Income Tax Ordinance, 2001 in the year, 2004 accordingly the addition was to be made in the immediately preceding financial year i.e. 2003---Order passed under S.111 of the Income Tax Ordinance, 2001 suffered from factual infirmity and incurable legal lacunae---Departmental appeal was rejected by the Appellate Tribunal.

2005 PTD 1316; 2006 PTD 673 and 2006 PTD (Trib.) 1778 ref.

(b) Income Tax---

----Evidence---Discarding the evidence without, taking as whole the pieces of evidence produced was legally not be approved, so such a way of proceeding was 'without any legal sanction behind it.

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

----S. 122(5)---Amendment of assessments---Definite information---Proceedings under S.122 of the Income Tax Ordinance, 2001 could not be initiated except on the basis of definite information acquired from an audit or otherwise.

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

----S. 111---Income Tax Ordinance (XXXI of 1979), S.13---Unexplained income or assets---Assessing Officer firstly mentioned S.13 of the Income Tax Ordinance, 1979 and thereafter S.11 of the Income Tax Ordinance, 2001 in the show-cause notice, which indicated un­-decisiveness/ambiguity in mind for applying the law -Such infirmity was to be interpreted in favour of the assessee because the assessee had the right to know the exact provision of law under which he was required to be proceeded.

(2006) 93 Tax 73 (Trib.) rel.

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

----S. 122---Amendment of assessment---Amendments in the applied provisions---Effect---Section 122 of the Income Tax Ordinance, 2001 had been made victim of series of amendments so the action under such provisions of law where the provisions had been made by the law makers in pieces then in this scenario, the action could not be strictly termed as legal and such repeated amendments cause misuse of authority.

S. Ashraf Ahmad Ali, D.R. for Appellant.

Ajmal Khan for Respondent.

2006 P T D (Trib.) 2670

[Income-tax Appellate Tribunal Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member

I.T.As. Nos. 6284/LB and 6285/LB of 2005, decided on 6th June, 2006.

Income Tax Ordinance (XXXI of 1979)---

----S.13(1)(aa)---Addition---Detail of source of investment were furnished that those were the result of life long savings and selling of jewelry and in this respect sale receipts were also furnished---Taxation Officer rejected the explanation and made the addition---Validity---Addition had been made despite the fact that assessee had submitted all the details but Taxation Officer without confirming from persons to whom the jewelry was sold/purchased had made the addition on the basis of presumptions and surmises---First Appellate Authority had not considered this fact although it had reduced the addition made by the Taxation Officer but there was no justification for the addition which was deleted by the Appellate Tribunal---Appeal of assessee was allowed.

Muhammad Shahid Abbas for Appellant.

Mrs. Sabiha Mujahid, D.R. for Respondent.

2006 P T D (Trib.) 2680

[Income-tax Appellate Tribunal Pakistan]

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

I.T.As. Nos. 5349/LB and 5350/LB of 2005, decided on 17th March, 2006.

Income Tax Ordinance (XXXI of 1979)---

----Ss. 13(1)(d), 61, 134 & 156---Appeal to Appellate Tribunal---Rectification of mistake---Commissioner Income Tax (Appeals), on rectification applications by appellant company for assessment of relevant years, admitted applications on the ground that Assessing Officer had not given adequate opportunity to explain his version before making impugned assessments---Commissioner Income Tax, set aside the case and remanded same to Assessing Officer with direction to reframe assessment order afresh after giving full opportunity to and confronting assessee/appellant regarding proposed treatment---Appellant had filed appeal against order of Commissioner Income Tax, contending that it was beyond the jurisdiction of Commissioner Income Tax (Appeals) to have set aside the entire assessment made in the case for the assessment years against the prayer of appellant for giving a finding on `escaped' ground which only needed proper dilation---Contention of appellant/ assessee that Commissioner Income Tax (Appeal) had acted beyond his jurisdiction in setting aside assessment years for relevant years---Impugned orders of Commissioner Income Tax, were vacated and those of his predecessor, were restored accordingly.

2000 PTD (Trib.) 3732; 2000 PTD (Trib.) 3752; 1993 PTD (Trib.) 964; 1987 PTD (Trib.) 66 and 1997 PTD (Trib.) 85 ref.

Siraj-ud-Din Khalid for Appellant.

Anwar Ali Shah, D.R. for Respondent.

2006 P T D (Trib.) 2688

[Income-tax Appellate Tribunal Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member

I.T.A. No.2729 /LB of 2005, decided on 1st June, 2006.

Income Tax Ordinance (XXXI of 1979)---

----S. 13(1)(aa)---Addition---Setting aside---Opportunity to fill in the lacunae in the assessment---Assessment' was set aside after giving clear observations that estimation of receipts was without any logic or convincing basis---Likewise the addition in the trading account was without any basis and the disallowances out of Profit and Loss expense had been made without giving reason for the disallowance under each of head of account---Matter had been set aside for de novo proceedings affording the Taxation Officer an opportunity to fill in the lacunae in the assessment order which had never been approved by the Appellate Tribunal as well as higher forums---Order of First Appellate Authority was vacated by the Appellate Tribunal and declared version of the assessee was directed to be accepted.

Muhammad Shahid Abbas for Appellant.

Mrs. Sabiha Mujahid, D.R. for Respondent.

2006 P T D (Trib.) 2689

[Income-tax Appellate Tribunal Pakistan]

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

I.T.A. No. 1378/LB of 2004, decided on 6th May, 2006.

Income Tax Ordinance (XXXI of 1979)---

----S. 59---C.B.R. Circular No. 7 of 2002, dated 15-6-2002, para.9(a)(ii)--Self-assessment---Selection of case for total audit---First Appellate Authority directed to accept the case under Self-Assessment Scheme on the ground that selection for total audit on basis of guidelines was improper as held by the High Court---Appeal against, by the Department---Assessee contended that Supreme Court had granted leave to appeal against the said judgment on this issue but while granting the leave the judgment was not suspended and the said judgment being still in the field was binding on the Department---Validity---When the First Appellate Authority had followed the judgment of High Court which he was bound to do, the Department should not have claimed that the First Appellate Authority directed for acceptance of the case without any solid reason---Such arguments were unwarranted and need to be avoided---Revenue appeal being without merit was rejected by the Appellate Tribunal.

2006 PTD 538 ref.

Rana M. Laqman, D.R. for Appellant.

M. Shahid Abbas for Respondent.

2006 P T D (Trib.) 2693

[Income-tax Appellate Tribunal Pakistan]

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

M.As. Nos. 381/LB to 383/LB of 2005, decided on 30th December, 2005.

Income Tax Ordinance (XXXI of 1979)---

----S. 156---Partnership Act, (IX of 1932), S. 19(2)(b)---Rectification of mistake---Association of persons---Bank account in the name of partner---Department contended that no partner was allowed to open a bank account in his own name on behalf of the firm under the provisions of S.19(2)(b) of the Partnership Act, 1932 and such mistake in Income Tax Appellate Tribunal's order was apparent and the order was clearly rectifiable on the mistake of facts and law---Appellate Tribunal had mistakenly held that partner of the firm was maintaining bank accounts on authorization of Association of Persons/Firm in the name of Firm, declared in Association of Person's name, which was allegedly detected by the Assessing Officer---Copy of Account Opening Form was furnished and contended that bank accounts were opened in the name of partner instead of Association of Persons/Firm---Validity---Held, it was not a focal point at the time of hearing that partner of the firm had opened bank account in his name without authorization of Association of Persons/Firm whereas the vital objection at that time was that partner of the firm could not operate bank accounts on behalf of the Association of Persons/Firm---Department came up with new set of arguments with the support of additional evidence, which did not form the subject-matter of the case till hearing before Appellate Tribunal---Department was pressing with fresh arguments on the basis of a document of account opening Form for consideration and reassessment of the matter, which did not fall within the scope of rectification under S.156 of the Income Tax Ordinance, 1979---If a mistake which had to be discovered by a long-drawn process of reasoning of examining arguments on points where there may conceivably be two opinions could not be said to be a mistake or error which was apparent from record---Apparent error must be from the record of the assessee and not an error discovered from other sources---No mistake was floating on the surface of Appellate Tribunal's order---Rectification application was declined by the Appellate Tribunal being devoid of legal force.

(1962) 5 Tax 126 (Trib.); I.T.As. Nos. 556 and 557 of 1965-1966; Oxford Dictionary; 1995 PTD (Trib.) 770; 1993 PTD (Trib.) 964; National Foods' case; Narayan Nairs' case AIR 1959 Ker. 116 and Aggarwala's Book at page 380 ref.

PLD 1967 Dacca 35 and 1999 SCMR 2189 rel.

Haji Ahmad Din, D.R. and Faqir Hussain, C.I.T. for Applicants.

Saqib Bashir and Javed Iqbal for Respondent.

2006 P T D (Trib.) 2706

[Income-tax Appellate Tribunal Pakistan]

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

Income Tax Appeals Nos. 856/LB, 1408/LB and 938/LB of 2003, decided on 20th January, 2006.

Income Tax Ordinance (XXXI of 1979)---

----S. 62---Assessment on production of accounts, evidence etc.---Conceding of defects in accounts by representative of assessee mentioned through order sheet entry---Assessee contended that requirement of law as per S.62 of the Income Tax Ordinance, 1979 was not fulfilled by merely stating that defects in accounts were conceded by the Authorized Representative of the assessee as per order sheet entry---Obligatory for the Assessing Officer to point out specific defects in account and confront the assessee with the same and to obtain his explanation for proper consideration which was not done so---Effect---Submissions of the assessee were borne out from record---Assessing Officer failed to point out any specific defect in accounts---Requirement of S.62 of the Income Tax Ordinance, 1979 having not been fulfilled, Appellate Tribunal directed to accept the declared trading result of the assessee in circumstances.

Rana M. Liqman D.R. for Appellant (in I.T.A. No. 856 of 2003).

Siraj-ud-Din Khalid for Respondent (in I.T.A. No. 856 of 2003).

Siraj-ud-Din Khalid for Appellant (in I.T.A. No.938 of 2003).

Rana M. Liqman, D.R. for Respondent (in I.T.A. No.938 of 2003).

2006 P T D (Trib.) 2709

[Income-tax Appellate Tribunal Pakistan]

Before Khawaja Farooq Saeed, Chairperson and Abida Ali, Accountant Member

R.A. No.13/PB of 2004, decided on 13th July, 2005.

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

----Ss. 156 & 136---Rectification of mistake---Reference to High Court---Scope---Order of the Appellate Tribunal made under S.156 of the Income Tax Ordinance, 1979 could not give rise to question of law unless such order merged into the main order---If the Appellate Tribunal had found some mistake apparent from record and the order was rectified up to the said mistake, the rectified order became part of the main order up to that extent and there could always be new question and the assessee or the department became entitled to raise the same---Where the Appellate Tribunal found that there was no mistake apparent from record, order under S.156 of the Income Tax Ordinance, 1979 could not become part of the main order and no question could be raised from the said rejected order---Reference application could only be filed by posing a question of law arising out of the order of the Appellate Tribunal decided under S.34 of the Income Tax Ordinance, 1979---No question of law could be proposed from an order under S.156 of the Income Tax Ordinance, 1979 if the same had been rejected---Conversely in case of acceptance, the same became part of the main order and if a new question from the said situation arose the same could always be referred.

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

---Ss. 136, Second Sched., Part-I, Cls. (118C) & (80D)-Reference to High Court---Exemption---Trial production---Commercial production---Questions, "whether trial production in the Sugar Mill can be treated its commercial production in relation to determination of exemption period under Cl. (118C) of Part-I of the Second Schedule to the Income Tax Ordinance, 1979 and Appellate Tribunal was justified in confirming that assessment year 1999-2000 was seventh year and not sixth year of the exemption under the said Cl. (118C) of Part-I of the Income Tax Ordinance, 1979" was referred to High Court by the Appellate Tribunal for its opinion.

1999 PTD 4126; (1954) 26 IT; (1982) 133 ITR 879 and 1998 PTD (Trib.) 3742 ref.

Shaukat Amin Shah FCA for Applicant.

Mian Saeed Iqbal, D.R. for Respondent.

STATEMENT OF THE CASE

The reference application filed by the assessee speaks as follows:--

"Applicant Chashma Sugar Mills Ltd. is a Public Limited Company quoted on stock exchanges in Pakistan. The industrial undertaking of the company is situated at D.I. Khan and enjoys exemption from income tax for a period of 8 years under Clause 118C of Part-I, of the Second Schedule to the Income Tax Ordinance, 1979 (the Ordinance). Assessments for assessment years 1998-99 and 1999-2000 were finalized accepting the declared results of loss of Rs.8,845,625 for the former and profit of Rs.211,651 for the latter year from the industrial undertaking. The assessments were made vide combined order under section 62 of the Ordinance by the Deputy Commissioner of Income Tax, Companies Circle 08, Peshawar on 9th February, 2001 allowing exemption from tax under Clause (118C) of Part-I, of Second Schedule to the Ordinance as, according to the Department, 6th and 7th years of exemption. It is pertinent to note that whereas the loss and the exempt profit respectively assessed for the said two years is said to be of 6th and 7th years of tax holiday, the depreciation allowed as of the 5th and 6th years because for the assessment year 1993-94 no depreciation of industrial assets was allowed. This in the opinion of A.R. amounted to admission by the Department that during the income year relevant to the assessment year 1993-94 only trial production had been done inasmuch as in the case of a year of tax exemption depreciation cannot be legally ignored. After receipt of assessment order for assessment years 1998-99 and 1999-2000 the applicant filed two rectification applications both, dated 16th August, 2001 under section 156 of the Ordinance pointing out that the assessment years 1998-1999 and 1999-2000 were 5th and 6th years of exemption."

The Assessing Officer rejected both applications relying upon a judgment of Peshawar High Court in writ petition number 1122 of 1995. This case was later reported as (2000) 81 Tax 94. The said judgment related to Sales Tax Act, 1951 the provision of which were not at par with those of Clause (118C) of Part-I Second Schedule to the Ordinance under which period of tax holiday started running from the month in which the undertaking is set up or commercial production is commenced, whichever is the later. Applicant felt aggrieved of the rejection of its application and instituted appeal for the assessment year 1999-2000 before the learned Commissioner of Income Tax (Appeal-I), Peshawar (the CITA) who set aside the order of the Assessing Officer directing him" to examine the matter afresh in the light of above observations keeping in view the fact the Clause (118C) of the Second Schedule to the Income Tax Ordinance, 1979 which allows exemption for 8 years from the date the industry is set up or commercial production is commenced whichever is later, and disposed off the rectification application accordingly". According to the learned CITA the issue for determination was the month and year in which commercial production started. Against the appellate order both the parties approached the honourable Income Tax Appellate Tribunal (Tribunal) for their grievances. The assessee claims that he omitted to file appeal for the assessment year 2000-2001 by being misled by the Assessing Officer's combined order vide Memo. dated 10th December, 2001 whose caption mentioned the assessment year 1999-2000 only (instead of the assessment years 1999-2000 and 2000-2001).

1. The grounds of appeals agitated by the parties are reproduced as under:

Applicant's objection:

"(i) That the L/CIT(A) has legally erred to set aside in respect of treating the assessment year 1999-2000 as seventh year of exemption under Clause (118C) of Part-I of the Second Schedule to the Ordinance instead of sixth year as claimed by the appellant.

(ii) That the L/CIT(A) has legally erred in remanding the case back to the Assessing Officer for de novo proceedings even stating the following remarks on page 4 of the appellate order:

As already held by the Higher Appellate Authorities and S.R.O. referred to above the term set up included trial production therefore according to Clause (118C) of the Second Schedule to the Ordinance exemption period starts from the month in which the undertaking is set up or commercial production is commenced whichever is later. He should have himself decided this issue instead of remanding the case back to the Assessing Officer for de novo proceedings.

(iii) That the L/CIT(A) has legally erred in not following the judgments reported as (1954) 26 IT & (1982) 133 ITR 879 in which it is held that set up and commencing of business are two distinct terms and set up includes trial production. It is well-settled principle of law that the ruling of higher Courts are binding on subordinate authority till the time such is overruled.

(iv) That the judgment reported as (2000) 81 Tax 94 (H.C. Pesh.) referred by the learned Assessing Officer in the rectification order was not in favour of Revenue, wherein it has been held that set up includes trial production.

(v) That the L/CIT(A) has legally erred in not following the S.R.O. 857(1)/88, dated 26 September, 1988 which clearly states that set up includes trial production."

Departmental Objection: --

"(i) That the L/CIT(A) has misconceived the judgment of the Peshawar High Court in Writ Petitions Nos. 1122 and 1189 of 1995, reported as 1999 PTD 4126, wherein para. 17, the Hon'ble Peshawar High Court while disposing of the case, very clearly terms the marketing of product and payment of sales tax on the product being part of commercial production. The judgment by the L/ITAT reported as 1998 PTD (Trib.) 3742 considers trial production being only experimental and not meant for marketing in the instant case, crushing was done for full season (113-days), product worth Rs.15,55,12,430, marketed, and Excise Duty to the tune of Rs.3,24,49,950 paid.

(ii) That the L/CIT(A) on page 3, last para. of order failed to appreciate accounting facts by accepting assessee's plea regarding capitalization of loss incurred as trial production. In the instance case, ,the statement of accounts for the relevant period bears testimony to the fact that the loss capitalized by the assessee Rs.67,23,150 was not result of sale of product at Rs.15,55,12,430 and cost incurred thereon at Rs.16,37,27,310."

Applicant's additional grounds:

"(i) That the L/CIT(A) erred in ignoring the position that the profit and gains in the income year relevant to assessment year, 1999-2000 could not be counted as 7th year of tax holiday inasmuch as the alleged first year of tax holiday (i.e. assessment year 1993-94) admittedly did not have any profits and gains to avail exemption.

(ii) That the Authorities have erred in failing to note that while competing profits and gains for the assessment year 1999-2000 depreciation has been allowed as of the sixth year of tax holiday thus there remains no justification in the departmental claim that the profit and gains were of the seventh year of tax holiday."

1. The issue for determination was the month and year in which the industrial undertaking started commercial production to Earn Tax Holiday in Respect of its Profits and Gains under Clause (118C) of Part-1 of the Second Schedule to the Ordinance. The said Clause (118C) read as follows:--

"(118C) (1) Profits and gains derived by an assessee from an industrial undertaking set up between the first day of December, 1990 and the thirtieth day of June, 1995 both days inclusive, for a period of eight years beginning with the month in which the undertaking is set up or commercial production is commenced, whichever is the later.

(2) The exemption under this clause shall apply to an industrial undertaking which fulfils the following conditions, namely:--

(a) That is set up in the Province of Balochistan (excluding Hub Chowki area), the North-West Frontier Province, the Federally Administered Tribal Areas, the Northen areas, Azad Khasmir, the divisions of Dera Ghazi Khan and Bahawalpur in the Province of the Punjab or the divisions of Sukur and Larkana in the Province of Sindh.

(Provided that the exemption under this clause shall be admissible to the industries for processing of fish, minerals, fruits, vegetables, flowers and mineral- water based on the natural resources of the Province of Balochistan, including those situated in the Hub Chowki Area; and)

(b) That it is owned and managed by a company formed exclusively for operating the said industrial undertaking and registered under the Companies Ordinance, 1984 (XI-VII of 1984), and having it registered officer in Pakistan.

(c) That it is not formed by the splitting up or the re-construction or re- constitution of business already in existence or by transfer to a new business of any machinery and plant used in business which was being carried on in Pakistan at any time before the commencement of the new business; and

(d) That it is engaged in the manufacture of goods or materials, or the subject of goods or materials to a manufacturing process, or mining (excluding petroleum and gas) or extraction of timber."

[1 Substituted for semi-colon by Notification S.R.O.1155(1)/93, dated November 29, 1993]

[2 Provision inserted by Notification No.S.R.O.1155(1)/93, dated November 29, 1993].

1. The assessee claim was that exemption of profits and gains is a right, which exists for each and every year during eight years of tax holiday commencing from the month in which commercial production started and the statutory right of exemption could not be curtailed by an error of mathematical counting by any authority whatsoever.

2. Facts relevant for determination of the aforesaid question were declared vide the assessment orders for assessment years 1993-94 and 1994-95. These are reproduced below from para. 3 page 3 of the Hon'ble Tribunal's order:

"Learned A.R. of the assessee argued that the assessee had filed nil income return for assessment year, 1993-94 and had not put in any claim for tax holiday as there were no industrial profits or gains in respect of which exemption could have been claimed, the Assessing Officer while completing the assessment for succeeding year i.e. assessment year 1994-95 accepted that the industrial profits and gains were exempt under tax holiday clause and he also admitted that the industrial undertaking of the assessee commenced production during the November, 1992 which fell to be assessed in the assessment year 1994-95 the Assessing Officer in his order for the same assessment year has recorded that the company is granted exemption under Clause (118C) for 8 years and this being the second year of exemption and according to AR's contention 2nd year of exemption was used by a mistake inasmuch as the normal depreciation for industrial assets was allowed for the first time. According to them, it goes without saying that the industrial profits of a limited company cannot be computed without taking into consideration the normal depreciation and the tax holiday clause eight years period of tax holiday would commence from the month of November, 1992 and that the period of eight years could not be curtailed by the mistaken remark in assessment year 1993-94 that "it was the second year of exemption." It was further argued that the assessee submitted and application for rectification of the above mistake on 8th March, 2001 covering the assessment year 1994-95 and the subsequent years assessments completed till the date of the application. The Department has not passed any order in response to the said application for any of the above referred years. The action of the Department seeking to change the well considered finding by refusing to rectify the mistake in order passed for assessment year 1999-2000 is illegal. It was further submitted that the finding of fact given in the assessment order for the assessment year 1993-94 has attained finality. In support the learned A.R. of assessee referred cases-law reported as 2001 PTD (Trib.) 2922, 2000 (82) Taxation 481."

1. Arguments of the Departmental Representative before the honourable Tribunal which appear in para. 4 of the Tribunal's order are as under:--

"While on behalf of the Department the learned D.R. contended that for the assessment year 1993-94 the Assessing Officer allowed exemption under Clause (118C) of Part-III of the Second Schedule to the Income Tax Ordinance, 1979. Later on, the exemption was regularized under Clause (118C). On these parameters the exemption continued and lasted in the assessment year 2000-2001 under Clause (118C). The same fact was cited in the assessment year 1993-94, where the Assessing Officer stated hat, "the exemption will continue till 2001, meaning thereby assessment year 2000-2001." The assessee agitated the assessment order for assessment year 1993-94 before CTT(A) Peshawar on the following grounds:

(a) That trial run production was treated as commercial production.

(b) That minimum tax under section 80D was charged.

(c) That federal education fee was charged.

"Learned CIT(A) Peshawar vide his Order No.1014, dated 25-1-1994 did not entertain the appeal after exhaustive discussion on each aspect. The assessee did not agitate these issues in further appeal. It was further stated that if assessment year 1993-94 tax under section 80D was charged at Rs.7,77,562 out of which Rs.58,161 was claimed as tax deducted at source, while Rs.7,63,748 was paid through challan vide, dated 30-12-1993. It was further contended that assessee-Company never agitated or applied for rectification for so-called correction in the order of exemption since the very inception. The assessee claim that production during the period relevant to the assessment year 1993-94 was trial production was not accepted by the Department as the same was treated as commercial production. In the assessment order for assessment year 2000-2001, the assessee claimed exemption under Clause (118C) for 7th year, exemption was allowed for the year keeping in view the requisite qualification, which was fulfilled by the assessee. However, the assessee misconceived that the exemption allowed for assessment year 2000-2001 is for the 7th year of the tax holiday period. No such omission was made in the assessment order. Moreover, in each assessment order from assessment years 1993-94 to 1999-2000 the year of tax holiday period has been specifically mentioned, hence the assessment year 2000-2001 is 8th and last year of exemption of tax holiday period under Clause (118C.)"

1. The A.R. before us argued that the facts stated in para.4 of the honourable Tribunal's order do not depict correct picture of the event:

(i) Firstly, it is erroneously stated in fifth line in para. 4 on page 4 of the honourable Tribunal's order as follows:---

"The same fact was cited in the assessment year 1993-94 where the Assessing Officer stated that, "the exemption will continue till 2001, meaning thereby for the assessment year 2000-2001."

It is submitted that the words "meaning thereby assessment year 2000-2001" do not appear in the assessment order for the assessment year 1993-94. The sentence which appears in sixth line of fourth paragraph on page 4 of the said assessment order reads as under:--

"The exemption will continue till 2001"

The words "meaning thereby assessment year 2000-2001" are not part of said order. The sentence constructed meant the relevant month of. the calendar year, 2001 and not the assessment year 2000-2001.

(ii) The learned departmental representative (D.R.) was not correct in stating that the appellate order of the learned CIT(A), dated 25th January, 1994 was not agitated by the appellant in further appeal. The appellant did file an appeal before the honourable Tribunal upheld levy of minimum tax under section 80D of the Ordinance without determining the issue as to when the commercial production commenced. Thus no finding of the Tribunal exists in the appellate order for the assessment year 1993-94 as to when commercial production commenced. The assessee's appeals before the learned CITA and the honourable Tribunal were against the charge of tax under section 80D of the Ordinance and Federal Education Fee, which the then authorized representative considered were chargeable, only if commercial production took place. In the appellant's grounds of appeal it did not concede that the applicant carried on commercial production in the period relevant to assessment year 1993-94.

(iii) The learned DR misled the honourable Tribunal by contending that the applicant "never agitated or applied for rectification for so-called correction in the order of exemption since the very inception." As regards the assessment order For 1993-94 after the Assessing Officer accepted the capitalization of loss, the point of view of the applicant had been fully accepted. If there was any grievance it should have been that of the Department which they could seek to correct under section 66A of the Ordinance which was never done.

1. The A.R. further added that the honourable Tribunal has rejected the appeal of the applicant and accepted the appeal of the Department, for the assessment year 1999-2000 on the. Following grounds:--

(i) The production carried on by the applicant in the period relevant to assessment year 1993-94 was not of a trial nature but of commercial nature. In this connection the honourable Tribunal relied upon a judgment of the Lahore Bench of the honourable Tribunal reported as 1998 PTD (Trib.) 3742. It is respectfully stated that findings about the trial production given in the assess­ment order for 1993-94 could not be reviewed by the honourable Tribunal in appeal for the assessment year 1999-2000. This reported judgment does not distinguish trial production from commercial production where the said trial production was first for sale. That case was that of a weaving factory involving only one machine and one process. He added that the nature and problems of a sugar manufacturing mills which was complex involving multiple operations could not be decided on the basis of a judgment of an easy technology weaving factory. The honourable Tribunal misdirected itself by comparison of two industrial units of different nature. The difference between the nature of production activity of a weaving factory and that of a sugar-manufacturing mill was completely ignored while deciding the applicant's appeal in relying upon case-law reported as 1998 PTD (Trib.) 3742.

(ii) The A.R. further said that the honourable Tribunal in this behalf also relied upon "year-wise comparative schedule of production: which appear at page 9 of the appellate order of the honourable Tribunal. This chart was submitted by the Department. The significant factor considered in this chart was the number of days worked and quantity of sugarcane crushed and the quantity of the sugar produced. If the said chart submitted by the Department was properly interpreted.' It would have revealed that actual production of sugar in the year relevant to the assessment year 1993-94 was 38.76% of the installed capacity of 4500 MT and that the actual production of the next year was 72.98% of the installed capacity. This fact alone would show that undertaking was facing trial run problems in the year relevant to assessment year 1993-94.

(iii) The A.R. has also gone to argue that the honourable Tribunal also ignored to give its judgment on merit on two additional grounds of appeal though it took notice of applicant's grounds in para. 3 of its appellate order. These additional grounds raised vital issues having bearing for determining the nature of production in the period relevant assessment year 1993-94. On the question of finality, the applicant relied upon a judgment of the honourable Tribunal reported as 2001 PTD (Trib.) 2922 which has not been discussed but only cursorily referred to by the honourable Tribunal. This judgment in his opinion clinches the issue and in the light of the said judgment the assessment year 1993-94 could never be held as the year in which commercial production commenced. The honourable Tribunal again failed the A.R. claimed to pronounce its judgment on the other additional ground relating to depreciation which appears at page 3 of appellate order and reads as follows:--

"That the Authorities below have erred in failing to note that while computing profits and gains for the assessment year 1999-2000 depreciation had been allowed as of the sixth year of tax holiday thus there remains no justification in the Departmental claim that the profit and gains were of the seventh year of tax holiday."

(iv) Thus there is an irreconcilable contradiction in holiday the assessment year 1999-2000 as the seventh year of tax holiday while the depreciation has been allowed as of the sixth year of tax holiday the A.R. remarked.

(v) Regarding refusal to believe that any application for the assessment years 1994-95 and onwards under section 156 of the Ordinance had been filed by the applicant on 8th March, 2001, the A.R. claims that the learned DR misled the honourble Tribunal in the matter. Not only the application was on record, but a reminder, dated 2nd December, 2002 was filed by the applicant and was also available on the file. It is respectfully submitted that no finding of fact in this matter could legally and justifiably be given by the honourable Tribunal without due verification about this aspect from the relevant official who acknowledged its receipt on 8th March, 2001. Failing on the part of the former authorized representative in his arguments or that of the Department to enter the receipt of the application in the order sheet could not be a basis for the honourable Tribunal to give an adverse finding against the applicant. Following sentence appearing at the start of para. 5 of the honourable Tribunal's order needs special mention:

"We have considered the arguments of the representatives, perused the relevant orders and also examined the case record with the help of the learned D.R."

It was argued that the examination of case record is a matter of vital importance for the applicant and its exclusion from the process, infringes its basic and natural right namely "audi­alteram partem". The applicant, therefore, request for recommendation of the following question of law to the High Court the A.R. added:--(sic)

1. It was pointed out to learned AR that in view of the importance of the main issue the Tribunal and even to some extent the Department does not object to sending of the relevant issue to the Hon'ble High Court for getting their superior wisdom. In this regard the Tribunal is of the opinion that having decided in some other judgment that trial production is covered within the term commercial production the issue has become of the more importance. The assessee claim that his item being sugar manufacturing his case on facts can be distinguished from the said referred case wherein the said assessee had done weaving, also requires consideration. However, the questions proposed do not reflect clearly these legal prepositions. We are convinced from the arguments and detailed discussion of the history of the issue that certain important questions of law emerge from the order but we are not satisfied with the question. Some questions relate to main order while same emerge from the miscellaneous applications. In this regard suffice will be to say that the orders of the Tribunal made under section 156 cannot give rise to question of law unless such order merges into the main order. It means that if the Tribunal has found some mistake apparent from record and the order is rectified up to the said mistake, the rectification order becomes part of the main order up to that extent. In an eventuality like this there can always be new question and thus the assessee or the Department becomes entitled to raise the same. However, in the cases where the Tribunal finds that there was no mistake apparent from record, order under section 156 does not become part of the main order. No question, therefore, can be raised from the said rejected order, as provision of law does not provide for a situation like this. A reference application can only be filed by posing a question of law arising out of the order of the ITAT decided under section 134 of the erstwhile Income Tax Ordinance, 1979. No question of law can be proposed from an order under section 156 if the same has been rejected conversely in case of acceptance we have already mentioned that the same become part of the main order hence if a new question from the said situation arises the same can always be referred.

The question proposed before us, therefore, does not convey the actual controversy. During the course of the proceedings and upon dilating the arguments it has satisfactorily been felt that there are certain issues which do require indulgence of the High Court and we should get the benefit of their superior wisdom.

1. The issue, which in our opinion emerge from the long and detailed arguments of the two sides, are:--

(1) Whether on the facts and in the circumstances of the case trial production in the Sugar Mill can be treated its commercial production in relation to determination of exemption period under Clause (1180) of Part-I of the Second Schedule to the Income Tax Ordinance, 1979? and

(2) Whether on the facts and in the circumstances of the case the Income Tax Appellate Tribunal was justified in confirming that Assessment Year 1999-2000 was seventh year and not sixth year of the exemption under the said Clause (118C)?

2006 P T D (Trib.) 2722

[Income-tax Appellate Tribunal Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member and Istataat Ali, Accountant Member

I.T.As. Nos. 3264/LB, 3265/LB, 3392/LB, 3393/LB of 2004, decided on 24th July, 2006.

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

----S. 52---Liability of persons failing to deduct or pay tax---Assessee in default---Limitation---Issuance of notice after period of four years---Validity---Notice issued after the period of four years regarding the action taken under S.52 of the Income Tax Ordinance, 1979 was illegal---Appeals filed by the Department for the two years were dismissed as a single notice for all the four years had been sent by the Assessing Officer after the period of four years.

(2003) 87 Tax 89 (Trib.) rel.

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

----Ss. 52 & 86---S.R.O. No. 368(1)/94, dated 7-5-1994---Liability of persons failing to deduct or pay tax-4 -Assessee in default---First Appellate Authority cancelled order made under S.52 of the Income Tax Ordinance, 1979 for the two years by holding that the notice sent in this regard was out of time, but on the same out of time notice it upheld the order for the next two years while the paid-up capital of the company/assessee was also below Rs.1.5 million and the assessee/company was not liable to deduct tax under S.50(4) of the Income Tax Ordinance, 1979 on this score also---Validity---Capital of the assessee company was below Rs.1.5-million for the four years---Where the capital of the company was below Rs.1.5 million, the company would not be liable to deduct tax---Assessee company had erroneously been declared as assessee in default for both the years and order passed by the Taxation Officer was without lawful jurisdiction---Order of First Appellate Authority was vacated and orders passed under sections Ss.52/86 of the Income Tax Ordinance, 1979 by the Assessing Officer for all the four years were cancelled--Two appeals filed by the Department were dismissed, while the two appeals filed by the assessee were allowed.

I.T.As. Nos. 2666 to 2670, dated 10-3-2003 ref.

2002 PTD 1523 and 2001 PTD 1480 rel.

Sabiha Mujahid, D.R. for Appellant (in I.T.As. Nos. 3264/LB and 3265/LB of 2004).

Saleem Abid, ITP for Respondent (in I.T.As. Nos. 3264/LB and 3265/LB of 2004).

Saleem Abid, ITP for Appellant (in I.T.As. Nos. 3392/LB and 3393/LB of 2004).

Sabiha Mujahid, D.R. for Respondent (in I.T.As. Nos. 3392/LB and 3393/LB of 2004).

2006 P T D (Trib.) 2729

[Income-tax Appellate Tribunal Pakistan]

Before Muhammad Ashfaq Balouch, Judicial Member and S. A. Minam Jafri, Accountant Member

I.T.A. No.321/KB of 2004, decided on 28th April, 2006.

Income Tax Ordinance (XLIX of 2001)---

----S. 122---Income Tax Ordinance (XXXI of 1979), S.62---Amendment of assessment---Assessment finalized under S.62 of the Income Tax Ordinance, 1979 on 29-5-2002 was cancelled under S.122 of the Income Tax Ordinance, 2001 being erroneous and prejudicial to the interest of Revenue---Validity---Assessing Officer had passed the order under S.122 of the Income Tax Ordinance, 2001 without specifying specific provision within ken of S.122 of the Income Tax Ordinance, 2001---Conceivable direction led to the existing provision of S.122 (5A) of the Income Tax Ordinance, 2001 but the same had been introduced on 17th June, 2003 vide Finance Act, 2003---Cogitation mentioned in order under S.122 of the Income Tax Ordinance, 2001 did not stand covered by any statutory provision in S.122 of the Income Tax Ordinance, 2001, existent on the juncture while the assessment was framed---Order framed under S.122 of the Income Tax Ordinance, 2001 amounted to casus omissus as such was not sustainable under law---Order passed under S.122 of the Income Tax Ordinance, 2001 was not livable on legal plane and was cancelled and order passed under S.62 of the Income Tax Ordinance, 1979 was restored.

2005 PTD 1316 and I.T.A. No.1849/KB of 2093 rel.

Sheikh Jalaluddin, F.C.A. for Appellant.

Muhammad Ali Indhar, D.R. for Respondent.

2006 P T D (Trib.) 2737

[Income-tax Appellate Tribunal Pakistan]

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

I.T.A. No. 2697/LB of 2003, decided on 1st December, 2005.

Income Tax Ordinance (XXXI of 1979)---

----S. 66-A & Third Sched., R. 8(8)(e)---Powers of Inspecting Additioial Commissioner to revise Deputy Commissioner's order---Loss on account of exchange fluctuation on repayment of instalment of loan---Capital expenditure or revenue expenditure---Loss sustained on account of exchange fluctuation on repayment of instalment of loan was claimed as a revenue expenditure in Profit and Loss account, which was allowed by the Assessing Officer---Inspecting Additional Commissioner discarded assessee's explanation and treated loss as capital expenditure under R.8(8)(e) of the Third Schedule of the Income Tax Ordinance, 1979 and assessment order was modified accordingly treating the same to be erroneous being prejudicial to the interest of Revenue---Validity---Loss on account of exchange fluctuation had wrongly been treated as capital expenditure despite the fact that the assessee's loan did not fall within the category of loan, which attracts the provisions of law laid down under R.8(8)(e) of the Third Schedule of the Income Tax Ordinance, 1979 as the basic ingredient Was the purchase of machinery or plant which was not available in the case of assessee---Assessee paid back short term loan and it was properly shown in the statement of accounts---Inspecting Additional Commissioner had ignored the fact that another loan was in Pak Rupees and had been availed in Pakistan and was repayable in Pak Rupees, thus R.8(8)(e) of the Third Schedule of the Income Tax Ordinance, 1979 did not cover the case for invocation of S.66A; of the Income Tax Ordinance, 1979---If the said rule was not applicable to the loan then how could it be made applicable to the exchange fluctuation loss on repayment of loan---Action taken under S.66A of the Income Tax Ordinance, 1979 was unfounded and unsustainable and original assessment order passed was strictly in accordance with law being neither erroneous nor prejudicial to the interest of Revenue---Appellate Tribunal vacated the order of Inspecting Additional Commissioner and restored the assessment order framed under S.62 of the Income Tax Ordinance, 1979.

1986 PTD (Trib.) 105 and 1991 PTD (Trib.) 894 rel.

Dr. Muhammad Sharif Chaudhry for Appellant.

Anwar Ali Shah, D.R. for Respondent.

2006 P T D (Trib.) 2745

[Income-tax Appellate Tribunal Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member

I.T.As. Nos. 3490/LB and 3491/LB of 2005, decided on 10th June, 2006.

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

----S. 88---Income Tax Ordinance (XXXI of 1979), Second Sched., Part-I, Cl. (110)---Individual as a member of an association of persons---Shared income---Exemption---Assessee was a private limited company---Taxation of returns income filed declaring nil income while regarding share received from association of persons, the assessee claimed exemption under Cl.(110) of Part-I of Second Schedule to the Income Tax Ordinance, 1979---First Appellate. Authority cancelled such order on the ground that Assessing Officer was not justified in taxing the share received by the assessee-company as a member from association of persons---Validity---Section 88 of the Income Tax Ordinance, 2001 stipulates share of a company from income of association of persons, which was exempt from tax, but the share will only be included in the income of the company for tax rate purposes---Effect of S.88 of the Income Tax Ordinance, 2001 is to maintain position of cl. (110) of Part-I of Second Schedule to the Income Tax Ordinance, 1979 for tax of share of a 'company in the income of association of persons---First Appellate Authority had rightly cancelled the assessments---Order of First Appellate Authority was upheld by the Appellate Tribunal and the appeals filed by the Department were dismissed.

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

----S. 88A---Income Tax Ordinance (XXXI of 1979), S.2(16)(e)---Share profits of company to be added to taxable income---Term "association of persons"---Definition---"Association of persons" was not defined in the Income Tax Ordinance, 1979, which means it has no technical meaning---Income Tax Ordinance, 2001 had defined the term "association of persons", which included a Firm and Hindu Undivided Family as association of persons---View of Taxation Officer that a Firm or Hindu Undivided Family could not be termed as "association of persons" was not correct---Definition in Income Tax Ordinance, 2001 excluded company just because S.88A of the Income Tax Ordinance, 2001 specifically dealt with taxation of the share of the company in the income of the association of persons, as its member---Definition of company' given in Income Tax Ordinance, 1979 also included "foreign association" as defined in S. 2(16)(e) of the Income Tax Ordinance, 1979 and as such,company' was basically an `association of persons'.

(c) Income-tax---

----Share of profit from association of persons---Taxation---If the income of association of persons was taxable, the share of profit received by a member whatsoever was their legal form, could not be taxed again, as it would amount to tax the same persons twice simultaneously for the same income---Central Board of Revenue in its Letter C. No.20(447)-IT-3/65, dated 20-4-1972 had also indicated that correct position was to tax the income of association of persons and not the member of association of persons.

Mrs. Sabiha Mujahid, D.R. for Appellant.

Imran Rasool and Khawar Rafique, Chief Accountant for Respondents.

2006 P T D (Trib.) 2755

[Income-tax Appellate Tribunal Pakistan]

Before Jawaid Masood Tahir Bhatti, Judicial Member

M.A.(AG) No.551/LB of 2006 and I.T.A. No.4780/LB of 2005, decided on 21st June, 2006.

(a) Income-tax---

---Sales---Estimation of---Estimated sales Rs.3,800,000 against declared sales Rs.2,680,000 was reduced to Rs.3,600,000 by the First Appellate Authority---Such estimation was made on the basis of enquiry report made by the Income Tax Inspector who had estimated the sales on quantum of stock available ill the shop at the time of visit at Rs.400,000 against the declared stock of Rs.2,85,000---Appellate Tribunal, keeping in view the nature of business and stock of the assessee, further reduced to the sales Rs.2,800,000.

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

---S. 210---Delegation of power---Scope---Under S.210 of the Income Tax Ordinance, 2001 Commissioner may delegate his power only to Taxation Officer.

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

---Ss. 175, 207 & 208---Income Tax Ordinance (XXX1 of 1979). Ss.3 & 146---Power to enter and search premises---Scope---Sales---Estimation on the basis of Inspector's report---Validity---Income Tax Inspector was not included in the Income Tax Authorities under the Income Tax Ordinance, 2001 and had no jurisdiction to enter and search premises ill order to enforce any provision of the Income Tax Ordinance, 2001 and even the Commissioner could not delegate his power to the Inspector as in S. 175 of the Income Tax Ordinance, 2001 the Commissioner could only authorize an officer for the purposes of this section and theIncome Tax Inspector' had not been mentioned in the Income Tax Ordinance, 2001 as an 'officer'-Taxation Officer had estimated the sales on the basis of enquiry of Inspector's report which was made without any jurisdiction---Estimated sales were reduced keeping in view the history, turnover and other facts of the case by the Appellate Tribunal.

Naeem Munawar for Appellant.

Mrs. Sabiha Mujahid, D.R. for Respondent.

2006 P T D (Trib.) 2773

[Income-tax Appellate Tribunal Pakistan]

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

I.T.As. Nos.6691/LB to 6695/LB of 2005, decided on 31st August, 2006.

Income Tax Ordinance (XXXI of 1979)---

----Ss. 66-A & 134---Appeal to Appellate Tribunal---Revisional jurisdiction of Inspecting Additional Commissioner---Scope---Assessee had questioned in appeal the entire proceedings initiated under S.66-A of Income Tax Ordinance, 1979 by Inspecting Additional Commissioner for relevant assessment years through consolidated order, on the ground that Revisional Authority had no jurisdiction' to invoke provisions of S.66-A of Income Tax Ordinance, 1979 in the case---Assessee contended that jurisdiction to assess .a certain case had to be acquired before any further legal proceedings could be undertaken in that case and that before invoking action under S.66-A of Income Tax Ordinance, 1979, Inspecting Additional Commissioner should have been assigned the jurisdiction to assess the case of assessee by the C.B.R. under S.5-(1)(c) of the Ordinance and in the absence of such an order by the C.B.R., proceedings under S.66-A of the Ordinance would become void and nullity in the eyes of law---Assessee further contended that where any order was passed by any forum in excess of jurisdiction or abuse of jurisdiction then superior courts had treated such decisions as being without jurisdiction and void and held them as nullity in the eyes of law---Validity---Wordjurisdiction' as understood in common parlance, was a term of large and comprehensive import and would embrace every kind of judicial action; it was a legal right, power or authority by which the Courts and Judges take cognizance and decide cases-'Jurisdiction' should be first assumed before a matter could be decided by an authority---Proceedings under S.66-A of Income Tax Ordinance, 1979 in the present case, were invoked in a hurried manner by Inspecting Additional 'Commissioner ignoring the legal requirements of having proper jurisdiction' of the case which was a fatal error not curable in the eyes of law---Proceedings initiated under S.66-A of Income Tax Ordinance, 1979 for all assessment years under appeal, therefore, had no validity in the eyes of law---Said proceedings were accordingly cancelled for lack ofjurisdiction'.

PLD 2005 SC 842 ref.

Mian Ashiq Hussain for Appellant.

Anwar Ali Shah, D.R. for Respondent.

2006 P T D (Trib.) 2784

[Income-tax Appellate Tribunal Pakistan]

Before Khawaja Farooq Saeed, Chairperson and Mukhtar Ahmad Gondal, Accountant Member

R.As. Nos. 144/LB to 146/LB, 148/LB to 152/LB of 2005, decided on 24th April, 2006.

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

---Ss. 136, 24(c) & 50(5B)---Reference to High Court---Question "whether Appellate Tribunal was justified to uphold addition under S.24(c) of the Income Tax Ordinance, 1979, for alleged default of non-deduction of tax under S.50(5B) of the Ordinance in spite of the fact that owner of property fell outside the taxable territory of the country" was refused for reference to High Court as exempt status of Gilgat Agency had not been produced at the time of hearing of appeal and there was no reason for further reference of the question to the High Court.

CIT Peshawar v. Gul Cooking Oil and Vegetable Ghee (Pvt.) Ltd. PLD 2003 SC 614 =2003 PTD 1913 ref.

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

---Ss. 136 & 52---Reference to High Court---Question "whether Appellate Tribunal was justified to uphold action under S.52 of the Income Tax Ordinance, 1979 for alleged non-deduction of tax on payment made to Korangi Association"---Validity---Background of the issue was that amount was to be deducted from a person who lived in Gilgat Agency who was statedly exempt---Status of the said area stood determined and there was no question of non-deduction of tax and the assessee having been found as assessee in default as per law and rules, Reference of the question to High Court was refused by the Appellate Tribunal in circumstances.

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

----S. 136 & Second Sched: Part-IV, Cl.(3)---Reference to High Court---Question "whether Appellate Tribunal was justified to uphold that word "or" appearing in Cl. (3) of Part-IV of Second Schedule to the Income Tax Ordinance, 1979 between two distinct expressions "Banking Company" and "Financial Institutions" was not disjunctive" was proposed for the consideration of High Court as it was raised by the Appellate Tribunal.

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

----Ss. 136 & 52---Reference to High Court---Questions "whether Appellate Tribunal was justified in directing that dividend income and capital gain should be taxed at a reduced rate, whereas the same forms a part of the composite banking income and separate rate of tax is prescribed for income from banking business under the Income Tax Ordinance, 1979" was refused for reference to High Court on the ground that settled question should not again be referred to it the same had already been decided against the Department.

PLD 1997 SC 700 = 1997 PTD 1693; (2002) PTD (Trib.) 507 and (2004) 90 Tax 266 (H.C. Lah.) rel.

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

----Ss. 136 & 52---Reference to High Court---Question "whether Appellate Tribunal was justified to hold that interest credited to suspense account was not liable to tax" was refused to be referred to High Court as the same had already been decided by a High Court of the country and there was absolutely no reason for its reference to other High Court.

Habib Bank Ltd. v. CIT I.T.A. No. 279 of 1999 rel.

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

----Ss. 136 & 80D---Reference to High Court---Question "whether Appellate Tribunal was justified to direct to charge tax under S.80D of Income Tax Ordinance, 1979 on turnover excluding dividend"-Validity-Dividend had been found as not to be a turnover in various judgments and the present case had only followed the said findings given earlier---Appellate Tribunal did not agree with the Department that a question could be referred even if it did not properly arise out of the order of the Appellate Tribunal---Not for the reason of earlier judgments but also the issue did not arise out of the order of the Appellate Tribunal---Appellate Tribunal refused to refer the same to High Court.

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

----S. 136---Reference to High Court---Question---Construction of---Framing of a legal question should not be in the form of allegations but should bring out the real controversy involved between the parties.

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

----S. 23(1)(x)---Deductions---C.B.R. Letter C. No. 13(26)-IT/1/74, dated 2-7-1975---Bad debts' anddoubtful debts' are not two different kinds of debts; legislature, in Income Tax Ordinance, 1979 used the word `bad debt', which could not be interpreted to mean not including doubtful debts.

Hong Kong and Shanghai Banking Corporation v. CIT (1955) 28 ITR 199 rel.

I.T.A. No. 2328 and 2623/KB of 1992-93, dated 16-6-2000 per incurrium.

(i) Interpretation of statutes---

----Redundancy cannot be assigned to any provision of law.

Pakistan Lyallpur Samundri, Transport Co. Ltd. v. CIT, Lahore Zone, Lahore 1980 PTD 69 rel.

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

----S. 23(1)(x)---Deductions---Loans and advances---Stock-in-trade---Banking business--Loans and advances given to clients represent stock­-in-trade or circulating capital---Any irrecoverable loan/advance was thus even otherwise a trading loss and allowable deduction.

Arunachalam Chetliar v. CIT 4 ITR 173; CIT v. Nanital Bank Limited 55 ITR 707 (SC) and CIT v. Veerabhadra Rao 102 ITR 604 rel.

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

---S. 23(1)(x)---Deductions---Irrecoverable bad debts---Determination of---Assessing Officer was duty bound to determine the quantum of irrecoverable bad debts---Assessing Officer needed to perform his duty as per law and not on whims and surmises.

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

----S. 23(1)(x)---Deductions---Bad debts---No legal action for recovery---Effect---Bad debts were allowable deductions in the case of banks as per their regularly employed method of accounting, even where suits were 'pending or no legal action for recovery had been taken.

1976 PTD 237; CIT v. Grindlays Bank Limited Karachi 1991 PTD 569; Li re: Muslim Commercial Bank Ltd. 2006 PTD (Trib.) 356 and CIT Central Zone (C) Karachi v. ADBP 1992 PTD 39 rel.

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

----S. 23(1)(x)---Deductions---Bad debts---Prematurely written off---Allowability---Bank---Concept of prematurely written off could not be invoked to disallow bad debts (which also include doubtful debts), as their regular method of accountancy which was according to law, permitted such deductions and offer any recovery or reversal in the year of realization.

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

----S. 29---Income Tax Ordinance (XXXI of 1979), S. 23(1)(x)---Income Tax Ordinance (XI of 1922), 10(2)(xi)---Bad debts---Conditions for allowability---Bank---Conditions laid down for allowability of bad debt as deduction in a tax year in the case of financial year were the same as envisaged in S.10(2)(xi) of the Income Tax Ordinance, 1922 and S.23(1)(x) of the Income Tax Ordinance, 1979 i.e. that debt should be in relation to money-lending business chargeable to tax; that the debt or part of debt is written off in the accounts of the person in the tax year and that there are reasonable grounds for believing that the debt is irrecoverable.

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

----S. 23(1)(x)---Deductions---Bad debts---Bank---Pendency of suits for recovery and non-initiation of legal action for recovery were no basis to infer that bad debt claimed by a bank was "recoverable".

CIT, Central Zone C, Karachi v. Grindlays Bank Limited Karachi 1991 PTD 569 rel.

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

----S. 23(1)(x)---Deductions---Bad debts were allowable deduction in the case of financial institutions if under regularly employed system of accounting, the amount claimed is debited to the Profit and Loss Account and the corresponding credit entry is made even in a suspense or had and doubtful debts account (called provision for bad debts as per format prescribed by the State Bank of Pakistan or Security Exchange Commission of Pakistan as the case may be) and that the total of such amount for each year is deducted in the Balance Sheet from the amount of debts outstanding and (iii) when any amount is recovered subsequently, any excess allowance made previously is assessed as income.

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

----S. 23(1)(x)---Deductions---Bad debts---Estimations---Human estimates are necessarily fallible, the bank's claim and/or its books of account cannot be rejected merely because it maintains a system of, accounts, which permits it, in the event of windfall from the debtor, so to say, to reverse the earlier entries writing off a debt as irrecoverable.

2000 PTD (Trib.) 1898 rel.

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

----Ss. 136 & 23(1)(x)---Reference to High Court---Question "whether Appellate Tribunal was justified to allow the provision of bad debts in contravention to the provision of S.23(1)(x) of the Income Tax Ordinance, 1979 wrongly assuming that creation of provision for bad debts are synonymous and failing to appreciate that even in case of written off bad debts, the condition of irrecoverability of the same as determined by the Assessing Officer is a prerequisite for any allowance under S.23(1)(x) of the Income Tax Ordinance, 1979" proposed by the Department for reference to High Court was rejected by the Appellate Tribunal by following the rule of consistency.

R.A. No.349/LB/2002 and 1997 PTD 71 rel.

(2005) 92 Tax 162 (Trib.) per in curium.

2002 PTD (Trib.) 1898; (2002) 85 Tax 245 (Trib.); 2003 PTD (Trib.) 1189; R.A. No. 349/LB of 2002; 2006 PTD (Trib.) 356; 2002 PTD (Trib.) 1898; I.T.As. Nos.42 to 44/KB of 1977-78 - Order, dated 14-6-1978; LT.As. Nos. 1897 to 1899/KB of 1973-74 - Order, dated 17-2-1977 and I.T.A. No. 776/KB of 1975-76 re-afirm.

Dr. Ikram-ul-Haq, A.R. for Appellant (in R.As. Nos.144/LB to 146/LB of 2005).

Javed Iqbal Rana, I.A.C./D.R. for Respondent (in R.As. Nos.144/LB to 146/LB of 2005).

Javed Iqbal Rana, I.A.C./D.R. for Applicant (in R.As. Nos.148/LB to 152/LB of 2005).

Dr. Ikram-ul-Haq, A.R. for Respondent (in R.As. Nos.148/LB to 152/LB of 2005).

2006 P T D (Trib.) 2827

[Income-tax Appellate Tribunal Pakistan]

Before Ehsan-ur-Rehman, Judicial Member and Naseer Ahmad, Accountant Member

I.T.A. No.2166/LB of 2004, decided on 21st June, 2006.

Income Tax Ordinance (XXXI of 1979)---

----S. 80D---Minimum tax on income of certain persons---Assessment order---Charge of tax under S.80-D of the Income Tax Ordinance, 1979 only on the basis of I.T. 30 and without any assessment order, was illegal.

A.D. Ashgar for Appellant.

S. Ashraf Ahmad Ali, D.R. for Respondent.

2006 P T D (Trib.) 2843

[Income-tax Appellate Tribunal Pakistan]

Before S. Hasan Imam, Judicial Member and Agha Kafeel Barik, Accountant Member

W.T.As. Nos. 68/KB to 83/KB of 2005, decided on 23rd February, 2006.

Wealth Tax Act (XV of 1963)---

----Ss. 35, 16(2) & 17-B---Rectification of mistake---Finalization of assessment by Taxation Officer---First Appellate Authority rectified his order on the ground that issue of jurisdiction was not discussed, assessment finalized by the Taxation Officer was without lawful jurisdiction and ab initio void as the authority of the Taxation Officer was not listed in the wealth tax law, as such assessments made by the Assessing Officer in the capacity of Taxation Officer were not legally maintainable same were cancelled---Validity---Assessing Officer, who was the Taxation Officer as per Income Tax Ordinance, 2001 had been authorized to exercise powers under the Wealth Tax Act, 1963 as "Deputy Commissioner of Wealth Tax"---Person who exercised the jurisdiction had, at a particular time an absolute authority to pass wealth tax assessment orders---In the body of the order in the end only the words "Taxation Officer" of income tax had been written, contrary to this, all the proceedings had been carried out under the provisions of Wealth Tax Act, 1963---Order had been passed by invoking S.16(5)/17-B of the Wealth Tax Act, 1963---Missing of the words "Wealth Tax Officer" was a mistake not fatal and the nature of the mistake was such that it could not vitiate the proceedings---Words "Deputy Commissioner of Wealth Tax" if not written at the end of the assessment order along with the words "Taxation Officer" would not render the proceedings void ab initio in case the order was passed by the person having absolute power under the law; it was a typographical mistake not fatal in nature to vitiate the proceedings---Appeal of the Department was allowed and order of the First Appellate Authority was annulled.

2005 PTD (Trib.) 2062; 1999 PTD (Trib.) 4026 and 1997 PTD 821 distinguished.

Agha Hidayatullah, D.R. for Appellant.

Mehtab Khan for Respondent.

2006 P T D (Trib.) 2849

[Income-tax Appellate Tribunal Pakistan]

Before Rasheed Ahmed Sheikh, Judicial Member

I.T.As. Nos.2823/LB and 3700/LB of 2004, decided on 31st January, 2006.

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

---S. 56, proviso---Finance Ordinance (XXV of 2001), Preamble---Notice for furnishing return of total income---Retrospective effect of proviso to S.56, Income Tax Ordinance, 1979---Proviso inserted through Finance Ordinance, 2001 was procedural one as the same merely mentioned about filing of return of income for a certain period of time, meaning thereby that this was a machinery provision, therefore, its operation was retrospective and not prospective.

(b) Interpretation of statutes---

----Fiscal statute---Amendment---Once the amendment introduced in the existing law is held to be retrospective in its operation, it shall apply forcefully to all the cases which may be pending for adjudication at any stage starting from assessment to the apex Court of Pakistan.

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

---S. 56, proviso---Finance Ordinance (XXV of 2001), Preamble---Notice for furnishing returns of total income---Question of limitation of time for filing the return of income, was a matter of procedure and the amendment in S.56 of the Income Tax Ordinance, 1979 through Finance Ordinance, 2001 was out and out procedural.

1985 PTD 276; 2002 PTD (Trib.) 2609 and 2004 PTD (Trib.) 708 rel.

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

---S. 56, proviso---Finance Ordinance (XXV of 2001), Preamble---Finance Ordinance (XXI of 2000), Preamble---Notice for furnishing returns of total income---Assessment year 1986-87---Since, the

amendment made through Finance Ordinance, 2001 provided remedies and cures, therefore it had to be interpreted retrospectively---Case shall be governed by the proviso inserted in S.56 of the Income Tax Ordinance, 1979 through Finance Ordinance, 2001 and not by the explanation added to said section by Finance Ordinance, 2000.

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

----Ss. 56, proviso, 13(1)(aa) & 30(2)(e)---Finance Ordinance (XXV of 2001), Preamble---Finance Ordinance (XXI of 2000), Preamble---Notice for furnishing returns of total income---Period of limitation for issuance of notice---Assessment year, 1986-87---Action of Assessing Officer in issuing a notice under S.56 of the Income Tax Ordinance, 1979 on 9-3-1999 calling upon the assessee to file return of income in respect of assessment year 1986-87, was not sustainable in law having been issued beyond the period of five years from the end of the assessment year for which the return of income was due---Due date of filing the return of income for the assessment year 1986-87 was 30th September, 1987---When reckoned from this date, no notice under S.56 of the Income Tax Ordinance, 1979 could be issued after the assessment year 1992-93, whereas notice under S.56 of the Income Tax Ordinance, 1979 had been issued on 9-3-1999 which was relevant to assessment year 1999-2000---Notice under S.56 of the Income Tax Ordinance, 1979 dated 9-3-1999 for the assessment year 1986-87 was patently barred by limitation---Order passed under S.62 of the Income Tax Ordinance, 1979 was without any lawful authority which was annulled/cancelled by the Appellate Tribunal---Case should not have been set aside by the First Appellate Authority to be decided afresh, since legal infirmity was involved which went to the root of the assessment and was incurable.

2001 PTD 1998 rel.

(1998) 77 Tax 1991 Modified by 2001 PTD 1998.

Zafar Ali Ch. for Appellant (in I.T.A. No.2823/LB of 2004).

Dr. Shahid Siddique Bhatti, D.R. for Respondent (in I.T.A. No.2823/LB of 2004).

Dr. Shahid Siddique Bhatti, D.R. for Appellant (in I.T.A. No.3700/LB of 2004).

Zafar Ali Ch. for Respondent (in I.T.A. No.3700/LB of 2004).

2006 P T D (Trib.) 2859

[Income-tax Appellate Tribunal Pakistan]

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

I.T.As. Nos. 840/KB and 848/KB of 2005, decided on 23rd May, 2006.

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

----Ss. 169, 170(4), 148(7)(9), 122 (5A) & 2(2)---Tax collected or deducted as a final tax---Value of goods---Firs Appellate Authority found that for the purpose of calculating the tax under S.169 of the Income Tax Ordinance, 2001 the value of the goods imported shall be the value, ignoring the customs duty and sales tax, if any levied thereon and Taxation Officer was directed to compute the Income and Tax accordingly and if any refund became due by way of excessive deduction that shall be paid to the assessee after due verification---Validity---Section 148(7) of the Income Tax Ordinance, 2001 read with definition of "value of goods" under S.148(9) of the Income Tax Ordinance, 2001 along with S.109 of the Income Tax Ordinance, 2001 were very much clear and left no doubt so as to form different opinion that customs duty and sales tax shall be included in the value of the imported goods---At the time of collecting the Income Tax on the import of the goods, value of the goods was to be taken as value of the goods which shall be the value of the goods plus income tax (sales tax) and customs duty---Appellate Tribunal allowed the appeals of the Department and annulled the orders of the First Appellate Authority under section 170 and 122(5A) of the Income Tax Ordinance, 2001.

Civil Petition No.364-L of 2002, decided on 6th July, 2004 and 2005 PTD 194 ref.

1994 PTD 848 ref.

Messrs Madina Enterprises Ltd. v. Federation of Pakistan and others Constitution Petition No.598 of 2001, decided on 14th September, 2004 rel.

(b) Income tax---

----Admission by authorized representative---Effect---Admission on the part of representative contrary to the statutory law had no legal significance, as such the order which was purely based on such admission could not be relied upon.

Messrs Madina Enterprises Ltd. v. Federation of Pakistan and others Constitution Petition No.598 of 2001, decided on 14th September, 2004 rel.

Dr. Faiz Ellahi Memo. D.R. for Appellant.

Mazharul Hassan for Respondent.

2006 P T D (Trib.) 2869

[Income-tax Appellate Tribunal Pakistan]

Before Muhammad Tauqir Afzal Malik, Judicial Member and Khawar Khurshid Butt, Accountant Member

I.T.As. Nos. 357/LB to 360/LB of 2003, decided on 9th August, 2006.

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

----Ss. 52, 50(7D), 50(8), 2(32), 9, 151, Second Sched., Part-I, Cls. (115-A), (79A) & (79B)---Sales of Goods Act (III of 1930), S.2(7)---Pakistan Water and Power Development Act (XXXI of 1958)---Liability of persons failing to deduct or pay tax---Exemptions---Institutions of WAPDA like WAPDA Pension Fund, WAPDA G.P. Fund, WAPDA Welfare Fund, which were not trusts or otherwise independent legal entities, acquired the bonds directly from the Directorate of Bonds and interests thereon was credited to their account without deduction of tax---Assessing Officer found the appellant as assessee in default for not deducting tax on profits paid to WAPDA formations and employees---Validity---If one branch of the assessee earns a profit of an amount in its books, an equal amount was shown as expense by the Directorate of Bonds---Sum of both the entries was zero---Assessee, being the owner of the income and loss of the transactions, earns no income---No charge of tax was created under the charging section---Deduction of tax was mode of recovery to satisfy the charge created by law and there being no charge of tax on the internal transaction of the same person, question of deduction of tax would not arise---Assessee, in the present case, owned income or loss of all the transactions and payees were acting on behalf of the assessee having no claim on the profit of the transactions, there being no charge on the inter-departmental transactions-of the assessee, payer and payee being the same person, question of default would not arise---Assessing Officer acted illegally in holding the appellant as assessee in default for not deducting tax on profit paid in books to its own formations---Payees were employees of WAPDA and the Assessing Officer did not establish that the payees received any amount as income which was owned by them in their personal capacity, in case, they were not chargeable to tax in respect of the payments in question, question of adjustment or tax in terms of S.50(8) of the Income Tax Ordinance, 1979 would not arise---Such a situation is contradiction in terms---Payees were not assessable in respect of the profit on bonds still tax was deducted on the payment of such profit was adjustable in their cases under the law---Payee's identification for credit in terms of S.50(8) of the Income Tax Ordinance, 1979 should be made to establish default---Assessee itself being the payer and the payee, was not liable to deduct tax on the inter-departmental payments in its own offices---Order of the Assessing Officer was annulled by the Appellate Tribunal.

PLD 1985 SC 109; 1972 (83) ITR 211 particularly at page 214; Haji Ibrahim Ishaq Johri v. The Commissioner of Income Tax 1993 SCMR 287; Patiala State Bank's Case AIR 1941 Born. 94; (1990) 62 Tax 74 (SC Pak); Union Bank Ltd. v. The Federation of Pakistan 1998 PTD 2116; Board of Intermediate and Secondary Education v. Central Board of Revenue and others 1998 PTD 2012 and PLD 1990 SC 399 ref.

(2004) 89 Tax 430 (Trib.); 2003 PTD (Trib.) 2689 and 2003 PTD (Trib.) 405 rel.

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

----S.52---Liability of persons failing to deduct or pay tax---Assessee in default---Burden of proof--Before holding a person as defaulter, revenue was required to discharge the initial burden to show that such person was required under the law to deduct tax from the payments made to the payees.?

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

----Second Sched., Part-I---Exemption presuppose charge---If there was no charge of tax, question of exemption would not arise---Question of extension of exemption from original recipient to subsequent recipients would not arise.?

Messrs Julian Hoshang Dinshaw Trust and others v. ITO 1992 SCMR 250 rel.

Mian Ashiq Hussain for Appellant.

Ghazanfar Hussain, D.R. for Respondent.

2006 P T D (Trib.) 2884

[Income-tax Appellate Tribunal Pakistan]

Before Rasheed Ahmed Sheikh, Judicial Member and Masood Ali Jamshed, Accountant Member

M.As.(A.G.) Nos.566/LB to 568/LB of 2006, I.T.As. Nos. 1959/LB to 1961/LB of 2005, decided on 3rd August, 2006.

Income Tax Ordinance (XXXI of 1979)---

----Ss, 62 & 134---Assessment on production of accounts---Appellant/assessee who derived income from running a hotel, disclosed its net sales in addition to income from telephone---Assessing Officer did not accept said return of income holding that no supportive documentary evidence, including books of account were furnished by assessee to substantiate his returned version---Declared results was held by Assessing Officer to be unverifiable---To arrive at said conclusion, reference was made by Assessing Officer to enquiry report---On filing appeal by assessee against findings of Assessing Officer, Appellate Commissioner remanded case to, Assessing Officer for de novo assessment---Assessee had filed appeal before Appellate Tribunal against judgment of Appellate Commissioner-Validity-No useful purpose would be achieved by setting aside assessment for de novo consideration reason being that such cases never resulted into reasonable assessment---Assessee was maintaining books of accounts as were prescribed for payment of Sales Tax, bed Tax etc---Apart from those books of accounts, maintenance of passenger register was the pre-requisite to run hotel business and customer register was always open to inspection---Books of accounts were even open to inspection by other departments---Rejection of declared receipts in circumstances was not at all warranted---Assessing Officer was directed to accept the declared receipts.

(2006) 93 Tax 165 (Trib.) and I.T.A. No.5776/LB of 2002, decided on 18-6-2003 ref.

Azhar Ehsan Sheikh for Appellant.

Bashir Ahmad Shad, D.R. for Respondent.

2006 P T D 39

[Karachi High Court]

Before Sabihuddin Ahmad, C J and Khilji Arif Hussain, J

Messrs NASSER BROTHERS (PVT.) LIMITED through Principal Officer

Versus

FEDERATION OF PAKISTAN through Secretary, Ministry of Finance, Islamabad and 3 others

Constitutional Petition No.D-2125 of 2001, decided on 27 September, 2005.

Central Excise Act (I of 1944)---

---Ss.3, proviso, 4(4) & First Sched.---S.R.O. 454(I)/96, dated 13-6-1996---Customs Act (IV of 1969), S.31-A---Constitution of Pakistan (1973), Art.199---Constitutional petition---Import of lubricant oils and grease---Exemption from excise duty---Availability of such exemption while entering into purchase contract with foreign supplier and establishing letter of credit, but its withdrawal before arrival of goods in Pakistan---Denial of benefit of exemption to importer---Plea of importer was that he had acquired vested right as to benefit of exemption and its withdrawal would not apply to concluded contract---Validity---Addition of proviso to S.3 of Central Excise Act, 1944 made S.31-A of Customs Act, 1969 was applicable to both levy and collection of excise duty on imported goods--Such amendment came into effect prior to arrival of goods in Pakistan and with application of S.31-A of Customs Act, 1969, any earlier date of execution of contract would become irrelevant---High Court dismissed constitutional petition in circumstances.

Al-Samrez Enterprises v. Federation of Pakistan 1986 SCMR 1917 ref.

Kohinoor Textile Mills v. Federation of Pakistan 2002 PTD 121 distinguished.

M.Y. Electronics (Pvt.) Ltd. v. Government of Pakistan 1998 SCMR 1404 rel.

Muhammad Siddique Mughal for Petitioner.

Nadeem Azhar, D.A.-G. along with Raja Muhammad Iqbal for Respondents.

Ataur Rehman for Respondents Nos.2 and 3.

Date of hearing: 29th September, 2004.

2006 P T D 50

[Karachi High Court]

Before Muhammad Mujeebullah Siddiqui and Khilji Arif Hussain, JJ

ARIF MUKHTAR MALIK

Versus

SECRETARY REVENUE DIVISION, FEDERATION OF PAKISTAN, ISLAMABAD and 4 others

Constitutional Petition No.D-1020 of 2005, decided on 30th August, 2005.

Customs Act (IV of 1969)---

----S. 17---Constitution of Pakistan (1973), Art.199---Constitutional petition---Release of detained consignment---Petitioner had sought direction to department to release his consignment after collecting duty and taxes in accordance with law---Petitioner had conceded that two respondents being private parties, no writ could be issued against them under Art.199 of the Constitution---Constitutional petition was disposed of in terms that petitioner would approach the Collector of Customs in accordance with law and fulfil all requirements of valid bill of entry, whereafter Collector would pass appropriate order within a reasonable time in accordance with law---If petitioner had any grievance against private respondents he was at liberty to file suit against them in accordance with law---Petitioner was at liberty to raise all questions of fact and law before the Collector who would decide all such questions by a speaking order.

Aziz A. Shaikh for Petitioner.

Raja M. Iqbal for Respondents Nos.1 and 2.

Abul Inam for Respondent No.3.

Muhammad Yousuf Khan for Respondent No.4.

Sajjad Ali Shah, Dy. A.-G. for Respondent.

2006 P T D 74

[Karachi High Court]

Before Muhammad Mujeebullah Siddiqui and Khilji Arif Hussain, JJ

Messrs KAPRON OVERSEAS SUPPLY CO. (PVT.) LTD., KARACHI

Versus

COLLECTOR OF CUSTOMS, SALES TAX AND CENTRAL EXCISE EAST, KARACHI

Spl. Central Excise Appeal No.37 of 2002, decided on 13th September, 2005.

Central Excise Act (I of 1944)---

----S. 36-C---Appeal before Tribunal---Reply submitted by appellant before. Additional Collector (Adjudication) in response to show-cause notice issued to him, had shown that request was made by appellant for summary adjudication---No explanation was furnished to detailed show-cause notice and it was stated that appellants were very sorry as they were doing business for the first time and mistakes 'were committed due to lack of proper knowledge and that they would not repeat the mistake---Tribunal, in circumstances, dismissed appeal with observation that appeal filed before Tribunal was an exercise in futility, just to gain time and to wriggle out from admission made before adjudicating officer---Proposed questions did not arise out of order of Tribunal and observations made by Tribunal were not open to any exception.

S. Mohsin Imam for Appellant.

Raja Muhammad Iqbal for the Respondent.

2006 P T D 103

[Karachi High Court]

Before Muhammad Mujeebullah Siddiqui and Khilji Arif Hussain, JJ

COMMISSIONER OF INCOME-TAX, COMPANIES-III, KARACHI

versus

Messrs COTTON EXPORT CORPORATION OF PAKISTAN LIMITED, KARACHI

I.T.A. No. 256 of 1998, decided on 13th October, 2005.

(a) Income-tax---

---Assessment---Every assessment is an independent unit and the facts prevailing in every assessment year would be considered separately.

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

---Ss. 17(1)(a) & 18(3)---Interest---Deductions---Investment in Bearer National Fund Bonds by assessee---Allowing or disallowing interest expenses on such investment---Criteria stated.

Examination of position of cash flow on the date of investment would be necessary for this purpose. If on the date of investment, sufficient capital was available with assessee other than the borrowed capital and the evidence was produced to the effect reflecting in the entries in the account books that investment was made from assessee's own capital and not from borrowed capital, then assessee would become entitled to entire allowance under the head interest paid on borrowed capital. Conversely, if sufficient capital of its own was not available with assessee or investment was made out of borrowed capital and not from its own capital, then assessee would be disallowed interest expenses allocable to capital invested in such bonds.

Nasrullah Awan for Appellant.

Iqbal Salman Pasha for Respondent.

Date of hearing: 13th October, 2005.

2006 P T D 133

[Karachi High Court]

Before Muhammad Mujeebullah Siddiqui and Khilji Arif Hussain, JJ

Messrs KOHINOOR TEXTILE MILLS LTD., KARACHI

versus

COLLECTOR OF CUSTOMS, SALES TAX AND CENTRAL EXCISE (ADJUDICATION-II), KARACHI

Spl. Customs Appeal No.18 of 2002, decided on 14th October, 2005.

Customs Act (IV of 1969)---

----S. 196---Appeal to High Court---Point raised before High Court not shown to have been agitated before Appellate Tribunal---Effect---Not possible for High Court in the circumstances to give any opinion on such point---High Court dismissed appeal.

Sohail Muzaffar for Appellant.

Raja Muhammad Iqbal for Respondent.

2006 P T D 146

[Karachi High Court]

Before Muhammad Mujeebullah Siddiqui and Khilji Arif Hussain, JJ

COLLECTOR OF CUSTOMS, SALES TAX AND CENTRAL EXCISE, KARACHI-III

versus

MUDASSIR TRADERS KARACHI and another

Spl. Sales Tax Appeal No.205 of 2003, decided on 29th September, 2005.

Sales Tax Act (VII of 1990)---

----S.47---General Clauses Act (X of 1897), S.24-A---Appeal to High Court---Appellant had assailed findings of Appellate Tribunal---Impugned findings were bereft of any reason, which was condition precedent for, sustainability of a judicial order--Such order was violative of provisions contained in S.24-A of General Clauses Act, 1897---On the basis of slipshod finding without any reasons, it was not possible for High Court to give opinion on point of law arising out of the order of Tribunal---Impugned order was partly set aside to the extent of finding contained in the judgment and consequential order in the said order---Case was remanded to Tribunal with direction to re-hear parties on said issues only and decide same afresh by speaking order containing reasons.

Raja Muhammad Iqbal for Appellant.

Abdul Raheem Lakhani for Respondents.

2006 P T D 148

[Karachi High Court]

Before Muhammad Mujeebullah Siddiqui and Khilji Arif Hussain, JJ

DAWOOD CORPORATION (PVT.) LTD.

versus

COMMISSIONER OF INCOME TAX APPEAL-II, KARACHI.

I.T.R. No.35 of 1997 and I.T.A. No.778 of 2000, decided on 10th August, 2005.

Income Tax Ordinance (XXXI of 1979)---

----Ss.10, 85, 136 & First Sched., Part-III---Reference to High Court---Levy of Surcharge---Basis---Held, when the provisions contained in S.10 were read with First Sched. Part-III of the Income Tax Ordinance, 1979, it would become clear that the basis for levy of surcharge was the total income as assessed for the purpose of income-tax---Total income was for the entire assessment year, on the basis whereof the income-tax and super tax were charged regardless of the payment of, any advance tax---Surcharge was to be calculated on the amount of income-tax and super tax payable on the income-tax for the year and not the tax payable after adjustment of the advance taxes---Principles.

Muhammad Farid for Applicant.

Jawaid Farooqi for Respondent.

Date of hearing: 10th August, 2005.

2006 P T D 181

[Karachi High Court]

Before Muhammad Mujeebullah Siddiqui and Khilji Arif Hussain, JJ

Messrs SIDDIQSONS WEAVING MILLS (PVT.) LTD. through Director

versus

FEDERATION OF PAKISTAN through Secretary Law, Justice and Human Rights, Islamabad and 3 others

Constitutional Petition No.D-165 of 2004, decided on 23rd August, 2005.

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

----S. 32---General Clauses Act (I of 1897), S.24-A---Constitution of Pakistan (1973), Art.199--Constitutional petition---Representation to the President---Order passed by the President without issuance of notice to the petitioner, without supplying the copy of representation and without affording the opportunity of placing his point of view on record vis-a-vis the representation made by the agency, was violative of the principles of natural justice---Acceptance of the representation made by the agency on consideration of one sided point of view had caused gross miscarriage of justice---Consequence of condemning the petitioner unheard in the case, was very much obvious and glaring on the face of it---Impugned order passed by the President was set aside by the High Court under Art.199 of the Constitution and case was remanded for fresh proceedings---Reasons enumerated.

Federation of Pakistan v. Muhammad Tariq Pirzada 1999 SCMR 2189 and Federation of Pakistan v. Muhammad Tariq Pirzada, 1999 SCMR 2744 fol.

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

----S.32---General Clauses Act (I of 1897), S.24-A---Constitution of Pakistan (1973), Art. 1997-Representation to the President---Procedure to be adopted detailed by the High Court.

While processing and considering the representation under section 32 of the Establishment of Office of Federal Tax Ombudsman Ordinance, 2000 the following procedure shall be adopted:---

(a)A notice shall be issued to the opposite party intimating that a representation has been received assailing the recommendations made by the Federal Tax Ombudsman.

(b)A copy of the representation shall be supplied to the opposite party.

(c)A reasonable opportunity of personal hearing or submission of reply/comments/written arguments shall be afforded to the opposite party.

(d)If the opportunity is provided to the opposite party for placing its point of view through submissions/arguments, a reasonable time shall be allowed for furnishing the written submissions in reply.

(e)All the contentions raised in the representation and the written reply/submissions shall be considered objectively and shall be disposed of by a speaking order as required under section 24-A of the General Clauses Act.

(f)If a time-barred representation is entertained the reason for entertaining such representation and condonation of delay shall be recorded in writing showing the law empowering to condone the delay. Such order shall be incorporated in the final order.

(g)A copy of the full text of the order accepting or rejecting representation shall be supplied simultaneously to both the parties.

Muhammad Afzal Awan for Petitioner.

Sajjad Ali Shah, D.A.-G. for Respondent No.1.

Haider Iqbal Wahniwal for Respondents Nos. 2, 3 and 4.

Date of hearing: 23rd August, -2005.

2006 P T D 219

[Karachi High Court]

Before Muhammad Mujeebullah Siddiqui and Khilji Arif Hussain, JJ

COLLECTORATE OF CENTRAL EXCISE, KARACHI and another

versus

Syed MUZAKKAR HUSSAIN and another

High Court Appeals Nos. 31 and 32 of 2000, decided on 16th August, 2005.

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

----S. 40---Central Excise Rules, 1944, R. 10---Civil Procedure Code (V of 1908), S.9---Suit, maintainability of---Jurisdiction of Civil Court, invoking of, even where barred by statute---Suit for declaration and permanent injunction was filed by the respondent in order to challenge the notices issued to him by the Authority for the deposit of excise duty in respect of excisable services which were provided---High Court (Single Judge) decreed the suit---Appeal was filed by the Authority against the decision of the Single Judge---Contention of the Appellant/ Authority was that the suit was not maintainable as the jurisdiction of the Court was barred under S.40 of the Central Excise Act, 1944, and secondly, even if the plaintiff had felt aggrieved by the notices, then the remedy available to him was under the hierarchy of the Central Excise Act, 1944 itself and the same could not have been questioned by filing a suit---Rebuttal of the plaintiff was that the notices on the face of it were without jurisdiction having been issued with mala fide intentions and after the expiry of the period provided for issuing such notices, therefore bar contained under S.40 of the Central Excise Act, 1944 was not attracted more particularly because no order passed or any assessment, levy or collection of any duty was assailed---Validity---Section 40 of the Act provided that no suit could have been brought in Civil Court to set aside or to modify any order passed for assessment, levy or collection of any duty under the Act---Plaintiff had not filed the suit calling in question any order passed under the Act or questioned any assessment or levy or collection of any duty under it, but had only questioned the notice issued by the Authority on the ground that the same had been issued mala fide without any jurisdiction or lawful authority---When special law provided hierarchy for redress of grievance, then one could not normally be allowed to circumvent the same by invoking jurisdiction of Civil Court, however, if prima facie any mala fide could be shown on the part of the authority, or illegality, which was floating on the surface, and or absence of jurisdiction, then the jurisdiction of Civil Court could be invoked in the matter---Plea as to bar of jurisdiction could only by sustained if it could be shown that the impugned order was passed in the bona fide exercise of powers under the statute---When it was established that the very act questioned was without lawful authority and jurisdiction, then instead of asking a party to go under the agony of lengthy departmental proceedings where possibility of getting relief were limited, Civil Court could grant relief to deserving party by holding that the act was without lawful authority---Notices in the present case were served upon the plaintiff much after the expiry of one year, despite the fact that being under the ambit of Rule 10(1) of the Central Excise Rules, 1944 they ought to have been served within one year of the date when the excisable service had been rendered and for which excise duty had not been paid---Since, notices which formed the basis of claim of the Authority were barred by time, they were without lawful authority and such colourable exercise of power by Authority could have been ques?tioned before the Civil Court---Appeals were dismissed in circumstances.

Usman Panjwani and others v. Government of Sindh and others 1996 CLC 311; K.G. Traders and another v. Deputy Collector Customs and 4 others PLD 1997 Kar. 541; Messrs Pioneer Belting Mills Ltd. Muridkey v. Joint Secretary Ministry of Finance, Government of Pakistan and 2 others 1983 CLC 784; Mian Muhammad Latif v. Province of West Pakistan PLD 1970 SC 180; Hamid Hussain v. Government of West. Pakistan and others 1974 SCMR 356 and Muhammad Jamil Asghar v. The Improvement Trust, Rawalpindi 1965 SC 698 ref.

Messrs World Trade Corporation v. C.B.R. and others (1999) 80 Tax 84 distinguished.

(b) Administration of justice--

----Principles of---When special law provides hierarchy for redress of grievance, then one cannot normally be allowed to circumvent the same by invoking jurisdiction of Civil Court, however, if prima facie any mala fides could be shown on the part of the authority, or illegality, which is floating on the surface, and or absence of jurisdiction, then the jurisdiction of Civil Court could be invoked in the matter---Mala fide order or one without jurisdiction is a fraud on the law and can never be assumed to have been passed under the particular statute---Plea as to bar of jurisdiction could only be sustained if it could be shown that the impugned order was passed in the bona fide exercise of powers under the statute.

Usman Panjwani and others v. Government of Sindh and others 1996 CLC 311 and K.G. Traders and another v. Deputy Collector Customs and 4 others PLD 1997 Kar. 541 ref.

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

----S. 9---Jurisdiction of Civil Court, exclusion of---Principles---Exceptions---Jurisdiction of Civil Court can be excluded by the Legislature by special Acts which deal with the special subject but the statutory provision must expressly provide for such exclusion or must necessarily and inevitably lead to such inference---Bar created by the relevant provision of statute excluding jurisdiction of Civil Court cannot operate in cases, where the plea before the Civil Court goes to the root of the matter and would, if upheld, lead to conclusion that the impugned order is nullity---Even where the jurisdiction of Civil Court is barred and conferred upon special Tribunal, Civil Court being Court of ultimate jurisdiction will have the power to examine the acts of such forums to see whether their acts are in accordance with law or are illegal or even mala fide.

Mian Muhammad Latif v. Province of West Pakistan PLD 1970 SC 180; Hamid Hussain v. Government of West Pakistan and others 1974 SCMR 356 and Muhammad Jamil Asghar v. The Improvement Trust, Rawalpindi 1965 SC 698 ref.

Messrs World Trade Corporation v. C.B.R. and others (1999) 80 Tax 84 distinguished.

(d) Central Excise Rules, 1944---

----R.10(1) & (2)---Central Excise Act (I of 1944), S.3; Customs Act (IV of 1969), Ss.32(1), 32(2) and 32(3) were pari materia to R.10 of Central Excise Rules, 1944---Section 3 of the Central Excise Act, 1944 is the charging section, under which excise duty is levied and collected---Rule 10(1) of the Central Excise Rules, 1944 provides that where by reason of any inadvertence, error or misconstruction, any duty or charge had not been levied or had been erroneously refunded, the person liable to pay any amount on that account shall be served with a notice within one year of the relevant date---Notice under R.10(2) of the Central Excise Rules, 1944 could be served within three years if by reason of any mis-declaration, false information or collusion, any duty or charge had not been levied or had been short levied or had been erroneously refunded---Notices were served upon the assessee much after the expiry of one year, despite the fact that being under the ambit of Rule 10(1) of the Central Excise Rules, 1944 they ought to have been served within one year of the date when the excisable service had been rendered and for which excise duty had not been paid---Notices which formed the basis of claim of the Authority being barred by time, they were without lawful authority and such colourable exercise of power by Authority could be questioned before the Civil Court.

Messrs Pioneer Belting Mills Ltd. Muridkey v. Joint Secretary Ministry of Finance, Government of Pakistan and 2 others 1983 CLC 784; Assistant Collector Customs and others v. Messrs Khyber Electric Lamps and 3 others 2001 SCMR 838; Messrs Irfan Ashraf and Co. (Pvt.) Ltd. v. The Collector of Customs and 3 others in C.P. No.D-625 of 2003; Federation of Pakistan v. Messrs Ibrahim Textile Mills 1992 SCMR 1898 and Zamindar Paper and Boards Mills (Pvt.) Ltd. v. Collector, Central Excise and Sales Tax, Lahore and 2 others 2003 PTD 1257 ref.

Shakeel Ahmed for Appellants.

Kh. Shamsul Islam for Respondents.

Date of hearing: 16th August, 2005.

2006PTD236

[Karachi High Court]

Before Muhammad Mujeebullah Siddiqui and Khilji Arif Hussain, JJ

Messrs VOLKART PAKISTAN (PRIVATE) LIMITED through Manager Finance and others

versus

FEDERATION OF PAKISTAN through Secretary, Ministry of Finance, Islamabad and others

Constitution Petitions Nos. D-1408, D-1409, D-1656, D-1682, D-1701, D-1731 of 1991, D-2850, D-2851, D-3023 of 1992, D-1684, D-1685 of 1993, D-144, D-145, D-1344 and 1345 of 1994, decided on 24th August, 2005.

Wealth Tax Act (XV of 1963)---

----Ss.2(e)(ii)(h), 3, 7 & 17---Wealth Tax Rules, 1963, R.8(3)---C.B.R. Circular No.18 of 1991 (Wealth Tax) dated 2-7-1991---Constitution of Pakistan (1973), Fourth Schedule, Part I, Entry No.50, Arts.199 & 25---Constitutional petition---Charge of wealth tax---Contentions of the petitioners, private limited companies., that S.2(e)(ii) of the Wealth Tax Act, 1963 be declared to be ultra vires the Constitution, being beyond and outside the powers of Parliament as envisaged by Entry No.50, Part I of Fourth Schedule of the Constitution and the Explanation to S.2(e)(ii) of the Wealth Tax Act, 1963, introduced through Finance Act, 1991 also be declared to be ultra vires and that the petitioner companies be declared to be not chargeable to wealth tax, as they were not holding the property for the purpose of letting out and that the notices issued under Ss A7 & 14(2) of the Act be quashed, were repelled by the High Court with the observations that issues pertaining to the validity of Wealth Tax had already stood decided by the Supreme Court in the case of Haji Muhammad Shafi v. Wealth Tax Officer 1992 PTD 726 and were further covered by the dicta laid down by the apex Court in the case of Messrs Elahi Cotton Mills Ltd. v. Federation of Pakistan PLD 1997 SC 582---Constitutional petition was dismissed by High Court accordingly.

Haji Muhammad Shafi v. Wealth Tax Officer 1992 PTD 726 and Messrs Elahi Cotton Mills Ltd. v. Federation of Pakistan PLD 1997 SC 582 fol.

Sirajul Haq Memon, Arshad Siraj, Shahenshah Hussain for Petitioners (in C. P. Nos. D-1682, D-1731 of 1991 and D-3023 of 1992).

Sajjad Ali Shah, D.A.G. for Respondent No.1.

Nasrullah Awan and Jawaid Farooqui for Respondents Nos.2 and 3.

Date of hearing: 24th August, 2005.

2006 P T D 251

[Karachi High Court]

Before Sabihuddin Ahmed, C. J. and Khilji Arif Hussain, J

Messrs PAKISTAN VINYL INDUSTRIES, LAHORE

versus

CENTRAL BOARD OF REVENUE through Secretary (Customs Tariff-1) and 2 others

C.P. No. D-1509 of 1999, heard on 19th September, 2005.

Constitution of Pakistan (1973)---

----Art. 199---Civil Procedure Code (V of 1908), O. XXIII, R. 1---Constitutional petition---Dismissal of first constitutional petition by Lahore High Court as withdrawn---Second constitutional petition before Sindh High Court on same cause of action---Maintainability---Plea of petitioner was that first petition had been withdrawn in view of judgment of Supreme Court regarding jurisdiction---Validity---Nothing was available to show that permission to file fresh petition had ever been sought---Order of withdrawal did not show raising of any such plea, rather before withdrawal, petitioner had argued case for some time presumably on merits---First petition had been filed by another counsel, who had not even filed affidavit to such effect---Petitioner had simply withdrawn first petition without requesting or reserving right to file fresh petition---Second petition was, not maintainable.

Sandal Bar's PLD 1997 SC 334 ref.

Moula Bakhsh v. Muhammad Zahid PLD 1990 SC 596; Karim Gul v. Shahzad Gul 1970 SCMR 141 and Hashim Khan v. National Bank of Pakistan PLD 2001 SC 325 fol.

Junaid Ghaffar for Petitioner.

Raja Muhammad Iqbal for Respondents Nos.1 and 2.

Faisal Arab, Standing Counsel for Respondent No.3.

Date of hearing: 19th September, 2005.

2006 P T D 260

[Karachi High Court]

Before Muhammad Mujeebullah Siddiqui and Khilji Arif Hussain, JJ

TRADING CORPORATION OF PAKISTAN (PVT.) LTD.

versus

FEDERATION OF PAKISTAN through Secretary, Ministry of Finance, Government of Pakistan, Islamabad and 2 others

Constitution petition No.D-2325 of 1994, decided on 10th August, 2005.

Income Tax Ordinance (XXXI of 1979)---

----Ss. 50(7A) & 2(16) & First Sched., Part IV, Para. B (2)---C.B.R. Circular No.6 of 1981 (Income Tax), dated 17-3-1981---Companies Ordinance (XLVII of 1984), S.2---Constitution of Pakistan (1973), Art.199---Constitutional petition---Petitioner was incorporated as private limited company under the Companies Ordinance, 1984 and entire shareholding of the company was owned and controlled by the Federal Government---Record revealed that petitioner company was being assessed in the status of private limited company which showed that the company was a private limited company in terms of the definition contained in S.2(16), Income Tax Ordinance, 1979 read with S.2(28) of the Companies Ordinance, 1984---Held, definition of term "public company" contained in para. B(2), Part IV of the First Schedule to the Income Tax Ordinance, 1979 shall be applicable only for the purpose of rate of tax and for any other purposes/provisions of the Income Tax Ordinance, 1979 the term shall be assigned the meaning given in S.2(16) of the Income Tax Ordinance, 1979 read with the definition contained in S.2 of the Companies Ordinance, 1984---Petitioner company, therefore, was liable to be treated as private limited company, in the context of all the provisions of Income Tax Ordinance, 1979, except for the purpose of First Schedule to the Income Tax Ordinance, 1979, for which purpose it shall be treated as "Public Company"---Notice calling upon the petitioner company to deduct and deposit the tax under S.50(7A) Income Tax Ordinance, 1979, in circumstances, was not sustainable in law---High Court declared that the petitioner company was a private limited company for the provisions contained in Income Tax Ordinance, 1979, other than the First Schedule, and that provisions contained in S.50(7A) of the Ordinance were not applicable to the petitioner company and direction given by the department to the petitioner company to deduct and deposit tax under S.50(7A) was unlawful which was set aside---Principles.

Mansoor-ul-Arfin for Petitioner.

Aqeel Ahmed Abbasi for Respondents.

Date of hearing: 10th August, 2005.

2006 P T D 283

[Karachi High Court]

Before Muhammad Mujeebullah Siddiqui and Khilji Arif Hussain, JJ

COLLECTOR OF SALES TAX AND CENTRAL EXCISE (WEST), KARACHI

versus

Messrs CENTRAL FIBRE INDUSTRIES, KARACHI

Spl. Sales Tax Appeal No. 545 of 2004, decided on 29th September, 2005.

Sales Tax Act (VII of 1990)---

----Ss.30 & 47---Issuance of show-cause notice---Appeal to High Court---Collector, who issued show-cause notice to the appellant, subsequently was promoted and was posted as Member, Technical in the Tribunal and appeal filed by appellant was also heard by said Member who earlier issued show-cause notice as Collector---Was not proper for said Member to sit in appeal in which show-cause notice earlier issued by him as Collector was under challenge---Judicial propriety required that no officer should sit in same matter at two different stages of proceedings---Impugned order authored by said Member of Tribunal, was set aside and case was remanded with direction that it should be heard and disposed of by Customs, Excise & Sales Tax Appellate Tribunal and matter should not be placed before a Bench in which Member, who earlier had issued show-cause notice as Collector, was a Member.

Raja Muhammad Iqbal for Appellant.

Abdul Rahim Lakhani for Respondent.

2006 P T D 310

[Karachi High Court]

Before Muhammad Mujeebullah Siddiqui and Sajjad Ali Shah, JJ

TOWELLERS LTD. through Chief Operating Officer

Versus

GOVERNMENT OF PAKISTAN Represented by Member Sales Tax

Central Board of Revenue, Islamabad and another

Special Sales Tax Appeal No.23 of 1994, decided on 22nd November, 2005.

(a) Jurisdiction---

----Advisory jurisdiction of Court---Scope---Whenever any Court exercises normal appellate jurisdiction, it can exercise all the powers which are vested in forums below for the reason that appeal is continuation of original proceedings---While exercising advisory jurisdiction, the provisions of law under which the jurisdiction is exercised is to be kept in view by the Court.

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

----Ss.46 & 47---Appeal---Advisory jurisdiction of High Court---Scope---Non-raising of a plea before Appellate Tribunal---Assessee being dissatisfied with the order passed by Appellate Tribunal, filed appeal under S.47 of Sales Tax Act, 1990---Plea of double taxation, raised by assessee before High Court was not raised before the Tribunal---Effect--When appeal was preferred before High Court, the appeal before Appellate Tribunal was not deemed to have been finally disposed of and was to be disposed of when opinion of High Court was delivered in exercise of advisory jurisdiction, whereafter, the Appellate Tribunal would pass such orders as would be necessary to dispose of the case in conformity with such judgment---If a plea was not raised before, the Tribunal, it would not be deemed to be pending before the Tribunal and in such situation there was no question of deciding the case in accordance with the judgment of High Court---Tribunal could decide the case in respect of the issues over which it had seized and not the issues which were neither raised before it nor were taken cognizance of its own-Scope of advisory jurisdiction of High Court was limited to the extent of expressing opinion whether the finding given by the Tribunal was in accordance with the law .or otherwise---When there was no finding of the Tribunal, there was no question of giving any opinion in negative or affirmative---Question of double taxation was neither raised before the Tribunal nor decided and consequently the appeal in respect of such issue was not maintainable in terms of S.47 of Sales Tax Act, 1990---Appeal was dismissed in circumstances.

?

Aziz A. Shaikh and Khurram Aziz Shaikh for Appellant.

Raja Muhammad Iqbal for Respondents.

Date of hearing: 22nd November, 2005.

2006 P T D 324

[Karachi High Court]

Before Muhammad Mujeebullah Siddiqui and Sajjad Ali Shah, JJ

Mrs. NIGHAT TARIQ

Versus

DEPUTY COMMISSIONER OF INCOME-TAX and others

Wealth Tax Appeals. Nos. 382, 383, 556, 557 of 2000, decided on 29th November, 2005.

Wealth Tax Act (XV of 1963)---

----Ss.27 & 35---Appeal---Expression `mistake apparent on record'---Connotation---Appeal of assessee was dismissed by Income Tax Appellate Tribunal---Instead of filing appeal before High Court, assessee filed rectification application, which application was dismissed by the Tribunal---Plea raised by assessee was that the order of Tribunal suffered from mistake apparent on record---Validity---Deliberate finding by an authority or an interpretation was not mistake apparent on record, as envisaged under S.35 of Wealth Tax Act, 1963---If there was a considered and deliberate finding and a party to the proceedings did not agree with the finding and even if there was a possibility that it might not sustain in appeal, still it would not be a mistake apparent on record---Mistake apparent on record was only such finding which was made on account of ignorance of the law or fact or by non-consideration of any fact or law or was violative of any established principle of law or any judgment of superior Court or was patently against the fact available on record---Other requirement was that it should be apparent on record, meaning thereby that it should be obvious and floating on surface and for discerning whereof no long-drawn process of arguments was needed---If a deliberate finding was given by the process of interpretation of any statute or on ratio of any judgment or by way of appreciation of facts which might not be sustainable in appeal, that was not a mistake apparent on record; it might be a finding of fact or law which might be successfully challenged before appellate forum but it would not amount to be a mistake apparent from the record---Tribunal had given a deliberate finding disagreeing with the contentions raised before it on behalf of the assessee and while rejecting the rectification application found that a plea raised for rectification of the Tribunal's order was misplaced---No mistake apparent on record, existed in the order of the Tribunal, though it might be a point ,vhich required further consideration---Question of rectification under S.35 of Wealth Tax Act, 1963, was not there---Assessee had right of appeal, which he could exercise by tiling appeal before High Court but that remedy was not availed---Reference application was dismissed in circumstances.

(1999) 79 Tax 152 (Trib.) ref.

Arshad Siraj for Appellant.

Jawaid Farooqi for Respondent.

Date of hearing: 29th November, 2005.

2006 P T D 333

[Karachi High Court]

Before Muhammad Mujeebullah Siddiqui and Sajjad Ali Shah, JJ

Messrs ENGINEERING CONSORTIUM (PVT.) LIMITED, KARACHI

Versus

I.T.O. CO., CIRCLE CENTRAL ZONE-C, KARACHI

I.T.R. No. 17 of 1993, decided on 22nd November, 2005.

Income Tax Ordinance (XXXI of 1979)---

----S.136---Reference to High Court---Principle of res judicata---Applicability---Income tax authorities contended that assessee, by not filing appeal against the finding of Income Tax Officer recorded, in immediately preceding year, had accepted such finding---Validity---Plea raised by assessee was that there was no res judicata in Income Tax law---Validity---Principle of res judicata could not be allowed to the cases of assessments under Income Tax law, in the same maimer as it was applied in civil proceedings---Findings of Income Tax Appellate Tribunal being violative of settled law, was not sustainable and the order passed by Appellate Authority was in consonance with the law laid down by Supreme Court---Question referred to High Court was answered in negative.

Commissioner of Income Tax v. Pakistan Industrial Engineering Agencies Ltd. PLD 1992 SC 562 and C.I.T. v. Waheeduzzaman PLD 1965 SC 171 fol.

M. Akbar A. Ansari for Applicant.

Nasrullah Awan for Respondent.

Date of hearing: 22nd November, 2005.

2006 P T D 375

[Karachi High Court]

Before Muhammad Mujeebullah Siddiqui and Khilji Arif Hussain, JJ

MUHAMMAD SOHAIL and another

Versus

CENTRAL BOARD OF REVENUE and 2 others

Constitutional Petition No.1267 of 2003, decided on 22nd September, 2003.

Customs Act (IV of 1969)---

----Ss.35 & 41---Amount paid as duty drawback, recovery of---Mis­declaration, charge of---Order-in-original was alleged to have been passed without providing copies of documents and opportunity to cross-examine witnesses---Validity---Record showed that full opportunity had been provided to petitioner to obtain copies of relevant record and to submit list of witnesses, whom he wanted to cross-examine, but he had failed to avail the same---Such plea was without substance.

Abdullah Chandio for Petitioners.

Raja M. Iqbal for Respondents.

2006 P T D 397

[Karachi High Court]

Before Anwar Zaheer Jamali and Yasmeen Abbasi, JJ

Messrs PAKISTAN STATE OIL COMPANY LIMITED

Versus

COLLECTOR (ADJUDICATION) CUSTOMS, SALES TAX AND CENTRAL EXCISE and another

Special Sales Tax Appeal No.12 of 2004, decided on 27th October, 2005.

Sales Tax Act (VII of 1990)---

----Ss.2(44), 33, 34, 46 & 47---Non-payment of sales tax on advances received by assessee---Appeal before Tribunal against order-in-original challenging also levy of additional tax and penalty---Tribunal found assessee liable to pay sales tax and upheld order-in-original without touching issue of additional tax and penalty---Validity---Question of levy of additional tax and penalty would be decided on its own merits looking at the peculiar facts and circumstances of each case, whether evasion or non-payment of tax was wilful, mala fide or otherwise---High Court would not be the proper forum to decide for the first time such question, which could not be decided without detailed examination of relevant facts and circumstances of the case---High Court remanded case to Tribunal for recording its finding on such question.

Maple Leaf Cement Factory Limited v. The Federation of Pakistan and others 1999 PTD 3907 and D.G. Khan Cement Co. Ltd. and others v. Federation of Pakistan and others 2004 SCMR 456 ref.

Messrs Humayun Ltd. v. Pakistan and others PLD 1991 SC 963; Messrs Lone China (Pvt.) Ltd. v. Additional Secretary to the Government of Pakistan Ministry of Finance, C.B.R., Custom House, Karachi PTCL 1995 CL 415 and Ghandhara Nissan Diesel Ltd. v. Sales Tax Department and others 2004 PTD 2771 rel.

Ms. Danish Zuberi for Appellant.

Raja Muhammad Iqbal for Respondents.

2006 P T D 423

[Karachi High Court]

Before Nasir Aslam Zahid and Qaiser Ahmed Hamidi, JJ

COMMISSIONER OF INCOME TAX, CENTRAL ZONE-C, KARACHI

Versus

Messrs DADABHOY SILK MILLS LIMITED, KARACHI

Income Tax Reference No. 16 of 1986, decided on 2nd October, 1991.

Income Tax Ordinance (XXXI of 1979)---

----Ss.18-A(7), 23(3) & 35(1)---Framing of assessment order under S.23(3) of Income Tax Ordinance, 1979 on 23-6-1973---Charging additional amount of tax under S.18-A of the Ordinance on 1-12-1977---Plea of assessee was that subsequent order of charging additional tax was a rectifying order recorded under S.35(1) of Income Tax Ordinance, 1979, which was time-barred having been recorded after four years from the date of assessment order---Appellate Authority and Tribunal upheld such plea of the assessee---Plea of Revenue was that assessment order dated 23-6-1973 was rectified and stood merged in subsequent order dated 6-5-1974, thus, additional tax charged on 1-12-1977 was not time ­barred---Validity---Order dated 1-12-1977 was an order rectifying regular assessment order having been passed after four years, thus, same was time-barred---No advantage could be taken of order dated 6-5-1974 in the present Reference Application, before the High Court as Revenue should have first agitated such point before Appellate Authority and the Tribunal---Order dated 1-12-1977 was barred by time in circumstances.

Nasrullah Awan for Applicant.

Sirajul Haq for Respondent.

Date of hearing: 2nd October, 1991.

2006 P T D 437

[Karachi High Court]

Before Muhammad Mujeebullah Siddiqui and Sajjad Ali Shah, JJ

ABDUL GHAFFAR BHUNDI

Versus

FEDERATION OF PAKISTAN through Central Board of Revenue, Islamabad and another

Constitutional Petition No.D-1510 of 2005, decided on 9th December, 2005.

Customs Rules, 2001---

----Chap. VIII, R.104---General Clauses Act (X of 1897), S.24-A---Constitution of Pakistan (1973), Art.199---Constitutional petition---Suspension of licence of customs agent---Non-mentioning of reason in the order for taking such action by authority---Plea of Revenue was that material available with authority was reflected in show-cause notice for issuance of impugned order---Validity---Show-cause notice could not be read with impugned order---Impugned order was bald, bereft of any reason and did not conform to mandatory requirements of S.24-A of General Clauses Act, 1897---Order not containing any reason and not showing its passing on objective consideration would be treated as arbitrary and result of misuse of authority vested in public functionary--No room existed for such arbitrary order in any system of law---High Court accepted constitutional petition and quashed impugned order in circumstances.

Ch. Muhammad Iqbal for Petitioner.

S. Tariq Ali, Federal Counsel for Respondent No. 1

Raja M. Iqbal for Respondent No.2.

Date of hearing: 9th December, 2005.

2006 P T D 441

[Karachi High Court]

Before Anwar Zaheer Jamali and Mrs. Yasmin Abbasey, JJ

Mrs. FARIDA ABDUL AZIZ

Versus

COMMISSIONER OF INCOME-TAX

I.T.A. No. 27 of 1994, decided on 14th December, 2005.

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

----S.65---Exercise of discretion by Assessing Officer under S.65 of Income Tax Ordinance, 1979---Essential conditions stated.

Wide powers have been conferred upon the Deputy Commissioner/ Assessing Officer to exercise jurisdiction under section 65 of Income Tax Ordinance, 1979 in the cases, which are covered by any of the categories (a), (b) & (c) of subsection (1) thereof, but subject to fulfilment of two conditions. The first requirement of definite information has not been bracketed with any condition of outside source, impliedly meaning that such definite information can also be outcome of existing record.

Obtaining of prior approval by the Assessing Officer from the Inspecting Additional Commissioner of Income Tax is the other requirement under subsection (2) of section 65 of the Income Tax Ordinance, 1979.

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

----Ss.62 & 65---Additional assessment, framing of---Definite information---Non-application of mind by Assessing Officer to revised wealth statement filed before framing of previous assessment order---Additional assessment framed by successor Assessing Officer on basis of revised wealth statement---Plea, of assessee was that additional assessment was not based on any definite information collected from any outside source, rather same was a change of opinion by successor Assessing Officer on basis of record already available with him---Validity---Requirement of definite information was not subject to any condition of outside source, rather same could be outcome of existing record---Such wealth statement had skipped sight of predecessor Assessing Officer, thus, he could not apply mind to such aspect of the case---Assessing Officer had passed previous assessment order in a routine manner without conscious application of mind to such wealth statement---Such wealth statement had furnished definite information to successor Assessing Officer to invoke provisions of S.65 of the Income Tax Ordinance, 1979---Such plea of assessee was not tenable.

1993 SCMR 493; Edulji Dinsha Limited PLD 1990 SC 399 = 1990 PTD 155; Inspecting Assistant Commissioner and another v. Pakistan Herald Ltd. 1997 SCMR 1256; Car Tunes v. Income Tax Officer and others PLD 1989 Kar. 337 = 1989 PTD 478; Republic Motors Ltd. v. Income Tax Officer and others 1990 PTD 889; Mess H.M. Abdullah v. The Income Tax Officer 1991 PTD 217 and Messrs Pakistan Tobacco Co. Ltd. v. Government of Pakistan 1991 PTD 345 ref.

Pakistan Tobacco Co. Ltd. v. Government of Pakistan 1993 SCMR 493 rel.

Rehan Hassan Naqvi and Ms. Lubna Pervaiz for Applicant.

Nasrullah Awan for Respondent.

Date of hearing: 14th December, 2005.

2006 P T D 460

[Karachi High Court]

Before Muhammad Mujeebullah Siddiqui and Sajjad Ali Shah, JJ

COMMISSIONER OF INCOME TAX, COMPANIES-I, KARACHI

Versus

Messrs M. M. SILK MILLS LIMITED, KARACHI

Income Tax Appeal No.368 of 1999, decided on 6th December, 2005.

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

----Ss.2(4), 24(g) & Sixth Sched., Part-III---Deduction on account of gratuity, claim for---Scope---Establishment of approved gratuity fund would be essential for making such claim---Principles.

If the law requires that an approved gratuity fund is to be created and any sum paid to such approved gratuity fund is to be allowed and if no such approved gratuity fund exists, then the person claiming the benefit is required to act in accordance with law and cannot be allowed to put a premium on circumvention of or non-compliance with the requirements of law. Where no fund has been created formally, the provision created to which the gratuity accrued, but no actually paid is transferred and on the basis thereof claim for gratuity is preferred itself amounts to creation of gratuity fund. The reason being that the expression "fund" in the common parlance means accumulation of money for some specific purpose. The expression "fund" used in section 24(g) is to be taken as an ordinary expression and not as a term of art. The rules relating to approved gratuity fund are contained in Part-III of Sixth Schedule to the Income Tax Ordinance, 1979. The term gratuity fund has not been defined in these rules. However, the term "approved gratuity fund" has been defined in section 2(4) of Income Tax Ordinance, 1979, to mean a gratuity fund, which has been and continues to be, approved by the Commissioner in accordance with the rules contained in Part-III of the Sixth Schedule. The expression "approved gratuity fund" has been defined in the Income Tax Ordinance, 1979, but the expression "gratuity fund" has not been defined in the Ordinance or the Rules framed thereunder. The result is that the expression shall not be treated as term of art and is to be given ordinary meaning as is understood in the common parlance.

Messrs S.J.G. Fazal Ellahi Limited v. Commissioner of Income-tax, Karachi 1989 PTD 579 and Commissioner of Income-tax Central Zone, Karachi v. Pakistan Security Printing Press Corporation, 1985 PTD 413 ref.

Duncan Brothers & Co. Ltd. v. C.I.T. (1978) 111 ITR 885 and Duncan Brothers & Co. Ltd. v. C.I.T. (1981) 128 ITR 302 rel on.

(b) Words and phrases-----

--"Fund"---Definition.

Jowitt's Dictionary of English law, 2nd Edition, Vol. I, p.840; Dictionary of Accountants, Fourth Edition by Eric L. Kohler, pp. 204 to 208; Shorter Oxford English Dictionary Third Edition, p.761 and Dictionary of Accounting Terms of Derek French First Edition at p.130 ref.

(c) Income Tax Ordinance (XXX1 of 1979)---

----S.24(g) & Sixth Sched., Part-III---Deduction on account of gratuity, claim for---Maintenance of mercantile system of accounting by assessee-Non-establishment of approved gratuity fund---Assessing Officer allowed gratuity to the extent of amount actually paid, but disallowed as inadmissible balance amount for which mere provision was made---Validity---Provision for gratuity created by assessee amounted to gratuity fund---Method adopted by assessee showed that liability on account of gratuity accruing on mercantile basis was earmarked' to provisions for purpose of payment to employees and discharge of such liability in future---Such provision for gratuity had all the attributes of a gratuity fund, but had not been approved---Assessee claiming deduction on account of gratuity without establishing an approved gratuity fund could not be allowed such benefit---Assessee's claim was not admissible in view of specific bar contained in S.24(g) of Income Tax Ordinance, 1979.

Jawaid Farooqui for Appellant.

Nemo for Respondent.

Date of hearing: 6th December, 2005.

2006 P T D 476

[Karachi High Court]

Before Muhammad Mujeebullah Siddiqui and Sajjad Ali Shah, JJ

ABDUL WAHAB

Versus

COMMISSIONER OF INCOME TAX, COMPANIES-III, KARACHI and another

Wealth Tax Appeal No. 187 of 2002, decided on 15th November, 2005.

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

----S.27 [as amended by Finance Act (XXII of 1997)]---Limitation Act (IX of 1908), Ss.5, 14 & 29(2)---Constitution of Pakistan (1973), Art.199---Appeal to High Court after dismissal of Reference made by Appellate Tribunal as non-maintainable---Condonation of delay---Treating appeal as constitutional petition---Tribunal passed order on 15-2-2001---Appellant instead of filing appeal to High Court filed Reference Application to Tribunal, though no provision for its tiling existed after 1-7-1997---Reference Application was accepted on 19-9-2001 without any objection by Revenue or Tribunal as to its maintainability---Receipt of Tribunal's Reference in High Court on 28-11-2001---Dismissal of Tribunal's Reference by High Court on 8-3-2002 as non-maintainable---Filing of appeal before High Court on 11-3-2002 by appellant against Tribunal's order dated 15-2-2001---Application under Ss.5 & 14 of Limitation Act, 1908 for exclusion of time spent in prosecuting such proceedings before Tribunal, which were not maintainable for want of jurisdiction---Validity---Appellant had engaged a reputed law firm in field of Tax Laws---Negligence was not on appellant's part, but was on his counsel's part---Everybody concerned had contributed in negligence in taking appellant to a difficult situation and making him victim of such circumstances---Such agony of appellant was not on account of any fault of his own, but was on account of his counsel's mistake, non-application of mind by Tribunal's office, Revenue and members of Tribunals as to the point of jurisdiction and non-maintainability of Reference---Section 5 of Limitation Act, 1908 by virtue of S.29(2) thereof would not apply to present appeal under special law i.e. under S.27 of Wealth Tax Act, 1963---Section 14 of Limitation, 1908 would not apply to appeal---Act of Court would not prejudice any person---Nobody should be left without any redress---No specific provision existed in Limitation Act, 1908, under which Court can come to redress of appellant---No remedy was available to appellant in such circumstances---High Court treated appeal as petition under Art.199 of the Constitution as there was negligence on petitioner's part in pursuing the matter.

Aftab Medical Store v. Commissioner of Income Tax, PLD 1976 Lah. 1330 ref.

Sherin v. Fazal Muhammad 1995 SCMR 584; page 75 in Broom's Legal Maxims; Pulteney v. Warren (1801) 6 Ves. 73,92; East India Company v. Campion (1837) 11 Bli. (N.S.) 158; Rodger v. The Comptoir d'Escompte de Paris (1871) 3 P.C. 465; Jai Berham v. Kedar Nath AIR 1922 PC 269; Hidayatullah v. Murad A. Khan PLD 1972 SC 69 and Hari Rain v. Akbar Hussain ILR 29 All. 749 rel.

(b) Administration of justice---

----Judicial or quasi-judicial duty of public authorities including judicial functionaries---Performance of duty---Breach of duty---Remedy.

All public functionaries including the judicial functionaries while doing an act enjoined by law or merely empowered to do it must not do it improperly. An action may lie against a public authority for misfeasance or nonfeasance, but for the sake of safe administration of justice and good sense, no action lies for the breach of duty, when the duty to perform is judicial or quasi-judicial. There may be a variety of reason for omission or failure in performing such duty or exercising power with reasonable dispatch such as delaying tactics of the parties to the action, multiplicity of pending cases in the Court or intricacies of questions of law and facts raised before it.

Cases have occurred, in which injury was caused by the act of legal Tribunal, as by the laches or mistake of its officers; and where, notwithstanding the maxim as to actus curiae, the injured party was without redress. Presumably the necessity to mitigate the rigor of the hardship inflicted on a party in the course of administration of justice by an act of the Court led to the emergence of the norm that "the act of the Court shall prejudice no man".

If there be a principle upon which Courts of justice ought to act without scruple, it is this: to relieve parties against that injustice occasioned by its own acts or oversights at the instance of the party against whom the relief is sought.

One of the first and highest duties of all Courts is to take care that the act of the Court does not cause injury to any of the suitors and when the expression "the act of the Court" is used, it does not mean merely the act of the Primary Court or of any intermediate Court of Appeal, but the act of the Court as a whole from the lowest Court which entertained jurisdiction over the matter up to the highest Court which finally disposes of the case.

Sherin v. Fazal Muhammad 1995 SCMR 584; page 75 in Broom's Legal Maxims; Pulteney v. Warren (1801) 6 Ves. 73,92; East India Company v. Campion (1837) 11 Bli. (N.S.) 158; Rodger v. The Comptoir d'Escompte de Paris (1971) 3 P.C. 465; Jai Berham v. Kedar Nath AIR 1922 PC 269 and Hidayatullah v. Murad A. Khan PLD 1972 SC 69 rel.

Farogh Naseem for Appellant.

Aqeel Ahmed Abbasi for the Respondent.

Date of hearing: 15th November, 2005.

2006 P T D 514

[Karachi High Court]

Before Muhammad Mujeebullah Siddiqui and Sajjad Ali Shah, JJ

Messrs ADNAN TRADING CO., KARACHI

Versus

APPELLATE TRIBUNAL, CUSTOMS, CENTRAL EXCISE AND SALES TAX, BENCH-I, KARACHI and 2 others

Sales Tax Appeal No. 40 of 2004, decided on 22nd November, 2005.

Sales Tax Act (VII of 1990)---

----S. 47---Civil Procedure Code (V of 1908), O.XLI, R.19---Application for admission of appeal dismissed for non-prosecution---Delay of two days in filing application for restoration of appeal---Non-disclosure of proper reason in restoration application for its not filing within period of limitation---Non-filing of application for condonation of delay---Non­ engagement of Counsel by appellant till dismissal of appeal despite having availed several adjournments therefor---Appellant was not entitled to extra indulgence---High Court dismissed application for restoration of appeal as barred by time.

Atiq-ur-Rehman and Ahmed Khan Bugti for Appellant.

Raja Muhammad Iqbal for Respondents.

2006 P T D 518

[Karachi High Court]

Before Sabihuddin Ahmed, C.J. and Muhammad Athar Saeed, J

Messrs JEEWAJEE (PVT.) LTD. through Manager

Versus

FEDERATION OF PAKISTAN through Secretary, Finance and Economics Affairs Division, Islamabad and 3 others

Constitutional Petition No. 401 of 1996, heard on 10th November, 2005.

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

----Ss. 18 & 30---Exemption from duty, claim for---Value or rate of import duty, determination of---Relevant date---Date of establishing Letter of Credit would not be relevant, rather date of filing of Bill of Entry or clearance of goods from warehouse would be relevant for such determination---Principles illustrated.

Collector of Customs v. Ravi Spinning Mills 1999 SCMR 412 ref.

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

----Ss. 19 & 20---Notification providing exemption from duty---Scope---Unless expressly stated in notification, exemption would apply only to existing change of customs duty and not to duties, which might be levied in future.

Ali Bin Adam Jafri for Petitioner.

Raja M. Iqbal for Respondents.

Mahmood A. Rizvi, Standing Counsel.

Date of hearing: 10th November, 2005.

2006 P T D 590

[Karachi High Court]

Before Anwar Zaheer Jamali and Mrs. Yasmin Abbasey, JJ

Dr. MUHAMMAD YOUSAF

Versus

COMMISSIONER OF INCOME TAX

I.T.R. No.517 of 1990, decided on 30th January, 2006.

Per Mrs. Yasmin Abbasey, J.

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

----Ss.65 & 148---Registration Act (XVI of 1908), S.17---Addition---Islamic law---Gift---Essentials---Gift means transfer of property with immediate effect---Even if the first two conditions of offer and acceptance of gift by donor and donee are fulfilled, third element of transfer of property in favour of the donee is the essence of gift---Where the transfer of property was not effected and no registered gift deed as required under S. 17, Registration Act, 1908 had been placed on record, and donor/assessee had conceded to have received the rent of the said property, addition of income out of such gifted property was rightly made in the relevant assessment year of the donor assessee.

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

----S.134---Appeal to Appellate Tribunal---New plea---Admissibility---Appeal being continuation of the proceedings initiated at trial stage, if a ground was raised at appellate stage, same would amount to open a new line of investigation with the utter surprise to the other party, and that was not warranted under law.

Per Anwar Zaheer Jamali, J.

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

----Ss.65 & 148---Addition---Gift---Donor of the property in his statement recorded under S.148, Income Tax Ordinance, 1979 had conceded that he had been in receipt of rent from the property in question every month; that the property in question was exclusively owned by him and that he had not declared the rental income under the impression that he was not liable to pay tax thereon---Effect---Such statement of the assessee recorded on oath proved beyond doubt that the assessee actually received rent of the property which was owned by him---Addition made by the Assessing Officer for the rental income in assessee's account was justified in circumstances and was therefore unexceptionable.

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

----S. 134---Appeal to Appellate Tribunal---New plea---Raising of new plea at the stage of arguments which though seemed legal but had to be judged on the basis of other material brought on record, when the proceedings were subjudiced before the Income Tax Appellate Tribunal, was rightly rejected by the Tribunal.

Iqbal Salman Pasha for Applicant.

Nasrullah Awan for Respondent.

Date of hearing: 30th November, 2005.

2006 P T D 622

[Karachi High Court]

Before Muhammad Mujeebullah Siddiqui and Khilji Arif Hussain, JJ

Messrs MERCK MARKER (PVT.) LTD. through Senior Manager, Karachi

Versus

COLLECTOR, SALES TAX AND CENTRAL EXCISE, LARGE TAXPAYERS UNIT, KARACHI, EXCISE (ADJUDICATION-III), KARACHI and another

Special Sales Tax Appeal No. 91 of 2004, decided on 7th September, 2005.

Sales Tax Act (VII of 1990)---

----S.9---S.R.O. 1199(I)/1996, dated 22-10-1996---Debit and Credit Notes and Distribution of Goods Rules, 1996---Return of sales tax paid on unsold goods through debit and credit notes, claim for---Goods not physically returned to supplier by distributor---Issuance of debit and credit notes by supplier to avail benefit under S.9 of Sales Tax Act, 1990---Validity---Return of goods was a condition precedent for issuance of such notes---Non-passing of tax by distributor to consumers would not be relevant for purpose of claiming adjustment---Normally payment and delivery of goods would be concurrent condition, but parties might contract otherwise---Mere issuance of such notes could not be termed as compliance of requirement of S.9 of Sales Tax Act, 1990---Principles.

Muhammad Athar Saeed for Appellant.

Raja Muhammad Iqbal for Respondent.

Date of hearing: 7th September, 2005.

2006 P T D 635

[Karachi High Court]

Before Sabihuddin Ahmed, C.J. and Amir Hani Muslim, J

Messrs NAVEED BROTHERS through Manager, Karachi

Versus

DEPUTY DIRECTOR, DIRECTORATE OF CUSTOMS VALUATION AND POST CLEARANCE AUDIT, KARACHI and another

Constitutional Petition No. D-1525 and Misc. No. 5748 of 2005, decided on 13th January, 2006.

Customs Act (IV of 1969)---

----S.25(1)(5)---Imported goods---Provisional assessment at the rate calculated under S.25(5) of Customs Act, 1969---Validity---Assessment on basis of identical goods could be made only, when assessment on basis of declared value was not possible---Invoices submitted by importer were neither incorrect nor any other reason existed for deviating from normal basis of assessment---High Court accepted constitutional petition, set aside impugned order and remanded case to the authority for its decision afresh.

M. Afzal Awan for Petitioner.

Raja Muhammad Iqbal for Respondent.

2006 P T D 639

[Karachi High Court]

Before Muhammad Mujeebullah Siddiqui and Sajjad Ali Shah, JJ

Messrs S. ESSA, KARACHI

Versus

FEDERATION OF PAKISTAN through Secretary, Ministry of Finance, Islamabad and 3 others

C. P. No.D-2275 of 1997, decided on 16th December, 2005.

Customs Act (IV of 1969)---

----Ss.193 & 195-A---Constitution of Pakistan (1973), Art.199---Constitutional petition---Appeal to Collector---Limitation---Filing of appeal on 20-8-1995 against order-in-original dated 24-4-1995---Petitioner's plea was that copy of order was supplied late---Revenue's plea was that copy of order was supplied on 10-4-1995---Order of Collector dismissing appeal as time-barred was upheld by Central Board of Revenue in revision---Validity---Order-in-original dated 24-4-1995 could not be served upon petitioner on 10-4-1995---Both such forums had committed serious error in exercise of jurisdiction vested in them and had passed erroneous order apparent on the face of record---High Court accepted constitutional petition, set aside impugned orders and remanded appeal to Collector for its decision on merits.

Junaid Ghaffar for Petitioner.

Syed Tariq Ali, Federal Counsel for Respondents. Nos.1 and 2.

Raja Muhammad Iqbal for Respondents Nos.3 and 4.

Date of hearing: 16th November, 2005.

2006 P T D 651

[Karachi High Court]

Before Muhammad Mujeebullah Siddiqui, J

COLLECTOR OF CUSTOMS, KARACHI

Versus

Messrs ALI ENTERPRISES, KARACHI

Spl. Customs Appeal No. 9 of 2005, decided on 19th December, 2005.

Customs Act (IV of 1969)---

----Ss. 16, 32(1)(2)(14), 156(1) & 196---Import Policy Order, 2005, para. 16 read with Appendix G---S.R.O. 2(13)/71/GATT dated 27-2-1973---Commercial Documents Evidence Act (XXX of 1939), S.3---Reference to High Court---"Certificate of origin"---Presumption attached to such certificate, when rebutable---Principles---Reference to High Court is confined to the question of law arising out of Tribunal's order---No provision of law exists under which any evidence collected after the decision of the Tribunal can be brought on the record of the High Court---Jurisdiction of High Court under S.196, Customs Act, 1969 is advisory in nature and the opinion by High Court is to be given on the point of Law only arising out of an order by the Tribunal---Tribunal considers the issues raised before it, and gives finding on the points of fact and law on the basis of material produced before it and points canvassed by the parties---Customs Officers, in the present case, became aware of the provisions of Commercial Documents Act, 1939 after the order of the Tribunal, and they tried to wriggle out of the situation which was not possible, for the reason that after decision of the Tribunal no new evidence could be allowed to be collected---High Court, while dismissing the reference application by the department, on account of the fact that no question of law was involved in the case, observed that in spite of the several directions by the High Court, Central Board of Revenue had not taken any meaningful steps for imparting necessary training in the relevant laws pertaining to the customs duty to the Customs officials.

Haider Iqbal Wahniwal along with Ilyas Ahsan Khan, Appraising Officer for Appellant.

Date of hearing: 19th December, 2005.

2006 P T D 670

[Karachi High Court]

Before Muhammad Mujeebullah Siddiqui and Sajjad Ali Shah, JJ

ABDUL GHAFFAR BHUNDI

Versus

FEDERATION OF PAKISTAN through Central Board of Revenue, Islamabad and another

Constitutional Petition No. D-1510 and M.A. No. 5664 of 2005, decided on 9th December, 2005.

(a) Customs Rules, 2001---

----Rr.103 & 104(3)---General Clauses Act (X of 1897), S.24-A---Constitution of Pakistan (1973), Art.199---Constitutional petition---Customs Agent Licence, suspension of---Misconduct, charge of---Impugned order bereft of any reason---Validity---Such order would be treated as arbitrary and result of misuse of authority vested in public functionary---No room existed for such arbitrary orders in any system of law---Material reflected in show-cause notice could not be read with impugned order---Impugned order would not be sustainable in law for being violative of basic principles of good governance and mandatory requirements of S.24-A of General Clause Act, 1897---High Court accepted constitutional petition and quashed the impugned order.

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

----S.24-A---Order not containing any reason and showing its passing on objective consideration---Validity---Such order would be treated as arbitrary and result of misuse of authority vested in public functionary---No room existed for such arbitrary orders in any system of law.

Ch. Muhammad Iqbal for Petitioner.

S. Tariq Ali, Federal Counsel for Respondent No.1.

Raja M. Iqbal for Respondent No.2.

2006 P T D 674

[Karachi High Court]

Before Gulzar Ahmed, J

Messrs PAKISTAN DRY BATTERY MANUFACTURERS ASSOCIATION through Vice-Chairman and another

Versus

FEDERATION OF PAKISTAN through Secretary, Revenue Division, Islamabad and 9 others

Suit No. 551 and C.M.As. Nos. 7812, 7813, 2940, 6306, 6048 and 9932 of 2005, decided on 6th February, 2006.

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

----S.25---Customs value of goods---Determination---Procedure---Valuation advice---Significance---Customs authorities cannot have a fixed predetermined value of the imported consignment in the form of Valuation Advice issued by an officer of the Customs Department---It matters not whether the valuation advice is made after inquiry or with the consent of the persons affected by the valuation as valuation advice goes contrary to the provision of S.25(1), Customs Act, 1969---If, however, the transaction value as declared by the importer cannot be determined, the provision of S.25 and the rules provide an inbuilt mechanism for the Customs authorities to determine the value of imported goods---Fixed valuation of the imported goods by way of valuation advice obtained by any means, cannot be made the basis for determining the value of imported goods each of which has to be dealt with and processed in accordance with S.25 of the Customs Act, 1969 and rules made thereunder---Principles.

It is the function of the Customs authorities to determine value of the imported consignment in terms of section 25 of the Customs Act, 1969 and the rules, made thereunder. There is no provision in the Customs Act or its rules where the Customs authorities may make or have a fixed predetermined value of the imported consignment in the form of valuation advice issued by an Officer of the Customs Department. It matters not whether the valuation advice is made with inquiry or with the consent of the persons affected, by the valuation. Apparently, the valuation advice goes contrary to the provision of section 25(1) of the Customs Act, 1969 which provides that the transaction value to be Customs value of imported goods subject to the provisions of this section and the rules. If the transaction value as declared by the importer cannot be determined, the provisions of this section and rules provide an inbuilt mechanism for the Customs authorities to determine the value of imported goods. Fixed valuation of the imported goods by way of valuation advice obtained by any means, cannot be made the basis for determining the value of imported goods each of which has to be dealt with and processed in accordance with section 25 of the Customs Act and the rules made thereunder.

Valuation advice may not be taken as conclusive evidence of valuation and final assessment be made of the imported goods by the Customs authorities in accordance with the provision of section 25 of the Customs Act and rules after providing due opportunity to the importer to place material with regard to the value declared by it. There does not appear to be need for the Customs authorities to review or revise valuation advice because it will be an exercise in futility as the reviewed or revised valuation advice again will not be the only basis for arriving at the valuation of the imported goods as its valuation still, will have to be made under section 25 of the Customs Act and the rules. This is the mandate of law which has to be fulfilled.?

Writ Petition No. 15076 of 2005, C.P. No. D-394 of 2005 and C.P. No.D-659 of 2005; Shoaib Khan v. Collector of Customs Appraisement, Karachi 2005 PTD 1069; Moon Corporation v. Central Board of Revenue 2004 PTD 2615; Collector of Customs (Exports) v. Messrs Chemitex Industries (Pvt.) Ltd. 2002 MLD 836; 398 of 2005, 659 of 2005; Al-Mughni Trading Company v. Deputy Collector of Customs, Lahore 2005 PTD 2201; Messrs Sohrab Global Marketing (Pvt.) Ltd. v. Deputy Collector of Customs, Lahore 2005 PTD 67; Messrs Yousuf Enterprises v. Collector 2005 PTD 21; Customs Appeals Nos. 1668/LB and 1669/LB of 2002; 2005 PTD (Trib.) 617; Messrs Steel Syndicate v. Deputy Collector of Customs 2005 PTD 1600; Kashif Nasim v. Collector of Customs (Appraisement) Karachi 2005 PTD 1971 and Messrs Kings Pen Company v. Collector of Customs (Appraisement), Karachi 2005 PTD 118 rel.

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

----S.25-A---Taking over the imported goods---Conditions elucidated.

Subsection (1) of section 25A of the Customs Act, 1969 provides that if any person makes an offer in writing to buy the imported goods sought to be cleared at value declared by an importer in the bill of entry or goods declaration, the Assistant Collector or any other higher officer of Customs may order the following without prejudice to any other action against the importer or his authorized agent, namely (i) entertain offer by any other person to buy these goods at substantially higher value than the declared customs value in the bill of entry or goods declaration and payment of customs duties and other leviable taxes thereon, provided such offer is accompanied by a pay order equal to twenty five per cent of the amount of such value and duties and other taxes leviable on imported goods. If the relevant documents do not say in precise term that the offer of the buyer to buy these goods is substantially higher than the declared value and it is also not accompanied by a pay order equal to 25% of the amount of such value and dues and other taxes leviable on the imported goods and if even the subsequent letters of the buyer do not comply with the abovementioned conditions of section 25A(1)(i) of the Customs Act; in the face of the above provision of law, there is no offer so far" from the buyer to the Customs authorities in terms of section 25A(1)(i) of the Customs Act, 1969.?

Abid S. Zuberi for Plaintiff.

Raja M. Iqbal for Defendants Nos.2, 3 and 5.

Jawed Farooqui for Defendant No.4.

Shafi Siddiqui for Defendants Nos.6 and 7.

2006 P T D 700

[Karachi High Court]

Before Anwar Zaheer Jamali and Mrs. Yasmin Abbasey, JJ

Messrs SIMPSON WIRE (PVT.) LTD., KARACHI

Versus

COLLECTOR OF CUSTOM, SALES TAX AND CENTRAL EXCISE (ADJUDICATION), KARACHI-III, KARACHI and 2 others

Central Excise Appeal No. 19 of 2002, decided on 27th January, 2006.

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

----S.4(2)---S.R.O. 546(I)/94 dated 9-6-1994---Determination of value for the purposes of excise duty---Condition laid down in S.4(2) Central Excise Act, 1944 had to be fulfilled for availing the concession granted in S.R.O. 546(I)/94 dated 9-6-1994---Principles stated.

If the wholesale cash price of the goods are taken as retail price under the cover of section 4(2) of the Central Excise Act for availing the benefit of S.R.O. 546(I)/94 issued under section 4(2) of the Act then the condition laid down in section 4(2) of the Act had to be fulfilled for availing the concession granted in S.R.O. 546(I)/94. Bear reading of section 4(2) of Central Excise Act shows that it imposes conditions that the retail price of the product should be legible, prominently and indelibly printed or embossed on each article, packet, container, package cover or label as the case may be. If the retail price was neither printed nor embossed on the packets or container whatever that was the manufacturer, who was supplying his product to a general body of consumers, whether they belonged to the class of consumers in open market or to a particular class of industries, had to pay excise duty at 10% on retail price basis. Because once the manufacturer had cleared the goods on, retail price then he was bound to pay all charges and taxes as envisaged in section 4(2) of Central Excise Act, if condition for availing the exemption granted under S.P O. 546(I)/94 issued under section 4(2) of Act was not fulfilled.

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

----Appeal to High Court---Question of limitation having not been taken up before the Tribunal nor indicated in the memo of appeal, could not be allowed to be raised during the course of arguments before the High Court.

Amir Raza Naqvi for Appellant.

Raja M. Iqbal for Respondent No. 3.

Date of hearing: 17th November, 2005.

2006 P T D 715

[Karachi High Court]

Before Muhammad Mujeebullah Siddiqui and Khilji Arif Hussain, JJ

COLLECTOR OF SALES TAX AND CENTRAL EXCISE (EAST), KARACHI

Versus

Messrs ASPHALT INTERNATIONAL, KARACHI and another

Special Sales Tax Appeal No.200 of 2003, decided on 17th January, 2006.

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

----Ss.7 & 8---S.R.O. 1349(I)/99, dated 17-12-1999---Non-payment of tax on taxable supplies---Payment of principal amount of tax after adjusting input tax while availing Amnesty Scheme---Authority demanding entire principal amount of tax with additional tax and penalty---Validity---Right to deduct input tax from output tax in terms of S.7 of Sales Tax Act, 1990 would be available to a registered person only and during period 1st July 1998 to December 1998---Assessee during such period was not registered---Provision of S.8 of Sales Tax Act, 1990 would not apply to the present case, but would apply to goods specified in a notification by Federal Government---Sanctioning refund to assessee would not mean that authority had indirectly agreed to such claim of adjustment---No admission on the part of authority that assessee was entitled to such adjustment---Even presence of any such admission would not have the effect to override statute law---Nothing in S.R.O. 1349(I)/99 dated 17-12-1999 was available to show that while working out portion of principal amount of tax due, tax-evader would be entitled to adjustment of input tax even though not being a registered person---Principal amount of tax due would be calculated in terms of the provisions of Sales Tax Act, 1990---For availing Amnesty, entire principal amount of tax along with additional tax and penalty on such principal amount would become payable---Such demand raised by authority was justified.

Messrs Hamza Sugar Mills Ltd. v. Collector of Sales Tax 2005 PTD 1131 and Mayfair Spinning Mills Ltd. v. Collector of Sales Tax Appellate Tribunal PTCL 2002 CL 115 ref.

(b) Waiver---

----No waiver against law.

Raja Muhammad Iqbal for Appellant.

Sattar Silat for Respondent No. 1.

Date of hearing: 2nd September, 2005.

2006 P T D 734

[Karachi High Court]

Before Muhammad Mujeebullah Siddiqui and Khilji Arif Hussain, JJ

FAUJI OIL TERMINAL AND DISTRIBUTION COMPANY LTD., KARACHI

Versus

ADDITIONAL COMMISSIONER/TAXATION OFFICER-A, AUDIT DIVISION, KARACHI and 2 others

Constitution Petition No.D-378 of 2005, decided on 24th January, 2006.

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

----Ss. 122(5), (5A), 120, 114, 115 & 153---Constitution of Pakistan (1973), Art.199---Constitutional petition---Notice under S.122(5A), Income Tax Ordinance, 2001---Validity---Scope of Ss.114, 115, 120, 122 & 152 of Income Tax Ordinance, 2001---Assessment years 2000-20001 and 2001-2002---Amendment of assessment---Scope---Jurisdiction under S.122(5A), Income Tax Ordinance, 2001 is revisional in nature and the jurisdiction under S.122(5) is original in nature which can be exercised by the Deputy Commissioner of Income Tax as well and the requirements of the two provisions being distinct to each other, coupled with the fact that the conditions precedent for exercise of the two jurisdictions are also entirely different and distinct---For the purpose of exercising revisional jurisdiction with reference to the conditions precedent prescribed in S. 122(5A) to the effect that the assessment order is erroneous and prejudicial to the interests of revenue, it is necessary that an assessment order should be in existence---Contention that for the purpose of exercising jurisdiction under S. 122(5A), it is necessary to have resort to S.122(5) was repelled---Principles.

Amin Textile Mills (Pvt.) Ltd. v. C.I.T. PTCL 2000 CL 316 and Honda Shahrahe Faisal v. Regional Commissioner of Income Tax and others C. P. No. D-643 of 2004 ref.

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

----Ss.114, 115, 122, 120 & 153---Presumptive Tax Regime---Notice under S.122(5A) Income Tax Ordinance, 2001-Validity-Assessment Year 2003-2004---No concept of any assessment order in the realm of Presumptive Tax Regime---Entire Presumptive Tax Regime revolves around taking the entire payment as income---Determination as to whether in the Presumptive Tax Regime, any assessment order of the nature which may be erroneous or prejudicial to the interests of revenue, was made---Considerations and principles elucidated---Non filing of return of income under S. 114, Income Tax Ordinance, 2001---Invoking of jurisdiction under S.122(5) of Income Tax Ordinance, 2001 by the Commissioner---Procedure---Conditions.?

Amin Textile Mills (Pvt.) Ltd, v. C.I.T. PTCL 2000 CL 316 and Honda Shahrahe Faisal v. Regional Commissioner of Income Tax and others C. P. No. D-643 of 2004 ref.

Khalid Anwar for Petitioner.

A.R. Akhtar for Respondents Nos. 1 and 2.

Date of hearing: 27th September, 2005.

2006 P T D 778

[Karachi High Court]

Before Anwar Zaheer Jamali and Mrs. Yasmin Abbasey, JJ

I.C.I. PAKISTAN LTD., through Chief Financial Officer, Karachi

Versus

FEDERATION OF PAKISTAN through Secretary Ministry of Finance, Islamabad and 3 others

C.P. No.D-658 of 2005, decided on 13th January, 2006.

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

----S.62---Constitution of Pakistan (1973), Art. 199---Constitutional petition---Mala fides---Notice under S.62 of Income, Tax Ordinance, 1979, was assailed by assessee on the pleas of mala fides and lack of jurisdiction---Notice issued by the authorities was a detailed notice, which carried opinion of Taxation Officer based upon the facts deduced by him from the record made available before him by the assessee---Taxation Officer had also made reference of some cases from Indian jurisdiction to gain support for his view and unfolded certain other points to seek explanation of assessee on them---Taxation Officer also invited the assessee to hear its view point with regard to the points unfolded by it---Validity---Such action, prima facie, seemed to be within the four corners of S.62 of Income Tax Ordinance, 1979 and did not show any mala fides or element of lack of jurisdiction of the concerned officer---Petition was dismissed in circumstances.

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

----S.62---Constitution of Pakistan (1973), Art.199---Constitutional petition---Bona fides, lack of---In response to notice under S.62 of Income Tax Ordinance, 1979, issued by Taxation Officer, assessee sought adjournments for submission of its reply to such notice and instead of filing reply, assessee assailed the notice before High Court---Validity---Such conduct of assessee, prima facie, reflected lack of bona fides on its part in approaching the High Court.

(c) Constitution of Pakistan (1973)---

----Art.199---Constitutional petition---Fiscal matters---Alternate and efficacious remedy, non-availing of---Effect---Availability of alternate remedy had not been considered as an absolute bar for High Court, for' exercising its Constitutional jurisdiction under Art.199 of the Constitution in appropriate cases, despite non-availing such alternate remedy---In fiscal matters superior Courts have been more liberal in exercising their constitutional jurisdiction, keeping in mind financial constraints, which may be the compelling reason for the aggrieved party to bypass alternate remedy, as due to such financial constraints departmental remedy might lose its efficacy.

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

----S.62---Constitution of Pakistan (1973), Art.199---Constitutional petition---Mala fides, plea of---Factual controversy---Rule of propriety--Applicability---Jurisdiction of Authority---Determination---Non-availing of departmental remedy---Assessee assailed notice under S. 62 of Income Tax Ordinance, 1979, on the plea of mala fides and lack of jurisdiction---Validity---Officer, who had issued notice under S.62 of Income Tax Ordinance, 1979, was seized of assessment case and thus had jurisdiction to call upon the assessee to give reply to the queries made in the notice---Queries made in the notice not only involved question of law but also included number of other factual queries, which could only be answered after examination of the relevant record and explanation by the assessee before Taxation Officer---By passing the stage of submission of reply to the notice by the assessee seemed to be a device to avoid facing proceedings before Taxation Officer, who had jurisdiction for the purpose in terms of S.62 of Income Tax Ordinance, 1979---High Court did not find any valid justification to proceed readily with the presumption of mala fides against Taxation Officer, merely for the reason that he had issued notice calling upon the assessee for its explanation/reply and affording it an opportunity of hearing in the matter---Exercise of Constitutional jurisdiction at such stage would amount to usurpation of powers of the departmental authorities to adjudicate the assessment case of assessee at their level in accordance with law, in more comprehensive manner after investigation of all factual and legal aspects of the case---Rules of propriety also demanded that if question of jurisdiction was involved in a matter, such objection in the first instance, should be raised before the Authority whose jurisdiction had been challenged and thereafter, it needed be, further course available under the relevant provisions of law should be followed by the aggrieved party instead of approaching High Court directly in its Constitutional jurisdiction on the pretext that the concerned Authority had no jurisdiction to issue notice or that available remedy was not adequate, efficacious or effective---High Court declined to interfere in the notice issued by Taxation Officer---Petition was dismissed in circumstances.

Ujala Cotton Mills Ltd. v. Income Tax Officer and others 1985 PTD 510; Marshal Sons and Co. (India) Ltd. v. Income Tax Officer ,(1997) 88 Comp. Cases 528; Reghubar Dayal v. The Bank of Upper India Ltd. AIR 1919 PC 9; Abdul Majid and others v. Abdul Ghafoor Khan and other, PLD 1982 SC 146; Bahandur Ali and another v. Haji Amirullah Khan PLD 1955 Lah 140; Abdul. Ghani and another v. Subedar Shoedar Khan Company and others PLD 1968 SC 131; Messrs Usmania Glass Sheet Factory Limited Chitagong v. Sales Tax Officer, Chittagona PLD 1971 SC 205; Pakistan and the Assistant Collector, Central Excise and Land Customs, Kohat v. Qazi Ziauddin PLD 1962 SC 440; Messrs Julian Hoshang Dinshaw Trust and others v. Income Tax Officer, Circle XVIII South Zone, Karachi and others 1992 PTD 1; Chairman C.B.R. v. Pak-Saudi Fertilizer Limited 2000 PTD 3748; Commissioner of Income Tax, Central Zone "B" Karachi v. Farrokh Chemical Industries 1991 SCC 805; Commissioner of Income Tax v. Pakistan Industrial Engineering Agencies Ltd. 1991 SCC 878; Commissioner of Income Tax, East Pakistan, Dacca v. Wahiduzzaman 1965 SCC 212; Hafiz Muhammad Arif Dar v. I.T.O. 60 Tax 52; Nagina Dal Factory v. ITO 18 Tax 1; Roche Pakistan Limited v. DCIT and others 2001 PTD 3090; Sitara Chemicals Industries Limited v. DCIT 2003 PTD 1285; H.M. Abdullah v. Income Tax Officer, Circle-V, Karachi 1993 SCMR 1195; Farrukh Chemicals Industries's case 1983 PTD 67; Standard Chartered Bank's case PLD 2001 Kar. 344; Shagufta Begum's case PLD 1989 SC 360; Income Tax Officer and another's case 1993 SCMR 1108; Hyderabad Chamber of Commerce and Industry's case 1998 SCMR 206 and Tariq Mehmood and another's case 2001 MLD 1494 ref.

Abdul Hafeez Pirzada, Abdul Sattar Pirzada and Ms Danish Zuberi for Petitioner.

A.R. Akhtar for Respondents Nos. 2 to 4 along with Dr. Tariq Masood, DCIT/Departmental Representative.

Dates of hearing: 7th, 8th and. 15th December, 2005.

2006 P T D 816

[Karachi High Court]

Before Sabihuddin Ahmed and Ali Sain Dino Metlo, JJ

Messrs ALI GOHAR PHARMACEUTICAL (PVT.) LTD. through Chief Executive

Versus

FEDERATION OF PAKISTAN through Secretary, Ministry of Finance, Islamabad and 4 others

C.P. No. 477 of 2000, heard on 2nd February, 2006.

(a) Sales Tax---

---Levy of---Sales tax could not be levied and charged except by an Act of Parliament---Letter of Ministry could not be equated to an Act.

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

---Ss. 3-B & 34---Additional tax, demand of---Pharmaceutical products---Levy of 5% sales tax on import of raw materials, but finished products remaining exempt---Manufacturer was not authorized to increase price (MRP) of finished products, but could pass on burden of input tax levied on raw materials to consumers by charging 4% of MRP in shape of output tax---Deposit of principal amount received by manufacturer without delay---Manufacturer in' such circumstances was not liable for payment of additional tax under S.34 of Sales Tax Act, 1990.

D.G. Khan Cement Company Ltd. v. Federation of Pakistan 2004 SCMR 456 rel.

Kazi Anwar Kabul for Petitioner.

Raja Muhammad Iqbal along with Azam Nafees, Sr. Auditor for Respondent No.3.

Muhammad Aleem for Respondent No.4.

Mehmood Alam Rizvi Standing Counsel.

Date of hearing: 2nd February, 2006.

2006 P T D 909

[Karachi High Court]

Before Muhammad Mujeebullah Siddiqui and Sajjad Ali Shah, JJ

REHAN UMAR

Versus

COLLECTOR OF CUSTOMS, KARACHI and 2 others

Constitutional Petition No. 1483 of 2005, decided on 30th November, 2005.

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

----Ss. 25, 79-A, 80-A & 81---Customs Rules, 2001, Rr.108 to 122---Constitution of Pakistan (1973), Art.199---Constitutional petition---Determination of customs value of goods---Different methods of valuation provided in S.25 Customs Act, 1969 and the Customs Rules, 2001 are required to be applied in a sequential order and without visible exercise reflected on record, no resort can be made to S.25(5) Customs Act, 1969 and likewise without similar exercise under S.25(5) no resort can be made to S.25(6) of the Act---In the same manner without an exercise in writing on record under S.25(6) no resort can be made to S.25(7) and similarly to S.25(8) and S.25(9)---Such exercise is to be made in each case separately---On the basis of exercise in the case of earlier imports by other importers it cannot be applied to any subsequent import by another importer---Reasons recorded.

Provisions of section 25 Customs Act, 1969 are to be followed in the sequential manner. In addition to the concession on the part of Collector of Customs and Director of Customs Valuation & PCA it is specifically provided by the legislature in subsection (10) of section 25 that subsections (1), (5), (6), (7), (8) and (9) define how the customs value of imported goods is to be determined under the Customs Act. The methods of customs valuation are required to be applied in a sequential order except reversal of the order of subsections (7) and (8) at the importer's request, if so agreed by Collector of Customs. Whenever a question for determination of the customs value of goods for the purpose of Customs Act, arises, the methods provided in section 25 are to be applied in a sequential order.

The established principle of interpretation of the tax laws is that the plain language of the law is to be applied. A bare perusal of section 25 shows that it is specifically provided in subsection (1) of section 25 that the customs value of the imported goods, subject to the provisions of this section and rules shall be the transaction value, i.e. the price actually paid or payable for the goods when sold for export to Pakistan. The detailed guidelines in this behalf are given in sub-sections (1), (2), (3) and (4). The provisions contained in section 25(1) to (4) contain primary method of valuation and in the first instance the primary method of valuation is required to be adopted in each case of valuation of the imported consignment which is mandatory. The detailed guidelines in this behalf are contained in section 25 and the rules reproduced above. Thus, it is the mandatory requirement of law that before resorting to the method provided in subsection (5), the customs officials shall make an exercise in accordance with the provisions contained in subsections (1) to (4) of section 25 and if thereafter they find that the customs value of' the imported goods cannot be determined under the provisions of subsection (1) they shall resort to the method provided in subsection (5) and not otherwise. It shall be an exercise duly reflecting on the record so that the appellate forums may examine whether the mandatory requirement of law has been carried out or not. The provisions contained in sub-rule (3) of Rule 109 provides that, "when a final decision is made, the appropriate officer shall communicate to the importer in writing his decision and the grounds therefor." In addition to the specific provisions contained in sub-section (10) of section 25 to the effect that the methods of customs valuation are required to be applied in a sequential order we find that it is provided in subsection (6) that, if the customs value of the imported goods cannot be determined under the provisions of subsection (5) the method provided in subsection (7) shall be resorted to and similar provisions are contained in subsections (7), (8) and (9).

For the foregoing reasons it is held that different methods of valuation provided in section 25 of the Customs Act, 1969 and the Customs Rules, 2001 are required to be applied in a sequential order and without visible exercise reflected on record no resort can be made to subsection (5) and likewise without similar exercise under subsection (5) no resort can be made to subsection (6). In the same manner without an exercise in writing on record under subsection (6) no resort can be made to subsection (7) and similarly to subsections (8) & (9). This exercise is to be made in each case separately. On the basis of exercise in the case of earlier imports by other importers it cannot be applied to any subsequent import by another importer. The reason being that it is provided in Rule 109 that where appropriate officer has reason to doubt the truth or accuracy of the particulars or of documents produced in support of the declaration, such officer may ask the importer to provide further explanation, including documents or otherwise. Under subsection (1) of section 25, the customs value of the imported goods isto be determined subject to the provisions of section 25 and the rules. The rules envisage inquiry "in case of' each import giving right to each importer to provide explanation and produce documents or other evidence in support of his/her declaration. When the provisions contained under section 25(1) of the Customs Act and the rules are read with sections 79 and 80 of the said Act, they lead to same conclusion. Under section 79 the owner of any imported goods is required to file a goods declaration containing correct and complete particulars of the goods and its assessment i.e. valuation of the goods, its value and the duty, taxes and other charges payable thereon. Under section 80, on the receipt of goods declaration under section 79, an officer of the customs shall satisfy himself of' the correctness of the import including declaration and assessment. It indicates that initially the valuation of' goods and assessment is to be given by the importer himself, which, if found satisfactory, shall be accepted. However, if the appropriate officer is not satisfied with the said declaration, he shall make his own assessment in accordance with the law. This exercise cannot be done without examination of each consignment, declaration of goods examination of assessment given by importers and of the documents in this behalf.

Sohaib Khan v. Collector of Customs Appraisement 2005 PTD 1069 fol.

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

----Ss. 25, 79-A & 80-A---Customs Rules, 2001, Rr.108 to 122---Constitution of' Pakistan (1973), Art.199---Constitutional petition---Determination of customs value of imported goods---Enhancement in value---Requirements---Enhancement in customs value of imported goods without sufficient evidence was not permissible---No enhancement in the value can be made on the recommendation of some Working Committee, which is not supported with any evidence---Resort to S.25(5) Customs Act, 1969, can only be made when the value cannot be determined under S.25(1) of the Act and where no evidence is to show that the disputed transaction is false or is an outcome of a fraudulent activity, in possession of the Customs Authorities, the commercial documents presented by an importer cannot be rejected---Transactional value cannot be rejected because there are some contemporaneous imports at higher price---Customs Authorities have to show that invoice price was not genuine and did not state the real price paid by the importer---Provisions contained in S.25, customs Act, 1969 and rules framed thereunder are complete Code in. themselves, so far, the customs valuation of the imported goods is concerned, which are required to be applied and acted upon strictly in the manner and method contained therein---No room exists for any deviation from these rules on the part of Customs Authorities.

Collector of Customs Appraisement Karachi v. Messrs H.M. Abdullah 2004 PTD 2993 and Messrs Dawlance Private Limited v. Collector of Customs 2002 PTD (Trib.) 3077 ref.

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

----S. 25(7)---Standing Operative Procedure I of 2005 dated 13-9-2005---Constitution of Pakistan (1973), Art.199---Constitutional petition---Determination of customs value of imported goods---Deductive method of valuation under S.25(7), Customs Act, 1969---Working Committee---Scope of powers---Importer or his representative shall be associated with the Working Committee if deductive method of valuation under S.25(7) is to be resorted---No assessment can be made on the basis of a Committee constituted for the purpose of . determining the deductive valuation under S.25(7), Customs Act, 1969 without associating importer or his representative in each case.

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

----Ss. 79, 80, 81 & 25---Constitution of Pakistan (1973), Art.199---Constitutional petition--Declaration by importer and assessment of customs duty---If the declared value in the Bill of Entry/goods declaration is not acceptable -to the appropriate officer of the Customs department and the value can be determined under the provisions of S.25(1) and resort is to be made to the other methods provided in S.25, Customs Act, 1969, then the importer is entitled to the release of goods under S.81 Customs Act, 1969 by provisional determination of the liability---Release of goods in such manner is a matter of right of importer and not as a matter of concession within the discretion of appropriate officer of the Customs---Principles elucidated.

(e) Customs Act (1V of 1969)---

----S. 81---Customs Rules, 2001, Rr.108 to 122---Provisional assessment of duty---No rules relating to customs computerised system having yet been framed by the Central Board of Revenue, even if goods declaration is tiled on customs computerised system, the provisions contained in Customs Rules, 2001 and in S.81, Customs Act, 1969 would be equally applicable.

(f) Interpretation of statutes---

----Plain language of the law is to be applied.

Syed Ali Bin Adam Jafri for Petitioner.

Haider Iqbal Wahniwal for Respondent No.1.

Raja Muhammad Iqbal for Respondent No.2.

Date of hearing: 30th November, 2005.

2006 P T D 978

[Karachi High Court]

Before Muhammad Mujeebullah Siddiqui and Khilji Arif Hussain, JJ

Messrs FORTE PAKISTAN (PVT.) LTD., KARACHI

Versus

DIRECTOR-GENERAL INTELLIGENCE AND INVESTIGATION (CUSTOMS & EXCISE), KARACHI and another

Special Custom Appeal No. 214 of 2003, decided on 13th October, 2005.

Customs Act (IV of 1969)---

----S.32---Misdeclaration envisaged under S.32 of Customs Act, 1969---Issuance of show-cause notice to three sister concerns of importer---Validity---Service of notice under S.32 of Customs Act, 1969 was condition precedent for initiation of proceedings for misdeclaration by importer---In absence of such notice, Customs Officials could not acquire jurisdiction for initiating proceedings for misdeclaration, misstatement or evasion of tax---In absence of service of such notice on importer, entire proceedings .initiated by Adjudication Officer and further super-structure thereon would become without jurisdiction, void and inoperative---High Court accepted appeal and struck off entire proceedings.

Sohail Muzaffar for Appellant.

Raja Muhammad Iqbal for Respondent No. 2.

Date of hearing: 13th October, 2005.

2006 P T D 985

[Karachi High Court]

Before Muhammad Mujeebullah Siddiqui and Sajjad Ali Shah, JJ

COLLECTOR OF CUSTOMS (EXPORTS), KARACHI

Versus

Messrs TAHIR FABRICS, LAHORE and another

Special Customs Appeal No. 280 of 2002, decided on 8th December, 2005.

Customs Act (IV of 1969)---

----S.196---Appeal to High Court---Title of appeal showing Collector of Customs as appellant, while memo. of appeal was signed and verified by Assistant Collector---High Court, with all just exceptions allowed application seeking permission to get memo. of appeal signed by Collector---Validity---Appeal under S.196 of Customs Act, 1969 on behalf of Department could be filed by Collector only and none else--Memo. of appeal was required to be signed and verified by Collector---Where signature of Collector was not affixed on memo. of appeal within period of limitation provided under law, then its subsequent signing would not cure illegality and appeal would become barred by time---Appeal signed and verified by Assistant Collector would not be competent in law---Present appeal was filed on 16-9-2002, thus, subsequent signing of memo. of appeal by Collector on 17-10-2005 would not cure illegality as appeal on such date had become barred by time---High Court dismissed appeal as non-maintainable.

Raja Muhammad Iqbal for Appellant.

Nemo for Respondents.

Date of hearing: 8th December, 2005.

2006 P T D 1000

[Karachi High Court]

Before Muhammad Mujeebullah Siddiqui and Sajjad Ali Shah, JJ

IQBAL HAJI ALI MUHAMMAD

Versus

INSPECTING ADDITIONAL COMMISSIONER OF INCOME/WEALTH TAX, KARACHI and others

Wealth Tax Appeals Nos. 18 to 21 of 2000, decided on 29th September, 2005.

Wealth Tax Act (XV of 1963)---

----Clause 7 (ii), Second Sched.---Exemption on asset made from foreign exchange---First conversion---Principles---Assessee purchased shares after exchanging his Foreign Exchange Bearer Certificates into Pakistani Rupees---Income Tax authorities refused to give exemption under clause 7(ii) of Second Schedule to Wealth Tax Act, 1963, on the ground that the purchase was not from first conversion of foreign exchange---Validity---Exemption was granted under clause 7 (ii) of Second Schedule to Wealth Tax Act, 1963, to the first conversion of asset only---Pakistani currency was not foreign exchange and foreign exchange was not Pakistani currency---Both were two different and distinct properties and consequently distinct assets---If foreign exchange belonged to an assessee, it was an asset and when the foreign exchange was encashed in Pakistani Rupees or any other property was acquired with foreign exchange, in either case as new asset other than foreign exchange was acquired, first conversion had taken place---If thereafter any other property was acquired either from Pak currency or out of any other asset created out of foreign exchange then the second conversion took place and the second conversion did not enjoy exemption from payment of wealth tax---Income Tax Appellate Tribunal had rightly held that the shares purchased by the assessee through Pak currency, which was created out of the Certificates was a second conversion and therefore, an asset created on second conversion was not entitled to exemption under clause 7 (ii) of Second Schedule to Wealth Tax Act, 1963---Answers to the questions were in affirmative.

(1999) 79 Tax 153 (Trib.) and 1997 76 Tax 76 (Trib.) ref.

Rehan Hassan Naqvi and Lubna Pervez for Appellants.

Nasrullah Awan for Respondents.

Date of hearing: 29th September, 2005.

2006 P T D 1012

[Karachi High Court]

Before Muhammad Mujeebullah Siddiqui and Khilji Arif Hussain, JJ

Messrs DEWAN SONS and another

Versus

FEDERATION OF PAKISTAN through Secretary, Ministry of Finance, Islamabad and 3 others

Constitutional Petition No. D-399 of 2002, decided on 3rd March, 2006.

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

----S.19---Exemption from customs duty---Principles---Exemption pre-supposes the chargeability of tax and if the exemption is unconditional such charge of tax is allowed to escape for all times to come---If the exemption is conditional then the exemption is to be enjoyed in terms of such conditions---Exemption from payment of customs duty is allowed under S.19 of Customs Act, 1969, subject to such conditions, limitations or restrictions. as Federal Government thinks fit to impose.

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

------Ss. 18 & 19---Notification S.R.D. 320(I)/75, dated 14-3-1975---

Constitution of Pakistan (1973), Art.199---Constitutional petition---Customs duty, liability to pay---Conditional exemption---One of the petitioners purchased the ship in question from Pakistan National Shipping Corporation and after plying it on commercial voyages for few years, sold it to other petitioner who brought it for breaking---Ship was exempted from customs duty under Notification S.R.O. 320(I)/75, dated 14-3-1975, till the time it was plying but customs duty was to be payable if the ship would be broken---Petitioners claimed that the ship was exempted from duty and if at all duty was to he recovered_ it was for the Shipping Corporation to pay---Validity---So long the ship was owned by the Corporation, the exemption was available and, thereafter, as long as it was plying for commercial voyages, the exemption continued to prevail but after sale of the ship for the purpose of breaking thereof, followed by seeking of permission for breaking, such event brought the exemption to end---Payment of customs duty was no more to be allowed to be escaped, thereby making the petitioner liable to pay the customs duty in terms of provisions contained in S.18 of Customs Act, 1969, read with S.18 thereof and Notification S.R.O. 320(I)/75, dated 14-3-1975, issued thereunder---Customs authorities had rightly demanded the duty from the petitioner, which was valid and in accordance with law to which no exception could be taken---Petition was dismissed in circumstances.

Akhtar Ali Ahmad for Petitioners.

Sajjad Ali Shah, D.A.-G. for Respondent No.1.

Date of hearing: 21st October, 2005.

2006 P T D 1027

[Karachi High Court]

Before Anwar Zaheer Jamali and Muhammad Athar Saeed, JJ

Messrs PAKISTAN PAPER PRODUCTS LTD.

Versus

COMMISSIONER OF INCOME TAX

I.T.C. No. 101 of 1994, decided on 16th February, 2006.

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

----S.136 (2) & R.7 (b)(I) of Third Sched.---Registration Act (XVI of 1908), Ss. 17 & 49---Reference to High Court---Maintainability---Factual controversy---Slump sale---Proof---Unregistered agreement to sell---Assessee claimed exemption on the basis of slump sale---Income - tax authorities declined to give any exemption on the ground that the assessee relied upon unregistered agreement to sell---Validity---Two documents purportedly .executed between assessee and vendors, at the best, could have been taken into consideration together and no conclusive transaction of slump sale could be accepted on the basis of such agreements, to accommodate the assessee to evade payment of income tax on that premises---By virtue of S.17 read with S.49 of Registration Act, 1908, no right, title or interest could be conveyed in favour of vendee without execution of registered deed in respect of immovable property forming part of such transaction---On the strength of alleged agreement, assessee had acquired no title in the assets---High Court agreed with the conclusion recorded by Income Tax Appellate Tribunal---Findings recorded by Income Tax Appellate Tribunal that there was no slump sale in favour of assessee was a question of fact, which was not referable for opinion of High Court under S.136 (2) of Income Tax Ordinance, 1979---Reference was dismissed in circumstances.

Messrs Hotel Metropole Ltd. v. The Commissioner of Income-tax (Central), Karachi 1973 PTD 371; Alapati Venkataramiah v. Commissioner of Income Tax, Hyrabad, 1965 Vol. 57 ITR 185 and Commission of Income Tax (East) v. Messrs Crescent Pak Soap and oil Mills Ltd. 1985 PTD 3 ref.

(b) Interpretation of statutes---

----Fiscal matters---Function of Court---Scope---Function of Court is not to render operation of a statute redundant or interpret it in a manner, which may lead to evasion of tax.

Dr. Muhammad Farogh Nasim for Applicant.

Javed Farooqui for Respondent.

Date of hearing: 16th February, 2006.

2006 P T D 1036

[Karachi High Court]

Before Muhammad Mujeebullah Siddiqui and Sajjad Ali Shah, JJ

MUHAMMAD YOUNUS SHAIKH

Versus

FEDERATION OF PAKISTAN through Secretary Revenue Division, Central Board of Revenue, Islamabad and 3 others

Constitutional Petition No. D-134 of 2006, decided on 15th February, 2006.

(a) Export Processing Zones Authority Ordinance (IV of 1980)---

---S.11 (3)---Export from Zone to Tariff area---Control---No power has been conferred upon 'Export Processing Zones Authority, under S.11 (3) of Export Processing Zones Authority Ordinance, 1980, to control export from the Zone to Tariff area or to other countries---Industry set up in Export Processing Zone, under S.11 (3) of Export Processing Zones Authority Ordinance, 1981, cannot take out any material ,or manufactured goods from the Zone to Tariff area except to the extent and in the manner to be specified by the authority in each case---Permission in such behalf is to be accorded by the authority with the prior approval of Federal Government.

(b) Export Processing Zones Authority Ordinance (IV of 1980)---

----S. 27---Power to make rules---Federal Government and Export Processing Zones Authority---Jurisdiction---Scope---Power to make rules under S.27 of Export Processing Zones Authority Ordinance, 1980, has been conferred on Federal Government and not on the Authority---Export Processing Zones Authority has been conferred the power to make regulations with prior approval of Federal Government not inconsistent with the provisions of Export Processing Zones Authority Ordinance, 1980, or the rules.

(c) Interpretation of statutes-

----Provisions of statute, reading of---Principles---No provision is to be read in isolation and entire scheme is to be kept in view while interpreting a particular provision---Expressions and provisions take their colour and complexion from the context in which they are used.

(d) Interpretation of statutes---

----Subordinate legislation---Effect---Rules are in the category of subordinate legislation and such legislation can never have overriding effect on an Act of Parliament---Even if one subordinate legislation is repugnant to other subordinate legislation, it does not make either of them to be invalid---In order to make a subordinate legislation to be invalid it has to be shown that either it is beyond the jurisdiction of the authority exercising power of delegated legislation or it was violative of the provisions of the Act of Parliament or is repugnant to any provision of the Constitution.

(e) Customs Export Processing Zone Rules, 1981---

----R.6--- Goods produced in Zone---Home consumption---Procedure---Goods produced by investors in a Zone to Tariff area for home consumption may be allowed subject to import restrictions---Such goods may be taken out of Zone after fulfilling all the requirements prescribed under Customs Act, 1969 and rules made thereunder for direct import from abroad into the Tariff area.

(f) Interpretation of statutes---

----Deeming provision---Scope---Legislature is empowered to enact deeming provisions, meaning thereby to give a particular meaning and connotation by fiction of law, which in fact does not exist---Such deeming provisions by fiction of law are to be treated at par with actual acts to all intents and purposes and are to be taken to their logical conclusions---While taking deeming provisions to their logical conclusion, the vision is not to be marred or blurred.

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

----Ss.16 & 219---Imports and Exports (Control) Act (XXXIX of 1950), S.3 (3)---Export Processing Zones Authority Ordinance (IV of 1980), S.26---Notifications S.R.O. No.46.1 (I)/2004, dated 12-6-2004 & S.R.O. No.634(1)/2004, dated 22-7-2004---Constitution of Pakistan (1973), Art.199---Constitutional petition---Vires of Notifications S.R.O. No.461 (I)/2004, dated 12-6-2004 & SRO No.634(1)/2004, dated 22-7-2004--Scope-Federal Government being empowered under S.26 of Export Processing Zones-Authority Ordinance, 1980, to frame rules it had framed the Export Processing Zones Authority Rules, 1981---Central Board of Revenue had issued notification S.R.O. 249(1)/81, dated 25-3-1981, whereunder R.6 of Customs Export Processing Zone Rules, '1981, had rightly dealt with the levy of taxes and duties only if and when export or import under Export Processing Zones Authority Ordinance, 1980, took place---Notification S.R.O. No. 634(I)/2004, dated 22-7-2004, issued by Federal Government in exercise of powers conferred by S.3(1) of Imports and Exports (Control) Act, 1950, in the form of Import Policy Order, 2004, was a valid piece .of delegated legislation---By virtue of provisions contained in S.16 of Customs Act, 1969, read with S.3 (3) of Imports and Exports (Control) Act, 1950, the Central Board of Revenue was empowered to frame rules in exercise of powers under S.219 of Customs Act, 1969, therefore, Notification S.R.O. No.461(1)/2004, dated 12-6-2004, amending various rules in Customs Rules, 2001, including addition of sub-rule (4) in Rule 228 was in accordance with the law and was not open to any exception---Petition was dismissed in limine.

Writ Petition No. 1644 of 2004 distinguished.

Messrs Sikandar & Brothers v. Government of Pakistan PLD 1986 Kar. 373 ref.

Sultan Ahmed Shaik for Petitioner.

Nemo for Respondents.

Date of hearing: 15th February, 2006.

2006 P T D 1061

[Karachi High Court]

Before Muhammad Mujeebullah Siddiqui and Khilji Arif Hussain, JJ

COMMISSIONER OF INCOME TAX, ZONE-B, KARACHI

Versus

Messrs OLYMPIA POULTRY FARMS

I.T.R. No. 20 of 1996, decided on 3rd March, 2006.

Income Tax Ordinance (XXX1 of 1979)---

----S.55(1) & (2)---Income exempted from tax---Filing of nil return---Assessee was engaged in the business of poultry farming and filed income tax return showing nil income---Assessing officer issued notices under S.61 9of Income Tax Ordinance, 1979, and charged tax on interest income---Appeal against the order of assessing officer was dismissed---Appeal before Income Tax Appellate Tribunal was disposed of in the terms that a person deriving exempt income was not required to file the return of total income and if such return was filed it would not be a valid return and should not give jurisdiction to assessing officer to initiate assessment proceedings on the basis thereof---Validity---Income Tax Appellate Tribunal, while deciding the provisions contained in S.55 of Income Tax Ordinance, 1979, had committed an error in observing that under S.55 of Income Tax Ordinance, 1979, a person whose income exceeded the maximum amount which was not chargeable to tax was required to file his return in accordance with the provisions of S.55(2) of Income Tax Ordinance, 1979---Return of total income was. to be filed under S.55 (1) and not under S.55 (2) of Income Tax Ordinance, 1979---Exempt income merely enjoyed immunity from payment of tax and not the chargeability of tax---No provision in Income Tax Ordinance, 1979, existed which could make the payment of tax a condition precedent for filing of the return of total income---Only condition was that a person whose total income had exceeded the maximum amount which was not chargeable to tax under Income Tax Ordinance, 1979, was required to file the return---Exemption pre-supposed the liability and merely granted immunity from payment of tax---Income Tax Appellate Tribunal was not correct in holding that a person deriving exempt income was not required to file the return of total income and if such return was filed, it would not be a valid return and should not give jurisdiction to assessing officer to initiate assessment proceedings on the basis thereof---Question referred to High Court was answered in negative---Reference was dismissed accordingly.

CIT v. Ranchodas Karsondas (1959) 36 ITR 569 and Commissioner of Agricultural Income Tax v. Sultan Ali (1956) 30 ITR 439 ref.

Al-Samrez Enterprises v. The Federation of Pakistan 1986 SCMR 1917 fol.

Jawaid Farooqi for Applicant.

Nemo for Respondent.

Date of hearing: 14th September, 2005.

2006 P T D 1088

[Karachi High Court]

Before Mujeebullah Siddiqui and Sajjad Ali Shah, JJ

Messrs KASBATI BUILDERS through Partner

Versus

INCOME TAX APPELLATE TRIBUNAL and 2 others

C. P. No. D-438 of 2005, heard on 13th December, 2005.

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

----S. 35---Income Tax Ordinance (XXXI of 1979), S.156(1)---Rectification of mistake, application for---Omission an the part of legislature to provide to department under Wealth Tax Act, 1963 'right to file rectification application was deliberate---Principles.

Sumbleen Anwar and others v. Deputy Commissioner of Income Tax 2003 PTD 1276 rel.

(b) Jurisdiction---

----Court/Tribunal/Authority, if lacking jurisdiction at all to do an act, then no amount of consent or acquiescence in the proceedings could invest same with jurisdiction---Court/Tribunal/Authority, if having jurisdiction to pass an order, then mere procedural lapse or irregularity would not vitiate its order---Principles.

Where a Court suffers from want of jurisdiction, then no amount of consent or acquiescence in the proceedings can invest such Court with the jurisdiction.

If a Court/Tribunal/Forum has no jurisdiction at all to do an act, a consent given by any party shall not confer such jurisdiction for the reason that a Court/Tribunal/Authority acquires jurisdiction from the statute law and not by consent of party. The principle that is merely a procedural lapse or irregularity, it shall not vitiate the order passed by it.

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

----S.35---Constitution of Pakistan (1973), Art. 199---Constitutional petition---Rectification of mistake by Tribunal with consent of assessee on application of department---Validity---Section 35 of Wealth Tax Act, 1963 was a composite provision containing substantive and procedural law---Substantive law conferred jurisdiction on Tribunal to rectify mistake apparent on record, whereas procedural law provided for rectification either suo motu or upon application by assessee, whereas department has been excluded from exercising such right---Tribunal had not committed illegality in rectifying mistake in its own discretion and in exercise of suo motu jurisdiction by taking application of department as information without doing any violence to substantive provision of law conferring jurisdiction for rectification---Impugned rectification would be a case of illegal exercise of jurisdiction by Tribunal, which was always curable and subject to waiver---After objecting to jurisdiction of Tribunal to entertain application of department, assessee by recording his consent had given up his right to object to such irregularity touching upon its jurisdiction---Consent of assessee amounted to curing irregular exercise of power by Tribunal-Principles-High Court dismissed constitutional petition in circumstances.

Messrs Harjina and Co. (Pak.) Ltd., v. Commissioner Sales Tax Central 1971 SCMR 128; Collector of Customs (Appraisement) v. Abdul Majeed Khan and others 1977 SCMR 371; Mehran Associates Limited v. Commissioner of Income Tax Karachi 1993 SCMR 274 = 1993 PTD 69; Moulvi Azizur Rehman v. Ahmad Khan and others 2004 SCMR 1622; Muhammad Hussain and others v. Muhammad Shafi and others 2004 SCMR 1947) and P. Dasa Muni Reddy v. P. Appa Rao AIR 1974 SC 2089 ref.

Imtiaz Ali v. Ghulam Ali PLD 1963 SC 382 rel.

Rehan Hassan Naqvi and Miss Lubin Pervez for Petitioners.

Aqeel Ahmed Abbasi for Respondents.

Date of hearing: 13th December, 2005.

2006 P T D 1119

[Karachi High Court]

Before Gulzar Ahmed, J

Messrs PAKISTAN DRY BATTERY MANUFACTURERS ASSOCIATION through Vice-Chairman and another

Versus

FEDERATION OF PAKISTAN through Secretary, Revenue Division, Islamabad and 9 others

S. No. 551 of 2005, decided on 20th January, 2006.

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

----S. 25---Determination of value of imported goods on basis of valuation advice---Principles.

There is a judicial consensus that it is the function of Customs Authorities to determine value of imported consignment in terms of section 25 of Customs Act, 1969 and the Rules made thereunder. There is no provision in Customs Act, 1969 or its Rules, where Customs Authorities may make or have a fixed predetermined value of imported consignment in the form of valuation advice. issued by an Officer of Customs Department. It matters not whether the valuation advice is made with inquiry or with tise consent of the person affected by the valuation. Apparently, the valuation advice goes contrary to the provisions of section 25(1) of Customs Act, 1969, which provides that the transaction value to be Customs value of imported goods subject to the provisions of this Section and the Rules. If the transaction value as declared by the importer cannot be determined, the provisions of this section and the Rules provide an in-built mechanism for the Customs Authorities to determine the value of imported goods. Fixed valuation of imported goods by way of valuation advice obtained by any means cannot be made the basis for determining the value of imported goods each of which has to be dealt with and processed in accordance with section 25 of Customs Act, 1969 and the Rules and thereunder.

In the present case, the valuation advice between parties may not be taken as conclusive evidence of valuation, and final assessment will he made of imported goods by Customs Authorities in accordance with the provisions of section 25 of Customs Act, 1969 and the Rules after providing clue opportunity to the importer to place material with regard to the value declared by it. It does not appear to be necessary for Customs Authorities to review or revise valuation advice, because it will be an exercise in futility as the reviewed or revised valuation advice again will not be the only basis for arriving at the valuation of imported goods as it valuation still, will have to be made under section 25 of Customs Act, 1969 and the Rules. This is the mandate of law, which has to be fulfilled.

Shoaib Khan v. Collector of Customs Appraisement, Karachi, 2005 PTD 1069; Moon Corporation v. Central Board of Revenue 2004 PTD 2615; Collector of Customs (Exports) v.. Messrs Chemitex Industries (Pvt.) Ltd. 2002 MLD 836; A1-Mughni Trading Company v. Deputy Collector of Customs Lahore, 2005 PTD 2201; Messrs Sohrab Global Marketing (Pvt.) Ltd. v. Deputy Collector of Customs Lahore, 2005 PTD 67; Messrs Yousuf Enterprises v. Collector, 2005 PTD 21; 2005 PTD (Trib.) 617; Messrs Steel Syndicate v. Deputy Collector of Customs, 2005 PTD 1600; Kashif Nasim v. Collector of Customs (Appraisement) Karachi 2005 PTD 1971 and Messrs Kings Pen Company v. Collector of Customs (Appraisement) Karachi 2005 PTD 118 ref.

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

----S. 25-A---Importer's rights to buy goods---Offer of importer to buy goods neither higher than declared value nor accompanied by pay-order equal to 25% of amount of such value, dues and other taxes leviable thereon---Importer was not entitled to goods as there was no offer on his behalf in terms of S. 25-A(1)(i) of Customs Act, 1969.

Abid S. Zuberi for Plaintiff.

Raja M. Iqbal for Defendants Nos. 2, 3 and 5.

Jawed Farooqui Defendant No. 4.

Shall Siddiqui for Defendants Nos. 6 and 7.

Dates of hearing: 17th, 18th, 19th and 20th January, 2006.

2006 P T D 1137

[Karachi High Court]

Before Anwar Zaheer Jamali and Mrs. Yasmeen Abbasi, JJ

Messrs GENERAL TYRE AND RUBBER CO. PAKISTAN LTD. through Managing Director, Karachi

Versus

DEPUTY COLLECTOR COLLECTORATE OF CUSTOMS, CENTRAL EXCISE AND SALES TAX, KARACHI

Special Sales Tax Appeal No. 38 of 2004, decided on 27th January, 2006.

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

----Ss. 2(33) & 3---Term "supply" as defined in S.2(33) of Sales Tax Act, 1990---Essential ingredient---Transaction must be "in furtherance of business", otherwise same would not be called as "supply" and could not form part of taxable supply to create a charge under S.3 of Sales Tax Act, 1990.

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

----Ss. 2(16)(33), 3 & 7---Sales Tax General Order No.1 of 1998, dated 17-6-1998---Input tax claim---Process of mixing raw material with other material carried out by assessee on machinery of vendor on fixed processing charges---Assessee seeking. input tax adjustment for payment made to vendor as processing charges---Validity---Raw material was supplied by assessee to vendor and after its process, same was returned back to assessee---Element of inclusion of sales tax was, thus, not appearing during whole transaction as processing activity was carried out by vendor on fixed processing charges with no factors of sale, lease or other disposition of goods as embodied in S.2(33) of' Sales Tax Act, 1990 or explained in Sales Tax General Order No. 1/98---None of the clauses of Sales Tax General Order No.1/98 authorised assessee to claim input tax adjustment just on processing activity carried out by him on machines and through labourers of vendor---Holding of a tax invoice was a condition precedent by virtue of S.7 of Sales Tax Act, 1990 for input tax claim on taxable supplies---Non-placing on record such tax invoice by assessee was sufficient proof of the fact that return of processed goods was not in terms of' supply by vendor to vendee, because no tax-paid material of vendor himself was used in processing activity, creating a charge of sales tax on processed goods---In absence of sales tax invoice, when there was no transfer of sales tax charges from vendor to assessee, input tax claimed by assessee was not warranted under law.

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

----S.7---Input tax claim---Tax invoice, holding of---Condition precedent for input tax claim on taxable supplies.

Aminullah Siddiqui for Appellant.

Raja Muhammad Iqbal for Respondents.

2005 P T D 1151

[Karachi High Court]

Before Muhammad Mujeebullah Siddiqui, and Khilji Arif Hussain, JJ

Messrs SIDDIQSONS WEAVING MILLS (PVT.) LTD through Director

Versus

FEDERATION OF PAKISTAN through Secretary Law, Justice and Human Rights, Islamabad and 3 others

Constitutional Petition No.D-165 of 2004, decided on 23rd August, 2005.

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

----S. 32---General Clauses Act (I of 1897), S.24-A---Constitution of Pakistan (1973), Art.199--Constitutional petition---Representation to the President---Order passed by the President without issuance of notice to the petitioner, without supplying the copy of representation and without affording the opportunity of placing his point of view on record vis-a-vis the representation made by the agency, was violative of the principles of natural justice---Acceptance of the representation made by the agency on consideration of one sided point of view had caused gross miscarriage of justice---Consequence of condemning the petitioner unheard in the case, was very much obvious and glaring on the face of it---Impugned order passed by the President was set aside by the High Court under Art.199 of the Constitution and case was remanded for fresh proceedings---Reasons enumerated.

Federation of Pakistan v. Muhammad Tariq Pirzada 1999 SCMR 2189 and Federation of Pakistan v. Muhammad Tariq Pirzada,. 1999 SCMR 2744 fol.

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

----S.32---General Clauses Act (I of 1897), S.24-A---Constitution of Pakistan (1973), Art.199---Representation to the President---Procedure to be adopted detailed by the High Court.

While processing and considering the representation under section 32 of the Establishment of Office of Federal Tax Ombudsman Ordinance, 2000 the following procedure shall be adopted:---

(a) A notice shall be issued to the opposite party intimating that a representation has been received assailing the recommendations made by the Federal Tax Ombudsman.

(b) A copy of the representation shall be supplied to the opposite party.

(c) A reasonable opportunity of personal hearing or submission of reply/comments/written arguments shall be afforded to the opposite party.

(d) If the opportunity is provided to the opposite party for placing its point of view through submissions/arguments, a reasonable time shall be allowed for furnishing the written submissions in reply.

(e) All the contentions raised in the representation and the written reply/submissions shall be considered objectively and shall be disposed of by a speaking order as required under section 24-A of the General Clauses Act.

(f) If a time-barred representation is entertained the reason for entertaining such representation and condonation of delay shall be recorded in writing showing the law empowering to condone the delay. Such order shall be incorporated in the final order.

(g) A copy of the full text of the order accepting or rejecting representation shall be supplied simultaneously to both the parties.

Muhammad Afzal Awan for Petitioner.

Sajjad Ali Shah, D.A.G. for Respondent No.1.

Haider Iqbal Wahniwal for Respondents Nos. 2, 3 and 4.

Date of hearing: 23rd August, 2005.

2006 P T D 1171

[Karachi High Court]

Before Sabihuddin Ahmed, C.J. and Ali Sain Dino Metlo, J

ABDUL SATTAR

Versus

FEDERATION OF PAKISTAN through Secretary, Revenue Division/Chairman, Central Board of Revenue, Islamabad and 2 others

C.P. No. D-1581 of 2005, decided on 17th March, 2006.

(a) Constitution of Pakistan (1973)---

--Art. 77---Levy 'of tax---Principles---Any agreement for payment of a tax not recoverable under tax statute is repugnant to Art.77 of the Constitution and thus void.

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

---Ss.32 (2) & 81 (2)---Constitution of Pakistan (1973), Art.199---Constitutional petition---Provisional assessment---Recovery of short levied duty---Limitation---Goods imported were provisionally assessed on 27-10-1996, and the assessment was secured by bank guarantee executed by importer---Authorities issued show-cause notice on 14-2-2005 for recovery of short-levied duty---Plea raised by the importer was that demand made by the authorities was time-barred and illegal---Validity---After expiry of such a long period of nine years, neither final assessment could be made under S.81 of Customs Act, 1969, nor any action for recovery of so-called short-levied duty and taxes could be initiated under S.32 (2) of Customs Act, 1969---Notice of recovery issued by Authorities was time-barred and was without lawful authority---High Court restrained the authorities from acting upon the notices---Petition was allowed in circumstances.

Ms. Navin Merchant for Petitioner.

Mehmood Alam Rizvi, Standing Counsel for Respondent No. 1.

Raja Muhammad Iqbal for Respondents Nos.2 and 3.

Date of hearing: 7th March, 2006.

2006 P T D 1245

[Karachi High Court]

Before Muhammad Mujeebullah Siddiqui and Sajjad Ali Shah, JJ

Messrs ROSE COLOR LABORATORIES AND NAYAB NO.(1) (PVT.) LTD. through Director

Versus

GOVERNMENT OF PAKISTAN through Customs Excise and Sales Tax Appellate Tribunal, Karachi and another

Spl. Customs Appeal No. 5 of 2001, decided on 7th March, 2006.

Customs Act (IV of 1969)---

----Ss.19 & 196---Notification S.R.O. 1284(I)/1990, dated 13-12-1990---Exemption in import duty---Conditions imposed by notification---Importer sought exemption on import of film processor and printer processor under the provisions of Notification S.R.O. 1284(I)/1990, dated 13-12-1990---Authorities denied benefit of the Notification on the ground that importer did not obtain industrial licence from CCI&E and machinery was classifiable under PCT Heading---Validity---For the purposes of availing exemption, machinery should be one which was not locally manufactured and operated by power of any description as was. for use in any industrial process---Apparatus and equipment imported were operated by power for installation in a Colour Photo Processing Laboratory which was an approved industrial unit---Such apparatus and equipment were entitled to exemption in accordance with Notification S.R.O. 1284(I)/1990, dated 13-12-1990---Authorities failed to point out any provision in the Notification which required an importer to obtain industrial licence from CCI&E and/or that the machinery classifiable under any PCT Heading would not be entitled to exemption---Appeal was allowed in circumstances.

Zamiruddin Ahmed for Appellant.

Raja Muhammad Iqbal for Respondents.

Date of hearing: 7th March, 2006.

2006 P T D 1276

[Karachi High Court]

Before Muhammad Mujeebullah Siddiqui and Sajjad Ali Shah, JJ

Messrs DEWAN FAROOQUE MOTORS LTD., KARACHI

Versus

CUSTOMS, EXCISE AND SALES TAX APPELLATE TRIBUNAL, KARACHI and 2 others

Custom Appeals Nos.83 to 89 of 2003, decided on 23rd February, 2006.

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

----Ss.79, 80 & 81---Provisional value of goods---Determination---Criteria---No criteria is provided in Customs Act, 1969, to determine additional or ad hoc amount which is to be added in declared value in order to reach figure of provisional value for assessment of duties and taxes---Legislature has left it to the discretion of concerned officer to add an amount which, in his opinion, is sufficient to meet the likely differential between final determination of duty and declared value---In case ad hoc enhancement over the declared value is taken as provisional. assessment then it has certain implication which negates the scheme of law as provided in Ss.79, 80 and 81 of Customs Act, 1969.

Collector of Customs (Appraisement), Karachi v. Auto Mobile Corporation of Pakistan, Karachi 2005 PTD 2116 ref.

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

----S. 81---Provisional assessment---Failure to finalize assessment within statutory period---Effect---Imported Mini buses were assessed provisionally under S.81 of Customs Act, 1969---Importer deposited duty and taxes assessed on the declared value and deposited pay orders to secure 5% loading---Valuation department failed to determine fair/ normal value of consignment as such the duties finally payable could not be determined without making any final order and authorities encashed the pay order deposited as security---Plea raised by importer was that as no final assessment could be made within the prescribed period, therefore, provisional assessment on the basis of declared value had become final and he was entitled to refund of amount deposited to secure 5% loading---Validity---As the Customs authorities failed to finalize assessment of goods within the stipulated period as provided in S.81 (2) of Customs Act, 1969, the provisional assessment made by Customs authorities on the basis of declared value had attained finality---Ad hoc amount to meet the differential in case of final assessment thus became refundable to the importer---Department was liable to refund the amount representing 5% loading over and above the declared value to importer---Appeal was allowed accordingly.

Collector of Customs (Appraisement), Karachi v. Auto Mobile Corporation of Pakistan, Karachi 2005 PTD 2116; Messrs Wall Master v. Collector of Customs 2005 PTD 2573 and Rehan Umar v. Collector of Customs and others C.P. No. D-1483 of 2005 rel.

Akhtar Hussain for Appellant.

Haider Iqbal Wahniwal for Respondents.

Date of hearing: 23rd February, 2006.

2006 P T D 1290

[Karachi High Court]

Before Anwar Zaheer Jamali and S. Ali Aslam Jaffery, JJ

Messrs MARKATIA CORPORATION

Versus

PAKISTAN through Secretary Revenue and others

C.P.D. No.1355 of 2004, decided on 10th January, 2005.

Customs Act (IV of 1969)---

----S. 25---Constitution of Pakistan (1973), Art. 199---Constitutional petition---Release of imported consignment---Petitioner had also availed remedy of appeal before the Appellate Tribunal in respect of same grievance as agitated in the present petition, which was pending there---Petitioner had contended that he was suffering day to day loss due to non-release of consignment and stated that without prejudice to his legal rights he was willing to make payment of all duties and charges in respect of said consignment on the basis of his declared value---Submission made by petitioner being reasonable, equitable and fair, constitutional petition was disposed of in the terms that customs duty, sales talc, etc., leviable on consignment in question, on basis of his own declared value, could be directly paid to Customs Authorities, accordingly---Appellate Tribunal was directed to decide pending appeal within specified period.

Syed Mohsin Imam for Petitioner.

Ahmad Khan Bugti for Respondent No.2.

Muhammad Sarfaraz Sulehry for Respondent No.5

Nemo for the Remaining Respondents.

Date of hearing: 10th December, 2004.

2006 P T D 1319

[Karachi High Court]

Before Muhammad Mujeebullah Siddiqui and Sajjad Ali Shah, JJ

Messrs GRINDLAYS BANK P.L.C., KARACHI

Versus

COMMISSIONER OF INCOME TAX, CENTRAL ZONE `C', KARACHI

I.T.C.. Nos. 64 to 67 and 69 to 70 of 1993, decided on 14th March, 2006.

Income Tax Ordinance (XXXI of 1979)---

----S. 23(1)(xviii)---Deduction of amount embezzled by employee of assessee-Bank, claim for---Disallowance of such claim by Assessing Officer and Tribunal for its being inadmissible---Validity---Amount embezzled in the course of business would be admissible deduction, though there was no specific provision in such regard, but such claim could not be laid unless and until efforts for recovery thereof made Through process of law and those made for compelling its restitution, had failed---NO material was placed before Assessing Officer regarding report from F.I.A. that such employee was not traceable; and that suit filed against employee, if decreed, amount embezzled would not be recovered---Such last condition had not been met---High Court answered reference in affirmative.

Associated Banking Corporation of India Ltd. v. CIT (1965) 56 ITR 1 and Badridas Daga v. Commissioner of Income Tax (1958) 34 ITR 10 ref.

Iqbal Salman Pasha for Applicant.

Aqeel Ahmed Abbasi for Respondent.

Date of hearing: 14th March, 2006.

2006 P T D 1343

[Karachi High Court]

Before Muhammad Mujeebullah Siddiqui and Sajjad Ali Shah, JJ

Messrs PAK SAUDI FERTILIZER LTD., KARACHI

Versus

COMMISSIONER OF INCOME TAX, KARACHI

I.T.R. No: 3 of 1994, decided on 14th March, 2006.

Income Tax Ordinance (XXXI of 1979)-

----S. 31(3)---Investment in purchase of National Funds Bonds out of borrowed capital---Claim under head "interest"---Disallowance of such claim for reason that income from such Bonds was exempt from tax, thus, expenditure on earning such income was not admissible---Validity---Assessing Officer had not examined the cash flow position on the day when National Funds Bonds were purchased in order to ascertain the liquidity position of assessee on such date---Incumbent upon Tribunal, before proportionately disallowing claim under head "interest", to examine factual position, if any investment was actually made for purchase of National Funds Bonds with borrowed capital---Plea of assessee could not be brushed aside without any material in possession of Assessing Officer leading to the contrary conclusion---Assessing Officer was not justified in making proportionate disallowance out of the claim for `interest'.

Iqbal Salman Pasha for Applicant.

Nasarullah Awan for Respondent.

Date of hearing: 14th March, 2006.

2006 P T D 1362

[Karachi High Court]

Before Muhammad Mujeebullah Siddiqui and Sajjad Ali Shah, JJ

Messrs TRADING CORPORATION OF PAKISTAN (PVT.) LTD. through General Manager (Finance and Accounts), Karachi

Versus

COMMISSIONER OF INCOME TAX COMPANIES ZONE-III, KARACHI

Constitutional Petition No.187 of 2005, decided on 16th November, 2005.

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

----S. 177(1) (prior to its substitution by Finance Act (II of 2004)---General Clauses Act (X of 1897), S. 24-A---Selection of case for total audit---Essentials---Commissioner of Income Tax while passing such order would have to assign specific reason having regard to the factors specified in S.177(1) of Income Tax Ordinance, 2001---Reasons for selection of case would be given by Commissioner himself and should be contained in the order itself---Subsequent assignment of reason by any other officer would not satisfy requirement of law---Principles.

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

----S. 24-A---Order devoid of reasons---Validity---Such order would be arbitrary, for which there was no room in the realm of rule of law and good governance.

(c) Practice and procedure---

----Things should be done, as they are required to be done in law or not at all.

Haider Raza Naqvi for Petitioner.

Muhammad Altaf Mun for Respondent.

Date of hearing: 16th November, 2005.

2006 P T D 1387

[Karachi High Court]

Before Sabihuddin Ahmed, C.J. and Ali Sain Dino Metlo, J

Messrs CHEMITAX INDUSTRIES LTD., KARACHI

Versus

COLLECTOR OF CUSTOMS APPRAISEMENT, KARACHI and 4 others

C.P. No.D-16 of 1993, decided on 17th March, 2006.

Customs Act (IV of 1969)---

----S. 32---Constitution of Pakistan (1973), Art. 199---Constitutional petition---Underdeclared value of imported goods and attempt to evade huge amounts of duty and taxes by the importer---Confiscation of goods, with option of release only on payment, of redemption fine and imposition of personal penalties---Importers could not rebut the evidence available with the department with regard to the imported goods---High Court, under its constitutional jurisdiction, declined to disturb the concurrent findings of all the departmental fora which were based upon sufficient material available on record.

'Sattar Silat for Petitioner.

Raja Muhammad Iqbal for Respondents Nos. 1 to 4.

Mehmmood Alam Rizvi, Standing Counsel for Respondent No.5.

Date of hearing: 17th February, 2006.

2006 P T D 1396

[Karachi High Court]

Before Muhammad Mujeebullah Siddiqui and Shamsuddin Hisbani, JJ

NISHAT MILLS LIMITED through Principal Officer, Karachi

Versus

GOVERNMENT OF PAKISTAN through Ministry of Law, Justice and Human Rights, Islamabad and 4 others

C.P. No. D-35 and C.M.As. Nos.143 and 144 of 2006, decided on 28th March, 2006.

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

---S. 32-General Clauses Act (X of 1997), S.24-A---Constitution of Pakistan (1973), Art.199---Constitutional petition---Acceptance of time-barred representation of Central Board of Revenue by the President of Pakistan without affording any opportunity to the petitioner for submitting its objections and without condonation of delay and without assigning any reason for the condonation---Validity---High Court under its constitutional jurisdiction set aside the order of the President communicated to the petitioner and. remanded the case to the President of Pakistan for fresh proceedings with the directions that: (a) a notice shall be issued to the opposite party intimating that a representation has been received assailing the recommendations made by the Federal Tax Ombudsman; (b) that a copy of the representation, shall be supplied to the opposite party; (c) that a reasonable opportunity of personal hearing or submission of reply/comments/written arguments shall be afforded to the opposite party; (d) that if the opportunity is provided to the opposite party for placing its point of view through written submissions/ arguments, a reasonable time shall be allowed for furnishing the written submissions in reply; (e) that all the contentions raised in the representation and the written reply/submission shall be considered and shall be disposed of by speaking order. as required under S.24-A of the General Clauses Act 1897; (1) that a time-barred representation is entertained the reason for entertaining such representation and condonation of delay shall be recorded in writing showing the law empowering to condone the delay, such order shall be incorporated in the final order; and (g) that a copy of the full text of the order accepting or rejecting representation shall be supplied simultaneously to both the parties.

Siddiqsons Weaving Mills (Pvt.) Ltd. v. Federation of Pakistan and others PLD 2005 Kar. 656 fol.

Taswar Ali Hashmi for Petitioner.

S. Tariq Ali, Federal Counsel for Respondent No. 1

Raja M. Iqbal for Respondents Nos. 2 to 4.

2006 P T D 1400

[Karachi High Court]

Before Sabihuddin Ahmed and Zia Perwaz, JJ

Messrs PAKISTAN INDUSTRIAL CREDIT AND INVESTMENT CORPORATION LTD.

Versus

COMMISSIONER OF INCOME TAX and others

Income Tax Appeals Nos. 306 to 308 of 1999 and 785 of 2000, decided on 18th September, 2002.

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

---S.32---Accounting, system of---Cash system and mercantile system---Distinction.

According to the cash system, the income of an assessee is calculated on the basis of the amount actually received from debtors/ customers and the amount actually paid by way of disbursement during a particular assessment year. In the mercantile system, profits are calculated on the basis of accrual of debts and rights to receive irrespective of the date when the amounts are actually received or paid.

Dhakeswar Persad Narain Singh v. Commissioner of Income Tax 1936 4 ITR 72 rel.

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

---S. 136---Findings of fact by Appellate Tribunal---Validity---Such findings would be immune from interference by High Court.

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

----Ss. 32 & 136---Finding of Appellate Tribunal regarding maintenance of two systems of accounting by assessee i.e. cash as well as mercantile system---Validity---Question as to whether on basis of such admitted fact, assessee was legally justified in applying cash system to some of its account, while keeping its normal accounts under mercantile system---such question was a pure question of law, which was not immune from interference under S.136 of Income Tax Ordinance, 1979.

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

---Ss. 32 & 66-A---Assessee maintaining two systems of accounting simultaneously---Reopening of assessment by Inspecting Additional Commissioner---Validity---Where assessment. was made on a basis, which was wrong in law and tax liability of assessee could be higher than what was determined by Assessing Officer, then Commissioner could always reopen the assessment---Revenue, in the present case found that assessee was not legally entitled to benefit of two systems of accounting and could be made liable to pay tax on interest credited to suspense account on accrual basis---Power to reopen assessment in such circumstances could not be denied to the Commissioner.

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

----S.32---Accounting, system of---Right of assessee to keep accounts according to any system they pleased---Assessee under law could apply hybrid system of accounting treating some transactions according to accrual or mercantile system and others according to cash system---Application of cash system to sticky or irrecoverable loans could not be rejected merely for reason that assessee was applying mercantile system to its normal accounts---Duty of Income Tax Authorities was to determine on the basis of faets and circumstances of each case, whether any amount receivable could be properly treated as irrecoverable for the purpose of qualifying for cash system.

Radhaka Corporation v. Central Board of Revenue 1989 SCMR 358; (1998) 77 Tax 231; Commissioner of Income Tax v. Citibank 208 ITR 1994 930; Commissioner of Income Tax v. Jaya Lakshmi Trading Company 214 ITR (95) 661 and UCO Bank v. Commissioner of Income Tax 1999 PTD 3752 ref.

State Bank of Travencore v. Commissioner of Income Tax (1986) 158 ITR 102 disapproved.

Dr. Farough Naseem for Appellants.

Muhammad Fareed for Respondents (in I.T.As. Nos.306, 308 of 1999 and 785 of 2000).

Muhammad Ilyas Khan for Respondents (in I.T.A. No.306 of 1999).

Nasrullah Awan for Respondents (in I.T.A. No.785 of 2000).

Date of hearing: 16th May, 2002.

2006 P T D 1412

[Karachi High Court]

Before Muhammad Mujeebullah Siddiqui and Khilji Arif Hussain, JJ

Messrs CHENAB FABRICS AND PROCESSING MILLS LTD., FAISALABAD

Versus

GOVERNMENT OF PAKISTAN through Secretary, Ministry of Finance, Islamabad and 5 others.

Constitutional Petition No.D-1665 of 2000, decided on 20th October, 2005.

(a) Public functionary-

----Private person cannot be saddled with responsibility of getting an act done by a public functionary.

(b) Taxation---

.----Concessionary S.R.O.---Requirements of such S.R.O. fulfilled by party---Lapse on the part of a tax official in compliance with an administrative order---Effect---Such lapse would not have, effect of negating concession available under law.

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

----S.21---S.R.O. 1083(I)/90, dated 16-10-1990---S.R.O. 929(I)/92, dated 28-9-1992---Constitution of Pakistan (1973), Art.199--- Constitutional petition---Refund of duty drawback, claim for---Fulfilment of all requirements by exporter for availing rebate/duty drawback on export---Non-countersigning of quadruplicate copy of Bill of Export by Assistant Collector (Examination)---Rejection of claim for want of such countersigning--Validity---Such lapse on the part of tax official in compliance with an administrative order would not have the effect of negating concession available under law---Authority had committed a serious error in rejecting such claim on a frivolous ground, which was not sustainable in law---High Court accepted constitutional petition, set aside impugned orders and directed authorities to refund duty drawback to exporter in terms of concessionary S.R.Os.

(d) Administrative instructions---

----Administrative instructions should not be acted in a manner, which would negate the mandate of law---Substantive rights of citizens should not be sacrificed on altar of some procedural and administrative instructions---Principles.

The rights conferred on the citizens under the law should not be denied, on account of any administrative lapse on the part of any public functionary. The administrative instructions for carrying out the purposes of law should not be acted in a manner that the mandate of law itself is negated. The procedures and administrative instructions are always devised and issued for the sake of convenience and uniformity and for promoting the purposes of substantive law and not otherwise. The substantive rights of the citizens should not be crucified on the altar of some procedural, administrative instructions, if otherwise the requirements of a beneficial legislation or notification issued thereunder are fulfilled.

Imtiaz Ali v. Ghulam Ali PLD 1963 SC 382 rel.

(e) Taxation-

----Concession/exemption notification---Concession/exemption would be allowed on fulfilment of conditions specified in such notification and could not be withheld on the ground of any administrative instructions on the part of tax officials subordinate to Central Board of Revenue.

Amir Malik for Petitioners.

Raja Muhammad Iqbal for Respondents.

Date of hearing: 20th October, 2005.

2006 P T D 1422

[Karachi High Court]

Before Muhammad Mujeebullah Siddiqui and Khilji Arif Hussain, JJ

COMMISSIONER OF INCOME TAX, ZONE-C, KARACHI

Versus

A. R. HUSSAIN

I.T.R. No.101 of 1987, decided on 17th January, 2006.

Income Tax Act (XI of 1922)---

----S.34---Concealment of income---Non-declaration of exempt income in the column of income tax return form---Agricultural land was converted into small plots and was sold---Assessee did not declare income from the sale of such plots. in his income tax return but declared the same in wealth tax---Income Tax Appellate Tribunal found that such income of assessee was in the nature of sale proceeds of plot of land in the nature of gain and no income was concealed---Validity---Income Tax Appellate Tribunal had rightly found that profit/gain after development of agricultural land was not liable to income tax and that the income so earned was not required to be disclosed in the return of income---Tribunal was also right in holding that the entire facts were disclosed in wealth statement and non-disclosure of income/gain in the relevant column of the return of income would not amount to concealment or suppression of particulars of income/gain---Findings given by Income Tax Appellate Tribunal were in consonance with the law and were not open to any exception---Questions referred by the Tribunal were answered in -affirmative---Reference was disposed of accordingly.

Syed Akhtar Ali v. Commissioner of Income Tax, Hyderabad, 1994 PTD 675 ref.

Edulji Dinshaw Limited v. Income Tax Officer (1990) 61 Tax 105 rel.

Nasrullah Awan for Applicant.

Rehan Hasan Naqvi for Respondent.

Date of hearing: 31st August, 2005.

2006 P T D 1459

[Karachi High Court]

Before Muhammad Mujeebullah Siddiqui and Sajjad Ali Shah, JJ

Messrs AMIE INVESTMENT (PVT.) LTD. through Director

Versus

ADDITIONAL COLLECTOR-II and 4 others

Spl. Sales Tax Appeal No. 64 of 1998, heard on 18th March, 2006.

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

----Ss. 2(16)(33)(41) & 3(1)---Contract Act (IX of 1872), S. 148---Assessee engaged in business of receiving ship plates from principal, then converting same into M.S. twisted bars and returning such bars to principal on payment of conversion charges---Charging of sales tax at standard rate on value of supplies instead of on conversion charges received by assessee---Validity---Sales tax would be payable on value of supplies---Transaction between assessee and its principal could not be termed as sale or lease---Returning of such bars by assessee after processing ship plates would not amount to "disposition of goods"--- Processing of ships plates by assessee was surely a manufacturing process---Pre-condition to include goods acquired, produced or manufactured in the course of business was the "use" of goods by the person, who acquired, produced or manufactured goods---Assessee did not use goods to attract consequence of "supply"---Goods in the present case were delivered by bailor (principal) to bailee (assessee) for specific purpose and bailee (assessee) was bound to return goods to bailor after accomplishment of purpose for which goods were delivered---Returning of goods by assessee, in such circumstances, could not be termed as supply to attract charging provisions---If such goods were disposed of by bailee (assessee) at bailor/principal's instructions, then such disposition of goods would amount to supply, but in such case, supplier would be bailor and not bailee and purchaser would be to whom goods were disposed of at bailor's instructions---Manufacturing in course of business could not be termed as supply as manufacturing would not attract charging provision, but its sale, lease, disposition or use---Such transaction between assessee and its principal could be termed as a contract of bailment and not "supply"' as envisaged in S.3 of Sales Tax Act, 1990---No sales tax would be payable by assessee either on value of goods returned to principal or on charges received for conversion, which was in the nature of consideration for providing services---Amount of sales tax received by revenue on conversion charges was refundable to assessee.

Ambar Tobacco Co. (Pvt.) Limited v. Additional Collector Sales Tax 2003 PTD 800 and General Tyre & Rubber Co., Pakistan Limited v. Deputy Collector and others (Spl. Sales Tax A. No. 38/2008) rel.

(b) Sales Tax Act (VII of 1990)

-- S. 2(33)---Expression "disposition of goods" as used in S.2(33) of Sales Tax Act, 1990---Meaning.

?Black's Law Dictionary (Sixth Edition); Concise Oxford Dictionary (10th Edition) and Goli Eswariah v. Commissioner of Gift Tax AIR 1970 SC 1722 ref.

Aziz A. Munshi and Muhammad Saleem Mangrio for Appellant.

?Raja Muhammad Iqbal for Respondents.

Date of hearing: 7th December, 2005.

JUDGEMENT

SAJJAD ALI SHAH, J.---This appeal has been filed against the order of the Customs Excise and Sales Tax Appellate Tribunal, Karachi dated 17-10-1998.

The following question of law, arising out of the order of the Tribunal, was framed for determination by this Court vide its order dated 10-11-2005:---

Whether the learned Customs & Sales Tax Appellate Tribunal Karachi Bench erred in holding that the supply of twisted steel bars made by the Appellant to the recipients was chargeable to sales tax on their full value of the goods instead of on the conversion charges only which were received by the appellant?

The facts giving rise to the present controversy are that the Appellants are engaged in conversion of the ship plates into mild steel twisted bars. A show-cause notice dated 14-2-1998 was issued by the Additional Collector Sales Tax East Karachi on the ground that the Appellants have unlawfully paid fixed sales tax on the manufacture of MS re-rolled products during the period from 1st July 1996 to 30-12-1996 and on the basis of conversion charges from January 1997 to 30th June 1997 instead of paying sales tax at standard rates on the value of the supplies. It was the case of the Department that since the Notification in respect of fixed Sales Tax Scheme was rescinded therefore the appellants had become liable to pay sales tax at standard rate from 1st July 1996 onwards. The Appellants admitted before the Tribunal that since Fixed Tax Rules were rescinded by the Federal Government and therefore the Appellants had become liable to pay sales tax at standard rate on the value of goods supplies from 1-7-1996 to December 1996, as such this portion of the controversy sands finally resolved. The controversy in the case in hand is only to the extent whereby the Tribunal found the appellants liable to pay sales tax for the period commencing from 1-1-1997 to 30-6-1997 at standard rates on the value of supplies instead of on conversion charges.

?Mr. Aziz A. Munshi, learned counsel for the Appellants, has argued that since the Appellants have received the raw material i.e. ship plates from their Principals and after processing it and converting it into MS twisted bars returned the same to their Principal on receipt of processing or conversion charges, therefore they are only liable to pay Sales tax on the amount received from their Principal i.e. conversion charges and not on the value of the supplies. It was further argued that in the year 1998 the Respondent No. 1 issued Sales Tax General Order 1 of 1998 by interpreting the value of supply in the cases of like nature as the consideration/charges of conversion received by the job worker.

On the other hand, Mr. Raja Muhammad Iqbal, learned counsel for the Respondent, has pleaded that the Appellants were liable to pay the Sale tax on the value of their supply during the period from 1-1-1997 to 30-6-1997 and not on the basis of conversion charges. In support of his contention he has placed reliance on the case of Ambar Tobacco Co. (Pvt.) Limited v. Additional Collector Sales Tax (2003 PTD 800) and an unreported judgment delivered by Division Bench of this Court in the case of General Tyre & Rubber Co., Pakistan Limited v. Deputy Collector and others (Spl. Sales Tax A. No. 38 of 2004).

To determine the controversy as framed reference is to be made to the charging provision in the Sales Tax Act, 1990. Relevant provision in subsection (1) of section 3 of Sales tax Act reads as follows:---

"(3) Scope of tax (1) subject to the provisions of this Act, there shall be charged, levied and paid a tax known as sales tax at the rate of fifteen per cent of the value of;

(a) taxable supplies made in Pakistan by a registered person in the course or furtherance of any taxable activity carried on by him; and

(b)?????????????????

A minute perusal of the above provision reveals that in order to attract the charging provision taxable supplies should be made by a person who is registered under the Sales Tax Act in the course or furtherance of any taxable activity. Term taxable supply has been defined in subsection (41) of section 2 of the `Act' as supply of taxable goods in Pakistan.

?Since sales tax is payable on the value of supplies, therefore it would be very material to determine as to whether the transaction between the appellant and is Principal falls within the ambit of supplies. Supply as defined in subsection (33) of section 2 of the Sales Tax Act runs as follows:---

"(33) `supply' includes sale, lease excluding financial or operating lease or other disposition of goods in or furtherance of business carried out for consideration and also includes;

(a) putting to private, business or non-business use of goods acquired, produced or manufactured in the course of business;

(b) auction or disposal of goods to satisfy a debt owned by a person;

(c) possession of taxable goods, held immediately before a person ceases to be a registered person; and

(d) such other transaction as the Federal Government may, by notification in the official Gazette, specify;"

A supply which could attract charging of sales tax, in accordance with the definition as reproduced above, can be visualized as follows:--

(a) Sale:

(b) Lease;

(c) Other disposition of goods in or furtherance of business carried out for consideration;??????????

(d) Putting to private, business or non-business use of goods acquired, produced or manufactured in the course of business.

The transaction between the appellants and its Principal can by no stretch of imagination be termed as sale or lease as such it requires no deliberations. Now it is to be examined as to whether the transaction, as above, amounts to "other disposition of goods in or furtherance , of business carried out for consideration". There can be no denial of the fact that the business of the Appellant is carried out for consideration, but the question which needs to be examined is as to whether the returning of goods by the Appellants after processing. would amount to "disposition of goods". The term "disposition" has not been defined in the Act and the ordinary meaning of the word `disposition' as defined in various Dictionaries are as under:--

Black's Law Dictionary (Sixth?????????????? `act' of disposing, transferring to Edition)?????????????????????????????????????????????????????????? ??????????????????????? the care or the possession of

??????????????????????????????????????????????????????????????????????? another.??????????? The????? parting? with, ??????????????????????????????????????????????????????????????????????? alienation with, or giving up

??????????????????????????????????????????????????????????????????????? property'.

Concise Oxford Dictionary (10th?????????????????????? `The action of disposing or

Edition).?????????????????????????????????????????????????????????? transferring property or money to ???????????????????????????????????????????????????????? ??????????????????????????????????? someone, in particular by bequest. The ???????????????????????????????????????????????????????????????????????? power to deal with something as one ?????????????????????????????????????????????????????????????????????????????????????????? pleases'.

The expression disposition' further was considered by the Supreme Court of India in the cases of Goli Eswarian v. Commissioner of Gift Tax AIR 1970 SC 1722 and it was held thatthe word disposition is not a term of law'. Further it has no precise meaning. Its meaning has to be gathered from the context in which it is used.

Since the word disposition' has not been defined in theAct' therefore the ordinary meaning of the word which is of wide connotation is to be adopted. It is used only as an expression of transfer inter vivos or by operation of law and for such purpose an element of ownership must exist upon the goods/property under disposition or at least the person acquiring the goods must possess some right or title in the goods in order to dispose it of at his will. Consequently, the returning of goods cannot be included in the expression `disposition' of goods.

It brings us to examine as to whether said transaction amounts to putting the goods acquired, produced or manufactured in the course of business to private, business or non-business use'. The expressionmanufacturer' has been defined in subsection (16) of section 2 of the Act which reads as follows:

"Any process in which an article singly or in combination with other articles, materials, components is either converted into other distinct article or product or is so changed, transformed or re-shaped that it becomes capable of being put to use differently or distinctly and includes any process incidentally or ancillary to the completion of a manufactured product."

The processing of goods by the Appellant surely is a manufacturing process. However, the pre-condition to include the goods acquired, produced or manufactured in the course of business is the `use' of the goods by the person who acquired, produced or manufactured the goods and in the present case the Appellant did not use the goods to attract the consequences of supply.

?In our opinion, the transaction between the Appellants and their 'Principal can safely be termed as a contract of bailment as defined in section 148 of the Contract Act which is reproduced for the sake of convenience:--

"(148) "Bailment "bailor", and "bailee' defined. A "bailment" is the delivery of goods by one person to another for some purpose, upon a contract that they shall when the purpose is accomplished, be returned or otherwise disposed of according to the directions of the person delivering them. The person delivering the goods is called, the "bailor". The person to whom they are delivered is called the "bailee"."

A perusal of the above provision of law reveals that the goods are delivered by the bailor (principal in this case) to the bailee (Appellant in this case) for some specific purpose and the bailee is bound to return the goods to the bailor after accomplishment of the purpose for which the goods were delivered. As such returning of goods can by no stretch of imagination be termed as supply in order to attract the consequences of charging provisions.

?However, in case, if the goods are disposed of by the bailee (Appellants in the present case) at the instructions of the bailor (Principal in the present case) then, of course, such disposition of goods would amount to supply and would invite the consequences accordingly. However, in such eventuality, the supplier would be bailor and not the bailee and the purchaser would be the person to whom the goods are disposed of at the instructions of bailor.

?Adverting to the case of Ambar Tobacco Company (Pvt.) Limited (supra) a demand was raised upon the petitioner in the light of STGO 1 of 1998 to pay sale tax on conversion charges received for manufacturing cigarettes from the raw material provided by the Principals. The petitioner challenged the demand before the Peshawar High Court. The Hon'ble Judges of Peshawar High Court while considering the meaning of supply as defined in subsection (33) of section 2 of the Act came to the following conclusion:--

"It will be seen that supply is not confined to sale transaction but extends to other disposition of goods in furtherance of business carried for consideration, including manufacturing in the course of business."

It was observed that since the petitioners were manufacturing cigarettes in .the course of business, therefore, were liable to pay sales tax on the value of supply and not on conversion charges. We have given our anxious consideration to the findings by the learned Division Bench of the Peshawar High Court. With all due deference and respect for the learned Judges, we are not able to persuade ourselves to accept that `manufacturing in the course of business' could, by any stretch of imagination, be termed as supply as it is not-the manufacturing which attract the charging provision but its sale, lease, disposition or use.

?So far as the case of Messrs General Type and Rubber Company (Pvt.) Limited (supra) is concerned, we are in agreement with the following observation of a Division Bench of this Court:--

"From the above it is clear that much emphasis has been given by the legislature for levy of sale tax on the taxable supplies made in the course of or in furtherance of any taxable activity. Whereas in the present case the undisputed fact is that raw material was supplied by appellant to Diamond Rubber Mill and after its process, it was returned back to him. Thus, element of inclusion of sale tax is not appearing during this whole transaction, as processing activity was carried out by Diamond Rubber Mill on the fixed processing charges as settled vide letter, dated 29-6-1999 with no factors of sale, lease or other disposition of goods, as embodied in section 2(33) of Act or explained in Sale Tax General Order 1198. Therefore, levy of sale tax under section 3 of Act, entitling a registered person to deduct input tax from the output tax, is not available to appellant."

The above discussions leave no room for any doubt that the transaction between the Appellants and their principal, amounts to bailment and not a supply' as envisaged in section 3 of theAct' therefore the conversion charges received by the Appellant cannot be subjected to charging provision of the `Act'.

?For the foregoing reasons, we answer the question framed above by holding that no Sales Tax was payable by the appellant either on the value of goods returned to its principal or on the charges received for the conversion.

2006 P T D 1491

[Karachi High Court]

Before Faisal Arab, J

Messrs BINACO TRADERS through Proprietor

Versus

FEDERATION OF PAKISTAN through Secretary, Revenue Division/Chairman, Central Board of Revenue, Islamabad and 3 others

Suit No. 205 of 2002, decided on 13th March, 2006.

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

----Ss. 25-A & 25---Taking over imported goods---Pre-conditions---Under-valuation of goods by importer and availability of prospective buyer of goods at higher value must co exist before taking such action Before accepting higher offer of prospective buyer, authority must have material to assert that value of imported goods was understated---Object of S.25-A of Customs Act, 1969 was to discourage under-invoicing of goods and protect honest importer of his goods bought over by local purchaser without going through importer's effort made therefor---Principles.

Section 25-A of Customs Act, 1969 empowers the Customs Authorities to take over imported goods in these two conditions i.e. (1) if the value imported goods declared in Bill of Entry or Goods Declaration is understated; and (2) there is a buyer of imported goods at substantially higher value. Thus, power under section 25-A does not become exercisable merely because there is a buyer of imported goods willing to pay high price, but the importer has also undervalued the value of imported goods. The object of section 25-A is to discourage under-invoicing of goods, whereby the duties and other charges are evaded by an importer, and at the same time protect an honest importer from. his goods being bought over by a local purchaser, who, without going through the importer's effort of analyzing foreign markets, reading local market conditions and negotiating best price with foreign supplier of goods, want to become owner of imported goods. In such a situation paying more might prove for him to be a good bargain, but at the expense of importer, who would have to give up his title in goods without any just cause. This cannot be allowed. Therefore, before higher offer of an interested person is accepted, the concerned Customs Official must have material to assert that the value of imported goods has been understated.

The principle laid down in Section 25-A Customs Act, 1969 is that before exercising right to acquire goods in terms thereof, the duty on goods is to be first assessed according to the value determined under section 25 of Customs Act, 1969.

Sohaib Khan v. Collector of Customs 2005 PTD 1069 and Moon Corporation v. Central Board of Revenue 2004 PTD 2615 rel.

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

----Ss. 25-A, 25 & 217(2)---Specific Relief Act (I of 1877), S. 42---Civil Procedure Code (V of 1908), S.9---Taking over imported goods---Sale of goods to prospective buyer at value more than 300% higher than declared value---Suit for declaration and damages by importer challenging such action of authority---Maintainability---Authority, after considering declared value to be understated had directed for examination of goods on reverse of Goods Declaration---Importer, instead of subjecting goods for examination had presented Goods Declaration again for its process under Appraisement System---Authority, after receiving such higher offer from prospective buyer had served notice on importer apprising him of such offer and under-valuation of goods---Importer in reply to such notice had sought full inquiry into valuation of goods---Importer, without waiting for result of such inquiry had filed suit within four days of delivering such reply to authority---Contents of such notice, though neither disclosed in plaint nor its copy annexed thereto, showed that authority had first formed opinion regarding understatement of declared value of goods by importer---Duty of importer was to have contested such matter before authority and got valuation done by authority in order to rebut its claim---Such offered price was not just substantially higher offer, but was enormously high---Such fact coupled with importer's reluctance to agitate such matter before authority created doubts about his case---Impugned action of, authority in such circumstances could not be termed to be mala fide or without jurisdiction---Suit was dismissed for being not maintainable in view of bar contained in S.217(2) of Customs Act, 1969.

PLD 1997 Kar. 541; 2002 PTD 654; 2003 PTD 409; 2004 PTD 1189; Adamjee Insurance Company Ltd. v. Pakistan 1993 SCMR 1798; Amin Textile Mills v.- Commissioner of Income Tax 2000 SCMR 201; Shahid Agency v. The Collector of Customs 1989 CLC 1938 and Moon Corporation v. Central Board of Revenue 2004 PTD 2615 ref.

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

----S.217(2)---Civil Procedure Code (V of 1908), S.9---Action or order of Customs authority suffering from mere illegality---Remedy---Aggrieved party could seek his remedy in the hierarchy provided under Customs Act, 1969.

PLD 1997 Kar. 541; 2002 PTD 654; 2003 PTD 409; 2004 PTD 1189; Adamjee Insurance Company Ltd. v. Pakistan 1993 SCMR 1798; Amin Textile Mills v. Commissioner of Income Tax 2000 SCMR 201 and Shahid Agency v. The Collector of Customs 1989 CLC 1938 and ref. Moon Corporation v. Central Board of Revenue 2004 PTD 2615 rel.

(d) Tort---

----Damages, claim for---Appropriate time for agitating such claim---Act or omission resulting in injury would give rise to such claim which could be agitated under general law by way of civil suit---Legality of such act or omission, if challenged before Civil Court, then claim for damages could simultaneously be agitated in same suit---Legality of such act or omission, if challenged only before special forum provided under special statute, then until such main controversy was put at rest before such forum, filing of suit for damages before Civil Court would be premature---Principles.

A claim for damages is always agitated under the general law by way of civil suit. Claim for damages arises on account of some act or omission, which results in injury. Where legality of an act or omission is challenged under the general law by way of a civil suit, then claim for damages .can also be simultaneously agitated in the same suit. However, where legality of an act or omission is challenged only before a special forum provided under a special statute, then until the main controversy is put at rest before such special forum, filing of suit for damages in Civil Court would be premature. In such circumstances, the person who has sustained injury has to wait until the special forum decides the controversy, all appeals taken thereunder or time for filing appeal has gone by and the decision has attained finality. Only then the person who has sustained injury on account of some act or omission can file suit for damages in Civil Court. A party cannot be allowed to agitated a claim for damages in Civil Court at a time, when the main controversy is either pending or is required to be agitated before the special forum, but the aggrieved person has chosen not to take it before such forum. Filing of suit for damages in such a situation would be premature and liable to be so declared.

Junaid Ghaffar for Plaintiff.

Raja Muhammad Iqbal for Defendants Nos. 1 to 3.

Muhammad Nadeem Qureshi for Defendant No.4.

Date of hearing: 31st January, 2006.

2006 P T D 1566

[Karachi High Court]

Before Sabihuddin Ahmed, C.J. and Mrs. Qaiser Iqbal, J

ABDUL GHAFFAR BHUNDI

Versus

COLLECTOR OF CUSTOMS (APPRAISEMENT), KARACHI and 2 others

Constitutional Petitions Nos. D-31 and 32 of 2006, decided on 13th April, 2006.

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

---Preamble & First Sched.---Pakistan Customs Tariff Schedule would be treated as part of Customs Act, 1969.

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

---5.223 & First Sched., PCT Headings 8704.1010---Customs General Order No.18 of 2005, dated 22-10-2005---Used dumper trucks for off highway use, import of---Importer seeking release of trucks on payment of duty @ 5% in terms of Item No.8704.1010 of PCT Schedule---Refusal of authority to release trucks without clearance from Central Classification Committee of C.B.R.---Validity---Pakistan Customs Tariff Schedule would be treated as part of Customs Act, 1969---Rights conferred by statute could not be curtailed by an executive order, unless statute itself permitted so---Conditions contained in Customs General Order No.18/2005 stipulating such import by a construction company registered with Pakistan Engineering Council for ongoing project etc., were ultra vires the Customs Act, 1969 and thus, would not have effect on trucks imported by a person answering requirements of Item No.8704.1010---Benefit of 5% rate of duty would be available to dumper trucks possessing attributes mentioned in such PCT Schedule---Classification of goods for purpose of duty was a matter casting financial burden on importer, which could not be controlled by C.B.R.---by issuing directions could not interfere with quasi-judicial functions of officers of Customs---No role was attributed to Central Classification Committee to examine physically each and every imported consignment---Appraisers of Department were bound to physically examine goods and charge duty @ 5%, if requirements of Item No. 8704.1010 enumerated in CGO-18/05 were fulfilled.

(c) Interpretation of statutes---

----Executive order---Rights conferred by statute could not be curtailed by an executive order unless statute itself permitted so. [p. 1570] C

Khawaja Shamsul Islam for Petitioners.

Raja Muhammad Iqbal for Respondent No.1

Javed Farooqi for Respondent No.3.

Date of hearing: 13th April, 2006.

2006 P T D 1609

[Karachi High Court]'

Before Muhammad Mujeebullah Siddiqui and Shamsuddin Hisbani, JJ

R.B. AVARI & CO. (PVT.) LTD., KARACHI through Director

Versus

FEDERATION OF PAKISTAN through Secretary, Revenue Division, Central Board of Revenue, Islamabad and 2 others

Constitutional Petition No. 204 of 2006, decided on 9th March, 2006.

Customs Act (IV of 1969)---

----Ss.79, 80 & 83(1)---Agricultural Pesticide Ordinance (II Of 1971), Ss.5, 6, 7, 8 & 9---Agricultural Pesticide Rules, 1973, R.9-A---Poisons Act (XII of 1919), Ss. 3 & 5---General Clauses Act (X of 1897), S.24-A---Constitution of Pakistan (1973), Art.199---Constitutional petition---Import- of pesticides---Refusal of Director General, Ministry of Agriculture to renew certificate for import of pesticide for not being registered abroad---Refusal of Customs authorities to release consignment for want of NOC/Registration Certificate from Director General Agriculture---Validity---Before renewal of certificate of import, factual probe would be required in accordance with provisions of R.9-A of Agricultural Pesticide Rules, 1973---Petitioner was neither given personal proper hearing nor confronted with information received by Director General from Australia and China, on the basis whereof renewal of certificate was refused---Agricultural Pesticide Ordinance, 1971 was in addition to and not in derogation of provisions of Ss.3 & 5 of Poisons Act, 1919, which had not been considered at all---Director General was required to pass a speaking order---High Court set aside order of Director General rejecting renewal of certificate for import of pesticide registered abroad with directions to him to decide such. issue after conducting a fresh probe into entire matter and considering documentary evidence and details as required under R.9-A(5) read with sub-rules (1) to (4) of R.9-A of Agricultural Pesticide Rules, 1973 and proof of compliance of conditions specified in Form-17 of the Rules furnished by petitioner and confronting petitioner with information received from Australia and China and examine the provisions of Ss.3 & 5 of Poisons Act, 1919 and notification/Rules, if any made thereunder.

Aziz A. Shaikh for Petitioner.

Syed Tariq Ali for Respondents Nos.1 and 3.

Raja Muhammad Iqbal for Respondent No.2.

Date of hearing: 29th March, 2006.

2006 P T D 1624

[Karachi High Court]

Before Muhammad Mujeebullah Siddiqui and Syed Zawwar Hussain Jaffery, JJ

Messrs MIA CORPORATION (PVT.) LTD.through Director, Islamabad

Versus

COLLECTOR OF CUSTOMS (APPRAISEMENT), KARACHI and 4 others

Constitutional Petitions Nos. D-81 to D-87 of 2006, decided on 21st April, 2006.

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

----S.32---Final assessment order made in first instance---Final assessment order on account of non-passing of final order after provisional assessment---No distinction existed in S.32. of Customs Act, 1969 between both such orders.

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

----Art. 1'99---Matter of evidence---Not be adverted to in Constitutional petition.

Ziaul Hassan of Petitioner

Raja Muhammad Iqbal for Respondents Nos.l to 4 along with Tariq Aziz, Appraising Officer.

Date of hearing: 21st April, 2006.

2006 P T D 1635

[Karachi High Court]

Before Sabihuddin Ahmed, C. J. and Nadeem Azhar Siddiqui, J

Messrs HOME LIFE through Proprietor

Versus

DIRECTOR-GENERAL OF CUSTOMS VALUATION AND PCA, DIRECTORATE OF CUSTOMS VALUATION OF PPA, KARACHI and 2 others

W.P. No. 443 and Misc. A. No.1696 of 2006, decided on 21st April, 2006.

Customs Act (IV of 1969)--

----S. 25---Constitution of Pakistan (1973), Art. 199---Constitutional petition---Valuation of imported goods---Advice of the trade body of the line of imported goods, could be kept into consideration, but determination of value of imported goods was to be made in accordance with the clear parameters laid down in S.25 of the Customs Act, 1969.

Shafqat Mehmood Chohan for Petitioner.

Raja Muhammad Iqbal for Respondents.

2006 P T D 1647

[Karachi High Court]

Before Muhammad Mujeebullah Siddiqui and Shamsuddin Hisbani, JJ

GHULAM MUSTAFA JATOI, KARACHI

Versus

COMMISSIONER OF INCOME TAX, CENTRAL ZONE-B, KARACHI

Income Tax Reference No. 240 of 1997, decided on 4th April, 2006.

(a) Income Tax Act (XI of 1922)---

----S. 66---Income Tax Ordinance (XXXI of 1979), S.136---Income tax Ordinance (XLIX of 2001), 5.133---Reference/appeal to High Court under laws relating to direct taxes---Nature and scope of jurisdiction elucidated.

Income Tax Appellate Tribunal is the final facts finding authority and the High Court exercises merely advisory jurisdiction under section 66 of the repealed Income Tax Act, 1922, section 136 of the Income Tax Ordinance, 1979 under which the reference has been . made to this Court and section 133 of the Income Tax Ordinance, 2001. While exercising advisory jurisdiction the High Court is not supposed to probe into a question of fact not raised before the ITAT. The High Court derives advisory jurisdiction under the provisions of laws referred to above. All these provisions are very specific on the point that a reference can be made to the High Court in respect of a question of law arising out of the order passed by the Appellate Tribunal. Thus, a party who has not raised a point before the Appellate Tribunal is not permitted to raise it for the first time before the High Court under its advisory jurisdiction. The rationale for it is simple to the effect, that the High Court in exercise of its advisory jurisdiction decides the questions of law raised through a Reference Application, giving the answer in affirmative or negative, meaning thereby, a finding given by the Tribunal on the point of law is either held to be in accordance with the law or otherwise and thereafter the final order is passed by the Appellate Tribunal disposing of the case conformably to such judgment of the High Court. If a point is not raised before the Tribunal and there is no finding on the said point, then the question of giving any affirmative or negative finding by the High Court in respect of such non-existing finding of the Appellate Tribunal shall not arise. No doubt, new points of law can be raised before the High Court when exercising appellate jurisdiction and those questions should be pure questions of law and not mixed questions of fact and law requiring any factual probe. However, the scope of advisory jurisdiction of the High Court being very limited as compared to the appellate jurisdiction, no new points of law are allowed to be raised before the High Court specially when it is a mixed question of fact and law. The nature of appellate jurisdiction and, advisory jurisdiction have nothing in common, and are absolutely distinct to each other. An Appellate Court exercises all the powers vested in the Court below. including the Court of original jurisdiction to the extent that it can record additional evidence as well. However, the High Court, while exercising advisory jurisdiction is not clothed with such powers and has to confine its findings on the point of law decided by the Tribunal by interpreting the relevant provisions of law. In exercise of appellate jurisdiction, the High Court can allow a question of law which was neither raised nor considered by the forums below for the reason that the appellate jurisdiction is not restricted to the questions of law arising out of the order of the lower appellate forum. However, no such questions can be allowed to be raised and are not to be entertained by the High Court for the reason that the advisory jurisdiction is limited to the decision on the question of law arising out of the order passed by the Appellate Tribunal. The question of prior approval by the IAC sought to be raised before High Court cannot be allowed to be raised for the reason that it was not raised before the Tribunal and there is no finding of the Tribunal on this point. No question was proposed before the Tribunal that the addition was not sustainable for want of prior approval of IAC. If this issue is allowed to be raised it will require factual probe and any such exercise in respect of mixed question of fact and law by High Court would amount to travel beyond the jurisdiction vested in High Court under the advisory jurisdiction conferred under section 66 of the repealed Income Tax Act, 1922, section 136 of the repealed Income Tax Ordinance, 1979 and section 133 of the Income Tax Ordinance 2001.

Under the law relating to references, heard by High Court, arising under the tax laws, in exercise of its advisory jurisdiction; there is no scope for agitating the points which were never raised or considered by the Tribunal. The law on this point is settled, but, the settled principles in this behalf are being ignored by the bar and the points which cannot be raised before the High Court are being entertained with the result that the system has been distorted to the great extent. In every walk of life and particularly in the realm of law the preservation of system is absolutely necessary, without which, there could be no rule of law. The absence of the rule of law results in legal anarchy.

In the references emanating from tax laws the jurisdiction of High Court is confined to the question of law arising out of the order of Tribunal. The principles pertaining to the reference proceedings before the High Court under the direct tax laws namely Income tax and Wealth Tax, are fully established. The provisions pertaining to the references/ appeals uncle. the indirect tax laws namely Customs, Sales-tax and Excise laws 1.tve been introduced recently and the advocates practicing on indirect tax side have not gained sufficient sight in the principles and, system of tax references under these laws. The system under the indirect taxes has not taken its roots because the Appellate Tribunal under these laws has been established recently and on account of being run on ad hoc basis it has not created its impact as created by the Income Tax Appellate Tribunal which is working in the subcontinent from the year 1942. The law relating to the references before the High Court under the indirect taxes is same as in the case of direct taxes. Thus, the resume of the law, to be given presently, is equally applicable to the references under the direct taxes (income tax and wealth tax) and indirect taxes (Custom Act, Sales Tax Act and Central Excise Act/Federal Excise Act). [p. 1657] E

(b) Income Tax Act (XI of 1922)---

----Ss. 4(2)(c) & 66---Deemed income---Person holding public office receiving public money for public purposes---If such money was not spent for "public purposes" but was spent for his personal purposes, it would not lie with the said person to plead that amount so received could not be subjected to tax in his hands, for the reason that the Income Tax Law did not differentiate in the income received legally, and/or illegally---Income Tax Appellate Tribunal was right in holding that amount received by the person was liable to be subjected to Income Tax as 'deemed income' in the hands of the person under S.4(2)(c) Income Tax Act, 1922.

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

----S. 133---Income Tax Ordinance (XXXI of 1979), S.136---Income Tax Act (XI of 1922), S.66---Reference/appeal to High Court---Principles enumerated.

The following principles emerge:---

1. Any person submitting reference application before the High Court under the direct tax law or indirect tax law is required to formulate the questions of law and no vague reference application is to be submitted.

2. The question of law formulated should arise out of the order of Tribunal meaning thereby that it was raised, pressed, argued and decided by the Tribunal or it was considered and finding was given by the Tribunal.

. 3. If any question of law is not raised before the Tribunal it could not be raised for the first time before the High Court.

1. If a question of law is- raised before the Tribunal but it is not pressed, it shall be deemed as if it was never raised.

2. The Tribunal is final fact finding authority and all the findings involving factual controversy attain finality with the decision of the Tribunal and no point involving factual controversy can be subject-matter of reference application before the High Court.

3. If a point of law is not raised before the Tribunal but is raised in the reference, application only it is not to be entertained and considered by the High Court.

4. The question of law raised before the High Court should involve substantial point of law requiring interpretation by the High Court and the points of law answer to which is clear and obvious, are not to be raised in reference application.

5. Once a question of law is admitted to regular hearing then the jurisdiction of High Court is confined to answer the point of law involved in said question and no other point of law is to be raised or entertained.

6. While dealing with the reference application the High Court exercises advisory jurisdiction which is very limited in scope, as compared to the constitutional jurisdiction and the appellate Jurisdiction.

7. The reference application should contain the statement of facts as decided by the Tribunal. No new facts are to be inserted in the reference application which were not raised before the. Tribunal and were not considered and decided. The opinion in exercise of advisory jurisdiction is to be given on the basis of facts; as decided by the Tribunal until and unless a question of law is raised on the point that the finding itself was violative of any provision of law.

8. No reference application is to be entertained on the points of law which already stand decided by the High Court or Supreme Court.

Messrs Muhammad Idrees Barry & Co. v. Commissioner of Income Tax PLD 1959 SC 202; Seth Gurmukh Singh v. Commissioner of Income Tax, Punjab 1944 ITR 399; National Mutual Life Association of Australia, Limited v. Commissioner of Income Tax Bombay 63 IA 99; Abdul Ghani v. Commissioner of Income Tax PLD 1962 Kar. 635; Messrs Odeon Cinema, Lahore v. Commissioner of Income Tax PLD 1971 Lah. 632; Messrs Ahmad Karachi Halva v. Commissioner of Income Tax 1982 SCMR 489; Collector of Customs v. Pakistan State Oil' 2005 SCMR 1636; Pakistan State Oil Co. Ltd. v. Collector of Customs 2006 SCMR 425 and Messrs Nida-I-Millat (Pvt.) Ltd. v. Commissioner of Income Tax 2006 SCMR 526 ref.

Rehan Hassan Naqvi and Lubna Pervaiz for Applicant.

Nasrullah Awan for Respondent.

Date of hearing: 4th April, 2006.

2006 P T D 1678

[Karachi High Court]

Before Anwar Zaheer Jamali and Muhammad Athar Saeed, JJ

Messrs UNION COSMIC COMMUNICATIONS (PVT.) ,LIMITED, KARACHI through Authorized Director and 5 others

Versus

CENTRAL BOARD OF REVENUE through Member Income Tax, Islamabad and another

Constitutional Petitions Nos. D-376 and D-611 of 2004, decided on 14th March, 2006.

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

----Ss.161 & 236(1)(b)(3)---Pakistan Telecommunication (Re-organization) Act (XVII of 1996), S.5---Constitution of Pakistan (1973), Art.199---Constitutional petition---Running of Public Call Offices (PCOs) under licence from Pakistan Telecommunication Company---Sale of prepaid cards by licensee to its PCOs---Demand of withholding tax on such sales---Denial of licensee to be involved in such business---Constitutional petition against such demand notice involving factual controversy was not maintainable.

ICI v. Federation of Pakistan (C.P. No.D-658 of 2005) ref.

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

----Ss.161 & 236(1)(b)(3)---Constitution of Pakistan (1973), Art.199---Constitutional petition---Show-cause notice demanding withholding tax---Order passed by Assessing Officer during pendency of constitutional petition and dismissal of assessee's appeal by Appellate Authority---Assessee neither availed further remedy under Income Tax Ordinance, 2001 nor amended constitutional petition to challenge such .orders---Constitutional petition was not maintainable---Principles.

ICI v. Federation of Pakistan (C.P. No.D-658 of 2005);' 2004 PTD 3032; ICI Pakistan Limited v. Federation of Pakistan 2006 PTD 778, Roche Pakistan Limited v. DICT and others 2001 PTD 3090; Sitara Chemicals Industries Limited v. DCIT 2003 PTD 1285; Commissioner of Income Tax, Karachi and 2 others v. N.V. Philip's Gloeilampen­-fabriaken, Karachi 1993 PTD 865 = PLD 1993 SC 434; Commissioner of Income Tax v. Hamdard Dawakhana (Waqt), Karachi PLD 1992 SC 847 and Pak Saudi Fertilizers v. Federation of Pakistan in C.P. No.283 of '1999 ref.

(c) Constitution of Pakistan (1973)---

----Art.199---Constitutional petition---Non-availing of alternate remedy under special statute providing complete mechanism to redress petitioner's grievance---Constitutional petition was not competent/ maintainable.

ICI v. Federation of Pakistan (C.P. No.D-658 of 2005); (2005) 91 Tax 1; ICI Pakistan Limited v. Federation of Pakistan 2006 PTD 778, Roche Pakistan Limited v. DCIT and others 2001 PTD 3090; Sitara Chemicals Industries Limited v. DCIT 2003 PTD 1285; Commissioner of Income Tax, Karachi and 2 others v. N.V. Philip's Gloeilampen­fabriaken, Karachi (1993) 68 Tax 35 (SC Pak); Commissioner of Income Tax v. Hamdard Dawakhana (Wagf), Karachi PLD 1992 SC 847 and Pak Saudi Fertilizers v. Federation of Pakistan in C.P. No.283 of 1999 rel.

Ahmer Bilal Soofi for Petitioners.

Aqeel Ahmed Abbasi for Respondents Nos. 1 and 2.

Nemo from the Office of D.A.-G.

2006 P T D 1709

[Karachi High Court]

Before Muhammad Mujeebullah Siddiqui and Sajjad Ali Shah, JJ

COMMISSIONER OF INCOME TAX, EAST ZONE, KARACHI

Versus

Messrs W.J. TOWELL & CO. AGENCIES (KUWAIT), KARACHI

Income Tax Reference Nos.70 and 232 of 1998, decided on 14th April, 2006.

(a) Interpretation of statutes---

---Tax law---While interpreting any provision of law and more particularly a tax law the plain language of the law is to be looked into---Words used by the Legislature are to be interpreted and they are not to be substituted or changed, as there is no room for any intendment if the language used by the Legislature is clear and unambiguous.

(b) Income Tax Act (XI of 1922)---

---S. 42(3) & (1)---Income deemed to accrue or arise within Pakistan---Interpretation, scope and application of S.42(3)&(1) of Income Tax Act, 1922---Words "Business"; "Operation"; "all the operations" and "part of operations" occurring in S.42(3) & (1) of the Act---Connotation---Expression "part of operations" used in S.42(3) of the Act is not confined to the completed purchase but is to be considered on the basis of various acts performed in the process of completion of purchase---Principles.

A perusal of subsection (3) of section 42 of the Income Tax Act, 1922 shows that the Legislature has provided that in case of business of which all operations are not carried out in Pakistan, the profits and gains of the business deemed under this section to accrue or arise in Pakistan shall be only such profits and gains as are reasonably attributable to that part of operations carried out in Pakistan. The word business is of wider import which includes, trade, profession, dealings, commercial activity, a methodical and systematic process of action carried out by the business people, to accomplish the commercial activity etc. All the acts connected with the commercial activity are included in the expression. It is evident from a perusal of the language used by the Legislature in section 42(3) that the word business had been used in this context which is indicated from the fact that the Legislature has provided that in case of a business of which all the operations are not carried out in Pakistan. The use of the word 'operation' is very important in this behalf. The word 'operation' means to work, to produce any effect, put in activity, act, carry on business, to conduct, carry on something, a method of working, an action or movement, dealing in stocks and the acts affecting a transaction etc. It is also obvious that in the course of business transaction the main ingredients are purchase and sale but in order to effect a purchase or sale, several acts are required to be performed such as negotiations, entering into agreements, settlement of the terms of agreement, delivery of the possession of the goods, payment of the price, receiving of the sale consideration, packing, loading, transport, insurance etc. All these acts come within the purview of operation for the purpose of purchase or for sale and if the entire transaction culminating to sale is not performed at one place it can be said that some of the acts which have been performed, amount to part of operations and all the acts from start to end would be the complete operation. Thus, when the Legislature has used the expression 'operation' it has to be interpreted in its plain and natural meaning and has not to be subst:,ated with the expressions purchase or sale or completed purchase or completed sale or the entire business transaction. The words, "all the operations" indicate performing of each and every act starting from the beginning of transaction culminating in the profit or loss on completion of the transaction. However, the expression 'part of the operations' 'shall mean various acts and activities performed at the beginning, in the middle or at the end of purchase or sale or in respect of both.

The Tribunal has fallen in error by equating the expression "part of the operations" with the expression "completed purchase". This approach on the part of Tribunal is not warranted by any canon of the principles of interpretation of statutes, as either it amounts to the substitution of the language used by the Legislature or insertion of the expressions not appearing in the statute. After combined reading of subsections (1) and (3) of section 42, the first and foremost consideration is whether there is any business? If it is in affirmative, then the second consideration requiring consideration would be, whether in the case of non-resident the income, profits and gains accrue or arise directly. or indirectly through or from any business connection in Pakistan or through any property in Pakistan, or through, or any money lent at interest and brought into Pakistan in cash or kind or through or from the sale, exchange or transfer of a capital asset in Pakistan. The third consideration would be, as to what are the operations as explained above, in the totality of the said business and in case all the operations are not carried out in Pakistan, whether any part of the profits and gains can be attributed reasonably to the part of the operations carried out in Pakistan. It is evident that for considering the above four aspects the Legislature has not imposed any condition of completed purchases in Pakistan or completed sales in Pakistan. The language used by the legislature envisages a set of acts in a completed business which has been described as operations and has thereafter created a deeming provision to the effect that in case of incomplete transaction of business culminating in profits and gains, the part of profits and gains attributable to part of the operations carried out in Pakistan shall be treated as deemed income. This part of the operations may be on account of a completed purchase in Pakistan or on account of various steps and acts in the process of completion of purchase. If the acts contribute towards the final completion of the purchase, these all the acts carried out in Pakistan, in respect of purchases completed outside Pakistan shall be treated as part of the operations carried out in Pakistan and the profits and gains attributable to such part of the operations shall be deemed income envisaged under the provisions contained in sections 42(1) and (3).

Tribunal in the present case had recorded the fact that the negotiations for purchase of rice were held in Pakistan, the agreements for purchase of rice were executed in Pakistan, the letters of credit were opened in Pakistan, the packing, transportation and loading on ship took in Pakistan, the sale consideration was received in Pakistan, the brokerage and commission was paid in Pakistan, and therefore in furtherance of the interpretation given by the Tribunal itself to the effect that section.42 of the repealed Income Tax Act, 1922, authorizes the break-up of different business operations into two or more portions and also, at same time, lays down the rule of apportionment as between them, for ascertaining profits resulting from one continuous process ending in a sale, ought to have upheld the treatment given by the Assessing Officer. The fallacy of the view held by the Tribunal is further evident from the fact that the Tribunal has held that section 42 authorizes the breaking up of different business operations into two or' more portions and has thereafter limited the portion pertaining to the purchase to a completed purchase. If it is upheld then the break-up shall be in two portions only; the completed purchase and the completed sale. It can never be broken up in more than two portions. Breaking of the portions in more than two portions is possible only if the part of operations is taken as different acts in the process of completion of purchase after fulfilment of the technical requirements, such as contained in the Sale of Goods Act.

The expression 'part of operations' used in section 42(3) of the repealed Income Tax Act, 1922 is not confined to the completed purchase but is to be considered on the basis of various acts performed in the process of completion of purchase. The treatment given by the Assessing Officer was not open to any exception and the view held by the Tribunal is based on considering the law in a wrong direction and on an incorrect interpretation on account of wrong premise that a completed purchase was required for attracting the provisions contained in section 42(3). The view taken by the Tribunal was not sustainable in law which was liable to be vacated.

Nasrullah Awan for Applicant.

Salman Pasha for Respondent.

Date of hearing: 11th November, 2005.

2006 P T D 1902

[Karachi High Court]

Before Muhammad Mujeebullah Siddiqui and Shamsuddin Hisbani, JJ

CYANAMID PAKISTAN LTD.

Versus

COLLECTOR OF CUSTOMS SALES TAX AND CENTRAL EXCISE

Spl. Sales Tax Appeal No. 534 of 2004, decided on 5th April, 2006.

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

----Ss.7, 8, 59, 71 & 73---Constitution of Pakistan (1973), Art.199---Constitutional petition---Beneficial provision of law---Non-extending of benefits on the basis of subsequent insertion in same statute---Assessee sought adjustment of input tax from output tax for the period when it was registered voluntarily---Authorities refused such adjustment and also did not extend the benefit under S.59 of Sales Tax Act, 1990---Customs, Excise and Sales Tax Appellate Tribunal also denied privileges and benefits of S.7 of Sales Tax Act, 1990, on the ground that provisions of Ss.8, 59, 71 and 73 of Sales Tax Act, 1990, were subsequent to S.7 of the Act in sequence and the latter provisions of the Act overrode the earlier provision of law---Tribunal also denied the benefit for the reason that S.7 of Sales Tax Act, 1990, did not control the provisions of S.59 of Sales Tax Act, 1990, as the latter was a special provision envisaging a special situation and allowing certain benefits with the disciplines of limitations and conditions prescribed therein---Validity---High Court disagreed with the view taken by Customs, Excise and Sales Tax Appellate Tribunal that subsequent provisions under a statute overrode the earlier provisions---No such view was sustainable until and unless legislature had specifically provided that the subsequent provisions would have overriding effect---High Court set aside the view taken by the Tribunal regarding exclusion of S.7 by S.59 of Sales Tax Act, 1990 and remanded the matter to the Tribunal for decision afresh---Appeal was allowed accordingly.

(b) Interpretation of statutes---

----General and special provisions of a statute---Applicability---Principles---If two sections deal with similar circumstances, special provisions under the statute would exclude the general provision in the statute---If two provisions deal with different situations and operate in different sets of facts then, the special provision would not exclude the general provision for the reason that they are not exclusive of each other---If two provisions of law, one special in nature and the other general in nature deal with two different situations there would be no overriding effect.

(c) Interpretation of statutes---

----Fiscal statute---Concession/benefit, extension of---Principles---Duty of Court---Scope---If assessee claims some concession or benefit under two different provisions of law, it is the duty of Court to examine whether the benefit is available in both or in anyone of the provisions---Benefit has to be extended until and unless there are some conditions prescribed under the law which have not been fulfilled.

Aziz A. Shaikh for Appellant.

Javed Farooqui for Respondent.

Date of hearing 5th April, 2006.

2006 P T D 1930

[Karachi High Court]

Before Muhammad Mujeebullah Siddiqui and Shamsuddin Hisbani, JJ

Messrs PAKISTAN CABLES LTD. through Finance Director and Company Secretary

Versus

FEDERATION OF PAKISTAN through Chairman, C.B.R. and 2 others

Constitution Petition No. D-557 of 2004, decided on 7th April, 2006.

Customs Act (IV of 1969)---

----Ss.19 & 223---Notification S.R.O. 357(1) / 2002, dated 15-6-2002---Constitution of Pakistan (1973), Art.199---Constitutional petition---Exemption from payment of duties---Declining benefit on the basis of letter issued by official of Central Board of Revenue---Petitioner imported polypropylene filler falling under PCT Heading 5607.4900 and claimed benefit of notification S.R.O. 357(I)/2002, dated 15-6-2002, as the material was not locally manufactured---Authorities, on the basis of letter issued by an official of Central Board of Revenue, refused benefit of the notification to the petitioner---Plea raised by the petitioner was that Customs General Order issued by Central Board of Revenue under S.223 of Customs Act, 1969, could not be overruled through a letter issued by Engineering Development Board---Petitioner also contended that the material imported by him was not included in the list of locally manufactured items in Indigenization Programme approved by Indigenization Committee---Validity---For the purpose of S.R.O. 357(I)/2002, dated 15-6-2002, such goods were to be treated as not manufactured locally which were not included in the list of locally manufactured items prepared by Central Board of Revenue in consultation with Ministry of Industries---Letter written by Engineering Development Board, until and unless duly concurred by Central Board of Revenue and item was included in the list of locally manufactured items, was not to be acted upon for declining the concession available under S.R.O. 357(I)/2002, dated 15-6-2002---Polypropylene filler (PCT Heading 5607.4900) was not being manufactured locally and authorities were not empowered to refuse the concession---Petitioner was entitled to the benefit of S.R.O. 357(I)/2002, dated 15-6-2002---High Court directed the authorities to extend the benefit of the notification to petitioner---Petition was allowed accordingly.

Abdul Ghaffar Khan for Petitioner.

Ahmed Khan Bugti for Respondent No.2.

Nemo for Respondents Nos. 1 and 3.

Dates of hearing: 31st March and 7th April, 2006.

2006 P T D 1976

[Karachi High Court]

Before Sabihuddin Ahmed, C.J. and Ali Sain Dino Metlo, J

PARKE DAVIS & COMPANY LTD. and others

Versus

COLLECTOR OF CUSTOMS through Assistant Collector Customs AFU

C.Ps. Nos.223 to 226 of 2003, decided on 26th January, 2005.

Customs Act (IV of 1969)---

----S. 18(2)---Constitution of Pakistan (1973), Art.199---Constitutional petition---Charging of regulatory duty---Contention of petitioners that in terms of notification regulatory duty could be charged on the import of goods chargeable to statutory or concessionary rate of 0% duty and not on the goods importable free of duty, was repelled as practically there was no difference between terms 0% and `free of duty' both conveyed the same meaning---No distinct or separate concept of Zero rated import as was in concept of Zero rated supply in Sales Tax Act, 1990 existed in Customs Act, 1969, under Sales Tax Act, 1990 concept of "Zero rated supply" was introduced only for the purpose of claiming adjustment or refund of input tax; whereas in the Customs Act, 1969 no such scheme existed---Regulatory duty, in circumstances was rightly charged from petitioners on the goods, which according to First Schedule were importable free of duty held;---Petitioners were not entitled to its refund.

Collector of Customs and others v. Ravi Spinning Ltd. and others 1999 SCMR 412 ref.

Aziz A. Shaikh and Ch. Muhammad Wasim Iqbal for Petitioners.

Nadeem Qureshi for Respondents Nos.1 and 2.

Mehmood Alam Rizvi, Standing Counsel.

Date of hearing: 26th January, 2006.

P T D 2006 P T D 1207

[Karachi High Court]

Before Sabihuddin Ahmed, C.J. and Ali Sain Dino Metlo, J

Shaikh RASHID AHMED and another

Versus

ASSISTANT COLLECTOR, SPECIAL RECOVERY CELL, COLLECTORATE OF CUSTOMS (EXPORTS), KARACHI and 4 others

Constitution Petition No. D-1360 and Misc. No. 5096 of 2005, decided on 1st February, 2006.

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

----Ss.32 & 156 (1), item 14---Constitution of Pakistan (1973), Art.199--Constitutional petition---Untrue statement/false declaration---Determi­nation---Fraudulent claim of rebate---Recovery---Petitioners were not the exporters but had some transactions with exporters and received certain amounts through crossed cheques drawn by exporters---Department found that the exporters made fraudulent claim with regard to duty draw back rebate thus notices were issued for refund of rebate---Petitioners being husband and wife inter se were also issued such notices as husband had received the cheques and wife was owner of the house---Validity---Only a person making false statement or a false declaration before officer of customs could be held guilty of offences under S.32 of Customs Act, 1969 and could be subjected to penalty under Item 14 of S.156 (1) of Customs Act, 1969---Amount erroneously paid could be refunded under S.32 (2) of Customs Act, 1969---When Customs Authorities were misled into making payments to exporters, such amount could only be recovered from them and from no other person---Nothing whatsoever was there even to infer that any allegation of any nature was ever made against wife by the authorities---Coercive measures for recovery were being applied against the wife merely because of the fact that house where her husband was living belonged to her---Such high-handedness on the part of officers vested with extensive powers for recovery of public revenues had to be strongly discouraged---High Court set aside the notice issued against petitioners for recovery of duty draw back---Petition was allowed in circumstances.

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

----S.32 (1)---False declaration---Onus to prove---Burden to prove liability for an offence under S.32 (1) of Customs Act, 1969, is squarely upon department and no penalty can be imposed on mere inferences.

Shoukat H. Zubedi for Petitioners.

Raja Muhammad Iqbal for Respondents Nos. 1 to 4.

Mehmood Alam Rizvi, Standing Counsel for Respondent. No.5.

2006 PTD 2030

[Karachi High Court]

Before Zahid Kurban Alvi and Muhammad Mujeebullah Siddiqui, JJ

GHANDHARA NISSAN DIESEL LTD., KARACHI

Versus

COLLECTOR OF CUSTOMS APPRAISEMENT, KARACHI and another

Constitutional Petitions Nos. D-1854, 396, 407, 193 of 1996 and 1648 of 1995, decided on 10th November, 2001.

(a) Words and phrases---

----"Levy"---Meaning in general and with reference to taxation.

Blacks Law Sixth Edition p.907 ref.

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

---Ss. 5, 18(I) & 19---Sales Tax Act (VII of 1990), S. 13(1)---S.R.O.815(I)/93, dated 16-9-1993, S.R.O. 438(I)/96, dated 13-6-1996---Customs General Order No. 13 of 1993, dated 4-10-1993---Constitution of Pakistan (1973), Art. 199---Constitutional petition---Import of trucks under Prime Minister's Transport Revamping Scheme (S.R.O. 815(I)/93) exempt from duty and sales tax---Opening of Letter of Credit on 22-11-1995---Arrival of vehicles during operation of S.R.O.815(I)/93---Denial of benefit under S.R.O. 815(1)/93 to importer on basis of Customs General Order No. 13 of 1993 providing cut off date of 24-4-1993 for opening Letter of Credit---Validity---Section 18(1) of Customs Act, 1969 was a charging provision imposing duty per First Schedule thereof as general statute---Such S.R.O. was a special statute granting exemption under S.19 of Customs Act, 1969 from charging S.18(1) thereof---Exemption granted under S. 19 of Customs Act, 1969 through such S.R.O. would prevail and could not be denied during operation of such S.R.O.---CGO No: 13 of 1993 and instructions of C.B.R. could not prevail over substantive provisions of Sales Tax Act, 1990 and S.R.O., issued thereunder---High Court accepted constitutional petition, declared impugned order as void ab initio and directed authority to assess duty under said S.R.O.

C.B.R. v. Sheikh Spinning Mills 1999 SCMR 1443; 1993 SCMR 1232; 1995 PTD 1212; PLD 1990 SC 626; 1996 SCMR 727; AIR 1961 SC 751; AIR 1985 Dehli 195; AIR 1987 Patna (sic); Collector Customs v. Saleem Araya PLD 1999 Kar. (sic); 1998 SCMR 1404; 1992 SCMR ' 1270; Federation of Pakistan v. Amjad Hussain, Al-Samrez's case 1986 SCMR 1917; PLD 1998 Karachi 11, 1998 MLD 4286; PLD 1990 SC 626; PLD 1998 Kar. 99; PLD 1993 SC 136 and AIR 1992 Rajisthan 99 ref.

Syed Wasey Zafar case's PLD 1994 SC 621; Messrs Ghandhara Nissan Diesel Ltd. v. The Collector of Customs (Customs Appeal No.K-371/2000) and Messrs Pak Suzuki Motor Company Ltd. v. The Collector of Customs (Appeals Nos. 1740 and 1741 of 1999 rel.

(c) Interpretation of statutes---

----Fiscal statutes---Terms should be strictly construed and every word and sentence of legislation has to be given meaning and significance---Redundancy cannot be attributed to a statute and each and every word therein would carry meaning.

1992 SCMR 1898; PLD 1988 SC 64; CLC 1994 1612; 1992 SCMR 1270; PLD 1998 Kar. 338; 1990 MLD 2304 and PLD 1963 SC 486 rel.

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

----Ss. 5 & 19---C.B.R's. instructions/orders and S.R.O.---Nature---C.B.R.'s instructions/orders could not override S.R.O.---One S.R.O. could only be rescinded/amended/modified through another S.R.O.

Aziz A. Shaikh for Petitioner.

Ziauddin Nasir, Standing Counsel for Respondents.

Date of hearing: 11th September, 2001.

2006 P T D 2053

[Karachi High Court]

Before Saiyed Saeed Ashhad, C.J. and Ghulam Rabbani, J

CYNAMID PAKISTAN LTD., KARACHI

Versus

GOVERNMENT OF PAKISTAN through Secretary, Ministry of Finance, Islamabad and another

Constitutional Petition No. D-861 of 1992, decided on 7th June, 2003.

Customs Act (IV of 1969)---

----Ss. 19, 30 & 31-A---S.R.O. 350(I)/85, dated 16-4-1985---S.R.O. 496(I)/88, dated 26-6-1988---Constitution of Pakistan (1973), Art.199---Constitutional petition---Rebate, claim of---Import of goods under concessionary S.R.O. 350(I)/85---Presentation of Bill of Entry from Bond on 16-6-1988---Non-clearance of Bill of Entry by authority and non-payment of duty till 28-6-1998, when such concession, stood withdrawn by S.R.O. 496(I)/88, dated 26-6-1988---Refusal of authority to accept rebate claim of importer on the ground that date relevant for determining rebate was the date of payment of duty and not the date of import or opening of Letter of Credit or presentation of Bill of Entry from Bond---Validity---Duty of authority was to establish beyond any reasonable doubt that delay in payment of duty was on account of any inadvertence, indolence or lethargy of importer---In absence of such proof, importer could not be denied benefit of such concessionary notification---Rebate claim had been filed on 16-6-1988, thus, importer could not be denied benefit thereof as S.R.O. 350(1)/88, dated 26-6-1988 could not operate retrospectively to deprive importer of his right accrued to him prior to 26-6-1988---Provision of S.31-A of Customs Act, 1969 would not apply to the facts of the present case---High Court accepted constitutional petition, set aside impugned order and allowed importer's claim of rebate.

Aziz A. Shaikh for Petitioner.

Nadeem Azhar Siddiqui, Dy. A.-G. for Respondents.

Date of hearing: 20th May, 2003.

2006 P T D 2066

[Karachi High Court]

Before Shabbir Ahmed and Muhammad Mujeebullah Siddiqui, JJ

GHANDHARA NISSAN DIESEL LTD., through Sr. General Manager Finance, Karachi

Versus

COLLECTOR, LARGE TAX PAYERS UNIT, GOVERNMENT OF PAKISTAN, KARACHI and 2 others

Special Sales Tax Appeal No.255 of 2002, decided on 27th February, 2004.

(a) Interpretation of statutes---

---Words used in a statute---Interpretation---Until and unless any contrary 'intention can be inferred expressly or impliedly, such words would be given their plain meaning in the ordinary course.

(b) Sales Tax Act (VII of 1990)

---Ss. 7 (1) & 8(1)(b)---S.R.O. 1307(I)/97, dated 20-12-1997---Claim for deduction of input tax paid on electric panels and transformers---Denial of such claim on basis of S.R.O., 1307(I)/97 for not having used such goods solely in producing taxable supplies---Validity---Provision of S.8(1)(b) of Act, 1990 is merely clarificatory to provision of S.7(1) thereof and not creating any new class of goods disentitling registered person from claiming or deducting input tax---Provision of S.8(1)(b) of Sales Tax Act, 1990 is in the nature of exception to general rule contained in S.7(1) thereof---Deduction of input tax permissible, if paid on goods being used for producing taxable supplies, but not, if paid on goods, which being either direct constituent and integral part of taxable supplies or used for a purpose other than taxable supplies---Entitlement of registered person to deduction of input tax, if available, would cease in respect of goods specified by Federal Government in notification---Federal Government in exercise of its power under S.8(1)(b) of Sales Tax Act, 1990 could exclude specific goods from admissibility of input tax, but could not create a new class of goods in general terms thereby excluding the whole class of goods from claim of input tax---Provision of S.R.O. 1307(I)/97 was in conflict with provision of Ss. 7(1) & 8(1)(b) of the Sales Tax Act, 1990 for having restricted wider connotation emanating from use of word "purpose" employed by legislature in S.7(1) thereof---Due to such conflict, provisions of Ss. 7(1) & 8(1)(b) of the Act, would prevail over S.R.O. 1307(I)/97---Such panels and transformers for not finding mention in S.R.O. 1307(I)/97 would not be excluded from entitlement of deduction of input tax---Such claim was allowed in circumstances ---Principles.

Central Board of Revenue v. Sheikh Spinning Mills Limited, Lahore 1999 SCMR- 1442 rel.

(c) Words and phrases---

---"Purpose"---Meaning.

Chamber's 20th Century Dictionary, 1983 Edition ref.

(d) Words and phrases---

---"Specific" & "General"---Meaning and distinction.

Chamber's Dictionary ref.

(e) Interpretation of statutes---

----Exception to general rule in a statute---Scope---Provision of law in the nature of exception shall not override substantive provisions, but shall operate merely to the extent of making exceptions to the general rule.

(f) Interpretation of statutes---

----Subordinate legislation=--Scope---Subordinate legislation could not expand or restrict substantive provisions contained in the Act---Any such attempt would be termed as conflicting to substantive provision and would, to such extent, have to give way to substantive provisions in the Act.

Aziz A. Shaikh for Appellant.

Raja Muhammad Iqbal and S. Mehmood Alam Rizvi, Standing Counsel for Respondents.

Date of hearing: 22nd January, 2004.

2006PTD2132

[Karachi High Court]

Before Mushir Alam, J

INDUSTRIAL DEVELOPMENT BANK OF PAKISTAN, KARACHI

Versus

Messrs VINDER TEXTILE MILLS LTD. and 15 others

J.M. No.1 of 1994 and C.M.A. No. 978 of 2003, decided on 27th April, 2006.

(a) Industrial Development Bank of Pakistan Ordinance (XXXI of 1961)---

----S.39---Customs Act (IV of 1969), Ss.19, 79 & 202---Civil Procedure Code (V of 1908), Ss.73 & 151---Sindh Chief Court Rules (0 S.), R.323---Execution of decree---Sale proceeds, distribution of---Government dues---Determination---Machinery imported under conces-sionary notification was put to auction in execution of decree passed in favour of the bank---From the sale proceeds of the machinery, Official Assignee paid customs duty, sales tax, Iqra surcharge, flood relief and withholding tax to Customs Authorities---Bank filed ,application contending that import of machinery was exempted from customs duty and other levies, therefore, Customs Authorities could not receive any amount from the sale proceeds of the machinery---Bank in its application, further contended that Customs Authorities were not party before the Court, therefore, could not claim any priority or distribution under S.73 C.P.C.---Validity---Exemption under notification could have been availed only in respect of machinery, which was imported for notified purposes and subject to fulfilling requirement laid down in the notification, provided that bill of entry as required under S.79 of Customs Act, 1979, was filed during the currency and in the manner provided for, under the exemption notification---As bill of entry was filed by importer but he could not clear the goods, then neither bank nor auction-purchaser was qualified to claim exemption from payment of customs duties or other charges or dues under the notification---When sale was effected under the provisions of Civil Procedure Code, 1908, payment was to be made in the order of priority as set down in S.73 (3) C.P.C.---Customs duty, sales tax, Iqra surcharge, flood relief and withholding tax were all statutory duties and levies imposed and recoverable by Customs Authorities under statutory mandate---All sums paid by Official Assignee to Customs Authority and Karachi Port Trust could not be questioned---Such encumbrance or charge holders were before the Court prior to sale and they had lodged their claims before Official Assignee under orders of the Court, therefore, in view of R.323 of Sindh Chief Courts Rules (O.S.) were to be treated at par with competing decree holders to assert claim and earn priority---Application was dismissed in circumstances

PICIC v. Government of Pakistan 2002 SCMR 496; Sohail Textile v. Federation of Pakistan PLD 1991 SC 329; State Life Insurance Corporation v. Hussain Mumtaz 2006 CLC 415; PIC&I Corporation v. Ali Gui Khan 1989 CLC 1774 and Mst. Shanti v. KTC 2000 CLC 595 ref.

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

----S. 19---Sales Tax Act (VII of 1990), S.3 (1)(b)---Income Tax Ordinance (XXXI of 1979), S.50 (5)---Exemption notification---Sales tax and withholding tax, recovery of---Principles---Even exemption from payment of customs duty in terms of notification issued under S.19 of Customs Act, 1969, does not exonerate from payment and collection of sales tax and withholding tax, unless otherwise exempted under respective statutes as well.

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

----S.202---Phrase "under any other law for the time being in force"---Connotation---Collection of duties and taxes, other than customs duty---Scope---Authorities of customs under S.202 of Customs Act, 1969, are statutorily bound to collect all taxes, duties and other levies as may be imposed under any other law, provided same are to be collected in the same manner as customs duty is collected---Phrase "under any other law for the time being in force" as used in S.202 of Customs Act, 1969, inevitably refers to all laws other than Customs Act, 1969,'under which duties in the nature of customs duties are levied, charged and recovered.

Aziz-ur-Rehman for Petitioner.

Shakeel Pervaiz for Respondents.

2006 P T D 2150

[Karachi High Court]

Before Muhammad Mujeebullah Siddiqui and Sajjad Ali Shah , JJ

AVERY SCALES (PRIVATE) LTD., KARACHI

Versus

ADDITIONAL COLLECTOR (ADJUDICATION III) KARACHI and another

Special Sales Tax Appeal No. 61 of 2003, decided on 12th May, 2006.

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

----Ss. 2(33)(41), 3 & 13---Sales Tax on taxable activity and taxable supply---Scope---Taxable activity would be read in conjunction with taxable supply---No taxable activity could attract imposition of tax, unless there was taxable supply and such activity was in the course of or in furtherance of any taxable supply---Principles.

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

---Ss. 2(33) & 3---Spare parts consumed and repair charges earned by assessee while performing repair services---Levy of sales tax on such parts, charges and services---Validity---Such services rendered by assessee could not be subjected to tax for not falling in any category of taxable supplies mentioned in S.2(33) of Sales Tax Act, 1990---No additional tax, thus, could be levied for non-payment of tax on repair charges---Levy of additional tax would be justified for non-payment of sales tax on account of consumption of such parts.

Collector of Sales Tax and Central Excise Large Taxpayers Unit, Karachi v. Messrs Allied Engineering and Services Ltd., Karachi 2005 PTD 2582 rel.

Ijaz Ahmed for Appellant.

Raja Muhammad Iqbal for Respondents.

Date of hearing: 12th May, 2006.

2006 P T D 2167

[Karachi High Court]

Before Nadeem Azhar Siddiqui, J

Malik MUHAMMAD SAEED

Versus

FEDERATION OF PAKISTAN and others

Suit No. 914 of 1999, decided on 12th June, 2006.

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

----S. 9---Jurisdiction of Civil Court---Scope---Provisions barring jurisdiction of Civil Court ought to be strictly construed---Such provisions would not be attracted to impugned action/order, if same was neither mala fide nor without jurisdiction, but found to be within four corners of statute whereunder same was taken---Principles.

Provisions barring jurisdiction of Civil Courts are only attracted, when the impugned action is found to be within four corners of the statute under which it was taken and does not suffer from mala fide and want of jurisdiction. The Court of general jurisdiction has jurisdiction to resolve all disputes of civil nature, unless barred by any law and the provisions of Special Law purporting to take away its jurisdiction ought to be strictly construed. Mala fide order or one without jurisdiction being fraud on law can never be assumed to have been passed under any particular statute. Plea as to bar of jurisdiction can only be sustained, if it can be shown that impugned order was passed in bona fide exercise of power conferred by the Act or the Rules and not otherwise.

When special law provides hierarchy for redress of grievance, then one cannot normally be allowed to circumvent it by invoking jurisdiction of Civil Court. However, if prima facie plaintiff shows mala fide on the part of authority or any illegality, which is floating on the surface and/or absence of jurisdiction, then jurisdiction of Civil Court can be invoked in the matters.

`

Collector of Central Excise v. Messrs Syed Muzakkar Hussain (sic) fol.

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

----Ss. 16, 17, 32, 156(9)(14), 169 & 217---Specific Relief Act (I of 1877), Ss. 42 & 54---Customs General Order No. 19/98, dated 7-9-1998---S.R.O. 599(I)/1993, dated 17-3-1993---Suit for declaration and permanent injunction---Import of used vehicle by plaintiff (a Pakistani National) under Transfer of Residence Scheme---Arrival of plaintiff in Pakistan on 17-4-1997----Bill of Entry, dated 15-7-1998 showing shipment of vehicle on 28-6-1998---Order-in-Original passed by Authority imposing fine and penalty together with leviable duty/taxes for shipment of vehicle after 60 days of plaintiff's arrival in Pakistan---Validity---Customs Authorities had power to check whether vehicle had been imported in accordance with S.R.O. 599(1)/93 or not---Such vehicle could be straightaway confiscated in terms of Customs General Order 19/98, dated 7-9-1998---Impugned action taken by Authorities was in accordance with S.17 of Customs Act, 1969 and not mala fide as vehicle had been imported in violation of 5.169 thereof---Remedy of appeal up to High Court was available to plaintiff, where he could agitate the pleas raised by him in present suit---Impugned action was saved under S.217 of Customs Act, 1969, thus, was not open to challenge before Civil Court, which could not set aside or modify same---Suit was not maintainable and dismissed in circumstances.

Hamid Hussain v. Government of West Pakistan 1974 SC 356; Town Committee Under the payment of Wages Act PLD 2002 SC 452; Kamran Industries v. Collector of Customs PLD 1996 Kar. 68; Pervaiz Kashanian v. Collector of Central Excise and Land Customs 2003 PTD 575; Abbasia Cooperative Bank v. Hakeem Hafiz Muhammad Ghaus PLD 1997 SC 3; Punjab Small Industries Corporation v. Ahmed Akhtar Cheema 2000 SCMR 549; S.M. Shafi Ahmed Zaidi v. Mir Hassan Ali Khan 2002 SCMR 338; Messrs K.G. Traders .v.. Deputy Collector of Customs PLD 1997 Kar. 541 and Collector of Central Excise v. Syed Muzakkar Hussain (sic) ref.

Al Ahram Builders (Pvt.) Limited v. Income Tax Appellate Tribunal 1993 SCMR 29 rel.

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

----S. 17---Use of words "good faith" in S.217(1) of Customs Act, 1969, but its omission in S.217(2) thereof---Effect---Protection to actions mentioned in S.217(1) of Customs Act, 1969 would be available, if same were taken or intended to be done in good faith, otherwise not---Non-use of words "good faith" in S.217(2) of Customs Act, 1969 would make all actions mentioned therein to be protected from challenge before civil Court---Principles.

(d) Constitution of Pakistan (1973)---

----Art. 199---Civil Procedure Code (V of 1908), S.9---Provisions in a statute barring jurisdiction of civil Court---Not applicable to filing of constitutional petition---Reasons.

The subordinate legislation under the Constitution cannot take away the rights granted by the Constitution. The provisions contained in various statutes barring jurisdiction of civil Court are not applicable to the filing of constitutional petition.

Khawaja Shams-ul-Islam for Plaintiff.

Raja Muhammad Iqbal.for Defendants Nos.2 and 3.

2006 P T D 2190

[Karachi High Court]

Before Ali Sain Dino Metlo, J

BABAR YOUNUS

Versus

THE STATE

Special Criminal Bail Application No. 22 of 2006, decided on 2nd June, 2006.

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

----Ss. 33 & 37-A---Offence of tax fraud---Arrest and prosecution of accused in every case not mandatory, but within discretion of authority to be exercised judiciously---Arrest could not be made merely on basis of reasonable suspicion, which could not be equated with "belief"---Condition precedent for arrest was availability of material evidence sufficient to believe commission of tax fraud by the person to be arrested---Principles.

(b) Criminal trial---

----"Reasonable suspicion" cannot be equated to "belief".

(c) Criminal Procedure Code (V of 1898)---

----S. 497---Sales Tax Act (VII of 1990), Ss. 33, 37-A, 46 & 66---Sales Tax Refund Rules, 2002, R. 8(1)---Bail, grant of---Refund claim, pendency of---Tax fraud case, registration of---Investigating Officer had inferred commission of tax fraud by assessee due to non-availability of supplier and assessee at given addresses---Investigating Officer had not made any effort to collect evidence to show that supplier had not deposited or accounted for tax covered by invoices---No equity has been started against supplier---Export of goods and receipt of value of goods in foreign exchange by assessee had not been denied by prosecution---Refund claim of assessee was still pending and no show-cause notice for its rejection or prosecution had been served on him---Purchases made on credit by assessee for not being prohibited could not be treated as confession of tax fraud---Assessee was in custody for more than 1-1/2 months---Completion of investigation would take a long time---Offence was compoundable and punishable with imprisonment for five years or fine or both---State had not suffered any loss of revenue---Assessee was granted bail in circumstances.

M. Ilyas Khan for Applicant.

Mahmood Alam Rizvi, Standing Counsel for the State.

Date of hearing: 31st May, 2006.

2006 P T D 2194

[Karachi High Court]

Before Muhammad Mujeebullah Siddiqui and S.Ahmed Sarwana, JJ

MEHRAN METAL CONTAINERS (PVT.) LTD. KARACHI, through Director

Versus

COLLECTOR OF SALES TAX AND CENTRAL EXCISE (EAST) GOVERNMENT OF PAKISTAN, KARACHI and 2 others

Spl. C.E. Appeal No.71 of 2002, decided on 14th May, 2003.

Central Excises Act (I of 1944)---

----S. 4(1)(3)---Central Excise Rules, 1944, R.10(2)(3)---Manufacturing of drums by contractor (assessee) for its owner on supply of steel sheets and payment of manufacturing charges---Agreement between contractor and owner provided for reimbursement by owner to contractor excise duty and all taxes paid on manufactured drums after producing documentary evidence thereof---Show-cause notice after three years demanding duty from contractor, issuance of---Validity---Intention to obtain any gain or advantage on account of any misstatement, misdeclaration, under valuation, under assessment or suppression of any tax was totally missing---Such case could be termed as a case of misdeclaration or short levy of tax attracting R.10(2) of Central Excise Rules, 1944---Loss of revenue, if any, could be retrieved within a period of three years---Case of fraud was neither made out nor established against contractor---Show-cause notice was barred by time and all proceedings in pursuance thereof were void and inoperative.

Aziz A. Shaikh for Appellant.

Raja Muhammad Iqbal for Respondents.

Date of hearing: 22nd January, 2003.

2006 P T D 2207

[Karachi High Court]

Before Anwar Zaheer Jamali and Muhammad Mujeebullah Siddiqui, JJ

KARACHI SHIPYARD & ENGINEERING WORKS LTD., KARACHI

Versus

ADDITIONAL COLLECTOR, CUSTOMS, EXCISE AND SALES TAX (ADJUDICATION-III), GOVERNMENT OF PAKISTAN, KARACHI and 2 others

Constitutional Petition No. 1940 of 2000, decided on 2nd January, 2001.

Constitution of Pakistan (1973)---

----Art. 199---Constitutional petition---Petitioner-company had contended that it had already preferred sales tax appeal against impugned order which was pending but due to non-availability of Member Technical in the Tribunal, same was not being taken up for hearing---Petitioner had further contended that it would be satisfied if petition was disposed of with observation that till said appeal filed was taken up by the Tribunal, no adverse action would be taken against the petitioner on the basis of impugned order---Submission made by petitioner appearing to be reasonable, High Court ordered that department would not take any adverse action against petitioner on basis of impugned order and recovery notice, till appeal of petitioner was taken up for hearing by Tribunal.

Aziz A. Shaikh for Petitioner.

Raja Muhammad Iqbal for Respondents Nos.l and 2.

2006 P T D 2209

[Karachi High Court]

Before Muhammad Mujeebullah Siddiqui and Sajjad Ali Shah, JJ

Messrs IHSAN SONS (PVT.) LTD., KARACHI

Versus

FEDERATION OF PAKISTAN through Secretary Revenue Division, Ministry of Finance, Islamabad and 2 others

Special Customs Appeal No.63 of 1999, decided on 2nd June, 2006.

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

----Ss. 19 & 32---S.R.O.484(I)/92, dated 14-5-1992, Table 1---S.R.O.1284(I)/90 read with C.B.R. Clarifications, dated 27-1-1992 & 29-8-1994---General Clauses Act (I of 1897), S.11---Setting up textile unit in Rural Area (i.e. beyond 30 kilometers of outer limits of Municipal or Cantonment Board)---Exemption on import of machinery for such unit, granting of---Distance of importer's unit, measured subsequently on horizontal plane, found to be less than 30 kilometers from outer limit of Metropolitan Corporation---Denial of exemption on such ground and issuance of show cause for misdeclaration---Validity---Declaration made by importer in Bill of Entry disclosed place of installation of machinery for purpose of expansion, where earlier imported machinery was already installed---Such statement of importer had been accepted earlier by authority and there was no misdeclaration therein---Authority recalled acceptance of importer's declaration on basis of subsequent clarification of C.B.R. prescribing measurement of distance on horizontal plane instead of through road---Such was a matter of interpretation and not a matter of misdeclaration within contemplation of S.32(1) of Customs Act, 1969---View taken by authority in the order-­in-original for being based on interpretation made by C.B.R. by way of clarification was not warranted in law-Importer was entitled to exemption---Principles.

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

----Ss. 19 & 195---Exemption notification/S.R.O. issued by Federal Government---Powers of Central Board of Revenue to interpret such notification/S.R.O.---Scope---C.B.R. in exercise of its administrative jurisdiction by way of clarifications could not interpret any law or add/subtract anything or expand/restrict scope of such notification/ S.R.O.s---Any addition, omission, alteration or modification in such S.R.O./notification could be made by Federal Government only and not by C.B.R. being an attached department---Principles.

Federal Government issues exemption notifications in exercise of the powers conferred by section 19 of Customs Act, 1969. There are certain other provisions in Customs Act, 1969, which empower C.B.R. also to issue certain notifications. In matters pertaining to the delegated legislation, the power has to be exercised strictly in accordance with the statutory law conferring such powers. The exemptions, scope and extent thereof under section 19 of Customs Act, 1969 are exclusively within the competence of Federal Government and therefore, the C.B.R. being an attached department has no authority to add anything or subtract or expand or restrict the scope of exemption by way of clarifications. All such alternations, additions, modifications, expansions and restrictions made by the C.B.R. in exercise of its administrative jurisdiction is not warranted in law and has no legal validity. Thus, the C.B.R. is neither empowered to interpret any law nor is authorized to add anything to the S.R.Os. issued by Federal Government in exercise of the delegated authority under particular provision of law. The addition, omission, alteration or modification in any S.R.O./notification issued by Federal Government can be made by Federal Government only and not by C.B.R. being an attached department.

Lever Brothers Pakistan Limited v. Customs Sales Tax and Central Excise Tribunal 2005 PTD 2462 ref.

Farogh Naseem for Appellant.

Raja Muhammad Iqbal for Respondent.

Date of hearing: 16th November, 2005.

2006 PTD 2219

[Karachi High Court]

Before Sarmad Jalal Osmany and Zahid Kurban Alavi, JJ

GHANDHARA NISSAN (PVT.) LTD., KARACHI

versus

ASSISTANT COLLECTOR, CUSTOMS GROUP VIII through Collector of Customs (Appraisement), Karachi and another

Constitutional Petition No. 1514 of 1994, decided on 28th September, 2002.

Customs Act (IV of 1969)---

----Ss. 30 & 31-A--- Constitution of Pakistan (1973), Art.199---S.R.O. 5000(I)/100, dated 26-6-1988---S.R.O. 1105(I)/93, dated 18-10-1993---Constitutional petition---Exemption from levy of Sales Tax---Petitioner's contention was that when he opened Letter of Credit on 21-9-1993 for importing goods, no Sales Tax was payable on importation of such goods per S.R.O. 5000(I)/100 dated 26-6-1988 and that at the time when goods arrived at Karachi and Bill of Entry was filed on 3-11-1993, department demanded Sales Tax on basis that exemption stood withdrawn vide S.R.O. 1105(I)/93 dated 18-10-1993---Claim of petitioner was that since no Sales Tax was payable on goods when the letter of credit was opened on 21-9-1993 and the goods shipped on 14-10-1993, it had acquired, vested right to get the goods imported free from payment of Sales Tax---Validity---Petitioner having entered into a contract by opening a Letter of Credit had acquired a vested right in getting goods cleared without paying tax---Amendment in the Customs Act, 1969 by introducing S.31-A, would only be applicable in those matters where customs duty was involved.

Al-Samrez v. Federation of Pakistan 1986 SCMR 1917; Crescent Pa Industries (Pvt.) Ltd. v. Government of Pakistan and others PTCL 1990 CL 457 and Punjab Steel Ltd, and 3 other Companies v. Deputy Collector of Customs Dry Port Lahore and others PTCL 1989 CL 289 ref.

Aziz A. Shaikh for Petitioner.

Nadeem Azhar Siddiqui, DAG for Respondents.

2006 P T D 2227

[Karachi High Court]

Before Muhammad Mujeebullah Siddiqui and S. Ahmed Sarwana, JJ

COMMISSIONER OF INCOME TAX, COMPANIES-I, KARACHI

Versus

AMIN HAJI USMAN

I.T.C. No. 243 of 1991, decided on 17th May, 2003

Income Tax Ordinance (XXXI of 1979)---

----S.13 [as stood before its amendment by Finance Act (VII of 1992)]---Addition to declared income of assessee on basis of increase in or re-determination of value of any property or valuable article---Essentials---Two separate and independent prior approvals of Inspecting Assistant Commissioner would be required for making such addition---Provision for obtaining second approval required by S.13(2) of Income Tax Ordinance, 1979 was deleted by Finance Act, 1992.

C.I.T. v. Muhammad Kassim 2000 PTD 280; CIT v. Messrs East Pakistan Chrome Lahore 2001 PTD 2312 and CIT Lahore v. Punjab Cooking Oil Limited 2001 PTD 2161 fol.

Jawaid Farooqui for Applicant.

Aziz A. Shaikh for Respondent.

2006 P T D 2237

[Karachi High Court]

Before Muhammad Mujeebullah Siddiqui and Syed Zawwar Hussain Jafferi, JJ

PAK SUZUKI MOTORS CO. LTD. through Senior General Manager (Corporate Planning & Logistics), Karachi

Versus

COLLECTOR OF CUSTOMS through Assistant Collector (Processing), Karachi

Customs Reference Application No.166 of 2005, decided on 14th June, 2006.

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

----S. 193(4)---Appellate Authority, order of---Essentials---Appellate Authority in exercise of quasi judicial function was required to decide appeal and not merely to dispose of the same---Such order must be a speaking order disclosing application of mind to the facts and law and reasons for every finding---Practice of dealing with an issue in a perfunctory manner and disposing of appeal by a slipshod order devoid of any reason---High Court strongly deprecated such practice---Principles.

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

----S. 25(3)---Customs Rules, 2001, R. 2(g), Expin. II---Relationship between buyer and seller in terms' of the rules---Expression "associated" used in R.2(g) of Customs Rules, 2001 while-defining expression "related persons"---Scope---Expression "associated" would not be taken as independent expression, but would be considered in the light of Explanation II to R.2(g) of Customs of Rules, 2001---Principles.

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

----Ss. 194 & 196---Reference to High Court---Question of fact not decided by Tribunal---Validity---Tribunal as a final fact-finding authority was obliged to consider such question---High Court in exercise of its advisory jurisdictions would not give any finding of fact for the first time in such a case.

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

----S. 25(3)(a)(b)---Interpretation of clauses (a) & (b) of S.25(3) of Customs Act, 1969---Use of word "or" in between such clauses made them disjunctive and/or not injunctive---Conditions specified in both such clauses not required to be satisfied simultaneously---Transaction value would be accepted for purpose of S.25(1) of Customs Act, 1969, if either of the .conditions specified in such clauses, was satisfied---Principles.

(e) Interpretation of statutes---

----Term used by legislature---Substitution of such term by any executive or judicial authority not warranted.

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

----S. 25(1)(3)---Customs Rules, 2001, R.2(g), Expin. II---Deduction of trade discount from price of imported goods---Validity---Exporter had allowed discount to applicant on importing 11280 vehicles in CKD kits---Exporter had not allowed discount to any other importer---Commercial level and quantity level of import made by applicant could not be compared with any other importer in Pakistan---Like would be compared with like, in such circumstances surrounding the sale of imported goods, discount allowed by exporter could not be treated on account of influence or due to relationship, but same was on account of commercial expediency and business consideration---Applicant was entitled to claim discount.

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

---S. 25(3)---Transaction value, determination of---Like would be compared with like.

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

---S. 32---Custom General Order No.12 of 2002, dated 15-6-2002, Para 44---Short-levy of duty, charge of---Issuance of show-cause notice pertaining to post import matter and passing order-in-original for recovery of short levied duty by Assistant Collector of, Customs---Validity---Such being a post importation case, only officers of Valuation Department could initiate action for recovery of government dues under S.32 of Customs Act, 1969---Order-in-original was without jurisdiction.

Aziz A. Shaikh and Khurram Shaikh for Applicant. Haider Iqbal Wahniwal for Respondent.

Dates of hearing: 25th April, 2005 and 26th April, 2006.

2006 P T D 2256

[Karachi High Court]

Before Muhammad Mujeebullah Siddiqui and Sajjad Ali Shah, JJ

COMMISSIONER (LEGAL DIVISION) LARGE TAXPAYERS UNIT, KARACHI

Versus

BAWANY METALS LTD. KARACHI

Income Tax Case No.154 of 2005, decided on 8th December, 2005.

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

----S. 136---Question already decided by High Court---Not to be entertained again.

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

----S. 23---Deductions---Expenditure incurred or extra amount paid on account of infraction of law---Not to be allowed as admissible deduction---Exceptions stated.

Any expenditure on account of infraction of law is not to be allowed. This principle is not to be applied when an extra amount is paid in pursuance of an administrative direction and not in pursuance of infraction of any statute law or rules framed thereunder.

If there is no infringement, transgression, violation or infraction of law and an excess amount has been paid on account of some , executive/administrative orders or in accordance with the terms of a contract between the two private parties and the course adopted is on account of business expediency, the expenditure so made must be treated as wholly and exclusively for the purpose of business. If infringement or violation of any law is such that any commission or omission is not warranted in law at all and the course adopted is not permissible under any provision of law, then any penalty and fine imposed by competent authority shall not be treated as an expenditure incurred wholly and exclusively for the purpose of business and shall not be an admissible expenditure, as infraction of law cannot be held to be for the business purposes. However, if the provision of law itself envisages different courses of action and option is available to a person to adopt any one of the courses, then it would not amount to infraction or violation of law, but would come within the precincts and premises of law. Adoption of any one of the courses open to a person under the law shall be deemed to be a compliance of the law and not the infraction or violation thereof. If any extra amount is paid on account of any delayed payment, such extra amount is in the nature of compensation and not in the nature of penalty or fine. For the purpose of fine or penalty, there should be a separate proceeding initiated and conducted by an authority competent in law. An extra amount paid in ordinary course and automatically without any intervening order passed by competent authority as penalty and fine, shall not be treated on account of infraction of law for the simple reason that the law or administrative act itself provides for payment of extra amount. Likewise any interest/mark-up paid on account of delayed payment of principal amount shall not be treated as fine or penalty. Such extra payment by whatsoever nomenclature charged shall not become a fine or penalty imposed by competent authority for infraction of law, but actually it would be in the nature of compensation, though described differently, and may be loosely termed as penalty or fine. The reason being that mere use of a particular term or a nomenclature is not the final determining factor, but the substance of the matter is to be examined.

The facts and circumstances of each case are to be examined for ascertaining, whether the extra amount paid is in the nature of fine or penalty on account of infringement of provision of law or it was for business expediency and if so, it shall be wholly and exclusively for the purpose of business and shall be treated as admissible deduction. However, if it is not for business consideration, and in fact it is in the nature of penalty or fine, the expenditure is not to be allowed.

If an amount paid is automatic and in contemplation of the parties, then notwithstanding the describing of excess amount as fine or penalty or penal interest or use of any word or nomenclature, shall not change the nature of transaction, which is to be determined and gauged on the basis of the substance of the matter. The reason being that the penalty and fine was not within the contemplation of the parties, but a competent authority on account of infraction of some law imposed it.

1991 PTD 669; Sui Southern Gas Company Ltd. v. Commissioner of Income Tax Companies-V, Karachi PLD 2001 SC 201 and Commissioner of Income Tax Companies-1 Karachi v. Premier Bank Limited 1999 PTD 3005 rel.

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

----S. 23---Deductions---Expenditure incurred on account of or in nature of tine or penalty for delayed payment---Kinds of fine or penalty and their admissibility as business expenditure---Principles.

An expenditure incurred on account of fine or penalty or in the nature of fine or penalty is not to be allowed as deduction.

An expenditure, which although has been incurred by an assessee on account of infringement of a provision of a statute, but not in the nature of fine or penalty, can be allowed as admissible deduction, provided it is incurred wholly and exclusively for the purpose of business.

The question, whether any expenditure on account of infringement of any provision of law is for the purpose of business and is an admissible expenditure shall depend on the facts and circumstances of each case.

If any expenditure is claimed on a transaction in flagrant violation of the provisions contained in any law and the transaction, act/omission is liable to the levy of fine or penalty by way of criminal or civil sanction and the competent authority has imposed civil or criminal penalty provided in the law, then expenditure incurred on illegal transaction as well as penalty for indulging in such illegal transaction both shall be inadmissible expenditure.

If there are various provisions in any law providing for automatic enhanced/excess payment on commission of a default or delay and there is a provision for imposition of penalty/tine as well with the discretion of authorities competent under a law and the provisions for imposition of fine or penalty within the discretion of competent authorities have not been invoked and an enhanced/excess amount is charged for any default/delay, such enhanced/excess amount shall be deemed to be part and parcel of original liability and not a fine or penalty.

If the excess amount paid by an assessee in the normal course of business purposes on account of any delay or default is within the contemplation .of the parties and the excess amount paid is automatic, which requires mere calculation, it would be in the nature of compensation paid for delay or default and it shall not be deemed as penalty or fine, or in the nature of penalty/fine or akin to the penalty or fine.

If any excess amount is paid by an assessee for any delay or default in performance of an act and in excess charge is fixed and not in the discretion of any competent authority in law and no separate proceeding is required for charging the excess/enhanced amount and no separate order is required to be made and there is no requirement of framing any charge or confronting the defaulting party and seeking explanation, then the amount so charged would not be deemed to be penalty/fine.

Mere use of word penalty or fine shall not make an amount to be in the nature of penalty or fine, until and unless in substance, the amount charged is penalty or fine or in the nature of penalty or fine.

The payment of only such amount shall be treated as penalty/ fine, which is charged as a result of infraction, transgression or violation, which is imposed by an authority competent in law. An amount paid by an assessee on its own volition/discretion/option available in law for the consideration of business purposes in pursuance of commercial expediency and not with the intention of flouting the mandatory provision of law shall not be deemed to be penalty/fine and shall be deemed to be extension of liability permissible in law and/or compensation for delay/default contemplated by the parties and permissible in law.

The demurrage paid to the Port and Railway authorities, which is in excess of the original liability, likewise surcharge for delayed payment of utility bills such as electricity bill, gas bill, telephone bill, property tax, water tax, municipal taxes, motor vehicle taxes, arms licence fee, late payment fee for examination, late payment fee for renewal of various licences so on and so forth, are not in the nature of penalty or fine, as all of these payments are automatic, without initiation of any separate proceedings and without any separate order and exercise of any discretion by any competent authority on the consideration of facts and circumstances of each case.

1991 PTD 669; Sui Southern Gas Company Ltd. v. Commissioner of Income Tax Companies-V, Karachi PLD 2001 SC 201; Commissioner of Income Tax Companies-1 Karachi v. Premier Bank Limited 1999 PTD 3005; ACIT v. Rustam Jehangir Vakil Mills Ltd 1976 103 ITR 298; Mahalakshmi Sugar Mills Co. v. CIT 1980 123 ITR 429; 1972 85 ITR 320 and CIT Karnataka v. Mandya National Paper Mills Limited 1984 150 ITR 27 Karnataka High Court rel.

(d) Law---

----Connotation---Such expression would include legislative Act, subordinate legislation in nature of Rules and notifications issued under authority of legislative Act---Executive directions issued from time to time would not fall within purview of "law".

Aqeel Ahmed Abbasi for Applicant.

2006 P T D 2378

[Karachi High Court]

Before Shabbir Ahmed and Muhammad Sadiq Leghari, JJ

Messrs CALTEX OIL (PAK.) LIMITED through Nuruddin Damani

Versus

COMMISSIONER OF INCOME TAX, COMPANIES II, KARACHI

I.T.C. No.56 of 1990, decided on 3rd December, 2002.

Income Tax Ordinance (XXXI of 1979)---

----Ss. 9, 24 & 136---Income Tax Rules, 1982, R.20---Assessment---Charge of Income Tax---Reference to High Court--Wader charging S.9 of Income Tax Ordinance, 1979, the law in vogue in the assessment year would govern the assessment, notwithstanding the ending of the income year---Income of previous year was assessable in subsequent assessment year---Assessment was to be made in accordance with the law in force at the beginning of assessment year in respect of income years preceding to the said assessment year---Petitioner/assessee's income year, in the present case, ended on 31-12-1981 thus assessment year would be 1982-83 i.e. from 1-7-1982 to 30-6-1983--Rule 20 of Income Tax Rules, 1982, in circumstances had not been applied retrospectively--Income Tax Appellate Tribunal in circumstances, had rightly rejected reference application under S. 136(1) of Income Tax Ordinance, 1979, to which no exception could be taken.

CIT v. Isthmian 20 ITR 572; Jayakumari v. CIT 165 ITR 792; Maharajah of Pithapuram v. CIT 13 ITR 221; Government of West Pakistan v. Nasir M. Khan PLD 1965 SC 106; Faizullah Khan v. Government of Pakistan PLD 1974 SC 291; Income Tax Officer, Alleppey v. M.C. Ponnoose and Income Tax Officer, Alleppey v. Excel Productions (1970) 75 ITR 174 SC; Rehmatullah v. Province of Punjab PLD 1978 Lah. 207; Sanghal Sugar Mills Ltd. v. Federation of Pakistan1991 CLC 456; Pakistan WAPDA v. Shamim Kamal 1998 SCMR 2571 = 1998 PLC (C.S.) 1306; Anis Ahmed v. Government of Pakistan PLD 1979 Kar. 709; Muhammad Bashir Butt v. Taheri PLD 1980 Kar. 458; Collector of Customs and Central Excise v. Rais Khan Ltd. 1996 SCMR 83; Commissioner of Sales Tax v. Kruddsons Ltd. PLD 1974 SC 180 and Ittefaq Foundaries v. Deputy Collector of Customs, Dry Port, Lahore 1988 MLD 2272 ref.

Abdul Ghaffar Khan for Applicant.

Nasarullah Awan for Respondent.

2006 PTD 2419

[Karachi High Court]

Before Sarmad Jalal Osmany and Zahid Kurban Alavi, JJ

COMMISSIONER OF INCOME TAX, COMPANIES-III, KARACHI

Versus

Messrs POLYPROPYLENE PRODUCTS LTD.

I.T.C. No.187 of 1993, decided on 16th, November, 2002.

Income Tax Ordinance (XXXI of 1979)---

----S.136(2) & Second Sched., Cl.125---Claim of exemption---Reference to High Court--Application for---Income Tax Appellate Tribunal, observing that assessee was a manufacturer, allowed exemption to assessee and also refused to refer question to High Court as according to it, that was a question of fact and not question of law---Question whether on facts and in circumstances of case, Income Tax Authority was justified in declaring assessee as "manufacturer" as framed was a question of fact---Reference application was dismissed.

Commissioner of Wealth Tax v. SMT Sajjanbai ITR 1982, Volume 137 at page 329 ref.

Nasrullah Awan for Applicant.

Abdul Ghaffar Khan for Respondent.

Date of hearing: 5th September, 2002.

2006 P T D 2435

[Karachi High Court]

Before Sarmad Jalal Osmany and Sajjad Ali Shah, JJ

MUHAMMAD SHARIF

Versus

COLLECTOR OF CUSTOMS (APPRAISEMENT), KARACHI and another

Constitutional Petition No.D-463 and M.A. No.1780 of 2006, decided on 16th May, 2006.

Customs Act (IV of 1969)---

----S. 82---Constitution of Pakistan (1973), Art. 199---Constitutional petition---Failure to get the goods clear---Effect---Petitioner/importer had contended that he had no knowledge that goods had arrived at the Port and for that reason he could not clear the same due to which said goods had been auctioned by Customs Authority---Contention of petitioner had been repelled on the ground that necessary notice under S.82 of Customs Act, 1969 was duly sent to petitioner and thereafter matter was proceeded---Validity---Imported goods were legally auctioned by Customs Authorities after serving necessary notice on petitioner under S.82 of Customs Act, 1969; as petitioner had disputed receipt of said notice, it was a question of fact which could not be agitated by petitioner in constitutional jurisdiction of High Court---Petition therefore, was dismissed---Petitioner however would be free to resort to any other forum for redress of his grievance---Customs Authorities would proceed to deliver goods to Auction purchaser, accordingly.

Muhammad Mushafey Ahmed for Petitioner.

Raja Muhammad Iqbal for Respondents along with Tariq Aziz Appraising Officer.

2006 P T D 2439

[Karachi]

Before Anwar Zaheer Jamali and Muhammad Ather Saeed, JJ

COMMISSIONER (LEGAL DIVISION)

Versus

N.D.F.C.

ITC No. 197 of 2004, decided on 1st March, 2006.

Income Tax Ordinance (XXXI of 1979)---

----Ss. 136 & 23(1)(vii)---Reference to High Court---Applicant/department being aggrieved by order passed by Income Tax Appellate Tribunal filed a Reference under S.136(1) of Income Tax Ordinance, 1979 before the Tribunal asking it to refer question of law for opinion of High Court---Office of Tribunal inadvertently treated said application as income tax appeal, did not fix it for hearing for a long period---Tribunal refused to refer question framed by applicant/department on the assumption that there must have occurred many changes in the law as well as in the facts and circumstances of the case during period of pendency of reference application which was pending for more than seven years---Impugned order of the Tribunal was tantamount to punishing applicant for an erroneous act of the Tribunal as it had been admitted that mistake in the treating of the reference as an income tax appeal was on the part of the office of the Tribunal and not on the part of applicant---Parties could not be punished for an erroneous act of the Court---Tribunal under provisions of S.136(1) of Income Tax Ordinance, 1979 could either refer the proposed question for the opinion of the High Court or could reject same either on the ground that no question of law had arisen or on the ground that application was time barred---No other order could be passed by the Tribunal under S.136(1) of Income Tax Ordinance, 1979---Order passed by the Tribunal, in circumstances was against the provisions of S.136 of Income Tax Ordinance, 1979---On merits, however, there was no substance in the question proposed by applicant either on fact or on law and High Court refused to answer the same---Reference application being devoid of merits, was dismissed.

Packages Limited v. The Commissioner of Income Tax 1993 SCMR 1224; The Commissioner of Income Tax West Zone Karachi and another v. Khairpur Textile Mills Ltd. and others 1989 SCMR 61; Calico Dyeing and Printing Works v. Commissioner of Income Tax, Bombay City, II 34 ITR 265; India Cement Ltd. v. Commissioner of Income Tax, Madras 60 IRT 52; Commissioner of Income Tax v. Gelcaps (Pvt.) Limited in ITR No.58 of 1992 and ITR No.226 of 1991 ref.

Aqeel Ahmed Abbasi for Applicant.

2006 P T D 2450

[Karachi High Court]

Before Muhammad Mujeebullah Siddiqui and Sajjad Ali Shah, JJ

ABDUL AZIZ

Versus

ASSISTANT COLLECTOR OF CUSTOMS and another

Spl. Customs Reference Application No.155 of 2005.

Customs Act (IV of 1969)---

----Ss. 16, 156(1)(a) & 196---Imports and Exports (Control) Act (XXXIX of 1950), S.3 (1)---Confiscation of imported goods---Reference to High Court---Application for---Additional Collector of Customs on allegation that applicant/importer had contravened provisions of S.16 of Customs Act, 1969 read with S.3(1) of Imports and Exports (Control) Act, 1950, ordered confiscation of goods, holding that applicant/importer was free to redeem confiscated goods on payment of fine---Department feeling aggrieved filed appeal before the Appellate Tribunal and Tribunal modified order-in-original to the extent of release of goods on payment of redemption fine and directed that offending goods be confiscated out­right---Validity---Items brought by the importer could be cleared subject to payment of duty and taxes as provided under the law as confiscation would serve no purpose and payment of duty would certainly add to the Government revenue which would be in the interest of State, but not the concerned officer who used to dispose of such confiscated items at very low price---Reference application was allowed and impugned order of Appellate Tribunal ordering outright confiscation of goods was set aside and order-in-original passed by Additional Collector, was restored.

Ch. Muhammad Iqbal for Applicant.

Haider Iqbal Wahniwal for Respondent No. 1.

2006 P T D 2530

[Karachi High Court]

Before Muhammad Mujeebullah Siddiqui and Khilji Arif Hussain, JJ

ASIA LUBRICANTS, KARACHI

Versus

COLLECTOR OF SALES TAX AND CENTRAL EXCISE (ENFORCEMENT), KARACHI

Special Sales Tax Appeal No.241 and C.M.A. No. 1682 of 2004, decided on 7th September, 2005.

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

----S. 3(1)(2)(c)---Lubricant oil---Chargeable to sales tax---Scope---Lubricant oil is chargeable to tax on basis of its value and not on basis of its retail price---Printing of retail price on such product not required by law---In absence of any evidence about charging of sales tax by manufacturer of lubricant oil from his dealer higher than the amount of sales tax deposited by him on basis of its declared value, he could not be made liable for sales tax not charged from ultimate consumers at retail price---Principles.

Khalid Jawed Khan for Appellant.

Raja Muhammad Iqbal for Respondent.

2006 P T D 2558

[Karachi High Court]

Before Muhammad Mujeebullah Siddiqui and Muhammad Moosa K. Leghari JJ

COLLECTOR OF SALES TAX AND CENTRAL EXCISE, (ENFORCEMENT), KARACHI

Versus

Messrs HAMDARD SUPPLIES, KARACHI and others

Special Sales Tax Appeals Nos.569, 576 and 579 of 2004, decided on 13th April, 2006.

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

----S. 47---Question raised in appeal to High Court neither raised before Tribunal or was thereon finding of Tribunal---Validity---Such question would not arise out of order of Tribunal---High Court dismissed appeal.

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

----S. 47-Appeal to High Court---Appeal filed in the name of Collector was signed by Assistant Collector--Application by Collector after more than seven months for permission to sign memo. of appeal alleging same to have been signed by his subordinate official inadvertently---Collector signed 'memo. of appeal after granting of permission---Validity---Appeal was not maintainable in law for having been signed by official not competent 'in law to file same---High Court dismissed the appeal.

Director, Directorate General of Intelligence and Investigation v. Messrs Al-Faiz Industries (Pvt.) Ltd. 2006 SCMR 129 fol.

Raja Muhammad Iqbal for Appellant.

Malik A.R. Arshad for Respondents.

Date of hearing: 13th April, 2006.

2006 P T D 2572

[Karachi High Court]

Before Muhammad Mujeebullah Siddiqui and Khilji Arif Hussain, JJ

Messrs AL-KAWKAB AL-FIDDI TRADING through Partner

Versus

COLLECTOR OF CUSTOMS, SALES TAX AND EXCISE (ADJUDICATION), KARACHI

Spl. Custom Appeal No.66 of 2002, decided on 14th October, 2005.

Customs Act (IV of 1969)---

----Ss. 32 & 156(I)(14)---Misdeclaration of weight of goods to be exported---Show-cause notice, issuance of---Validity---No loss caused to revenue by such act of exporter---Such act, even if deliberate with intention to defraud foreign buyers, would not call for any action under S.32 of Customs Act, 1969---Show-cause notice was declared to be illegal.

Sohail Muzaffar for Appellant.

Raja Muhammad Iqbal for Respondent.

Date of hearing: 14th October, 2005.

2006 P T D 2590

[Karachi High Court]

Before Muhammad Mujeebullah Siddiqui and Faisal Arab, JJ

Messrs SHADMAN COTTON MILLS LTD. through Director

Versus

COMMISSIONER OF INCOME TAX, COMPANIES-I, KARACHI and 2 others

I.T.A No.425 of 1999, decided on 18th August, 2006.

Income Tax Ordinance (XXX1 of 1979)---

---Ss. 66-A & 156---Revision and rectification of assessment order---Scope---Where assessment order was made in conformity with prevailing view of law and consistent practice of department, but subsequently legal view was changed on account of interpretation of law by appellate or superior Court, then such wrong committed would not be treated mistake apparent on record, but would be an error of judgment rectifiable by recourse to revisional jurisdiction under S.66-A of Income Tax Ordinance, 1979--Rectification of such error of judgment by Assessing Officer himself under S.156 of Ordinance, 1979 would amount to review of order, which jurisdiction was not available to him under Income Tax Ordinance, 1979---Where prevailing view of law on account of appellate decision or interpretation by superior Courts was not applied/acted upon by Assessing Officer deliberately or on account of ignorance or as a result of inadvertence, then same would be a case of mistake apparent on record rectifiable by himself under S.156 Income Tax Ordinance, 1979---Principles.

Khalid Adamjee v. Commissioner of Income Tax (1983) 48 Tax 56 fol.

1992 PTD 570(S.C. Pak.); (1959) 36 ITR 350 (S.C.); (1961) 41 ITR 732 (S.C.); (1970) 78 ITR 26 (S.C.) and 1998 PTD 147 (H.C. Kar.) distinguished.

Rehan Hassan Naqvi and Ms. Lubna Pervaiz for Appellants.

Muhammad Fareed for Respondent.

Date of hearing: 10th August, 2006.

2006 P T D 2609

[Karachi High Court]

Before Muhammad Mujeebullah Siddiqui and Faisal Arab, JJ

MANHATTAN INTERNATIONAL (PVT.) LTD., KARACHI and others

Versus

DIRECTOR GENERAL INTELLIGENCE AND INVESTIGATION CUSTOMS AND EXCISE), KARACHI and others

Special Customs Appeals Nos.18 to 21 of 2004, decided on 18th August, 2006.

Customs Act (IV of 1969)---

----S. 196---Appeal to High Court---Finding of Tribunal on a point not raised by parties--Validity---Such finding could not be treated as finding arising out of the pleas taken by parties---High Court in exercise of its advisory jurisdiction under S.196 of Customs Act, 1969, could not take suo motu notice of a plea, which was neither raised before the Tribunal nor was there any finding of Tribunal thereon---High Court in exercise of its limited jurisdiction could not grant any relief to appellant on such plea as same would amount to transgressing its jurisdiction---Principles.

Mian Shafiq Alam v. The Collector 1998 MLD 2985; .1995 SCMR 387 and Collector, Customs, Central Excise and Sales Tax, v. Haji Ahmedullah and others 2005 PTD 1654 ref.

Sohail Muzaffar and Ms. Fouzia Rasheed for Appellants.

Raja Muhammad Iqbal for Respondents.

Date of hearing: 10th August, 2006.

2006 P T D 2726

[Karachi High Court]

Before Anwar Zaheer Jamali and Mrs. Yasmin Abbasey, JJ

NISHAT MILLS LTD., LAHORE

Versus

COLLECTOR OF CUSTOMS, KARACHI and another

Special Sales Tax Appeal No.192 to 196 of 2001, decided on 10th November, 2005.

(a) Interpretation of statutes---

----Word used in a statute or notification---Scope---Intention of legislature would be gathered from language used---Where statute or notification made mention of its applicability in particular circumstances detailed therein, then no other meaning thereof could be taken---Principles.

(b) Interpretation of statutes---

----Statute creating an obligation also specifying manner of its performance could not be enforced in a manner other than what was provided therein---Principles.

Where an Act creates an obligation and enforces the performance in specified manner, it cannot be enforced in any other manner, because when the language of statute is clear and when a specified manner and expression is shown therein, the same cannot be curtailed or interpreted in a manner other than what is sought therein.

(c) Notification---

----Notification could not be given retrospective effect, until and unless specifically enacted so.

Tasawar Ali Hashmi for Appellant.

Nemo for the respondents.

Date of hearing: 1st November, 2005.

2006 P T D 2742

[Karachi High Court]

Before Muhammad Mujeebullah Siddiqui and Faisal Arab, JJ

MUHAMMAD SADQUAIN

Versus

COLLECTOR OF CUSTOMS (APPRAISEMENT), KARACHI

Special Custom Appeal No. 80 of 2000, decided on 10th August, 2006.

Customs Act (IV of 1969)---

----Ss. 32 & 156(1)---Misdeclaration by Clearing Agent---Filing of Bill of Entry by Agent on basis of shipping documents supplied by importer and Pre-shipment Inspection Report---Subsequent examination of container showed undeclared goods---Issuance of show-cause notice to agent---Specific denial by agent of his being involved or in connivance with importer in respect of misdeclaration made---Penalty imposed on agent was struck down in circumstances.

Sohail Muzaffar for Appellant.

Raja M. Iqbal for Respondent.

Date of hearing: 10th August, 2006.

2006 P T D 2762

[Karachi High Court]

Before Sabihuddin Ahmed, C.J. and Zia Perwaz, J

Messrs DEWAN CEMENT LTD. Through Chief Operating Officer

Versus

COLLECTOR OF CUSTOMS (APPRAISEMENT) and another

Special Customs Tax Reference Application No.29 of 2006, decided on 9th August, 2006.

Customs Act (IV of 1969)---

----S. 194---Appellate Tribunal, jurisdiction of---Scope---Tribunal could decide both questions of fact and law raised before it---Principles.

Farogh Naseem and Sardar Ejaz for Petitioners.

Raja Muhammad Iqbal and Akhtar Ali Mahmud, Deputy A.-G. for Respondents.

Date of hearing: 9th August, 2006.

2006 P T D 2780

[Karachi High Court]

Before Muhammad Mujeebullah Siddiqui and Faisal Arab, JJ

Messrs K & N'S POULTRY FARMS (PVT.) LTD., KARACHI

Versus

ADDITIONAL COLLECTOR OF CUSTOMS, KARACHI and another

Special Customs Appeal No.73 of 2002 and Customs Appeal No.87-K of 2000, decided on 22nd August, 2006.

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

----S. 27---Damaged or deteriorated goods---Abatement of duties---Pre-condition---Abatement of duties is to be claimed and processed at the time of import of consignment, which has been damaged or deteriorated; it is a condition precedent that importer at the import stage should inform customs authorities that damage or deterioration has taken place before or during unloading of goods at the port of discharge---Such intimation gives an opportunity to customs authorities to appraise the value of damage or deterioration in the manner provided under S.27 (2) of Customs Act, 1969---Upon such appraisal if any damage is ascertained then abatement in customs duties is allowed.

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

----S. 27---Damaged or deteriorated goods--Abatement of duties---Claim---Importer sought abatement against import of chicks made in August, 1998, for loss sustained to previous consignment of chicks imported in July 1998---When earlier imports were made, the consign­ment was got released upon payment of customs duties and charges without lodging any complaint in writing with regard to dead chicks---Complaint was lodged for the first time after more than one month of earlier import---Abatement of duty was declined by Customs Appellate Tribunal---Validity---Importer failed to take prescribed steps at the appropriate time provided under S.27 of Customs Act, 1969---Customs Appellate Tribunal rightly found that provisions of S.27 of Customs Act, 1969, were not followed and therefore, claim of importer was not legally maintainable---High Court declined to interfere in the order passed by Tribunal---Appeal was dismissed accordingly.

Sohail Muzaffar for Appellant.

S. Ashfaq Hussain for Respondents.

Date of hearing: 22nd August, 2006.

2006 P T D 2807

[Karachi High Court]

Before Muhammad Mujeebullah Siddiqui and Faisal Arab, JJ

Messrs KHAN TRADE INTERNATIONAL through Proprietor

Versus

ASSISTANT COLLECTOR CUSTOMS (GROUP-VII) APPRAISEMENT COLLECTOR, KARACHI and 4 others

Constitutional Petition No.D-1226 of 2004, decided on 17th August, 2006.

Customs Act (IV of 1969)---

----S.25---Constitution of Pakistan (1973), Art.199---Constitutional petition---Customs duty---Determination---Clearance on the basis of transaction value---After examination of goods imported by petitioner, the Customs Authorities found them exactly in accordance with the declaration but assessment was not finalized---Subsequently the assessment was valued and assessed on the basis of valuation advices issued: by Controller of Customs Valuation---Plea raised by petitioner was that all necessary material in support of declared value was submitted but customs officials ignored them and made assessment in violation of mandatory requirements' of law---Validity---Action of authorities resorting to assessment on the basis of valuation advice in pursuance of provisions contained in S.25 (7) of Customs Act, 1969, without resort to subsections (1) to (6) was illegal, without lawful authority and not sustainable in law---High. Court directed the Authorities to accept the transaction value declared by petitioner in terms of S.25 (1) of Customs Act, 1969---High Court further directed the Authorities to return excess amount of duty and taxes recovered from petitioner in violation of mandatory requirement of law---High Court declined to allow compensation for payment of wharfage, container and port charges as it was a matter of evidence which could not be resorted to in the proceedings in exercise of jurisdiction under Art.199 of the Constitution---Petition was allowed accordingly.

Rehman Umer v. Collector of Customs, Karachi, 2006 PTD 909 rel.

Glaxo Laboratories v. A.V. Venkateswran AIR 1959 Bombay 372; Union of India v. Tarachand Gupta and Bros. AIR 1971 SC 1558; H. Shaikh Noor-ud-Din and Sons Ltd. v. C.B.R. PLD 1989 Kar. 60; Saleem Ahmed v. Central Board of Revenue 1990 CLC 812 and Collector of Customs v. Abdul Razzak PLD 1996 Kar. 451 distinguished.

Mian Abdul Ghaffar for Petitioner.

Haider Iqbal Wahniwal for Respondents.

Date of hearing: 17th August, 2006.

2006 P T D 2821

[Karachi High Court]

Before Muhammad Mujeebullah Siddiqui and Faisal Arab, JJ

Messrs AMZ SPINNING AND WEAVING MILLS (PVT.) LTD. through Manager

Versus

APPELLATE TRIBUNAL, CUSTOMS SALES TAX AND FEDERAL EXCISE, KARACHI

Sales Tax Reference Application No. 89 of 2006, decided on 5th September, 2006.

(a) Notification---

----Provisions of substantive law could not be nullified through a notification or under any sub-legislative measure---Notification deriving its legitimacy on basis of substantive provisions of main enactment could not be termed as violative thereof.

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

----Ss. 7(1) & 8(1)(a)(b)---S.R.O. 578(I)/98, dated 12-6-1998---Input tax paid on purchase of diesel consumed in running of generator for manufacture and production of taxable goods---Claim for adjustment of such input tax---Validity---Legislature under S.8(l)(b) of Sales Tax Act, 1990 specifically empowered Federal Government to deny adjustment of input tax on any item that might be used by taxpayer for manufacture or production of taxable goods or supplies---Section 8 of Sales Tax Act, 1990 on account of non obstante clause would override and prevail over provision contained in S.7 thereof---Such power conferred on Federal Government could only be invoked, when any item was duly notified in official Gazette---S.R.O. 578(I)/98, dated 12-6-1998 derived its legitimacy from provisions of S.8(1)(b) of that Act---Applicant's claim was rejected in circumstances.

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

----S. 8(1)(b)---Notification disallowing tax credit for specified period--Subsequent withdrawal of such notification---Effect---Federal Government was competent to include any item in notification on which adjustment of input tax could not be claimed and to delete any item therefrom---Subsequent withdrawal of notification would not create any justification to avoid tax for period during which same was chargeable.

Sheikh Spinning Mills Ltd v. Federation of Pakistan PTCL 2003 CL 411 ref.

Abdul Rahim Lakhani for Applicant.

2006 P T D 2854

[Karachi High Court]

Before Anwar Zaheer Jamali and Muhammad Ather Saeed, JJ

COMMISSIONER INCOME TAX

Versus

GULF EDIBLE OILS (PVT.) Ltd.

I.T.As. Nos. 70 and 71 of 1999 , decided on 15th February, 2006.

Income Tax Ordinance (XXXI of 1979)---

---Ss. 80-D, 134, 136 & 156---Protection of Economic Reforms Act (XII of 1992), S.6---Rectification of mistake---Assessee filed application before Income Tax Officer under S.156 of Income Tax Ordinance, 1979 to rectify orders passed and to extinguish liabilities created under S.80-D of Income Tax Ordinance, 1979 as his case being covered by notification mentioned in Schedule to S.6 of Protection of Economic Reforms Act, 1992, he was not liable to minimum tax under S.80-D---Said application was rejected by Income Tax Officer and appeal against order of Income Tax Officer was also dismissed by Commissioner Income Tax---Appellate Tribunal, however, accepted appeal filed by assessee against concurrent impugned orders of Income Tax Officer and Commissioner Income Tax, holding that claim of assessee which required factual enquiry, could be given under provisions of S.156 of Income Tax Ordnance, 1979---Validity---Mistake being floating on the surface of record, Tribunal had rightly found that no factual enquiries to establish errors were needed and that case of assessee fell within four corners of 5.156 of Income Tax Ordinance, 1979---Tribunal had rightly opined that order passed by Income Tax Officer would achieve finality only after appellate and other proceedings by which said order could be disturbed, modified or amended had been resorted to or had become time-barred; and till the period of limitation provided under S.156 of Income Tax Ordinance, 1979 during which rectification could be made, had not expired, proceedings could not be called closed and shut---Opinion of Law and Justice Department had no binding force and Government Departments including the Law and Justice Department and Central Board of Revenue, did not figure in the hierarchy of the forum whose opinion or interpretation of law could be considered binding.

Jawaid Farooqui for Appellant.

Arshad Siraj for Respondent.

2006 P T D 1

[Lahore High Court]

Before Nasim Sikandar and Jawwad S. Khawaja, JJ

Messrs AES PAK GEN (PVT.) COMPANY, LAHORE

Versus

INCOME TAX APPELLATE TRIBUNAL, LAHORE and another

P.T.Rs. Nos. 134 and 135 of 2002, decided on 8th September, 2005.

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

----S. 136---Reference to High Court---Counsel for the assessee, at the time of arguments before the High Court, submitted reframed questions with a prayer for their consideration---Validity---Question reframed had only enlarged the scope of arguments, High Court permitted the counsel to argue his case on these lines without formally admitting these questions and observed that High Court would consider and answer only the questions which were earlier laid before the Tribunal for reference to the High Court.

(b) Interpretation of statutes---

----Provision of law could not be amended, rescinded or changed by any policy guidelines agreed to between the Government and certain private individuals or corporate entities---Any policy frame work or principle laid down by the Government in any manner could not take precedence over the express provisions of law.

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

----Second Sched., Part I, Cl. (176) & S.30--- Protection of Economic Reforms Act (XII of 1992), S.5(2)---Private Sector Power Projects---Exemption---Scope---Claim of exemption by assessee company on the interest income earned by it on its cash deposits in foreign banks outside Pakistan---Validity---Claimed exemption was available only to resident companies in respect of interest earned on accounts maintained within the country---Interest, in the present case, admittedly was earned on deposits kept in foreign banks outside Pakistan---Provisions of S.5(2), Protection of Economic Reforms Act, 1992 were not invocable for the purpose of exemption---Under S.30,Income Tax Ordinance, 1979, it was only the accrual of interest income which was relevant and neither the nature of funds on which such income was earned nor the end use of the interest income were relevant---Earning of interest on "investment" and earning interest on deposits were two different concepts.

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

----Second Sched., Part I, Cl. (176)---Private Sector Power Projects---Exemption---Scope---Every activity undertaken by the "project" will not result in income which could properly be described as "profits and gains" from power generation business---Liberal meanings assigned to these words cannot be taken into consideration in order to interpret . Cl. (176) of Second Sched., Part I of the Income Tax Ordinance, 1979---Principle that charging provisions are to be interpreted strictly and that in case of a doubt where two interpretations are equally possible, the one favourable to the tax payer should be adopted, is not relevant to the exemption clauses---Exemption provisions are to be construed strictly and that it is always for the assessee/tax payer to establish that his case clearly falls within the exemption clause.

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

----Second Sched, Part I, Cl. (176)---Protection of Economic Reforms Act (XII of 1992), S.5(2)---Private Sector Power Projects---Exemption---Scope---Exempt profits under Cl. (176), Part I, Second Schedule, Income Tax Ordinance, 1979 read with S.5(2), Protection of Economic Reforms Act, 1992, do not include profits on bank accounts maintained wholly and solely for the purpose and in connection' with the power generation plant.

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

----Second Sched., Part I, Cl. (176)---Private Sector Power Project---Exemption---Bank deposits---No borrowing cost can be set -off against income from bank deposits which were necessarily kept for the purpose of meeting lenders covenants under agreement with lenders.

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

----Second Sched., Part I, Cl. (176)---Private. Sector Power Project---Exemption---Exemption from tax is only available to income from sale of electricity and not from power generation project covering all the segments of power generation project income.

1999 PTD (Trib.) 708; Gresham Life Assce Society v. Styles (3 TC 185, 188 (HL); Pandicherry Rly Co. Ltd. v. C.I.T. 5 ITC 363, 370; Badridas Daga v. C.I.T. 34 ITR 10, 15; Calcutta Co. Ltd. v. C.I.T. 37 ITR 1, 9; C.I.T. v. Shirinbai Kooka 46 ITR 10, 15; C.I.T. v. Shoorji Vallabadas 46 ITR 144, 148 (SC); Poona Electric Supply Co. Ltd. v. C.I.T. 57 ITR 52 (SC); C.I.T. v. Kalooram Govndram 57 ITR 630 (SC); C.I.T. v. Birla Gwalior Ltd. 89 ITR 266 (SC); Madeva Sinai v. Union of India 98 ITR 209, 222 (SC); Kashiparekh & Co. Ltd. v. C.I.T. 39 ITR 706; Cochin State Power & Light Corpn. Ltd. v. C.I.T. 93 ITR 582, 594; Amalgamated Electricity Co. Ltd. v. C.I.T. 97 ITR 334, 349; C.I.T. v. Allareddy Sudarsanamma 83 ITR 759; C.I.T. v. Khairpur Textile Mills Ltd. 1989 SCMR 61; National Cooperative Sugar Mills Ltd. v. C.I.T. (1998) 96 Taxman 352 (Punj & Har); Irum Ghee Mills Ltd. v. I.T.O. and others 2000 SCMR 1871; Bajjaj Tempo Ltd. v. C.I.T. (1992) 62 Taxman 480; 1999 PTD (Trib.) 708; Genertech Pakistan Ltd. and others v. Income Tax Appellate Tribunal of Pakistan, Lahore and others 2004 PTD 2255; Messrs Packages Ltd. v. Commissioner of Income-tax 1993 SCMR 1224; California Copper Syndicate Ltd. v. Haris, Superintendent of Taxes 5 TC 159; Mazagaon Dock Ltd. v. C.I.T. (1958) 34 ITR 368; Traco Cable Co. Ltd. v. C.I.T. (1969) 72 ITR 503; C.I.T., N.-W.F.P. v. N.-W.F.P. Forest Development Corporation 1990 PTD 178; C.I.T. Dacca v. Liquidator Khulna Bagerhat Railway Lines Limited (1962) 5 Tax 267; Senairam Doongarmal v. C.I.T. (1961) 42 ITR 392; C.I.T. v. Lahore Electric Supply Company (1966) 60 ITR 1; Narayan Swadeshi Weaving Mills v. C.E.P.T. (1954) 26 ITR 765; Commissioner of Income-tax v. Amalgamation Ltd. 2000 PTD 427; 2003 PTD (Trib.) 1643 and Army Welfare Sugar Mills Limited and others v. Federation of Pakistan 1992 SCMR 1652 ref.

Dr. Ikramul Haq for Petitioner.

Shahid Jamil Khan for Respondents.

Date of hearing: 4th May, 2005.

2006 P T D 37

[Lahore High Court]

Before Muhammad Sair Ali and Sh. Azmat Saeed, JJ

COMMISSIONER OF INCOME-TAX AND WEALTH TAX GUJRANWALA ZONE, GUJRANWALA

Versus

Mst. FAHMIDA AKHTAR

W.T.A. No. 350 of 2002, decided on 25th April, 2005.

Wealth Tax Act (XV of 1963)---

----Ss. 16(2) & 27---Appeal to High Court---Failure to issue notice under S. 16(2) of the Wealth Tax Act, 1963---Appellate Tribunal had particularly noted and found that no documentary evidence was produced by the department to prove service of requisite notice on the assessee---First Appellate Authority had categorically recorded in its order that upon perusal of the record it was noticed that notice under S. 16(2) of the Wealth Tax Act, 1963 was not issued by the Department to the assessee---Record was withheld by the Department from the Tribunal fearing an adverse order which in any case was made by the Tribunal against the Revenue---Department had failed to prove service of notice on the assessee and had not questioned observations of the Tribunal noting the non-production of record and evidence---Tribunal had decided said question of fact against the Revenue in absence of proof and in the perspective of First Appellate Authority's order made upon perusal of the record---Appeal of Revenue being without merit was dismissed by the High Court.

Muhammad Ilyas Khan for Petitioner.

2006 P T D 42

[Lahore High Court]

Before Nasim Sikandar and Jawwad S. Khawaja, JJ

PAKARAB FERTILIZERS (PVT.) LIMITED

Versus

INCOME TAX APPELLATE TRIBUNAL OF PAKISTAN and others

Income Tax Appeals Nos.134, 133, 135 and 136 of 2000, decided on 28th April, 2005.

(a) Workers' Welfare Fund Ordinance (XXXVI of 1971)---

----Ss.2(f), proviso & 4---Income Tax Ordinance (XXXI of 1979), First Sched. Part IV, para. B(2)---Private limited company---Exemption from levy of Worker's Welfare Fund, claim of---Validity---Such company not falling in three specified categories of companies qualifying for exemption---Legal position would not change, if such company, though wholly owned by a. Corporation created by Federal Government, was not directly managed by such Corporation---Such company was, not exempt from levy of Fund.

(b) Interpretation of statutes---

----Fiscal statute---Exemption provisions would be construed strictly and in favour of Revenue. (Taxation).

Imtiaz Rashid Siddique and Imran Anjum for Appellant.

Muhammad Ilyas Khan for Respondents.

Date of hearing: 28th April, 2005.

2006 P T D 48

[Lahore High Court]

Before Ali Nawaz Chowhan and Umar Ata Bandial, JJ

MUHAMMAD IHSAN QAZI

Versus

COMMISSIONER OF INCOME-TAX/ WEALTH TAX ZONE-A

W.T.As. Nos.51 and 52 of 2003, decided on 10th May, 2005.

Wealth Tax Rules, 1963---

----R.8(3)---Determination of value of property---Valuation according to Valuation Chart maintained by the Registrar for purposes of stamp duty---Determination of location of property was essential for such valuation---Principles.

Shafqat Mehmood Chohan for Petitioner.

Muhammad Ilyas Khan for the Revenue.

2006 P T D 54

[Lahore High Court]

Before Ijaz Ahmad Chaudhry, J

COLLECTOR OF CUSTOMS

Versus

Messrs MULTAN BEVERAGE (PVT.) LTD. and others

Writ Petitions Nos.1445 and 1449 of 2004, heard on 27th October, 2004.

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

----S.3-D---Constitution of Pakistan (1973), Art. 199---Constitutional petition---Maintainability---Preliminary objection had been raised by respondent companies that petitioner/the department being a subordinate, could not challenge orders of his superior and in circumstances constitutional petitions were not maintainable---Validity---Impugned decisions were passed pursuant to orders passed by High Court in constitutional petition which were maintained by Supreme Court whereby matter was remanded to Central Board of Revenue to determine specific question after hearing parties concerned---In the beginning of impugned orders, it had been specifically provided that it could be appealed against before Authority which had remanded the case---Even otherwise petitioner-department was custodian of public exchequer and on its move, the vires of impugned orders could be looked into by High Court to determine whether same had been passed fully in line with parameters given by High Court and Supreme Court while remanding case to it---Preliminary objection, about maintainability of constitutional petition was repelled, in circumstances.

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

----Ss. 3, 3-D & 12-A---Constitution of Pakistan (1973), Art.199---Constitutional petition---Levy of Excise Duty---Exemption---Respondent ­companies had been allowed through the impugned order, refund claim on sole ground that they did not raise prices of beverage goods at the juncture of withdrawal of capacity system and had suffered losses by absorbing excess burden of duties on account of supervised clearance system in their existing prices---Prices of beverage goods, in certain Divisions were increased by different companies after introduction of supervised clearance system, while case of respondent-companies themselves was that they did not raise price of their goods to achieve their targets and had themselves borne the excess of duties and taxes deliberately but impugned orders were silent on the said aspect of case---Sole ground furnished was that there was no price hike of beverage goods after issuance of impugned notification, and thus same could not be made basis to opine that incidence of excise duty on beverage goods was not passed on to purchasers/consumers of said goods, if they had suffered loss by not increasing price of goods in order to promote their business---Impugned orders, in circumstances appeared to have been passed in arbitrary manner and did not reflect findings on each and every aspect of case, rather same were against the decision of Supreme Court that actual controversy was not whether beverage companies had suffered any financial losses which were set aside---Matter was remanded with direction to decide appeals of respondent-companies afresh after affording opportunities of hearing to both parties and definite findings would be given on said aspects of the case within specified period.

Ch. Saghir Ahmed for Petitioner.

Syed Mansoor Ali Shah for Respondent.

Date of hearing: 27th October, 2004.

2006 P T D 60

[Lahore High Court]

Before Muhammad Sair Ali and Sh. Azmat Saeed, JJ

Sh. ZAFAR IQBAL

Versus

DEPUTY COMMISSIONER OF INCOME-TAX/ WEALTH TAX, CIRCLE-01, SIALKOT and 2 others

I.T.A. No.457 of 2000, decided on 16th March, 2005.

Income Tax Ordinance (XXXI 1979)---

---- Ss. 108 & 136---Appeal to High Court---Penalty---Appellate Authority or the Appellate Tribunal has the discretion to reduce, vary or change the quantum of penalty---Where the Appellate Tribunal had exercised its discretion by reducing the penalty to a very reasonable (in fact insignificant) amount and assessee had admitted that his default attracted imposition of penalty but had only sought reduction of. penalty to a token amount of Rs. 10 per day discretion had already been exercised by the Tribunal and no ground or question of law as to the absence of discretion in the Tribunal had either been raised in the appeal or framed therein, request made by counsel for adjournment was -not reasonable as there was no ground to adjourn the case which was denied by the High Court and appeal was dismissed.

Nasir Gillani for Appellant.

Mian Yusuf Umar for Respondents.

2006 P T D 72

[Lahore High Court]

Before Nasim Sikandar and Jawwad S. Khawaja, JJ

Haji MUHAMMAD YOUSAF

Versus

COMMISSIONER OF INCOME-TAX AND WEALTH TAX, COMPANIES ZONE, FAISALABAD

Wealth Tax Appeal No.291 of 1999, decided on 8th March, 2005.

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

----S.27(1)---Remand order of Appellate Tribunal---Validity---Such order would not give rise to a question of law to be considered by High Court.

(b) Wealth Tax Rules, 1963---

----S.8(3)---Open industrial plot---Value of such plot, determination of---High Court disapproved valuation of properties on basis of cost of construction and rates of land notified by District Collectors for charging stamp duty---Assessing Officer, in absence of such notified rates, would, apply rates of residential land to such industrial plot.

Nemo for Appellant.

Muhammad Ilyas Khan for Respondent.

Date of hearing: 8th March, 2005.

2006 P T D 83

[Lahore High Court]

Before Muhammad Sair Ali and Sh. Azmat Saeed, JJ

SARDAR ALI BHATTI

Versus

INCOME TAX APPELLATE TRIBUNAL, LAHORE and another

Income Tax Appeal No.233 of 1998, decided on 24th March, 2005.

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

----Ss. 65 & 136---Appeal to High Court---Question relating to the assumption of jurisdiction by the Assessing Officer under S.65, Income Tax Ordinance, 1979 in the absence of alleged "definite information", was neither raised before the Tribunal nor the same was ruled upon by the Tribunal---Such question having not arisen from the order of the Tribunal, assessee was not entitled to an opinion of High Court under S.136, Income Tax Ordinance, 1979.

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

----Ss. 13 & 136---Addition---Appeal to High Court---Scope---Question of fact---Adjudication of questions as to whether restoration of addition by the Tribunal was justified or not and whether said amount purportedly represented a part of the brought forward amount from the earlier years, was dependent upon the inquiry into and the examination of the record---Tribunal being the final arbiter of the questions of fact determined the same against the assessee---High Court under S.136, Income Tax Ordinance, 1979, had no jurisdiction to re-inquire into and re-determine a question of fact.

Mian Ashiq Hussain for Appellant.

Muhammad Ilyas Khan for Respondents.

Date of hearing: 24th March, 2005.

2006 P T D 96

[Lahore High Court]

Before Nasim Sikandar and Jawad S. Khawaja, JJ

LAHORE CHAMBER OF COMMERCE AND INDUSTRY, LAHORE through Secretary

Versus

INCOME TAX APPELLATE TRIBUNAL, LAHORE and others

Wealth Tax Appeal No. 156 of 1999, decided on 12th May, 2005.

Wealth Tax Act (XV of 1963)---

----S. 27---S.R.O.650(I)/85, dated 1-7-1985---Appeal to High Court---Appellant, during pendency of the proceedings had sought to raise an additional ground/question of law with regard to retrospectivity of S.R.O.650(I)/85, dated 1-7-1985---Validity---Held, admission of a new ground or a question at the present stage was likely to create complication inasmuch as the S.R.O. was in the field when the impugned judgment of the Tribunal was passed, therefore the issue could not be said to have arisen out of the order of the Tribunal or as a natural consequence thereof---S.R.O. in question having the force of law at the relevant time and apparently due to inadvertence on the part of the assessee it was not brought to the knowledge of the Tribunal nor the matter was argued on the basis of concession given by the S.R.O., High Court set aside the order of the Tribunal and remitted the matter to the Tribunal for consideration of the effect of the said S.R.O. for the relevant assessment year as well as all the earlier years involved.

Shahtaj Sugar Mills Ltd. through Chief Executive v. G.A. Jahangir and 2 others 2004 PTD 1621; Iftikhar Hussain Alvi C/o Kaghan Ghee Mills (Pvt.) Ltd. v. Income Tax Officer/Dy. Commissioner, Income Tax and others 2003 PTD 812 and Commissioner of Income Tax v. Shahnawaz Ltd. and others 1993 SCMR 73 ref.

Siraj-ud-Din Khalid for Appellant.

Shahid Jamil Khan for Respondents.

Date of hearing: 12th May, 2005.

2006PTD 114

[Lahore High Court]

Before Nasim Sikandar and Jawad S. Khawaja, JJ

Mst. MUMTAZ BEGUM

versus

COMMISSIONER OF WEALTH TAX

W.T.A No. 78 of 2002, decided on 8th March, 2005.

(a) Wealth Tax Rules, 1963---

----R. 8(3), Expin.---Term "Gross Annual Rental ,Value" as used in Explanation to R. 8(3) of Wealth Tax Rules, 1963---Implications stated.

The term and expression GARV as defined in Explanation to sub-rule (3) of Rule 8 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 GARV rule. This Explanation defines "Gross Annual Rental Value" to be the one for which the property might reasonably be expected to be let from time to time. The definition itself indicates that GARV is only a notional value on which a property could reasonably be expected to be let from year to year. The actual renting out of property for the purpose of application of this rule, therefore, is not required at all.

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

----S.27---Appeal to High Court---Observations in impugned order regarding non-pressing of some grounds before Appellate Tribunal---Validity---Appellant, if had any objection/grievance against such observations, could seek a rectification of impugned order---High Court in referable jurisdiction would proceed on the facts found by Tribunal, unless those were, prima facie, against the record---Such situation was not available in the present case---High Court dismissed appeal in circumstances.

Nemo for Appellant.

Muhammad Ilyas Khan for Respondent.

Date of hearing: 8th March, 2005.

2006PTD 116

[Lahore High Court]

Before Syed Hamid Ali Shah, J

WELCON CHEMICALS (PVT.) LIMITED through Chief Executive and others

versus

CENTRAL BOARD OF REVENUE, ISLAMABAD through Chairman, C.B.R. and 3 others

Writ Petitions Nos.5673, 8934, 8186, 8376, 9783 and 10850 of 2005, heard on 8th July, 2005.

Income Tax Ordinance (XLIX of 2001)---

---Ss. 114(1), 120(1)(b)(3) & 177(1)---Central Board of Revenue's Circular No.5 of 2003, dated 30-6-2003---Constitution of Pakistan (1973), Art. 199---Constitutional petition---Return under "Universal Self Assessment Scheme"---Issuance of notice selecting return for audit without first hearing assessee---High Court in view of principles laid down in Ch. Muhammad Hussain's case (2005 PTD 152) accepted constitutional petition and set aside impugned notice declaring same to be without lawful authority while observing that Commissioner of Income Tax could initiate proceedings afresh after meeting legal requirements.

Ch. Muhammad Hussain v. Commissioner of Income Tax 2005 PTD 152 fol.

Noor Ahmed Qureshi for Petitioner.

Zahid Ferani Sheikh for Respondents.

Date of hearing: 8th July, 2005.

2006 P T D 132

[Lahore High Court]

Before Muhammad Sair Ali and Sh. Azmat Saeed, JJ

COMMISSIONER OF INCOME TAX/WEALTH TAX COMPANIES ZONE, FAISALABAD

versus

AYUB RAZA

W.T.A. No.100 of 2001, decided on 17th February, 2005.

Wealth Tax Rules, 1963---

----R.8(2)(c)(ii)---Manner to determine the break-up value of shares of non-listed company---Principles.

Rule 8(2)(c)(ii) Wealth Tax Rules, 1963 does not in any manner prohibit exclusion of provision for taxation while computing the value per share of a non-listed company. The rule 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. In other words the reserves are to be included in the paid-up capital, while computing valuation per share. However, the provisions for liabilities 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 part of liabilities.

W.T.A. No.3 of 2002 and W.T.A. No.20 of 2002 fol.

Mian Yusuf Umar for Appellant.

2006 P T D 135

[Lahore High Court]

Before Nasim Sikandar and Muhammad Sair Ali, JJ

COLLECTOR OF CENTRAL EXCISE AND SALES TAX, LAHORE

versus

Messrs DECSON ENGINEERING LTD., LAHORE

Customs Appeal No. 188 of 2002, decided on 11th December, 2003.

Central Excise Act (I of 1944)---

----Ss. 3 & 36(c)---Central Excise Rules, 1944, R.210---Appeal before High Court---Evasion of payment of excise duty---Demand of excise duty with additional duty and penalty---Payment of excise duty by respondent before hearing of appeal by Appellate Tribunal---Remission of additional duty and penalty by Tribunal in view of its earlier decision taken in an identical case---Validity---Discretion exercised by Tribunal was neither unfounded nor perverse---No question of law arose out of impugned order---High Court dismissed appeal in circumstances.

Mian Qamar-ud-Din for Appellant.

Rana Muhammad Afzal for Respondent.

2006 P T D 140

[Lahore High Court]

Before Nasim Sikandar, J

Messrs YAHYA TEXTILE MILLS LIMITED, MULTAN CANTT.

versus

FEDERATION OF PAKISTAN through Ministry of Finance, Islamabad and 3 others

Writ Petition No.1198 of 2004, heard on 29th August, 2005.

Income Tax Ordinance (XLIX of 2001)---

----S.122---Income Tax Ordinance (XXXI of 1979), Ss. 156 & Second Sched., Cl. (118-C)---Constitution of Pakistan (1973), Art. 199---Constitutional petition---Amendment of assessment---Issuance of notice in year, 2003 to rectify assessment framed for year, 2001-2002 alleging that exemption allowable to assessee for assessment year 1993-94 was actually allowed for year, 1994-95, thus, assessee had started commercial production in year, 1992---Validity---Revenue in the guise of such notice wished to rectify assessment order recorded in year, 1995 in respect of assessment year 1993-94---Revenue had recorded twice clear findings in earlier assessment orders regarding date and period of commencement of business production by assessee---Proposed rectification could not be permitted under the law on account of stipulated limitation having long gone before issuance of impugned notice---High Court accepted constitutional petition and declared impugned notice as invalid.

Rana Muhammad Afzal for Petitioner.

Muhammad Ilyas Khan for Respondents.

Date of hearing: 29th August, 2005.

2006 P T D 143

[Lahore High Court]

Before Ali Nawaz Chowhan, J

MUHAMMAD UMAR

versus

CENTRAL BOARD OF REVENUE and others

W.P. Nos.9803, 9806, 9798 and 9812 of 2004, decided on 27th September, 2005.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 120 & 177---Constitution of Pakistan (1973), Art.199---Constitutional Petition---Assessment---Re-opening the matter for auditing---Matter had been re-opened for auditing under S.177 of Income Tax Ordinance, 2001---Main ground taken before High Court was that pre-requisite requirement as laid down in S.177 of Income Tax Ordinance, 2001 for purpose of re-auditing, had not been fulfilled where returns had already been accepted under provisions of S.120 of Income Tax Ordinance, 2001; that S.177 of Income Tax Ordinance, 2001 was arbitrary and extended excessive delegation of powers with respect to exercise of powers at the level of local formation and that need was for restructuring that---Said questions had been dealt with exhaustively in cases reported as 2005 PTD 152 and 2005 PTD 1974 and principles dealt with in said two cases would be applicable in the present cases as well---Matters were referred to concerned Revenue Authority for purposes of giving effect to principles laid down in the mentioned reported judgments.

Ch. Muhammad Hussain and others v. Commissioner of Income Tax 2005 PTD 152 and Munir Bhimjee and others v. Islamic Republic of Pakistan and 2 others 2005 PTD 1974 fol.

Muhammad Naeem Shah for Petitioner.

Shahid Jamil Khan for Income Tax Department.

2006 PTD 144

[Lahore High Court]

Before Muhammad Sair Ali, J

Mian MUHAMMAD MUNAWAR

versus

PROVINCE OF THE PUNJAB through Secretary Excise and Taxation Department and another

W.Ps. Nos.8904, 1775 and 1660 of 2004, decided on 4th October, 2005.

Central Excise Act (I of 1944)---

----S. 12-A---Constitution of Pakistan (1973), Art.199---Constitutional petition---Exemption---Exempting Cinema Houses from payment of entertainment duty--Withdrawal of Constitutional petition---Counsel for petitioner had stated that in view of Notification dated 30-6-2004 exempting cinema houses from payment of entertainment duty, he would like to withdraw Constitutional petition to agitate matter through a representation before the department for any possible departmental relief which petitioner could persuade them to grant---Petition was disposed of as withdrawn---Petitioner could seek departmental remedies.

Ahmad Waheed Khan for Petitioner.

Ch. Rizwan Mushtaq, A.A.G.

Riaz Hussain Shah, Office Incharge (Legal Cell) Excise and Taxation Department.

2006 P T D 162

[Lahore High Court]

Before Maulvi Anwarul Haq and Fazal-e-Miran Chauhan, JJ

Messrs SARWAR & CO. (PVT.) LTD.

Versus

CUSTOMS, CENTRAL EXCISE AND SALES TAX, APPELLATE TRIBUNAL, LAHORE and another

S.T.A. No.477 of 2002, heard on 21st July, 2005.

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

----Ss.2(12), (14), (33), (34) & (41)---Term goods'---Connotation---To becomegoods' an article must be something which ordinarily comes to the market, to be bought and sold and is known in the market.

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

----Ss.2 (12), (16), (17), (35), (41) & 3(3)---Expressions taxable activity' andtaxable supply'---Scope---Goods, leviable to sales tax---Girders used in construction of overhead bridge---Punjab Highway Authority designed the bridge and the girders to be used in its construction were of a specific size which were not available in open market---Contractor purchased raw material from open market, which was already liable to sale tax and pre-cast the girders at site under the direct supervision of engineer of the Authority---Sales tax authorities levied sales tax on the construction of girders used by the contractor in the construction of the overhead bridge---Validity---Sales tax could be charged, levied and paid only when a taxable supply was made in the course or furtherance of a taxable activity, which involved in the whole or in part the supply of goods to any other person---Word supply', as defined under S.2(33) of Sales Tax Act, 1990, included, sale, transfer, lease or other disposition of the goods in course of furtherance of business carried for consideration---Contractor could not be termed as manufacturer, producer and whole-seller as he did not indulge in the manufacturing of any kind of goods which could be bought or sold in open market---Contractor had not created any independent market product, which could ordinarily be brought to market and sold in the 'ordinary course of business---Required girders, pre-cast at site and used in the construction of overhead bridge, were not goods saleable in open market, as the same were of a particular design, size and specification and could not be used in any other bridge or building or construction work---Use of such girders by the contractor itself amounted to taxable supply to itself---Construction of bridge which was handed over to the Highway Authority could not be treated asgoods', therefore, supply of girders was not made in furtherance of taxable activity---Contractor could not be held liable to pay sales tax---Appeal was allowed in circumstances.

2001 PTD 2982 fol.

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

---Ss. 2(35) & 2(41)---Expressions taxable activity' andtaxable supply'---Connotation---Expressions taxable supply' andtaxable activity' both operate in their own respective fields---Quantum of tax liability is determined on the basis of the value of taxable supply, but liability to pay tax under the charging section would arise only when such supply is made in furtherance of taxable activity involving in whole or in part, the supply to any other person.

Dr. Ilyas Zafar for Appellant.

Ch. Sagir Ahmad, Standing Counsel for Respondents.

Date of hearing: 21st July, 2005.

2006 P T D 178

[Lahore High Court]

Before Mian Hamid Farooq and Syed Hamid Ali Shah, JJ

Messrs SHAMA SOAP FACTORY, FAISALABAD

versus

COMMISSIONER OF INCOME-TAX, ZONE, FAISALABAD

Reference Case No. C.T.R. 75 of 1993, heard on 13th July, 2005.

(a) Stamp Act (II of 1899)---

---S. 35---Document not duly stamped---Evidentiary value---Such document, though not invalid, would neither be admitted in evidence nor be acted upon.

Union Insurance Company of Pakistan Ltd. v. Hafiz Muhammad Siddique PLD 1978 SC 279 rel.

(b) Registration Act (XVI of 1908)---

---S. 49(as amended by Registration (Amendment) Ordinance (XLV of 1962)---West Pakistan Urban Rent Restriction Ordinance (VI of 1959), S.13---Unregistered lease deed---Validity---Such deed was invalid for purposes of West Pakistan Urban Rent Restriction Ordinance, 1959, but same could be acted upon for other collateral terms and conditions between parties.

Malik Muhammad Ishaque v. Messrs Erose Theatre and others PLD 1977 SC 109 and Messrs Syed Brothers v. Messrs Film Exhibitors Ltd. and 10 others 1984 CLC 3434 rel.

(c) Registration Act (XVI of 1908)---

----S. 49 (as amended by Registration (Amendment) Ordinance (XLV of 1962)---Income Tax Ordinance (XXXI of 1979), S.129---Unregistered lease deed---Acceptance of lease arrangements by Income Tax Appellate Authority was correct and legal.

M.A. Zafar for Appellant.

Muhammad Ilyas Khan for Respondent.

Date of hearing: 13th July, 2005.

2006 P T D 207

[Lahore High Court]

Before Mian Hamid Farooq and Syed Hamid Ali Shah, JJ

Messrs EVERNEW AGENCIES

versus

CUSTOMS, CENTRAL EXCISE AND SALES TAX APPELLATE TRIBUNAL, LAHORE and others

Customs Appeals Nos.173 to 188 of 1999, decided on 8th March, 2005.

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

----Ss.32 & 209(3)---Income Tax Ordinance (XXXI of 1979), S.50(5)---Custom Agents Licensing Rules, 1971---S.R.O. 13(1)/1971, dated 8-1-1971---Import of vehicle---Failure of Clearing Agent to mention correct rate of withholding tax in Bill of Entry---Demand of deficient tax from Agent---Plea of Agent was that he was not liable to pay such tax, but its liability was that of importer that neither he nor importer had knowledge of levy of such tax; and that impugned demand was time­barred---Validity---Agent would be deemed to be importer---Agent was under an. obligation to know about tax chargeable and leviable on imports---Primary responsibility of Agent was to fill various columns of Bills of Entry in a proper manner and in accordance with prevalent law---Agent's neglect to do so would amount to wilful neglect on his part---Ignorance of law would be no excuse and Agent could not be paid dividend for his ignorance---Such omission on the part of Agent was wilful omission to defraud State Exchequer, thus, period of limitation would be three years under S.32 of Customs Act, 1969-.--Impugned demand was legal.

(b) Administration of justice---

----Ignorance of law is no excuse, thus, defaulting party cannot be paid dividend for his ignorance.

(c) Natural justice, principles of---

----Party absenting himself to appear before am authority could not claim that he was not provided opportunity of hearing.

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

----Ss.32 & 196---Appeal before High Court---Question of fact---Non­payment of withholding tax---Question, whether importer deliberately avoided such payment or same was on account of bona fide mistake, would be a question of fact---Such question could not be entertained in appeal before High Court.

Khawaja Adnan Ahmed for Appellant.

Date of hearing: 8th March, 2005.

2006 PTD 214

[Lahore High Court]

Before Umar Ata Bandial, J

AAMIR FOOD INDUSTRIES

versus

CENTRAL BOARD OF REVENUE and 2 others

Writ Petition No.20554 of 2004, heard on 14th April, 2005.

Income Tax Ordinance (XLIX of 2001)---

----S.177---Audit---Essential requisites of exercise of powers under S.177, Income Tax Ordinance, 2001---Notice which failed to disclose any reason for conducting audit of the assessee's return was illegal and void---Department was at liberty to undertake audit of the assessee by taking essential legal steps strictly in accordance with law.

Ch. Muhammad Hussain v. Commissioner of Income Tax, Sialkot 2005 PTD 152 fol.

Mian Nasir Mehmood for Petitioner.

Muhammad Ilyas Khan for Respondent.

Date of hearing: 14th April, 2005.

2006 P T D 215

[Lahore High Court]

Before Muhammad Sair Ali and Sh. Azmat Saeed, JJ

COMMISSIONER OF INCOME-TAX AND WEALTH TAX, GUJRANWALA ZONE, GUJRANWALA

versus

Messrs MUGHAL MECHANISMS (PVT.) LTD., GUJRANWALA

I.T.As. Nos. 26 of 2000, 379/LB of 1999, decided on 25th October, 2005.

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

----Ss.108 & 139---Income Tax Rules, 1982, Rr.53, 61 & 61-A---Failure in filing monthly statements under S.139, Income Tax Ordinance, 1979 read with R.53, Income Tax Rules, 1982-Imposition of penalty under S.108, Income Tax Ordinance, 1979---Validity---Penal provisions of S.108, Income Tax Ordinance, 1979 were attracted to the case of non-compliance with Rr.53, 61 & 61-A of the Income Tax Rules, 1982---Rules prescribing the time limit were validly legislated even though the said rules made no reference to the particular sections of the Income Tax Ordinance, 1979 under the statutory authority of which the rules were made---Mere non-mentioning of the principal statutory provisions as the source and authority for the subordinate legislation like the said rules was not a reason to invalidate or avoid the rules---Rule 53, Income Tax Rules, 1982 therefore, was not in contravention of the requirement of S.139, Income Tax Ordinance, 1979.

Commissioner of Income-tax/Wealth Tax, Companies Zone, Faisalabad v. Messrs Asim Textiles Mills Limited, Faisalabad 2003 PTD 2077; 1999 PTD 3456; Commissioner of Income-tax v. Messrs Flora Food Industries (Pvt.) Ltd. Faisalabad 2005 PTD 1012 and Commissioner of Income-tax/Wealth Tax, Companies Zone, Faisalabad v. Messrs Kamil Cotton Industries (Pvt.,) Ltd. Toba Tek Singh 2005 PTD 2283 ref.

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

----S.136(5)---Income Tax Ordinance (XLIX of 2001), S.133(12)---Reference to High Court---Provisions of S.136, Income Tax Ordinance, 1979 and S.133, Income Tax Ordinance, 2001, which were identical, provided that on decision by High Court of the question of law raised in reference/appeal, the copy of High Court's judgment Under the seal of the High Court and signatures of the Registrar of the Court shall be sent to the Appellate Tribunal which shall pass such orders as were necessary to dispose of the case conformably to such judgment---Tribunal, on the receipt of the copy of the judgment of High Court, was, therefore, required to apply itself to the case to pass such orders as were necessary to dispose of the case complaint or conforming to and in accord with the judgment of the High Court.

Shahid Jamil for the Revenue.

Ch. Anwaar ul Haq for Respondent.

2006 P T D 232

[Lahore High Court]

Before Umar Ata Bandial, J

Messrs S.T.B. INTERNATIONAL through Proprietor

versus

COLLECTOR OF CUSTOMS, LAHORE and 5 others

Writ Petition No.11802 of 2005, decided on 30th September, 2005.

Customs Act (IV of 1969)---

----S.25---Constitution of Pakistan (1973), Art.199--Constitutional petition---Determination of Customs value of goods---Principles---Express statutory intent was for the transactional value to be established through the procedure specified under S.25, Customs Act, 1969; this was to be applied or otherwise exhausted sequentially under S.25(10) of the Customs Act, 1969 to arrive at a lawful valuation of goods---Department, in the present case, instead of following the specified method for determination of transactional value in the prescribed sequence, had straightaway gone to the deductive method of valuation contemplated by S.25(7) of the Act and replies to Court queries had explained "group under-invoicing by all importers through fake invoices" to be the cause for rejecting the statutorily prescribed methods of valuation under S.25(5) and S.25(6) of the Act that were based on evidence of identical and similar goods in the market---Such was the factual defence, but was faulty from the legal point of view because said ground did not find mention in the impugned valuation ruling nor did the record presented with the comments justify the sweeping allegation made---Before a Court of law may accept the allegation, it should be shown some material to justify the charge---If the alleged causative phenomenon was so widespread both in terms of extent and duration (in the present case, longer than six months), it was more a case of the shipper's mischief rather than the importer's delinquency---Such a case did have its corrective remedies at the policy making level under anti-dumping laws and instruments rather than through the valuation authorities at the assessment stage---Impugned valuation ruling proceeded upon the allegation of massive fraudulent declarations---Said allegation, its prima facie basis and preventive action initiated to demonstrate veracity of the charge, should find mention in the record for resorting to action under S.25(7) of the Act---Such disclosure would lend credibility to the impugned action and satisfy the test of reason and relevance laid down in the case of Montgomery Flour and General Mills Ltd. v. Director Food Purchase PLD 1957 Lah. 914 which test remained just applicable to the impugned proceedings as any other administrative action because exercise of statutory discretion by the department was in issue---Statutory mandate that price material from the market be used to rebut declared value of imported goods was meant for the assessment to be realistic and verifiable---Valuation ruling, therefore, was at best evidentiary and to possess any sanctity it must reflect the material on which it was based---Price materials from the market should necessarily satisfy the test of contemporaneity embedded in S.25 of the Act and the Valuation Rules, 2004---Failing such validating measures demonstrating substantive adherence to the statutory requirements, valuation ruling would derogate the specific terms of S.25 of the Act and be illegal---Impugned valuation ruling was devoid of the stated attributes and was, therefore, declared to be without lawful authority---High Court remanded the matter accordingly to the department who shall reassess the imported goods in accordance with S.25, Customs Act, 1969 and the law stated in the present judgment.

Montgomery Flour and General Mills Ltd. v. Director Food Purchase PLD 1957 Lah. 914 fol.

Mian Abid Ahmed for Petitioner.

Mian Shahid Iqbal for Respondent No.5.

Akhtar Ali for Respondent No.6.

Ms. Kausar Akhtar for Respondent No.4.

Dr. S. Faisal Bukhari, Deputy Director Valuation, Lahore.

Zafar Iqbal, Principal Appraiser Valuation, Lahore

2006 P T D 248

[Lahore High Court]

Before Muhammad Sair Ali and Sh. Azmat Saeed, JJ

COMMISSIONER OF INCOME/WEALTH TAX, COMPANIES ZONE-I, LAHORE

versus

MUHAMMAD MUGHFOOR

Wealth Tax Appeal No. 284 of 2002, decided on 17th February, 2005.

(a) Wealth Tax Rules, 1963-----

-----R. 8(2)(c)(i)(ii)---Valuation of shares of a company---Methodology.

Rule 8(2)(c)(i) of Wealth Tax Rules, 1963 provides that for shares of an incorporated company not quoted at the Stock Exchange, out of the "face value" or the "break-up value" of the shares, whichever is higher is to be adopted as the share value. Under Rule 8(2)(c)(ii), the total wealth of the company is to be computed by adding to paid-up capital, debentures, reserves and the balance as per the Profit and Loss Account and liabilities are to be accounted for by excluding items forming part of the reserves. And from that the total so arrived at, the paid-up value of the preference shares and debentures is deductible, and' the resulting balance is to be divided by the amount of paid-up ordinary shares capital value of the shares held by an assessee. The break-up value of the shares of company will be negative irrespective of its "face value".

(b) Wealth Tax Rules, 1963---

----R. 8(2)(c)(i)(ii)---Companies Ordinance (XLVII of 1984), S. 235---Share of a dissolved company, valuation of---Mode---Such share would not be taken as an "asset" owned by its former shareholders---Such share would carry no value with reference to paid-up capital or subscribed capital of such company---Reasons stated.

In the case of winding-up of a company, liquidation of its assets and ultimate dissolution of company, its' share would carry no value with reference to paid-up capital or subscribed capital. The reason is that on dissolution of the company, its assets and capital are also liquidated either by adjustment or distribution or, in the final accounts. A share being a' unit of the capital also erodes with reference to the capital of company. On dissolution, the company is taken off the register of incorporated companies. The company, thus, ceases to exist and so do its share units. The shares of a dissolved company as such cannot be held to be an "asset" owned by its former shareholders.

Sirdar Ahmed Jamal Sukhera for Appellant.

Date of hearing: 17th February, 2005.

2006 P T D 256

[Lahore High Court]

Before M. Javed Buttar and Muhammad Muzammal Khan, JJ

CENTRAL BOARD OF REVENUE, ISLAMABAD through Chairman for 2 others

versus

Messrs TRIPPLE EM (PVT.) LTD., through Managing Director

I.C.A. No. 650 of 1997, heard on 2nd June, 2004.

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

----S. 84---Constitution of Pakistan (1973), Art.199---Constitutional petition---Maintainability---Application to warehouse---Permission to warehouse the goods was not refused through some speaking written order and Department had not taken any plea in its comments filed in the constitutional petition that inbonding was not refused verbally, resulting exposure to heat and moisture for 27 days to the imported goods on the dry port---Refusal order, in circumstances, was arbitrary, fanciful and contrary to law in view of provisions of S.84, Customs Act, 1969---Inbonding having been refused through verbal orders, without order in writing contrary to the law, there was no question of availing statutory remedy by the importer and the Department 'could not be heard saying that in spite of verbal orders, importer be directed to avail the remedy of appeal in place of constitutional petition---Constitutional petition was maintainable in circumstances.

Abdul Zaheer and another v. Director General Pakistan Coast Guards and 4 others PLD 1990 Kar. 412; Islamia University Bahawalpur though Vice-Chancellor v. Dr. Muhammad Khan Malik PLD 1993 Lah.141 and Messrs Kamran Industries v. The Collector of Customs (Export), Karachi and 4 others PLD 1996 Kar. 68 ref.

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

---Ss. 115 & 84---Constitution of Pakistan (1973), Art.199---Constitutional petition---Refusal of inbonding facility to the importer---Powers to remit duties on warehoused goods lost or destroyed---Collector of Customs was empowered under S.115, Customs Act, 1969 to remit duty of warehoused goods which had been lost or destroyed yet in view of the damage on account of refusal of facility of inbonding, the Collector recommended the case of the importer to C.B.R. who had ample powers to direct refund of duties/ taxes charged on account of lapse on the part of the Department, but being oblivious of its powers, it erroneously refused the recommended prayer---High Court, in circumstances had rightly issued writ against such orders.

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

----S. 84---Constitution of Pakistan (1973), Art.199---Constitutional petition---Maintainability---Application to warehouse---Until some order in writing refusing the inbonding facility, had been passed, invocation of constitutional jurisdiction could not have been refused to the importer.

A. Karim Malik for Appellant.

Mushtaq Ahmad Chaudhaty for Respondent.

Date of hearing: 2nd June, 2004.

2006 P T D 276

[Lahore High Court]

Before Nasim Sikandar, J

Messrs BASHIR DAR-UL-MAHI through Muhammad Aslam, Ex-Managing Partner

versus

REGIONAL COMMISSIONER OF INCOME-TAX, EASTER REGION, LAHORE and 2 others

W.P. No.11759 of 2005, heard on 6th September, 2005.

Income Tax Ordinance (XXXI of 1979)---

----Ss. 59 & 55---C.B.R. Circular No. 7 of 2002, dated 15-6-2002, para. 9(a)(ii)---Constitution of Pakistan (1973), Art.199---Constitutional petition---Self-Assessment Scheme once issued can be amended or extended---Such change or extension cannot be detrimental to the assessees after returns have been filed and a final and decisive step has been taken by the assessees in response to the scheme notified for the year---Availing the scheme by the assessee is optional and every assessee can file a return under S.55 of the Income Tax Ordinance, 1979 to be treated and assessed under the normal law---Such fact alone, however, does not justify the issuance of parameters of denial of scheme to the assessees individually or collectively after filing of returns---Guidelines issued by the authorities, in the present case, showed that para.9(a)(ii) of the Circular No.7 of 2002 (Self-Assessment Scheme) had been completely substituted---Revenue however, was totally silent as to why these guidelines could not be issued as part of para.9 of the Scheme simultaneously with the scheme or at least before filing of the returns---Shroud of uncertainty appeared to have deliberately been allowed to remain covering guidelines only in order to have unchecked discretion to select a case for total audit---Withholding of parameters or guidelines of selection of cases out of the scheme may not necessarily be mala fide, however, withholding of the guidelines till the filing of returns, did not appear bona fide either---State does not cheat the citizens---Revenue, therefore, was not correct in claiming that the purpose of the guidelines was to provide for impartiality and transparency---Selection of cases for process under normal law on the basis of such guidelines issued after filing of returns was improper---High Court accepted the constitutional petition and set at naught the selection of cases along with any super-structure raised on the basis of that notice including the framing of an assessment.

W.P. No.9979 of 2003, dated 24-9-2003 fol.

Sayyid Ali Imran Rizvi for Petitioner.

Muhammad Ilyas Khan for Respondents.

Date of hearing: 6th September, 2005.

2006 P T D 282

[Lahore High Court]

Before Muhammad Sair Ali and Sh. Azmat Saeed, JJ

COMMISSIONER OF INCOME TAX/ WEALTH TAX, SPECIAL ZONE, LAHORE

versus

Mian NAEEM UMAR

W.T.A. No.115 of 2001, decided on 17th February, 2005.

Wealth Tax Rules, 1963---

----R.8---Wealth Tax Act (XV of 1963), S.27---Appeal to High Court---Break-up value of shares of company---Determination---Principles---Surplus on revaluation of the fixed assets of the company could be excluded while determining the break-up value of shares---Any amount not realized on revaluation of assets cannot be treated as a free reserve nor could it be considered as part of profit and loss account.

W.T.A. No.317 of 2002 fol.

Mian Yousaf Umer for Appellant.

2006 P T D 284

[Lahore High Court]

Before Muhammad Sair Ali and Sh. Azmat Saeed, JJ

COMMISSIONER OF INCOME TAX AND WEALTH TAX SIALKOT ZONE, SIALKOT

versus

KHALID JAVID, BAT MAKER, SIALKOT

W.T.A. No.37 of 2003, decided on 28th February, 2005.

Wealth Tax Rules, 1963-------

-----R(3)-Determination of value of constructed property be adopted on "gross annual rental values" basis when the property has not been let out---Principles.

The term and expression GALV as defined in explanation to sub-rule (3) of Rule 8 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 GALV Rule. The said explanation defines "Gross Annual Letting Value" to be the one for which the property might reasonably be expected to be let from time to time. The definition itself indicates that GALV is only a notional value on which a property could reasonably be expected to be let from year to year. The actual renting out of property for the purpose of application of the Rule, therefore, is not required at all."

Commissioner of Income-Tax/Wealth Tax v. Mst. Kamal Asghar 2005 PTD 50 fol.

Mian Yusuf Umar for Petitioner.

2006 P T D 307

[Lahore High Court]

Before Nasim Sikandar and Jawwad S. Khawaja, JJ

KASHMIR AGENCY

Versus

COLLECTOR OF CUSTOMS and others

Customs Appeal No.44 of 2004, decided on 30th March, 2005.

Customs Act (IV of 1969)---

----S.32---Misdeclaration of origin, brand and value of imported NTN Ball Bearings--Importer declared such Bearings to be of China made, While revenue alleged same to be of Japan made---Request of importer to get standard and quality of such Bearing verified from a laboratory---Tribunal upheld penalty imposed by revenue while ignoring such request of importer---Validity---Forums below had not recorded any reason for their refusal to accept such request---Inquiry into the value of comparable cases would be relevant only on finding as a fact that such Bearings were of Japanese origin---Such matter could have been decided directly on, obtaining expert opinion---Failure to accept such request of importer had resulted in miscarriage of justice---High Court accepted appeal and remanded case to Tribunal for decision afresh after obtaining an expert opinion or report from an official laboratory.

Mumtaz Hussain Bhutta for Appellant.

Izhar-ul-Haq for Respondent.

Date of hearing: 30th March, 2005.

2006 P T D 313

[Lahore High Court]

Before Umar Ata Bandial, J

Messrs M.M.M. TRADERS through Proprietor

Versus

DEPUTY COLLECTOR CUSTOMS (GROUP-IV), LAHORE and 4 others

Writ Petition No.15073 of 2005, heard on 11th November, 2005.

Customs Act (IV of 1969)---

----S.25---Constitution of Pakistan (1973), Art.199---Constitutional petition Determination of Customs Value of goods---Contention of the petitioner was that the value advice issued by the Controller of Customs Valuation had been made basis for rejecting the declared value of the petitioner's imported goods and that reliance on such valuation advice was not contemplated by the law unless the same was notified in the official Gazette---Validity---Valuation advice simpliciter was not a valid basis of assessment of the value of imported goods within the framework of S.25, Customs Act, 1969---High Court declared the impugned assessment to be without lawful authority with the observation that Customs Department was at liberty to re-assess the imported goods of the petitioners in accordance with law considering, in particular the provisions of S.25 of the Customs Act, 1969 or any other provision applicable to the said procedure.

Messrs Sohrab Global Marketing (Pvt.) Ltd. v. Deputy Collector of Customs Lahore and others 2005 PTD 67 ref.

Mian Abdul Ghaffar for Petitioner.

Dr. Sohail Akhtar and Sultan Mehmood for Customs Department and Mian Shahid Iqbal for Respondent No.4.

Date of hearing: 11th November, 2005.

2006 P T D 319

[Lahore High Court]

Before Nasim Sikandar and Jawwad S. Khawaja, JJ

COLLECTOR OF SALES TAX AND CENTRAL EXCISE, LAHORE

Versus

COCA COLA EXPORT CORPORATION, LAHORE

Customs Appeal No.153 of 2001, heard on 24th October, 2005.

Central Excise Act (I of 1944)---

----S.4(1)---Central Excise Rules, 1944, Rr.7 & 9---Central Excise General Order No.53 of 1967, para. 3---Determination of value for purposes of duty---Supply of beverage concentrate by manufacturer to franchised bottlers in same vicinity---Addition of incidental charges while determining value of concentrate---Scope---General body of retail traders was situated only next door---Due to proximity of location of both manufacturer and franchised bottlers, no octroi post was involved, thus, no duty or toll tax would be payable by franchise holder---Only handling and transportation charges could be added to value of concentrate as sundry charges for purpose of fixation of excise duty.

PLD 1995 SC 659; Pakistan through Secretary Finance and another v. Kohat Cement Company and others PLD 1995 SC 659; Atlas Battery Limited Karachi v. Superintendent Central Excise and Land Customs Circle `C' Karachi PLD 1984 SC 86 and Central Board of Revenue, Government of Pakistan v. Messrs Maple Leaf Cement Factory Ltd. 2002 PTD 1989 ref.

Aftab Hassan for Appellant.

Imtiaz Rashid Siddiqui for Respondent.

Date of hearing: 24th October, 2005.

2006 P T D 327

[Lahore High Court]

Before Nasim Sikandar and Jawwad S. Khawaja, JJ

Rao TALIB ALI KHAN

Versus

INCOME TAX APPELLATE TRIBUNAL, LAHORE and 2 others

Income Tax Appeal No. 536 of 1998, decided on 16th May, 2005.

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

---S.134---Appeal to Appellate Tribunal---Question of fact---Production of fresh evidence before Tribunal, prayer for---Scope---Question of fact could not be converted into a question of law on the idea that Tribunal itself ought to have probed into the matter to find out the truth---In absence of an application (oral or in writing) and without first recording reasons, Tribunal could not grant such prayer---Principles 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 ref.

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

----S.136---Question of fact cannot be a subject-matter of appeal before High Court.

Ch. Jan Muhammad for Appellant.

Nemo for Respondents.

Date of hearing: 16th May, 2005.

2006 P T D 330

[Lahore High Court]

Before Muhammad Sayeed Akhtar and Umar Ata Bandial, JJ

ADDITIONAL COLLECTOR OF SALES TAX-II, LAHORE

Versus

Messrs B.O.C. PAKISTAN LIMITED, LAHORE and another

Sales Tax Appeal No.6-S of 1999, decided on 4th October, 2005.

Sales Tax Act (VII of 1990)---

----Ss. 2(46)(e) & 46---Valuation Committee---Scope---Valuation Committee was created by an amendment of a procedural nature in the Sales Tax Act, 1990---Such forum was meant to facilitate the determination of the controversies between parties on the question of valuation---Such amendment being a procedural one same applied to all pending cases---No change took place in the substantive rights of the parties pursuant to the said amendment and therefore no objection on the ground of prejudice by retrospectivity was made out---Directions given by the Tribunal for assessment of the valuation of the taxable supplies by the Valuation Committee constituted under S.2(46)(e) of the Sales Tax Act, 1990 were both lawful and practicable which the Revenue shall implement in accordance with law.

Izhar-ul-Haq Sheikh for Appellant.

2006 P T D 332

[Lahore High Court]

Before Nasim Sikandar, J

Messrs WAK LIMITED through Chief Executive

Versus

FEDERATION OF PAKISTAN through Ministry of Finance, Islamabad and 5 others

Writ Petition No.17797 of 2005, decided on 31st October, 2005.

Sales Tax Act (VII of 1990)---

----Ss.46 & 48---Constitution of Pakistan (1973), Art.199---Constitutional petition---Appeal to Appellate Tribunal---Grievance of the petitioner was non-hearing of the appeal pending before the Customs, Central Excises and Sales Tax Appellate Tribunal with the assertion that appeal filed by the petitioner had already been heard by the Tribunal but the judgment was awaited and despite the fact that the Tribunal had reserved its judgment the Revenue was bent upon enforcing the recovery which was a subject-matter of appeal before the Tribunal---Held, Tribunal being the first extra departmental appellate forum an assessee was entitled to interim relief till the matter was decided by the Tribunal---High Court allowed the prayer for interim relief till the decision of the appeal by the Tribunal---Tribunal was directed by the High Court to decide the appeal within 15 days from the date present order of the High Court was conveyed to them; till then no coercive mode of recovery shall be enforced against the petitioner and in case any order enforcing the recovery had already been issued the same shall forthwith cease to have effect for the aforesaid period.

Ali Sibtain Fazli for Petitioner.

Dr. Sohail Akhtar for the Revenue.

Malik Pervaiz Akhtar, Dy. A.-G. for the State.

2006 P T D 336

[Lahore High Court]

Before Nasim Sikandar and Jawwad S. Khawaja, JJ

Messrs SHEIKH WAHID-UD-DIN INDUSTRIES (PVT.) LTD.

Versus

ADDITIONAL COLLECTOR SALE TAX II and another

Custom Appeal No.164-S of 1999, decided on 9th May, 2005.

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

----Ss.3, 6, 22, 23, 26, 33 & 34---S.R.O. 575(I)/98, dated 12-6-1998---Delayed payment of sales tax---Imposition of additional tax and penalty---Assessee claimed to have paid tax before issuance of S.R.O. 575(I)/98, dated 12-6-1998 and show-cause notice---Validity---Amnesty contemplated under such S.R.O. would also be available to cases of taxpayers even pending in appeal---Assessee already having paid tax due would not be burdened with additional tax and penalty, thus, he was entitled to the benefit of amnesty contemplated by the S.R.O.---High Court accepted appeal and set aside impugned orders.

(b) Taxation---

----Amnesty granting legislation both superior as well as subordinate needs to be construed liberally, so that same does not either trap an unwary taxpayer or otherwise succeed in taking away with the other hand while giving it by the one.

Altaf-ur-Rehman Khan for Appellant.

Sultan Mahmood with Izhar-ul-Haq for Respondents.

2005 P T D 338

[Lahore High Court]

Before Nasim Sikandar, J

Messrs JAVED RUBBER WORKS, through Proprietor

Versus

CENTRAL BOARD OF REVENUE, ISLAMABAD and 4 others

Writ Petition No.11847 of 2005, heard on 7th September, 2005.

Income Tax Ordinance (XXXI of 1979)---

----S.59---Self-Assessment Scheme---Change in or extension of Scheme after its announcement and filing of returns by the assessee---Scope and Validity---Availing of Self-Assessment Scheme was though optional for the assessee, but such fact would not justify the department for issuance of parameters of denial of Scheme to assessee individually or collectively after filing of returns---After filing of return by the assessee and taking final and decisive step in response to the Scheme notified for the year, department could not make change or extend the Scheme detrimental to the assessee---Principles.

Dr. Ilyas Zafar for Petitioner.

Muhammad Ilyas Khan for Respondents.

Date of hearing: 7th September, 2005.

2006 P T D 343

[Lahore High Court]

Before Muhammad Sair Ali and Muhammad Khalid Alvi, JJ

Messrs AJWA CENTRE, LAHORE

Versus

COMMISSIONER OF INCOME TAX/WEALTH TAX, ZONE-APPELLANT, LAHORE

Wealth Tax Appeal No. 59 of 2004, decided on 8th December, 2005.

Wealth Tax Act (XV of 1963)---

----Ss.2(5)(i) & 3---Mere holding of an immovable property by an AOP is not sufficient to qualify it as an asset---Holding of such property should be with the purpose of the business of construction and sale, or letting out of the property---Where it is proved that the property is held by an AOP with the said purpose it undoubtedly becomes an asset of the AOP chargeable to tax under S.3 of the Wealth Tax Act, 1963---Question as to whether a group of persons is or is not an AOP within meaning of S.2(5)(ii) of the Wealth Tax Act, 1963 is a pure question of fact to be determined keeping in view all the attending circumstances of the case.

Shahbaz Butt for Appellant.

Sajjad Ahmed Jaffari for Respondent.

Date of hearing: 29th November, 2005.

2006 P T D 348

[Lahore High Court]

Before Nasim Sikandar and Jawwad S. Khawaja, JJ

CEBEE INDUSTRIES (PVT.) LTD., LAHORE

Versus

INCOME TAX APPELLATE TRIBUNAL and 2 others

I.T.A. No.207 of 1997, decided on 30th June, 2005.

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

----S.136---Reference to High Court---Matter of estimation of sale and turnover of business---High Court would generally decline to interfere in such matter---Estimation of sales by Assessing Officer and Tribunal in two different ratio of sui-gas consumption during relevant period, if not supported by any material on record, then High Court would interfere in such matter---Principles.

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

----S.25(c)---Interest due on capital borrowed for business---Such interest claimed as expense was allowed, but was not paid by assessee in preceding three years---Assessing Officer treated unpaid interest as trading liability of assessee---Impugned assessment was upheld in circumstances.

1983 PTD (Trib.) 320 ref.

Mrs. Ethyl Saxena v. Commissioner of Income Tax, New Delhi (1984) 146 ITR 518 distinguished.

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

----S.25(c)---Term "trading liability" as used in S.25(c) of Income Tax Ordinance, 1979---Connotation---Provisions of sub-clause (c) of S.25 of the Ordinance would be read along with opening part of the main section---Such term would not be read in isolation, but in conjunction with allowances and deductions allowed in respect of loss, bad debt and expense incurred by assessee---Not all, but majority of deductions allowable under S.23 of the Ordinance, could be read as trading liabilities, unless same specifically found mention in S.24 thereof---Word "trade" would not be confined to mere sale and purchase, but in its wide meaning would signify whole of business of a person engaged in---Trading liability would be any liability incurred with respect and in regard to business of assessee---Principles.

Syed Abrar Hussain Naqvi for Appellant.

Mian Yousaf Umar for Respondent.

Date of hearing: 17th May, 2005.

2006 P T D 378

[Lahore High Court]

Before Nasim Sikandar, J

MICRO CORPORATION through Managing Partner

Versus

DEPUTY COLLECTOR, CUSTOMS, SIALKOT

Writ Petition No. 11296 of 2005, heard on 15th September, 2005.

Customs Act (IV of 1969)---

----Ss.32 [as amended by Federal Laws (Revision and Declaration) Ordinance (XXVII of 1981)] & 156(14)---Constitution of Pakistan (1973), Art.199---Constitutional petition---Withdrawal of rebate at a rate higher than admissible under law---Lodging of F.I.R. by Revenue without undertaking adjudication proceedings against petitioner---Validity---Provisions of S.32 read with S.156(14) of Customs Act, 1969 would attract only when on proper adjudication proceedings, petitioner was found to have acted dishonestly to claim excess amount of rebate---High Court accepted, constitutional petition and quashed F.I.R. in circumstances---Principles.

A claim of a concession or a rebate at a higher rate than it is admissible under the law can attract the penal provisions of Customs Act, 1969 only if it is manifestly mala fide. The addition of words "knowing or having reason to believe that such document or statement is false" added in subsection (1) of section 32 by the Federal Laws (Revision and Declaration) Ordinance, 1981 was to clear the ambiguity in the law and to put a check on the power of the Revenue Authorities to proceed against unwary tax-payer. The knowledge of a person or the fact that he had reason to believe as to the falsity of the statement or the document can be determined and ruled upon only if a person as contemplated in the subsequent provisions of subsections (3) and (3-A) of section 32 is served with a notice and required to show cause and explain his position. The proceedings contemplated in the subsequent part of section 32 contemplate an action only on adjudication proceedings. Once these proceedings have culminated in a judgment or order that the person filing the documents knew or had reason to believe them to be false in material particular, he can be brought to justice on criminal side. The addition of words "and upon conviction" added in subsection (1) of section 32' by aforesaid Ordinance of 1981 are indicative of the fact that criminal liability under section 32 will arise only, when earlier a person had, on proper adjudication proceedings, been found to have deliberately filed a false document or had made a false statement in a material particular not only knowingly, but also if he had reason to believe that such document or statement was false.

In the present case, without adjudication proceedings, the petitioner was required to pay and he actually made payment of an amount more than the rebate excessively withdrawn. Therefore, the Revenue had a very weak case, if, at all, it is one to demonstrate that the excess claim was made and received with dishonest motive. A claim of rebate is processed at different levels of the customs hierarchy starting from lower grade clerk passing through the officers with the status of a Collector. If none of them at the relevant time noticed the difference in the rate of rebate, then the petitioner deserves a fair consideration of his defence. It is that rebate claim is a routine exercise in view of exports worth millions every year and is carried out by staff employed in his office, who are not aware of the streak of changes in law and the rates, notwithstanding the established legal maxim that ignorance of law is no excuse.

The liability of a person contemplated under the penal provisions of section 32 is primarily a civil liability entailing determination of payment of the amount specified in the show-cause notice issued under subsections (3) and (3-A). It is only after determination of that liability and on the findings recorded in that regard that the penal provisions contained in various sub-clauses of section 156 can possibly be invoked.

In the present case, the allegation of collusion between petitioner and the functionaries of the customs department has been made to give a civil proceedings the colour of criminal liability inasmuch as no official of the department had been arrested or made to join investigation from the date of recording of the F.I.R. till the filing of this petition and even thereafter till today. No restraint order in respect of the departmental officials has ever been made by High Court.

The provisions of sections 32 and 156(14) of Customs Act, 1969 would be relevant only on proper adjudication proceedings if it is established on record that petitioner acted dishonestly to claim excess amounts of rebate.

?

In view of above legal position, the objection of Revenue against maintainability of present constitutional petition on account of availability of an alternate remedy cannot be sustained.

High Court accepted present constitutional petition and quashed F.I.R. recorded against petitioner.

Waqar Azim for Petitioner.

Dr. Sohail Akhtar and Muhammad Nawaz Cheema for Respondent.

Date of hearing: 15th September, 2005.

2006 P T D 383

[Lahore High Court]

Before Syed Hamid Ali Shah, J

ISHER SINGH

Versus

SUPERINTENDENT CUSTOMS (TRAFFIC), ALLAMA IQBAL INTERNATIONAL AIRPORT, LAHORE and 4 others

Writ Petition No. 13663 of 2005, decided on 28th July, 2005.

Customs Act (IV of 1969)---

----Ss.126, 142, 171 & 168(1)---Afghan Transit Trade Agreement, 1965---Constitution of Pakistan (1973), Art.199---Constitutional petition---Baggage of passenger in transit to Afghanistan---Detention of baggage at first instance, and then its seizure liable to confiscation---Validity---Detention report being earlier in time and an immediate response to declaration coupled with report of authority would have precedence over seizure report prepared subsequently---Reasons recorded in both such reports were contradictory and had different impact---Goods detained would be liable to be returned under S.142 of Customs Act, 1969, while goods confiscated and seized would be liable to be sold under S.201 thereof---Contradictory reports would create doubts regarding conduct of proceedings in a transparent manner---Detention of baggage itself proved that three essential conditions of S.142 of Customs Act, 1969 were met, thus, petitioner, would be entitled to return of baggage on his leaving Pakistan---Transshipment of baggage would be covered under Afghan Transit Trade Agreement, 1965---High Court accepted constitutional petition declaring petitioner (Afghan National) to be entitled to return of baggage at Torkham Border on his leaving Pakistan.

Mian Abdul Ghaffar for Petitioner.

Ahmar Bilal Sufi for Respondents.

2006 P T D 386

[Lahore High Court]

Before Nasim Sikandar and Jawwad S. Khawaja, JJ

COMMISSIONER OF INCOME TAX/WEALTH TAX

Versus

Messrs PAPERS AND BOARD MILLS

Income Tax Appeal No. 300 of 2000, decided on 12th May, 2005.

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

----S.12(18)---Provision of S.12(18) of Income Tax Ordinance, 1979---Applicability---Such provision would attract only to sums claimed or shown to have been received as loan.

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

----S.12(18) [as substituted by Finance Act (III of 1998)]---Amendment, of S.12(18) of Income Tax Ordinance, 1979 adding therein words "advance or gift"---Effect---Such amendment had not clarified existing law, but had brought a change therein---Such amendment would not apply to earlier assessments finalized before its coming into force.

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

----S.12(18) [prior to its amendment by Finance Act (III of 1998)]---C.B.R. Circular No.6 of 1987, 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 assets or a stock-in-trade --- Issuance of share deposits 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 fulfilment of two conditions: Firstly, when 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.

Messrs Fabrics (Pvt.) Limited v. Income Tax Appellate Tribunal, Lahore ITA No.491 of 2000 dated 6-2-2001; Edition of Black's Law Dictionary page 936;. Shorter Oxford English Dictionary page 1227 Volume-I; Chambers 20th Century Dictionary page 739; Guracharan Das and another v. Ram Rakhi. Mal AIR 1937 Lah. 81; Chairman Evacuee Trust Property West Pakistan, Lahore v. Muhammad Din and another PLD 1971 Lah. 217; C.I.T. North Zone (W.P.) Lahore v. Crescent Textile Mills Ltd. (1974) 29 Tax 242; Duggal and Co. v. CIT (1996) 220 ITR 456; K.A. Remaswamy Chettiar and another v. C.I.T. (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) 75 Tax 1 ref.

(d) Interpretation of statutes---

----Fiscal statute---Letter of law in taxing statute would be interpreted in the sense same had been used and expressed.

(e) Interpretation of statutes---

---Fiscal statute---Provision creating a legal fiction would be interpreted in such a manner as same would not cause injustice to a party.

CIT v. Nathimal Gayalal (1973) 89 ITR 190 fol.

(f) Administration of justice---

---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.

(g) Words and phrases-

---"Loan"---Meaning---Loan is a sum returnable after a certain or uncertain period with or without interest.

Black's Law Dictionary of 6th Edition page 936; Shorter Oxford English Dictionary page 1227 Volume-I; Chambers 20th Century Dictionary page 739; Guracharan Das and another v. Rain Rakha Mal AIR 1937 Lah. 81 and Commissioner of Wealth Tax v. Abid Hussain 1999 PTD 2895 rel.

(h) 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.

(i) Interpretation of statutes---

---Amendment in law---Effect and retrospectivity---Amendment brings change in existing state of law, unless same was of clarificatory/ declaratory nature---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 Gujranwala v. Presiding Officer Punjab Labour Court Northern Zone and 6 others PLD 1976 Lahore 1097 fol.

(j) Interpretation of statutes---

----Fiscal statute---Two interpretations equally possible---Scope of choice---Interpretation favourable to the 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 can 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.

Sajjid Ali Jafari for Appellant.

Nemo. for Respondent.

Date of hearing: 12th May, 2005.

2006 P T D 395

[Lahore High Court]

Before Umar Ata Bandial, J

Messrs SHAHEEN TRADING CORPORATION through Proprietor

Versus

ASSISTANT COLLECTOR OF CUSTOMS (GROUP-III) and 5 others

Writ Petition No. 12478 of 2005, decided on 10h November 2005.

Customs Act (IV of 1969)---

---Ss. 81(2) & 156(1)(14)---Constitution of Pakistan (1973), Art. 199---Constitutional petition---Assistant Collector, while finalizing the assessment under S.81(2), Customs Act, 1969 had imposed penalty under S.156(1)(14) of the said Act---Validity---Such order being without jurisdiction was void and of no legal effect---High Court directed that if there was any demand to be raised by the Department against the petitioner, same may be resorted to through lawful exercise of authority by the competent officer.

Abdul Zahir and another v. Director General Pakistan Coast Guards and 4 others PLD 1990 Kar. 412 ref.

Mian Abdul Ghaffar for Petitioner.

Dr. Sohail Akhtar for Respondents.

2006 P T D 402

[Lahore High Court]

Before Nasim Siknadar, J

Messrs PROSPERITY WEAVING MILLS LTD. through Director

Versus

FEDERATION OF PAKISTAN through Secretary, Finance Division, Islamabad

Writ Petitions Nos. 1803, 5511, 5486, 6483 and 4993 of 2004, heard on 26th September, 2005.

Income Tax Ordinance (XXXI of 1979)---

----Second Schedule, Part-I, Cl. 77-C [as amended vide S.R.O.1135(I)/91, dated 7-11-1991 & S.R.O. 1012(I)/99, dated 3-9-1999], C1.77-C(a) [as inserted by S.R.O. 1343(I)/99, dated 16-12-1999] & C1.78-E---Income Tax Ordinance (XLIX of 2001), Ss.151, 159 & 239 (14) [as amended by Finance Act (I of 2003)] & Second Sched. Part-I, C1.(83)---S.R.O. No.100(I)/93, dated 2-2-1993---Profit/interest accrued on National Saving Schemes---Investment made in such Schemes on or before 1st July, 2001---Deduction of income tax from such profit/ interest---Validity---Such profit would 'enjoy continuous exemption from levy of income tax under Income Tax Ordinance, 1979 and Income Tax Ordinance, 2001---Such exemption would be available in case of "Mahana Amdani Account", where monthly instalment does not exceed Rs. 1000---Any person paying such profit/interest would not be obliged to deduct tax at source nor recipient thereof would be required to produce exemption certificate under S. 159 of Income Tax Ordinance, 2001---Principles.

Siraj-ud-Din Khalid, Dr. Ikram-ul-Haq, Ch. Ishtiaq Ahmed and Qamar Riaz Hussain Basra for Petitioners.

Dr. Danishwar Malik, D.A.-G., Tariq Shamim, Standing Counsel and Muhammad Ilyas Khan for Respondent.

Date of hearing: 26th September, 2005.

2006 P T D 406

[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)---Deduction of Zakat from assets of assessee---Exemption from wealth tax---Essential conditions and object stated.

Section 25 of Zakat and Ushr. Ordinance, 1980 excluded such assets from the taxable wealth of an assessee in respect of which Zakat has been deducted at source during the year relevant to the assessment in question. This tax concession is, thus, dependent upon fulfilment of two conditions: (i) deduction of Zakat at source; and (ii) deduction of Zakat to be made during the year relevant to the assessment year in question. If these two conditions co-exist, then the assets in respect of which Zakat has been deducted at source would enjoy exemption from the levy of wealth tax.

The legislative intent in providing_ such tax concession, was obviously to avoid double taxation. Both Zakat and wealth tax are the "taxes on the wealth" of an assessee. The assets, which are liable to compulsory deduction of Zakat at source, are exempt from the levy of wealth tax under Wealth Tax Act, 1963. This exemption has been allowed to protect the assessee from the imposition of the double levy.

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

----S.5(1)(xviii)---Zakat and Ushr Ordinance (XVIII of 1980), S.25(1)(a)(ii)---Deduction of Zakat from assets of assessee---Exemption from wealth tax---Extent---Such exemption would extend to Zakat paid assets only, but not to the assets created with the cash obtained on encashment of Zakat paid assets---Principles.

(c) Interpretation of statutes---

----Fiscal statute---Exemption provisions---Principles of interpretation and duty of Court stated.

The exemption provisions are to be given strict construction.

In the case of exemption, 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 fol.

(d) Interpretation of statutes---

----Fiscal statutes---Doubt or ambiguity would be resolved in favour of assessee.

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

----S.5(1)(xvii) [as substituted by Finance Ordinance (XXVIII of 1984) & Second Schedule. Cl. (12)(1)]---Residential house---Exemption from wealth tax---Essential conditions and proof---Claimed house must be residential, owned and occupied by assessee for purposes of his own residence---Where assessee made such claim by declaring his intention/ goal/purpose, then onus would shift upon Revenue to prove otherwise through strong evidence that purpose of such occupation of assessee was not his own residence---Principles.

Black's Law Dictionary, 7th Edition ref.

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

----Ss. 5 & 27---Appeal to High Court---Residential house, whether occupied by assessee for own residence or not---Such question being a question of fact could not be made subject-matter of appeal before High Court.

(g) Words and phrases----

---"Purpose"---Definition.

Black's Law Dictionary, 7th Edition ref.

Muhammad Iqbal Khawaja for Appellant.

Muhammad Ilyas Khan for Respondent.

Date of hearing: 3rd May, 2005.

2006 P T D 415

[Lahore High Court]

Before Nasim Sikandar and Jawwad S. Khawaja, JJ

COMMISSIONER OF INCOME TAX/WEALTH TAX

Versus

Messrs HEART INTERNATIONAL (PVT.) LIMITED

Income Tax Appeal No.140 of 2000, decided on 13th June, 2005.

Income Tax Ordinance (XXXI of 1979)---

----Ss.12 (18) & 136---Cash loans from directors---Addition---Income Tax Appellate Tribunal in the circumstances of the case was justified to confirm the order of Commissioner Income Tax (Appeal) regarding deletion of addition under S.12 (18) of Income Tax Ordinance, 1979, made by Assessing Officer to assessee-Company's income on account of cash loans declared in balance-sheet as having been received from directors.

Messrs Mr. Fabrics (Pvt.) Limited v. Income Tax Appellate Tribunal, Lahore I.T.A. No.491 of 2000 fol.

Malik Muhammad Nawaz for Appellant.

Nemo for Respondent.

Date of hearing: 13th June, 2005.

2006 P T D 426

[Lahore High Court]

Before Syed Hamid Ali Shah, J

Messrs MUSTAFA FOOD INDUSTRIES (PVT.) LTD. through Director

Versus

TAXATION OFFICER OF INCOME TAX AUDIT-III, COMPANIES ZONE-I, LAHORE and 2 others

Writ Petitions Nos. 17269 and 17901 of 2005, heard on 14th November, 2005.

Income Tax Ordinance (XLIX of 2001)---

----Ss.114 (1), 120 (3) & 177 (1)---Constitution of Pakistan (1973), Art.199---Constitutional petition---Universal Self-Assessment Scheme---Selection of case for audit---Failure to give statutory notice ---Assessee filed his income tax returns under, S.114 (1) of Income Tax Ordinance, 2001, and without issuance of notice under S.120 (5) of Income Tax Ordinance, 2001, authorities selected his case for audit---Validity---Commissioner of Income Tax could proceed against any person but while doing so he had to mention the clause of S.177 (1) of Income Tax Ordinance, 2001, under which he proposed to proceed and at the same time, he had to give reasons for the action against assessee because his assessment order was to be reopened and declaration in return was to be scrutinized, which was an order adverse to the provisions of S.120 of Income Tax Ordinance, 2001---Notice issued by income tax authorities was declared to be illegal, void and passed/issued without lawful authority and of no legal effect and was set aside---Commissioner of Income Tax, could initiate proceedings afresh after meeting the legal requirements---Constitutional Petition was allowed accordingly.

Ch. Muhammad Hussain v. Commissioner of Income Tax 2005 PTD 152 fol.

Muhammad Naeem Shah for Petitioner.

Shahid Jamil Khan for Respondent.

Date of hearing: 14th November, 2005.

2006 P T D 440

[Lahore High Court]

Before Maulvi Anwarul Haq and Sh. Hakim Ali, JJ

Messrs FATIMA SUGAR MILLS LIMITED through Managing Director

Versus

FEDERATION OF PAKISTAN through Ministry of Finance, Revenue & Economic Affairs, Islamabad and 3 others

I.C.A. No.275 in W. P. No.8329 of 1999, heard on 14th November, 2005.

Sales Tax Act (VII of 1990)---

--Ss.3 & 5---Law Reforms Ordinance (XII of 1972), S. 3---Imposition of Sales Tax---Assessee had challenged imposition of Sales Tax at the rate of 1% and then further imposition at the rate of 3% as further tax upon sale of goods to unregistered persons---Held, imposition of Sales Tax at the rate of 3% vide amendment effected through Finance Act, 1999, did not suffer from any legal infirmity.

Tandlianwala Sugar Mills Ltd. and others v. Federation of Pakistan through Secretary, Ministry of Finance, Revenue and Economic Affairs, Islamabad and others 2001 SCMR 1398 ref.

Malik Muhammad Rafiq Rajwana for Appellant.

Ch. Sagheer Ahmad, Standing Counsel for Respondent.

Date of hearing: 14th November, 2005.

2006 P T D 470

[Lahore High Court]

Before Nasim Sikandar, J

Mst. SHUGFTA PARVEEN

Versus

FEDERATION OF PAKISTAN through Secretary Finance Division, Islamabad and 3 others

Writ Petitions Nos. 5511 and 1803 of 2004, heard on 26th September, 2005.

Income Tax Ordinance (XXXI of 1979)---

----Ss.151, 159, Second Sched., Part-I, Cls. 77-C & 78-E---Income Tax Ordinance (XLIX of 2001), S. 239(14), Second Sched., Part-I, Cls.(77-C(A)) & (83)---S.R.O. 100(I)/93, dated 2-2-1993---National Savings Schemes---Investment made in such Schemes on or before 30-6-2001---Deduction of withholding tax on yield from such Schemes---Validity---Recipients of such yield would enjoy exemption from levy of withholding tax under Income Tax Ordinance, 1979 and 2001---Such exemption would be available in case of Mahana Amdani Account, where its monthly instalment did not exceed Rs.1,000---Any person paying such yield would not be obliged to deduct tax at source nor recipients thereof would be required to produce exemption certificate under S.159 of Income Tax Ordinance, 1979---National Saving Organization as collecting agent of Revenue could not take away such concession given by law to the recipients of such yield---Principles.

2006 PTD 402 fol.

Ch. Ishtiaq Ahmed for Petitioner

Dr. Danishwar Malik, Dy.-A.G., Tariq Shamim, Standing Counsel and Muhammad Ilyas Khan for Respondents.

Date of hearing: 26th September, 2005.

2006 P T D 494

[Lahore High Court]

Before Syed Hamid Ali Shah, J

A.R.K. TEXTILES through Proprietor

Versus

FEDERATION OF PAKISTAN through Ministry of Finance, Islamabad and 4 others

Writ Petition No.10909 of 2005, decided on 29th December, 2005.

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

----Ss.25, 37, 37-A, 38, 40 & 40-A---Sales Tax General Order No.1 of 1991 dated 7-1-1999, S.3---S.R.O. 1160(I)/96 dated 6-10-1996---S.R.O. No.232(I)/91, dated 10-3-1991---C.B.R. Letter No.3(14) ST-L and P/2001 dated 21-7-2001---Criminal Procedure Code (V of 1898), Ss.96, 97, 98, 99, 100, 101 & 102---Constitution of Pakistan (1973), Art.199---Constitutional petition---Petitioner in the present case, was a registered person under Sales Tax Act, 1990 with the Collectorate of Sales Tax at M'---Superintendent of Sales Tax of Collectorate at "F", in order to seek clarification with regard to the manufacturing unit, took the petitioner into his office, confined him there and thereafter raided the office of his Tax Consultant, took illegally the record of various registered persons---Record was taken into possession without any preparation of list or inventory thereof and thereafter F.I.R. was lodged against the petitioner under S.37(2) of Sales Tax Act, 1990---Petitioner, consequent upon lodging of F.I.R., remained in jail and during this period Collector, Sales Tax "F" initiated audit of the petitioner's firm---Audit report was prepared which was made basis of issuance of show-cause notice---Additional Collector (Adjudication) commenced the adjudication in this respect---Petitioner through the constitutional petition had voiced his grievance against the audit report, show-cause notice and the illegal raid---Validity---Seizing of record and sealing the premises was to be carried out in accordance with the procedure laid down in Ss.96, 97, 98, 99, 100, 101, 102 & 103, Cr.P.C.---Seizure of documents without strict compliance of the provisions of Ss.37-A, 38, 40 & 40-A of Sales Tax Act, 1990 was an act without lawful authority---Raiding the premises of Tax Consultant and resumption of record by the Superintendent Sales Tax "F" was grave deviation of provisions of law as contemplated in Ss.37-A, 38, 40 & 40-A of the Sales Tax Act, 1990---Central Board of Revenue, through its Letter No.3(14) ST-L & P/2001 dated 21-7-2001, had conveyed that no F.I.R. be lodged without prior permission from the Board, but in the present case, Superintendent Sales Tax, "F" had ignored the directions of Central Board of Revenue while lodging the impugned F.I.R.---Collector, Additional Collector, Assistant Collector and Superintendent, I & P, Sales Tax Collectorate "F" had proceeded without any authority, petitioner was a registered person in the Collectorate of Sales TaxM' and as such Officers of Sales Tax in 'the Collectorate of Sales Tax at M' only had the jurisdiction to take any action against the petitioner and that too after compliance of provisions of Ss.38, 40 & 40-A of the Sales Tax Act, 1990---Impugned action of Collectorate of Sales Tax atF' against the petitioner was an act of excess of the Officers of Collectorate at F, it was without jurisdiction and as such being void order was nullity in the eye of law and liable to be struck down under constitutional jurisdiction by the High Court---Adequate remedy of appeal would only be adequate remedy when Officers had jurisdiction to take action against the petitioner---High Court allowed the constitutional petition and declared that resumption of record by Superintendent of Sales Tax Collectorate `F', without making of memorandum of seizure of documents, preparation of list and compliance of provisions of Ss.38, 40 & 40-A of Sales Tax Act, 1990 was without lawful authority and of no legal effect---Authorities were directed to return the record to petitioner which they had illegally possessed from the Tax Consultant---Proceedings on the audit report and show-cause notice, thereafter were also declared to be illegal and without any lawful authority---High Court, however, observed that there was no bar against the Collectorate of Sales Tax "M" to initiate any proceeding against the petitioner, after compliance of the provisions of law.

Federation of Pakistan v. Messrs Master Enterprises (Pvt.) Ltd. 2003 PTD 1034 and Messrs Ihsan Yousaf Textiles (Pvt.) Ltd. v. Secretary, Revenue Division, Islamabad (sic) ref.

Zahid Saleem for Petitioner.

Sarfraz Ahmad Cheema for Respondents.

2006 P T D 506

[Lahore High Court]

Before Muhammad Sair Ali and Muhammad Khalid Alvi, JJ

Messrs YOUNAS FURNITURE, GUJRAT

Versus

CUSTOMS, EXCISE AND SALES TAX, APPELLATE TRIBUNAL, BENCH-II, LAHORE and another

S.T.A. No.48 of 2004, heard on 7th December, 2005.

Sales Tax Act (VII of 1990)---

----S.3---S.R.O. 627(I)/95, dated 2-7-1995---Manufacture and supply of wooden furniture---Demand of sales tax as per standard rates---Appellant as manufacturer-cum-retailer of furniture claimed concession of fixed tax under S.R.O. 627(I)/95, dated 2-7-1995---Tribunal had found that appellant being a manufacturer of furniture was not entitled to such concession---Validity---Such notification provided concessional fixed rates only to a retailer of furniture and not a manufacturer or manufacturer-cum-retailer---Appellant in memo. of appeal had not raised objection as to findings of Tribunal regarding his status as manufacturer of furniture---Appellant could not detract from his such admission---Determination of status of appellant as a manufacturer or retailer was a question of fact settled by Tribunal as final arbiter of facts---No question of law arose from impugned order---High Court dismissed appeal in circumstances.

Dr. Ilyas Zafar for Appellant.

Izharul Haq for Respondents.

Date of hearing: 7th December, 2005.

2006 P T D 515

[Lahore High Court]

Before Syed Hamid Ali Shah, J

Messrs SARGODHA JUTE MILLS LIMITED through Director

Versus

ADDITIONAL COLLECTOR-II, (ADJUDICATION), COLLECTORATE OF CUSTOMS, SALES TAX AND CENTRAL EXCISE (ADJUDICATION), LAHORE and another

Writ Petition No. 658 of 2005, decided on 15th December, 2005.

(a) Interpretation of statutes---

----Fiscal statute---Interpretation beneficial to a taxpayer would be adopted---Fiscal provision would be interpreted to the benefit of subject and benefit of any ambiguity would go to him.

Collector of Customs, Customs House, Lahore and 3 .others v. Messrs S.M. Ahmad & Company (Pvt.) Limited, Islamabad 1999 SCMR 138 ref.

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

----S.34(1) [prior to its amendment on 1-7-2003]---Constitution of Pakistan (1973), Art.199---Constitutional petition---Additional tax, demand of---Making invoices of year 1996-97 as basis for such demand---Order in original passed on 24-7-2004 without finding mention of charging rate of additional tax---Validity---Additional tax could be levied and charged at the rates as per law prevalent on the date of passing the order in original---Assessee had paid amount of additional tax on simple basis at a rate of 1%, which was prevalent law---No justification existed for issuance of impugned notices of recovery---High Court accepted constitutional petition while declaring impugned notices to have been issued without lawful authority and of no legal effect.

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

----S. 34(1)---Constitution of Pakistan (1973), Art. 199---Constitutional petition---Alternate remedy---Notice demanding additional tax-No grievance of petitioner against order in original passed by Revenue--Petitioner's grievance was against impugned notice, against which no right of appeal was provided---Constitutional petition was maintainable.

Salman Akram Raja for Petitioner.

Dr. Sohail Akhtar for Respondents.

Date of hearing: 6th December, 2005.

2006 P T D 521

[Lahore High Court]

Before Nasim Sikandar and Jawwad S. Khawaja, JJ.

COMMISSIONER OF INCOME TAX

Versus

Messrs SUI NORTHERN GAS PIPELINES LTD., LAHORE

C.T.R. No.50 of 1995, decided on 8th September, 2005.

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

---Ss.65 & 136(1)---Reference to High Court---Findings of Tribunal as to reopening of assessment on basis of same material already available on record while framing of original assessment---Such findings of fact not disputed by any party---No question of law would arise out of the impugned order---High Court dismissed reference in circumstances.

(b) Income Tax Act (XI of 1922)---

----S.34---Income Tax Ordinance (XXXI of 1979), S.136(1)---Income escaping assessment after expiry of two years---Non-consideration of objection of limitation by Tribunal---Findings of Tribunal as to re-opening of assessment on the basis of material already available on record not challenged by Revenue in reference application---Failure of Tribunal to place complete facts of case before High Court---Effect---In absence of clear identification of material and documents stated to be available on record and their evaluation by Tribunal in perspective of objection of assessee qua change of opinion, question as framed could not be said to have arisen out of impugned order---High Court declined to answer referred questions.

Muhammad Ilyas Khan for Petitioner.

Azhar Maqbool Shah, for Respondent.

Date of hearing: 8th September, 2005.

2006 P T D 535

[Lahore High Court]

Before Umar Ata Bandial, J

SUN-RISE BOTTLING COMPANY (PVT.) LTD. through Chief Executive

Versus

FEDERATION OF PAKISTAN and 4 others

Writ Petition No.19173 of 2005, decided on 20th December, 2005.

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

----S.46 (4)---Constitution of Pakistan (1973), Art. 199---Constitutional petition---Interim injunction, expiry of---Grievance of assessee was that the authorities were not entitled to recover the tax liability on account of the fact that interim injunction already granted by Appellate Tribunal had expired with lapse of six months pursuant to S.46 (4) of Sales Tax Act, 1990---Validity---Access to justice was fundamental right and essential feature of such right was determination of any grievance or dispute by an independent Tribunal---High Court directed the authorities not to press for recovery of dues from the assessee, who would appear through appropriate application seeking final adjudication of his pending appeal---High Court directed the Appellate Tribunal to endeavour for deciding the appeal of assessee within a period of three months and during such period coercive recovery of the dues by authorities would not be resorted to---Petition was disposed of accordingly.

Z. N. Exports (Pvt.) Ltd. v. Collector Sales Tax 2003 PTCL 1363 and Mehram Ali and others v. Federation of Pakistan and others PLD 1998 SC 1445 fol.

(b) Administration of justice---

---- Access to justice was fundamental right and essential feature of such right was determination of any grievance or dispute by an independent Tribunal.

Tariq Kamal Qazi for Petitioner.

Kausar Akhter for Respondent.

2006 P T D 538

[Lahore High Court]

Before Syed Hamid Ali Shah, J

Messrs HARVEST TOPWORTH INTERNATIONAL through Member, Lahore

Versus

DEPUTY COMMISSIONER OF INCOME TAX, LAHORE and 2 others

Writ Petitions Nos. 10721, 10868, 10870, 11771 and 12179 of 2005, heard on 12th July, 2005.

Income Tax Ordinance (XLIX of 2001)---

----Ss. 61 & 62---C.B.R. Circular No. 7 of 2002, dated 15-6-2002---Self-.Assessment Scheme, (2002-2003), para. 9(a)(ii)---Supreme Court Rules, 1980, O.XIII---Constitution of Pakistan (1973), Art. 199---Constitutional petition---Total audit case---Selection---Grant of leave to appeal by Supreme Court---Effect---Assessees filed their returns under Self-Assessment Scheme but authorities selected their cases for total audit and notices under Ss. 61 and 62 of Income Tax Ordinance, 2001, were issued---Plea raised by assessees was that para. 9(a)(ii) of Self-Assessment Scheme (2002-2003) had been declared as without lawful authority by the High Court---Contention of authorities, was that against judgment of High Court, whereby para. 9(a)(ii) of the Scheme was declared without lawful authority, Supreme Court had granted leave to appeal---Validity---Supreme Court while granting leave to appeal did not suspend the judgment of High Court---Proceedings could not be stayed on the issuance of leave to appeal unless the order appealed from stood suspended-Supreme Court had taken very serious note of putting the proceedings at halt without any specific order of stay of proceedings---Cases of assessees were similar on facts as well as on question of law, therefore, selection of cases of assessees for total audit was improper---Proceedings initiated by the authorities were without lawful authority and with no legal effect---Petition was allowed in circumstances.

Messrs Sahib Textile Ltd. v. Federation of Pakistan 2004 PTD 1 fol.

Muhammad Naeem Shah for Petitioner.

Muhammad Shahid Jamil for Respondents.

Date of hearing: 12th July, 2005.

2006 P T D 551

[Lahore High Court]

Before Mian Hamid Farooq and Syed Hamid Ali Shah, JJ

COMMISSIONER OF INCOME TAX, GUJRANWALA

Versus

INAM ULLAH

C.T.Rs. Nos. 62, 65, 75 and 76 of 1998, decided on 31st October, 2005.

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

----S. 151---Exemption from tax---Scope---Such exemption was limited to original receipient of income and would not extend to a person receiving any payment wholly or in part out of income.

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

----S. 151 & First Sched. Part-IV, para. A(2)(a)---Partnership Act (IX of 1932), S. 4---Export rebate claimed by partner of firm---Validity---Partner in a firm would be entitled to business benefit in individual capacity---Firm was not a legal entity and was a collective name of its partners---Partners in a firm would be deemed as original recipients of income under S.151 of Income Tax Ordinance, 1979---Export rebate was allowable to a partner of firm.

Commissioner of Income Tax v. Nasir Ali and another 1999 PTD 1173 rel.

Muhammad Ilyas Khan for Petitioner.

2006 P T D 629

[Lahore High Court]

Before Muhammad Sair Ali and Muhammad Khalid Alvi, JJ

COMMISSIONER OF INCOME TAX/WEALTH TAX, COYS ZONE-II, LAHORE

Versus

Messrs CRESCENT COTTON AND ALLIED FACTORIES (PVT.) LTD., LAHORE

Wealth Tax Appeals Nos. 148 to 152 of 2001, heard on 8th December, 2005.

Wealth Tax Act (XV of 1963)---

----Ss.14, 16 (2) (5) & 17---Assessment of previous years---Non-issuance of notice under S.16 (2) of Wealth Tax Act, 1963---Annulling of assessment order---Assessee did not file its wealth tax return for some previous years, for which authorities issued notice under Ss. 14 and 17 of Wealth Tax Act, 1963---Assessee in response to the notice, filed its wealth tax return for the previous years and Assessing Officer finalized assessment under S.16 (5) of Wealth Tax Act, 1963---Income Tax Appellate Tribunal allowed the appeal filed by assessee and annulled assessment order on the ground that statutory notice under S.16 (2) of Wealth Tax Act, 1963, was not issued to the assessee---Plea raised by the Authorities was that when notice under Ss. 14 & 17 of Wealth Tax Act, 1963, had been given, then there was no requirement of notice under S.16 (2) of Wealth Tax Act, 1963---Validity---Notices under Ss.14 and 17 of Wealth Tax Act, 1963 and notice under S.16(2) Wealth Tax Act, 1963 were entirely of two different categories---Notice under the former provision was merely to compel and procure returns from assessee, while notice in the latter category was to call upon the assessee to produce evidence in support of its return so as to proceed with the assessment---Issuance of notice under S.14 or 17 of Wealth Tax Act, 1963, could not be equated with the statutory requirement of S.16 (2) of Wealth Tax Act, 1963---On account of failure to issue notice under S.16 (2) of Wealth Tax Act, 1963, assessment made by Assessing Officer was ab initio void and coram non judice---Such assessment was simply non-existent and Income Tax Appellate Tribunal had rightly annulled the same---High Court declined to interfere in the order passed by Income Tax Appellate Tribunal---Appeal was dismissed in circumstances.

M. Jamil Khan, Lahore v. Commissioner of Wealth Tax (1995) 71 Tax 265 and Collector, Sahiwal and 2 others v. Muhammad Akhtar 1971 SCMR 681 fol.

Shahid Jamil Khan for Appellant.

Khawaja Muhammad Iqbal for Respondent.

Date of hearing: 8th December, 2005.

2006 P T D 645

[Lahore High Court]

Before Nasim Sikandar and Jawwad S. Khawaja, JJ

COLLECTOR OF SALES TAX AND CENTRAL EXCISE, LAHORE

Versus

Messrs TREET CORPORATION LTD. through Chief Executive and 2 others

S.T.A. No.558 of 2002, heard on 16th November, 2005.

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

---S.47---Appeal to High Court---Question of law not arising out of Tribunal's order---Non-formulation of any such question by Revenue---Effect---High Court declined to entertain appeal in circumstances.

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

---Ss.7 & 66 [as amended by Finance Ordinance (III of 1998)]---Adjustment of input tax out of tax period, claim for---Imposition of additional tax and penalty for finding such claim to be out of tax period---Validity---Provisions of S.7 of Sales Tax Act, 1990 earlier to insertion of words "during the tax period" by Finance Act, 1998 were somewhat ambiguous---Such procedural lapse would not entail imposition of additional tax and penalty---Assessee paying millions of rupees as tax could not be presumed to have made such error deliberately---Such error had not resulted in any direct loss to revenue or an immediate benefit to the assessee---Entitlement of assessee to claim input tax had not been challenged as a fact---High Court dismissed appeal in circumstances.

(c) Taxation---

----Penalty provisions in a fiscal statute---Such provisions should not be invoked against a taxpayer merely for the reason that doing so would be legal.

Waqar Azim for the Appellant.

Mian Sultan Tanvir for Respondent.

Date of hearing: 16th November, 2005.

2006 P T D 660

[Lahore High Court]

Before Muhammad Sair Ali and Sh. Azmat Saeed, JJ

COMMISSIONER OF INCOME TAX/WEALTH TAX

Versus

LAHORE CANTT. COOPERATIVE HOUSING SOCIETY

Income Tax Appeal No. 642 of 1999, decided on 27th October, 2005.

Income Tax Ordinance (XXXI of 1979)---

----Ss. 2(16) & 80-B---Cooperative Society registered under Cooperative Societies Act, 1925---Status---Such Society not a company within meaning of and as defined by Income Tax Ordinance, 1979.

Commissioner of Income Tax, Companies Zone-II, Lahore v. Messrs Iqbal Avenues Cooperative Housing Society Ltd., Lah 2005 PTD 2343 fol.

Shahid Jamil Khan for Appellant.

Date of hearing: 27th October, 2005.

2006 P T D 693

[Lahore High Court]

Before Muhammad Sair Ali and Muhammad Khalid Alvi, JJ

MUHAMMADI SHOE MARKET through Bilal Ahmed Mir

Versus

SPECIAL OFFICER OF INCOME TAX/WEALTH TAX and others

Income Tax Appeals Nos. 65 and 66 of 2001, decided on 18th October, 2005.

Wealth Tax Act (XV of 1963)---

----Ss. 14(2) & 17--Wealth Tax Rules, 1963, R.8(3)---Valuation of rented building---Assessment on basis of General Annual Letting Value (GALV) of building---Dismissal of appeal by Tribunal on the ground that capitalized value of building on basis of A.L.V. had been approved by Inspecting Assistant Commissioner---Validity---Tribunal, though recorded objection of assessee that Assessing Officer had given no basis or reasons for evaluating building at impugned value, but had failed to deal with and decide same---Duty of Tribunal was to examine as to whether Appellate Authority and Assessing Officer had estimated value of building by giving due regard to parameters prescribed in R.8(3) of Wealth Tax Rules, 1963---High Court remanded appeal to Tribunal for its fresh decision in accordance with law.

Shehbaz Butt for Appellant.

Muhammad Ilyas Khan for Respondent.

Date of hearing: 18th October, 2005.

2006 P T D 774

[Lahore High Court]

Before Jawwad S. Khawaja and Nasim Sikandar, JJ

HANSA ENTERPRISES, SIALKOT

Versus

REVENUE

P.T.R. No. 382 of 2003, heard on 6th December, 2005.

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

----S. 12(18)---C.B.R. Circular No.3 of 1992, dated 27-1-1992---Income deemed to accrue---Payment, made by a sister concern of assessee to third parties on behalf of the assessee under advice to the assessee for their entries in its books of accounts---Transaction shown in the ledger account of the assessee clearly indicated that the payments made by the sister concern were on behalf of the assessee---Most part of the payments were made to third parties by the sister concern through banking channel---Reliance of assessee on C.B.R. Circular No.3 of 1992 dated 27-1-1992 was therefore, relevant as said circular had provided that S.12(18) of the Income Tax Ordinance, 1979 was only to check fictitious loans and entries in the books of accounts by the assessee---Amount in question during the assessment year 1992-93 could be added and deemed as income with reference to the provisions of S.12(18) of the Ordinance only if it had been claimed or shown to have been received as a loan and not as advance by the assessee---Assessee, in the present case, had been successful in demonstrating on the basis of the copies of ledger which were earlier examined by the Assessing Officer, that credit entries made in favour of sister concern were neither claimed nor were factually a loan---Treating such the payments made by the sister concern on behalf of the assessee by the Assessing Officer as `loan' and not advance was clearly unjustified as such payments could not be treated as unrecorded or offensive to the purposive approach of the provisions of S.12(18) of the Income Tax Ordinance, 1979---Appellate Tribunal, in circumstances, was also not justified in maintaining the payments made by the sister concern to be liable as additions under S.12(18) of the Ordinance---"Loan" connotation.

Utman Ghee Industries v. Commissioner of Income Tax 2002 PTD 63 and Messrs Micropak (Pvt.) Ltd., Lahore v. Income Tax Appellate Tribunal, Lahore and 2 others 2001 PTD 1 180 fol.

(b) Words and phrases---

----Loan---Connotation.

Messrs Micropak (Pvt.) Ltd., Lahore v. Income Tax Appellate Tribunal, Lahore and 2 others 2001 PTD 1180 ref.

Dr. Ilyas Zafar for Appellant.

Shahid Jamil Khan for Respondent.

Date of hearing: 6th December, 2005.

2006 P T D 824

[Lahore of High Court]

Before Ali Nawaz Chowhan and Umar Ata Bandial, JJ

COLLECTOR OF CUSTOMS, CENTRAL EXCISE AND SALES TAX, MULTAN

Versus

MOLA BAKHSH and another

Customs Appeal 38 of 2004, heard on 26th January, 2006.

Customs Act (IV of 1969)---

----S. 168---Seizure of vehicle liable to confiscation---Chassis number of vehicle comprised of 8 digits as per voucher reflecting its purchase from Central Military Stores Department in public auction---Registration Book containing same chassis number was recorded in such voucher---Appellate Tribunal set aside order-in-original after turning down the request of revenue for examination of vehicle from its dealer---Validity---Report of such dealer obtained by High Court showed that vehicle had 14-Digit chassis number, and that access to its model and year of manufacturing would not be possible through provided 6-digit chassis number---Tribunal had erred by relying on such voucher and brushing aside report of Forensic Science Laboratory---High Court set aside impugned judgment and remanded case to Tribunal for its decision afresh.

Ch. Sagheer Ahmed for Appellant.

C.M. Sarwar for Respondents.

Date of hearing: 26th January, 2006.

2006 P T D 836

[Lahore High Court]

Before Nasim Sikandar and Jawwad S. Khawaja, JJ

J.D.W. SUGAR MILLS LTD. Through Manager Finance

Versus

APPELLATE TRIBUNAL, SALES TAX, LAHORE and 2 others

S.T.A. No. 328 of 2002, decided on 1st February, 2006.

Sales Tax Act (VII of 1990)---

----S. 47---Appeal to High Court---Ambiguous order of Tribunal not having expressly decided issue of levy of additional tax---Such infirmity in impugned order had resulted in allowing revenue to interpret same in .their own peculiar way---Substantial amount was being withheld by revenue for such reason---High Court accepted appeal with direction to Tribunal to record its finding on such issue.

Ijaz Ahmed Awan for Appellant.

A. Karim Malik for Revenue.

2006 P T D 854

[Lahore High Court]

Before Mian Hamid Farooq and Syed Hamid Ali Shah, JJ

COMMISSIONER OF INCOME TAX, ZONE-A, LAHORE

Versus

Messrs RIAZUDDIN

P.T.R. No.5 of 1993, decided on 31st May, 2005.

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

----S.136(2)---Reference' to High Court---Question of law formulated and raised in reference not agitated or argued before or decided by Tribunal---Validity---Such question could not be agitated through filing of reference---High Court dismissed reference in circumstances.

Nemo for Applicant.

Date of hearing: 31st May, 2005.

2006 P T D 1054

[Lahore High Court]

Before Jawwad S Khawaja, J

Messrs YASIR BOARD INDUSTRY through Proprietor

Versus

CENTRAL BOARD OF REVENUE, ISLAMABAD through Chairman and another

Writ Petition No.60 of 2002, heard on 29th January, 2004.

Sales Tax Act (VII of 1990)---

----S. 46(7)---Constitution of Pakistan (1973), Art.199---Constitutional jurisdiction of High Court---Scope---Pending petitioner's appeal before the Appellate Tribunal, period of stay for recovery of amount granted to the petitioner, could not be extended by the. Tribunal because of the express provisions of S.46(7), Sales Tax Act, 1990---Contention of the petitioner was that order directing the stay of recovery of the said amount could be passed by the High Court in exercise of constitutional jurisdiction, as the remedy before the Tribunal was no longer available to the petitioner so far as interim relief was concerned---Validity---Held, circumstances of the case did not, in any manner, impinge upon the High Court's constitutional power to grant relief under Art.199 of the Constitution, particularly, where an alternate remedy was either not available or had become unavailable to the petitioner because of any sub constitutional legislation such as the Sales Tax Act, 1990 in the present case---Principles---Constitutional petition was allowed and it was directed that the amount's impugned by the petitioner, in its appeal before the Appellate Tribunal, shall not be recovered from the petitioner during the pendency of his appeal---High Court observed that present order of the High Court was subject to the provisions of Art.199 of the Constitution.

Messrs Karim Containers (Pvt.) Ltd. v. Customs, Central Excise 2003 PTD 1106 distinguished.

Waqar Ahmed for Petitioner.

Ch. Sagheer Ahmed, Standing Counsel for Respondents.

Date of hearing: 29th January, 2004.

2006 P T D 1116

[Lahore High Court]

Before Nasim Sikandar and Jawwad S. Khawaja, JJ

COLLECTOR, SALES TAX AND CENTRAL EXCISE through Law Officer of the Collectorate

Versus

Messrs KOHINOOR TEXTILE MILLS LTD., RAWALPINDI

S.T.A. No. 319 of 2000, heard on 13th February, 2005.

Sales Tax Act (VII of 1990)---

----Ss.2(35)(33), (25) & 47 [before promulgation of Finance Act (I of 2003)---Taxable activity---Sending of yarn for its treatment and conversion into greige cloth by the vendor (unregistered person) was not a supply as contemplated in the Sales Tax Act, 1990---Parting with the goods by the registered person for the purpose of limited addition by the unregistered person was neither a sale/lease nor "other disposition of the goods" thus not a taxable activity---Principles.

Sajjad Ali Jaffri for Appellant.

Nemo for Respondent.

Date of hearing: 13th February, 2005.

2006 P T D 1261

[Lahore High Court]

Before Nasim Sikandar, J

Mst. TASNIM AKHTAR

Versus

GOVERNMENT OF PAKISTAN and others

W.P. No.3363 of 2004, decided on 27th October, 2004.

(a) Personal Baggage and Gift Scheme (Import of Vehicles) Rules, 2000---

----R. 7---Customs Act (IV of 1969), Ss. 168, 194-A & 196---Constitution of Pakistan (1973), Art. 199---Constitutional petition---Import of vehicle under Personal Baggage Scheme---Refusal of revenue to clear vehicle for being two years old as same was not covered by such Scheme---Constitutional petition was filed by importer during pendency of his appeal before Appellate Tribunal---Maintainability---Issue as to year of manufacturing of vehicle could not be converted into one of law or interpretation of Constitution or other legal provisions for framing question of law before High Court---Importer being appellant before Tribunal could not complain of inefficacy of proceedings before Tribunal---Tax-payer could approach High Court under S.196 of Customs Act, 1969 against an order of Tribunal giving rise to a question of law---Importer had not challenged any specific order of revenue---Communication referred to in constitutional petition had not resulted into an action adverse to importer's interest---Deviation of revenue from its original stand by raising additional defence with regard to year of manufacturing of vehicle, could not justify exercise of constitutional jurisdiction---Interference at such stage by High Court would amount to pre-empt not only judgment of Tribunal, but would circumvent appellate hierarchy under Customs Act, 1969 including High Court as well as Supreme Court---Importer could place his arguments before Tribunal being a forum of fact as well as of law---High Court dismissed constitutional petition in limine.

Republic Motors Ltd. v. Income Tax Officer and others 1990 PTD 889; Pakistan and others v. Qazi Ziaud Din PLD 1962 SC 440; Muhammad Ashraf v. Board of Revenue PLD 1968 Lah. 1155; Messrs Usmania Glass Sheet Factory v. S.T.O. PLD 1971 SC 205; Julian Dinshaw v. ITO 1992 PTD 1 = 1992 SCMR 250; Attock Cement v. Collector of Customs 1999 PTD 1892; Gul Ahmad Textile Mills v. Collector of Customs 1990 MLD 126; Maple Leaf Cement v. Federation of Pakistan and others 1999 PTD 3907; United Business Lines v. Government of Punjab PLD 1997 Lah. 456; Ikram Bus Service and others v. Board of Revenue and others PLD 1963 SC 564; Al-Samrez 'Enterprise v. Federation of Pakistan 1986 SCMR 1917, Collector of Central Excise and Land Customs and 3 others v. Azizuddin Industries Ltd. PLD 1970 SC 439; Bilal Ahmad Malik v. Secretary, Ministry of Commerce PLD 1963 (W.P.) Kar. 981; Lever Brothers Pakistan Ltd. v. Government of Punjab PLD 2000 Lah. 1; Pakistan v. Fecto Balarus Tractors Ltd. PLD 2002 SC 208; Federation of Pakistan v. Ch. M. Aslam 1986 SCMR 916; Messrs Gadoon Textile Mills v. WAPDA 1997 SCMR 641; Pakistan v. Hussain Ali Shah PLD 1960 SC 310; Ghulam Nabi v. Province of Sindh and others PLD 1999 Kar. 372; Messrs Shadman Cotton Mills Ltd. v. Federation of Pakistan 2001 CLC 385; Messrs Syed Bhais v. Chairman, C.B.R. 2001 CLC 1445; Union of India v. Messrs Anglo Afghan Agencies AIR 1968 SC 718; Hashwani Hotels v. Federation of Pakistan PLD 1997 SC 315; Sheikh Fazal Ahmad v. Raja Ziaullah Khan PLD 1964 SC 494; Anisa Rehman v. PIAC 1994 SCMR 2232; Chief Commissioner Karachi v. Mrs. Dina Sohrab Katrak PLD 1959 SC (Pak.) 45; Pakistan v. Public at Large PLD 1987 SC 304; Indep Newspapers v. Wage Board 1993 SCMR 1533; Chairman RTA v. Pakistan Mutual Insurance Co. PLD 1991 SC 14 and Collector of Customs v. Muhammad Tasleem 2002 MLD 296 ref.

Punjab Beverage Company (Pvt.) Ltd. v. Central Board of Revenue 2001 PTD 3929 and Khalid Mehmood v. Collector of Customs, Customs House, Lahore 1999 SCMR 1881 rel.

(b) Order---

----Correspondence between two Government Departments---Not an order.

Aitzaz Ahsan and Barrister Sultan Tanvir for Petitioner.

Ahmar Bilal Soofi for Respondents.

2006 P T D 1353

[Lahore High Court]

Before Umar Ata Bandial, J

NIZAM ASSOCIATES through Proprietor

Versus

CENTRAL BOARD OF REVENUE through Chairman and 3 others

W.P. No.18050 of 2005, decided on 7th November, 2005.

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

----S. 16---Import or export of prohibited goods---Scope---Prohibition mentioned in S.16 of Customs Act, 1969, applies to the bringing into or taking out of Pakistan any goods of specified description.

East and West Steamship Company v. The Collector of Customs and others PLD 1976 SC 618 rel.

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

----Ss.15, 16 & 181---Notifications S.R.O. 374(I)/02, dated 15-6-02 & S.R.O. 574(I)/05, dated 6-6-2005---Import Policy Order, 2005---Constitution of Pakistan (1973), Art.199---Constitutional petition---Import of prohibited goods---Release of goods upon payment of redemption fine---Contract of import---Plea raised by importer was that prior to withdrawal of redemption Notification S.R.O. 374(I)/02, dated 15-6-2002, he had already entered into a contract for import of prohibited goods and payment of such goods was remitted, therefore, he was entitled to the benefit of redemption notification---Validity---Event of import and bringing in goods were synonymous and in relation to prohibition under consideration, the same was incurred when goods in question had crossed customs border---It was only when the prohibition and the simultaneous confiscation had been incurred that any question of the terms of redemption might arise for consideration---On the day when the goods in question arrived in Pakistan, the new Notification S.R.O. 574(1)/05, dated 6-6-2005, had already come into effect and redemption notification had already been withdrawn, thus importer did not have any right to claim the benefit of repealed Notification S.R.O. 374(I)/02, dated 15-6-2002---Plea raised by the importer was contrary to the scheme of S.'15 or 16 of Customs Act, 1969, which envisaged penalty or other consequence for import or export of prohibited goods and not contracts to import such goods---Petition was dismissed in limine.

Al-Samrez Enterprise v. The Federation of Pakistan 1986 SCMR 1917; Federation of Pakistan and others v. Ch. Muhammad Aslam and others 1986 SCMR 916 and A. Razaq & Company v. Government of Pakistan and others PLJ 2000 Lah. 52 ref.

Writ Petition No. 13498 of 2005 distinguished.

Mian Abdul Ghaffar for Petitioner.

2006 P T D 1375

[Lahore High Court]

Before Syed Hamid Ali Shah, J

Messrs ABN WORLD SUIT NO. 205 GOLD CENTRE through Proprietor

Versus

CENTRAL BOARD OF REVENUE, through Chairman and 3 others

Writ Petition No. 15077 of 2005, decided on 26th September, 2005.

Customs Act (IV of 1969)---

----Ss. 16 & 181---Notifications S.R.O. 374(I)/2002, dated 15-6-2002---S.R.O. 574(I)/05, dated 6-6-2005---Import Policy Order, 2005---Constitution of Pakistan (1973), Art. 199---Constitutional petition---Import of prohibited goods---Release of goods upon payment of redemption fine---Grievance of importer was that prior to withdrawal of redemption Notification S.R.O. 374(I)/02,. dated 15-6-02, goods in question had already entered into, therefore, he was entitled to the benefit of redemption notification---Contention of authorities was that at the time of release of goods, Notification S.R.O. 574(I)/2005, dated 6-6-2005, was applicable---Validity---Importer acquired a vested right to be burdened with the liability existing on the day when prohibition was contravened by it---In any event, the importer was also immune from impairment of its rights by retrospective enforcement of Notification S.R.O. 574(I)/2005, dated 6-6-2005---Notification which was an executive act could not be given retrospective effect to impart vested rights---To be treated in accordance with Notification S.R.O. 374(I)/2002, dated 15-6-2002, a legally valid and binding instrument on the date of import of goods in question, was a vested right of importer---Action of authorities holding to the contrary was, therefore, illegal, without lawful authority and of no legal effect---High Court directed the authorities to decide the case of importer in accordance with Notification S.R.O. 374(I)/2002, dated 15-6-2002---Petition was allowed accordingly.

Writ Petition No. 13498 of 2005 fol.

Mian Abdul Ghaffar for Petitioner.

Dr. Sohail Akhtar for Revenue.

2006 P T D 1393

[Lahore High Court]

Before Sheikh Azmat Saeed, J

Messrs MUSKZAR KNITWEAR (PVT.) LTD. through Chief Executive

Versus

ASSISTANT COLLECTOR OF CUSTOMS and 4 others